Watch for the Sausage Being Made in the Rush for the Exits

Image via WikipediaA real Oregon heroine, Jody Wiser, founder of Tax Fairness Oregon, sends this warning about an insanely stupid measure being jammed through at the last minute:

Another Bad Idea Gets Passed – Please Help to Stop It

Thursday was a deeply disappointing day in Salem.

The last two months have been good. I’ve watched as the Joint Tax Credit Committee, whose work this session has been so arduous, cut excessive tax code spending in place after place. They’ve done difficult and excellent work.

But as their final act of the year, they turned around and passed out of committee SB 817, creating the ironically titled “Oregon Low Income Jobs Initiative,” a bill that will actually give $78 million to an out-of-state money management firm and others like it, because they in turn agree to loan no more than $66 million to businesses in Oregon. Think what the Oregon State Bank might have done with that lost $78 million.

The travesty in this ill-considered bill is that if the state itself loaned the whole $78 million out, it could not only be more selective about what businesses it supported, it would get back the $78 million plus interest, and be able to loan that money out again and again. But with SB 817, Advantage Capital and a few other financial management companies will get the $78 million, loan out $66 million for six years or more, and after that, the whole $78 million plus all interest earnings are theirs.

The businesses that will receive the loans set up by SB 817 need not be anything special, need not hire any new employees, need not serve needy Oregonians. They do need to place themselves in lower income areas in Oregon--but the legal definition in the bill includes every acre of several counties and much of downtown Portland, Medford, Eugene, Beaverton and many other communities.

The Oregon New Market Tax Credit (NMTC) piggybacks on the unsuccessful Federal NMTC. According to a GAO report last year based on NMTC’s own data, it’s impossible to know whether its projects would have taken place even without the tax credit. Under the guise of helping needy communities, the Federal NMTC has funded projects like Portland’s Gerding and Schnitzer theaters and the Nines Hotel atop Macy’s.

In the hearing Thursday only one legislator, Rep. Phil Barnhart, asked a single substantive question that showed careful reading of the bill. He rightfully identified the full cost of the bill as $78 million. Reps Bailey and Brewer insisted he was wrong, that it was only $16 million. But Barnhart was right. When they later learned that the cost of the bill was nearly five times more than they thought, Bailey, Brewer, and every other committee member except Barnhart voted for the bill. It now moves to the Senate and House with a “do pass” recommendation.

There is still time to stop this travesty on the Senate and House floors. It may be taken up as soon as Monday. Please contact your State Legislators today and tell him or her that Oregon doesn’t need a tax giveaway that has already been discredited at the Federal level. Instead, let’s use our limited tax revenue for essential services.

Do it, just act:

If you need more guidance on what to ask, consider these points:

Questions for SB 817-1 proponents of the New Market Tax Credits:

· Why would you vote for legislation that passes out tax credits on a first come first serve basis? Don’t you believe the Oregon Business Development Department should choose amongst applicants, funding only those that will provide the best benefits to the low income communities? (Original bill, page 4 lines 33)

· Why would you pass out tax credits for $78 million but say that only 85% of it must be invested in Oregon? (Original bill, page one, line 29) What happens to the nearly $12 million that doesn’t need to be invested in Oregon?

· On page five, lines 28-32 there is another 15% that doesn’t need to be invested in an Oregon qualified low-income community investment. Is that an additional $12 million or the same $12 million as on page one? Can this money be taken as advisor fees for the money management businesses called “Community Development Entities”? The bill has no limits on fees.


· Ten states have had or currently have state side NMTC programs as in SB 817. If this mechanism is expected to bring more Federal NMTC dollars to Oregon, why has it not worked for 9 of the 10 states which have to date received fewer federal NMTC dollars per capita than Oregon receives without a state side program?

· Wouldn’t investing in a state bank be better?

· Without further amendment, it appears that as much as $4.8 million of each year’s $16 million doesn’t need to be invested in an Oregon qualified low-income community business, and that Oregon has no say in which businesses get up to $4 million each.

We note that the Oregon Business Development Department (OBDD) is not advocating for SB 817. This could be because:

1) Oregon already has other loan programs wherein the interest and principal return to the state rather than being lost to “Community Development Entities” (CDEs)

2) Where the costs for managing the programs are far below those collected by CDEs; and

3) Where the OBDD is able to target the loans.

If the Legislature wants state investments targeted to actual job creation in low income communities (as differentiated from moving jobs from one building to another as is typical with NMTC projects) then they should write that legislation.

For the Record: Oregon per-student spending LAGS the nation

Image by Paradox 56 via FlickrThere's a bizarre current of debate in Oregon where the know-nothings allege that Oregon spends a bundle on schools, with lots of it going to "illegals" (the preferred term among the anti-public-schools crowd for the children of non-citizens, whether their parents are here with proper documents for entry or not).

For the record then, here's a link to a very important piece worth filing away for the next time you're trapped with some gasbag who tells you that we would be fine if we just "got back to basics" and stopped providing so much lavish education, especially to the "illegals." An unusually good article in the local paper, by Betsy Hammond:

Oregon School Spending Trails National Average

PORTLAND, Ore. (AP) — Oregon has firmly established itself as a state that spends 7 percent less per student in public schools than the nation as a whole, according to federal data released last week.

Nationally, U.S. public schools spent $10,500 per student in 2008-09, the most recent year for which statistics have been nailed down for every school district. In Oregon, schools spent $9,800.

Oregon's pattern of spending 93 cents for every $1 spent nationally has become entrenched since 2002-03, when the Legislature slashed school funding as the economy tanked, prompting Hillsboro to lop 17 days off the school year. . . .

What is clear, Tapogna said, is that all trends suggest Oregon schools will continue to have to cut offerings, raise class sizes or shorten the school year in coming years.
"It is going to be, fiscally, a very challenging decade," he said.

Corrections and health care costs are growing faster than the economy, crowding out public schools and particularly higher education from their normal share of state spending, he said. The cost of employee benefits, particularly for the state pension system, is expected to surge in coming years, he said. . . .

A huge infusion of federal stimulus dollars blunted the impact on schools during the past few years, he said, but that money is gone. For next year, "the numbers are going to look really bad. We're not just talking about not climbing very much, we are talking about dropping. ... This will be the worst year that your school districts will have, even though the recession ended a while back."