Oregon officials face a daunting challenges as they prepare for negotiations over the 1993-95 budget, which begins next July 1. Lying ahead in the next budget cycle is a shortfall estimated ad $1 billion or more, a gap that stems from Measure 5 and its requirement that the state pay the public school system for funds lost as a result of the 1990 ballot initiative's reduction of property tax revenues.
Late last month, Gov. Barbara Roberts called for a special session of the Legislative Assembly to consider her proposals for restructuring taxes. The plan included property tax relief and the state's first-ever sales tax. But lawmakers, in a brief session the first week of July, declined to refer the tax plan to voters for a September election. Legislators are not united on potential solutions, but they are considering ideas such as a temporary tax surcharge, combined with cuts, to pare the shortfall.
State bond issuance has slowed dramatically because of a moratorium on most debt sales until Oregon develops an overall financial plan. The state has $5.25 billion of general obligation bonds outstanding, most of which are self-supporting through the veterans' loan program.
In an interview this week at the Western State Treasurers' Conference, held in Blaine, Wash., Oregon Treasurer Anthony Meeker discussed with Lost Angeles Bureau Chief Dennis Walters the state's budget situation, his debt management plan, and why he is running for Congress.
Q: A new tax plan won't be on the ballot this fall. What does this mean for 1993-95 budget planning and what options are being examined?
A: After the close of the 1991 [legislative] session, both the governor and the legislature moved forward with their own independent, but cooperative, look at state government.
Gov. Roberts, notwithstanding the special session, had been moving forward with this long-range preparation for the 1993 Legislative Assembly, the drafting of a budget that was inside the constraints of Measure 5 and the constitutional requirement to balance the budget.
So her budget process is moving forward. She had a couple of groups looking at ways to save money in state government, make reductions. Her process is one of, "Let's cut from the top down."
The legislature, on the other hand, has been approaching it from the other angle: "What are the basic requirements of Oregon state government, what do you want state government to do?" Sort of a bottom-up approach, if you will.
They're both moving forward, and I really think what happened in the special session was a pretty loud signal that the legislature is very tuned into the process that it has. In a way, I think that it's healthy for the state because you've got two processes going on.
You get the two groups, an executive branch and a legislative branch of government, that are taking a hard look [and asking], "Where do we we want state government to go with this new constitutional mandate?"
The 1993 session will resolve the issue. They're constitutionally required to, so there will be reductions in spending at the state level to come within the constraints of Measure 5.
Q: So they've got to figure out something, tax plan or no tax plan.
A: They have a number of meetings scheduled between now and when the legislature meets in January.
This is just my opinion, that [the legislature had] been doing their thing ... and the tax plan had not been a part of that discussion.
The governor really laid that before them just a few days before the session, and they said, "No thanks, we're looking at this thing from a different view."
Q: An initiative to tax businesses and residents differently will be on the November ballot. How did it develop?
A: Right after Measure 5 passed, there were observations made by some groups that residential property had a more dramatic increase in valuation than did commercial property. If you do a long-range historical study of both classes of property, you find they both go up at about the rate inflation, although there are different increases at certain times.
These last two years there's been tremendous pressure on residential property in Oregon, and it went up much higher statewide than had been anticipated.
Well, then the obvious happened in 1991. Some special interest groups that were tied to residential property owners said, "Wait a minute, we're getting the short end of the stick this tax year on Measure 5. We didn't get as much relief because values went up more."
Their reaction to that is, "Okay, we're going to have split roll, we're going to tax commercial property at one rate and residential at a different rate."
Q: Now what's going to happen?
A: I don't know, it's a pocketbook issue. There is going to be a strong tendency on the part of residential home owners to support it because it obviously shifts the tax from them over to business.
Most people who study taxes in Oregon don't like the split-roll concept. I don't believe that it's good for the economy of the state. There will be a pretty strong educational effort on the part of business and industry in Oregon to educate taxpayer that this is not a good idea.
Q: Where does your debt-management plan stand?
A: Right after the legislature adjourned in 1991, we moved forward with a three-phased debt management plan. The first phase was restructuring, which we are doing right along all the time. The second phase was to do a critical-needs survey of each issuing agency, and we identified bonds that were to be issued using a three-pronged test.
The third part of this was a special session, and we all know what happened there.
The first part of this month, we authorized another six months' worth of debt for each agency, using that same critical needs analysis. And next month, I'll be appearing before the bond rating agencies to describe what we've come up with.
It's limited amount of debt, less than $100 million for the next six months. We have our total state debt on a very well-defined path. We're reducing it at about a net $300 million a year.
The whole concept is that as state government goes through its process of analyzing Measure 5, we want to keep the amount of debt that's being issued very limited, very much under control.
I'm very comfortable, because we are issuing such a small amount of debt compared to what's been authorized, that the rating agencies will look at it favorably.
Q: You've been active in the Western state treasures group and produced a lot of ideas as Oregon's treasurer. Why are you running for Congress?
A: My term is up this year, so it was a tough decision. I could run one more time for treasurer [under a state constitutional limit]. I chose running for Congress mainly because of a lot that I've learned as state treasurer, that there are no silver-bullet answer to the tough problems.
I see the nation's debt as a real constant affecting this nation's ability to deal with tough problems. It'll be tough to deal with. It takes a lot of willpower, but the Congress has to do that.
And I felt that I could do that Treasurers are forced to think long term. Investment decisions, debt management decisions - you don't issue a bond for two years, it's a 30-year deal. That's what's wrong with Congress - they're making two-year decisions as opposed to long-term ones.
The other major reason I'm running is that there are going to be a lot of new faces. And I think a lot of them are going to be thinking like me, that Congress just has not disciplined itself to think long term, and that has to happen.