Stable and Adequate Funding for Public Services

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Stable and Adequate Funding for Public Services

• Ronald C. Parker
• Leadership Summit
• December 9, 2002

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Presentation Overview

• Public finance vision
• Forecasting state funding and expenditures
• Economic scenarios
• PERS
• Action steps

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Public Finance Vision
A high wage economy and quality public services
go hand in hand
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Oregons Budget Crisis
Permanent General Fund/Lottery Sources and
Associated spending, in millions (1997-2005)
Source ECONorthwest based on data from the
Legislative Fiscal Office and Office of Economic
Analysis.
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Forecasting General Fund Revenues
Source Oregon Office of Economic Analysis
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Preliminary Results Baseline Economic Scenario
Source ECONorthwest
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Preliminary Results Robust Economic Scenario
Source ECONorthwest
8
Preliminary Results Weak Economic Scenario
Source ECONorthwest
9
Oregons Tax System is Highly Concentrated
Source Legislative Revenue Office based on US
Census data
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PERS Overview

• Unfunded actual liability 15 to 20 billion
• Poor stewardship
• Unforeseen consequences of program rules
• 8 guarantee
• Money match

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Employer rates for PERS coverage (before pickup)
likely to rise sharply

• 1990-2002 average 9.73
• 2002-2006 average 15.56
• Could exceed 30 early next decade
• Each percentage point increase 60 million
  increase in state general fund spending

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ACTION STEPSFix PERS First

• Develop a full accounting of the liability
• Consider two broad alternatives
• Reduce anticipated liabilities in areas such as
  health benefits, cost of living adjustments and
  guaranteed account increases.
• Transform program into a 401k-type program
• Comprehensive resolution of PERS system must be
  completed by the end of the 2003 Legislature

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ACTION STEPSRevamp Revenue System

• Diversify tax base
• Stabilize revenue system
• Encourage capital investment and economic growth
• Reduce regressivity for low-income taxpayers

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ACTION STEPSCraft budget for 2003-05

• Develop long-term fiscal vision
• Establish a set of performance measures
• Create reengineering teams
• Develop an essentials only budget

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ACTION STEPSTax overhaul plan to voters, 2003

• Stabilize revenue base after balancing the
  2003-05 budget
• Voters must be involved with the solution to
  Oregons fiscal problems
• Oregon civic and business organizations can
  create a bridge between the legislature and voters

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Action Steps

• Fix PERS first
• Revamp revenue system to increase economic growth
  and provide for public services
• Craft budget for 2003-05
• After PERS is reconfigured and 2003-05 budget
  balanced, present tax overhaul plan to voters in
  2003

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Luncheon QuestionWhat do YOU think we must
do TOGETHER To Get our Fiscal House in Order?