Issues
Creating Jobs in Oregon
By Christopher Gergen
“We cannot solve our problems with the same thinking we used when we created them.” – Albert Einstein
Solving the grave economic challenges facing Lane County and the State of Oregon cannot be accomplished by mouthing the same tired rhetoric based upon faulty assumptions about the economy. We need fresh, original solutions based in reality.
Over the course of the last two installments (Part 1, Part 2) in this four part series we discovered why the usual suspects of job creation—government, “stimulus spending,” entrepreneurs and small business—do not by themselves create permanent jobs:
- Government does not create jobs by legislating, taxing, and regulating businesses to the point they leave the state or decide not to move their companies to Oregon in the first place.
- “Stimulus spending” on infrastructure projects only creates temporary jobs while the project is in progress. Once it ends, the jobs end with it. Also, “stimulus spending” forces governments to raise taxes on everyone, which in turn drags down consumer spending, further depressing job creation.
- Entrepreneurs and small businesses can’t create permanent jobs absent demand for their products.
- When companies and small business owners invest capital into the marketplace they hire under the assumption that demand will be sufficient to sustain the new jobs. Should demand fail to support the venture, the jobs created are lost—and thus were temporary.
In this installment we’re going to discuss where sustainable jobs really come from. Then in our final installment we’ll examine the proper roles of government, small business, and consumers in creating a healthy economic environment.
Understanding demand is key to understanding how consumers behave and how market forces work. Today we’re going to focus on two types of demand: market demand and consumer demand.
The macro solutions for Oregon’s and Lane County’s economic ills are found in creating market demand for goods and services, which, in turn, is created by consumer demand. To accomplish this, the Oregon Legislature needs to create a healthy economic environment by slashing a burdensome regulation regime.
A 2009 study by Cal State Sacramento economists on the effects of the State Legislature’s over-regulation of the Californian economy (1) found “…that the total cost of regulation to the State of California is $492.994 billion, which is almost five times the State’s general fund budget, and almost a third of the State’s gross product. The cost of regulation results in an employment loss of 3.8 million jobs, which is a tenth of the State’s population.” Oregon faces a similar challenge.
Regulation kills businesses and collaterally kills consumer demand in Oregon because the consumer cannot demand an Oregon product from a producer that does not exist in Oregon. He or she may still demand the product, but it now must come from a more business friendly state.
The Oregon Legislature has the power to erode or even destroy Oregon’s market demand. That destroys existing jobs and discourages creation of new ones. It’s as simple as that. If the market demand for Oregon goods and services is artificially low or non-existent for goods and services in demand elsewhere, it’s most likely because the business environment in Oregon is not advantageous to the producer of that good or service operating profitably. That fact alone means that while demand could potentially be high for a particular good or service, it makes no difference to our economy because Oregon doesn’t produce or offer it—which means these jobs don’t get created.
Market demand, which creates and sustains jobs, is driven by individual (i.e. consumer) demand. A group of consumers all buying the same thing creates market demand. At its optimum, this demand can even shield a company against a severe recession. Apple is a great example.
In January, 2012 Apple posted enormous earnings and revenue for the fourth quarter of 2011. To put into perspective how well Apple performed, the consumer demand for its products and services created more profits ($46.33B) for Apple than Google had in total revenue ($10.8B) (2) (3). It’s worth noting that Apple not only isn’t laying people off; it’s hiring—but not in Oregon.
At the other end of the spectrum is General Motors. In early March, GM announced it was suspending production of its Chevy Volt for five weeks (4). Chris Lee, GM spokesman, cited the reason for the suspension of production was “matching (its) production levels with demand and building to market.” This “matching…production levels with (consumer) demand and building to market (demand)” caused 1,300 people to temporarily lose their jobs. The Chevy Volt has continuously missed its sales (demand) targets because consumers just don’t like the product —resulting in job losses.
Public and private sectors both have a role to play in creating an environment that increases consumer demand. In our last installment we will look at specific things the public and private sectors in Lane County and Oregon can do to increase demand for Oregon goods and services. Specifically, we’ll look at how permanently lowering and reallocating public spending can bring Oregon’s economy out of stagnation. Well also look at the role wages play in this process.
Be sure to join me for this discussion in the next issue of “Lane Solutions.”
Note: For further study on the subject of economics, please click here for a good primer: http://www.investopedia.com/university/economics/default.asp#axzz1rwn7hGc4
Chris Gergen is a Springfield based financial advisor and is the author of The Quality Paradigm: Why You and Your Business Need it to Succeed. He blogs at Be Epic.Daily. He can be reached via email at [email protected].
(1) http://hotair.com/archives/2009/09/25/study-regulation-costs-california-economy-almost-500-billion/
(3) http://investor.google.com/earnings/2011/Q4_google_earnings.html
(4) http://www.mlive.com/auto/index.ssf/2012/03/gm_to_stop_chevy_volt_producti.html
Private Sector Job Creation is the Answer to Long Term Stability
By Chris Gergen
Someone once said “If you tell a lie big enough and keep repeating it, people will eventually come to believe it.”
Such is the case concerning the economy and how jobs are created. In my last article I discussed the role government does and does not play in creating jobs. The irrefutable fact remains that governments do not create jobs. Rather, through taxation and regulation they create or destroy the ecosystem indispensable for the creation of permanent jobs.
Many believe that entrepreneurs, small business owners, the wealthy and those aspiring to become wealthy are the driving force behind job creation. As with the idea of government creating jobs, this idea of entrepreneurs, small business owners, and the wealthy creating permanent jobs is also incorrect.
According to Forbes Magazine[i], Phil Knight, Oregon native, co-founder, and former Chairman of Nike, is the 47th richest man in the world and the 19th richest man in the United States. Surely, if anyone could create permanent jobs it would be Phil Knight and Nike. Few people realize that neither Phil Knight nor Nike created any permanent jobs. Entrepreneurs like Phil Knight invest capital to design, develop, and deploy their ideas, services, and products until the capital runs out. Jobs created by entrepreneurs such as Phil Knight, small business owners and the wealthy are only as secure as the level of initial capitalization of the venture. As I mentioned in my last article, any jobs in Oregon and Lane County would be good jobs, but Oregon and Lane County need to look long term at sustainable, permanent solutions to their persistent unemployment problems.
Let’s look at where these permanent jobs come from.
According to those who argue that entrepreneurs, small business owners, and the wealthy create jobs, a key role of government is simply lowering taxes on “job creators” so they have the capital to invest in creating ideas, services, and products. However, this logic is not supported by the facts. Low tax rates by themselves will not create permanent jobs. During the boom years of the 1990s, the dotcom rage “created” thousands of jobs in the United States. Unfortunately, the boom of the 1990s was really a bubble that burst in March 2000 and sent the economy into a deep economic struggle, forcing the Dow Jones Industrial Average to finish lower than the previous year for the following three consecutive years[ii].
During the 1990s billions of dollars were invested by investors, entrepreneurs, small business owners, and the wealthy in creating thousands upon thousands of jobs in many different sectors. According to the logic of those who argue for lower tax rates so job creators can create jobs, the tax rates should have been low during this period. However, the truth is much different: the high bracket tax rate on “job creators” from 1993 to 2000 was 39.6% and in 2001, the tax rate was only lowered to 39.1%[iii].
The current rate of 35% in 2012 is below the tax rates of the boom years of the 1990s. If the idea of lowering taxes on the wealthy in order to create jobs were valid, entrepreneurs, small business owners, and the wealthy would currently be creating jobs hand over fist because our current rates are the lowest they have been in over 20 years[iv]. If you were to look for rates lower than our current rates, you would have to go back to the three year period of 1988 through 1990 when the rate was 28%. Before that, you would have to go back to pre-World War Two era rates of 24% and 25% in the mid-1920s and early 1930s.
During the boom years of the 1990s and into the aftermath of the dotcom collapse, the national unemployment rate hovered between 3.7% (December 1999) and 6.3% (January 2002)[v]—even with tax rates above 36%. The sudden rise in unemployment in the early 2000s was due to a lack of capital to continue funding these companies, which in turn was caused by a lack of consumer demand. As a result, not only did investors take a bath, but most of the thousands of jobs “created” by the boom suddenly disappeared—because they were temporary. Ideas, services, and products that people demanded — not tax rates or the single-handed efforts of “job creators”—caused the jobs boom of the 1990s.
The reason jobs are not currently being created is because of a lack of demand. And a lack of demand doesn’t have anything to do with entrepreneurs, small business owners, and the wealthy creating jobs or taxation scaring investors away from starting businesses. Fixing our economic woes in Oregon and Lane County begins by looking at the real problems.
The economy is bigger than the government, entrepreneurs, small business owners and the wealthy. The economy is comprised of all of us. In order to create demand, a few things have to happen legislatively and in the business sector. Be sure to come back to “Lane Solutions” – because that will be the subject of our next installment.
Chris Gergen is a Springfield based financial advisor and is the author of The Quality Paradigm: Why You and Your Business Need it to Succeed. He blogs at Be Epic.Daily. He can be reached via email at [email protected].
[i] http://www.forbes.com/profile/phil-knight/
[ii]http://stockcharts.com/freecharts/historical/djia2000.html
[iii] http://ntu.org/tax-basics/history-of-federal-individual-1.html
[iv] http://ntu.org/tax-basics/history-of-federal-individual-1.html
Where Jobs Come From
By Chris Gergen
With all of the discussion about the economy, jobs, taxes, and the business climate in Oregon, I think it wise that we address the one question that keeps coming up in the national media and local debates in Salem—who creates jobs? Generally, debaters of this issue take one of two sides: the government creates jobs or the private sector (specifically, the rich and those trying to get rich) and small business owners—create jobs. Those who advocate one side over the other argue passionately in favor of their position. What’s more, both sides of the argument have legislators and political influencers who, just as passionately, believe their position is correct. Would you believe both of them are ignoring a significant factor in “job creation?” And it’s a factor that is crucial to understanding why Eugene, Lane County, and Oregon lag in job creation.
Let me tell you what they’re missing…
Regardless of who holds power at the state or national level, most (if not all) government economic expansion programs focus on providing tax breaks or subsidies to companies to entice them to move from one state to another. This was a significant factor in the robust job creation from 2000 to 2009 in Texas. 21.6% of these jobs were the result of employers moving in from other states. An additional 23.7% can be attributed to international migration (1). Thus more than one fifth of the jobs created in Texas were the result of jobs lost in other states because Texas offered an environment that was highly attractive to out of state companies.
Here are two other relevant facts:
- Between 2004 and 2007, 61 California companies moved to Austin alone (2). Why? Reasons often cited are low taxes & labor costs, less union control, ease of obtaining permits, and less stifling regulations.
- A survey of U.S. executives revealed that Texas is number one among states in offering a friendly business environment (California, New York and Illinois bring up the rear) (3). Many attribute this to the elements mentioned immediately above. In an era wherein capital and labor are highly mobile, job migration is a factor that states ignore at their peril.
All of us would be happy to have jobs shuffled to Oregon and, especially, to Lane County. And given the length of time the Oregon unemployment rate has been above the national average (25 of the last 30 years leading up to 2008 [4]), I would agree that any job growth would be good job growth. However, I would caution that any jobs created by shuffling jobs to Oregon from somewhere else could be shuffled out of Oregon just as quickly with the passage of anti-business and anti-wealth legislation such as Measures 66 and 67.
Let’s focus on some of the damage, either already caused or anticipated, as a result of Measures 66 & 67:
- According to the Cascade Policy Institute, Measures 66 and 67 will result in the loss of at least 70,000 jobs (5).
- According to Kiplinger, because of the high tax rates imposed by Measures 66 and 67 (for its effect on passive income) Oregon is the fourth most unfriendly state for retirees. For those retirees with taxable income of $250,000 or more, Oregon shares with Hawaii the dubious honor of imposing the highest income tax rate in America. Taken together, these policies have earned Oregon a place on its “do not live here in your second act” list (6).
- The year following the passage of Measures 66 and 67, Oregon dropped six places on the Tax Foundation’s list of states based upon business climate (7).
- Besides damaging both business and consumer climates, Measures 66 & 67 have missed their revenue projections by a staggering 50% (8). The “cure” for Oregon’s budgetary woes has left the State with continuing, huge budgetary challenges.
Clearly, the Oregon Legislature has failed to create an environment that would entice businesses to move to the state, let alone create sufficient jobs without such migration.
Will Oregon and Eugene absorb these lessons? Will they learn that high taxes, stifling regulations and difficulty in obtaining permits here are a formula for job creation – in Texas?
Next month we’ll discuss the role of the rich and small business owners in creating jobs. Be sure to come back – you’ll be very surprised.
Sources:
- http://www.factcheck.org/2011/08/texas-size-recovery/
- http://www.myfoxaustin.com/dpp/video/Is-Texas-Stealing-California-Jobs?20120119-ktbcw
- http://www.bizjournals.com/dallas/blog/morning_call/2011/09/texas-has-top-business- environment.html
- http://www.bls.gov/. http://www.statesmanjournal.com/assets/pdf/J0131639327.PDF
- http://cascadepolicy.org/projects/more/measures-66-and-67-will-cost-70000-oregonians-their-jobs/
- http://www.kiplinger.com/slideshow/TaxUnfriendlyStatesRetirees/5.html#top (10 Tax-Unfriendly States For Retirees 2011)
- http://www.taxfoundation.org/news/show/25680.html
- http://www.oregonlive.com/news/index.ssf/2010/08/measure_66_tax_revenue_coming/2382/comments-2.html
Chris Gergen is a Springfield based financial advisor and is the author of The Quality Paradigm: Why You and Your Business Need it to Succeed. He blogs at Be Epic.Daily. He can be reached via email at [email protected].
CONSERVATION VICTORIES
To provide protection for Oregon’s old growth and natural treasures the O&C TRUST, CONSERVATION, AND JOBS ACT
Provides legislative protection for old growth on 2.6 million acres of public forests in western Oregon for the first time in history.
Adds nearly 150 miles of Oregon rivers to the Wild and Scenic Rivers Act, including:
- 93 miles of the iconic Rogue River and its tributaries;
- 21 miles of the Molalla River;
- 19 miles of the threatened Chetco River; and
- 15 miles of Wasson and Franklin Creeks, tributaries of the Umpqua River
Protects 90,000 acres of Oregon forests as wilderness, including:
- 58,000 acres to be added to the existing Wild Rogue Wideness
- 32,000 acres of some of the last remaining old growth in Oregon’s Coast Range and permanent protection for Devil’s Staircase
Transfers more than 1,000,000 acres of mature and old growth forests from the Bureau of Land Management to the Forest Service to be managed as National Forest Lands.
Requires thousands of miles of legacy roads and logging roads in disrepair to be brought up to federal and state standards.
Repeals the contentious O&C Act of 1937 that led to the Western Oregon Plan Revisions.
Includes management restrictions on O&C Trust lands to protect clean water, terrestrial, and aquatics values, including:
- Prohibition on aerial application of herbicides and pesticides and a requirement for a public process for the development of an integrated Pest Management Plan;
- Long and short timber rotation ages to provide diversification and to encourage the recruitment of complex, early serial habitat; and
- A sustained yield requirement to prevent overcutting
Expedites land exchanges between the federal government, the O&C Trust lands, and private landowners to create larger contiguous blocks of forested land in western Oregon and to improve the conservation values of such lands.
Ensures the scientific community and general public are represented on the O&C Board of Trustees
Maintains federal ownership of all O&C lands and public access privileges.
CERTAINTY FOR COUNTIES
To uphold the federal governments’ commitment to rural and federally forested communities in western Oregon the O&C TRUST, CONSERVATION, AND JOBS ACT provides:
- Forested counties in western Oregon with a sustainable and more predictable level of revenues in perpetuity to support basic county government services like law enforcement, education, health, and transportation.
- Turns around nearly two decades of gridlock on federal forests that will help timber dependent counties in Western Oregon improve their economic and financial outlooks.
- Estimated to create thousands of new jobs in rural communities throughout Oregon and will reduce unacceptably high unemployment levels in the State.
- Moves counties away from an uncertain future of federal payments to a long-tern solution that meets the federal government’s obligation to federally forested communities while bringing jobs back to our communities and health back to our federal forests.
- Ensures legal certainty by establishing a fiduciary trust for the O&C Counties and ensures strong O&C county representation on the Board of Trustees to guarantee the Board’s fiduciary obligation to the 18 O&C Counties.
- Sets a fair standard for the federal government by requiring the Board of Trustees to provide a return from the O&C Trust lands to the American taxpayer and U.S. Treasury.
- Establishes a temporary federal loan to aid O&C Counties during transition to payments from the O&C Trust.
O&C Trust, Conservation and Jobs Act
Oregon’s rural communities cannot afford another 20 years of gridlock in our federal forest. Without a new path forward, mills will continue to disappear, forest jobs will be outsourced, counties will be pushed of the budgetary cliff, and forest health will continue to decline.
A bipartisan plan now before Congress, “O&C Trust, Conservation, and Jobs Act” would create thousands of new jobs in Oregon’s forested communities, ensure the health of federal forests for future generations, and provide long-term funding certainty for Oregon’s rural schools, roads and law enforcement agencies.
Federal support payment to rural and forested communities commonly known as “county payments” or “timber payments” that have helped support rural Oregon counties for over a decade expired on September 30, 2011. Lack of revenues from timber harvest from our federal forests or a continuation of timber payments in lieu of timber revenue will have serious consequences for Oregon families and businesses. A recent Oregon State University study found that without timber payments, Oregon’s rural counties will shed between 3,000 and 4,000 jobs. Oregon business sales will drop an estimated $385 million to $400 million. Also, Oregon’s rural counties will lose $250 million to $300 million in revenues.
For counties already near the financial cliff and facing depression-like unemployment, this could be the final blow. In fact, a few counties in southern Oregon may soon call for a public safety emergency and will be forced to eliminate most state-mandated services- including police, jails, courts and services that help the neediest citizens in our communities.
This should alarm all Oregonians, even those who do not live in rural communites. Failing counties will have both budgetary and quality of life consequences for the entire state. Vital county services would be severely restricted or altogether disappear. Counties will continue to release offenders and close jail beds. Pot-holed roads and structurally deficient bridges will be neglected and school funding throughout the state will be reduced.
Given the serious fiscal crisis our counties and schools face, a new approach is necessary to create jobs, help stabilize funding for our schools and communities and better manage our forest. Passage of “O&C Trust, Conservation and Jobs Act” is essential.
MYTHS AND FACTS: O&C TRUST, CONSERVATION, AND JOBS ACT
ACT MYTHS AND FACTS
MYTH: The expiration of the Secure Rural Schools and Community Self-Determination Act, aka “county payments, will not have a major impact on forested counties in Oregon, so a long term forest management plan is not needed.
FACT: A new study by Oregon State University found that if county payments are not extended or replaced with a long-term solution, Oregon counties will face combined revenue losses of $215 million, and lose 4,000 jobs, $400 million in business sales, and $250 million in value added economic activity. In fact, without a viable long-term solution, some rural counties in western Oregon may be forced to declare a public safety emergency or dissolve.
MYTH: Congress could solve the county payments problem by assessing a tax on raw log exports.
FACT: A tax on raw log exports is unconstitutional. Article I, Section 9, Clause 5 of the U.S. Constitution directly states, “No Tax or Duty shall be laid on Articles exported from any State.”
MYTH: The O&C Trust, Conservation, and Jobs Act (OCTCJA) is a bad deal for taxpayers.
FACT: Taxpayers spend $110 million per year to manage 2.6 million acres of O&C forests in western Oregon. OCTCJA would require a Board of Trustees to assume all management costs for the Trust lands, saving taxpayers tens of millions of dollars per year by reducing.fhr annual federal management costs associated with the management of western Oregon timberlands. Additionally, the Board of Trustees would be required to submit an annual payment to the United States Treasury to help pay down the federal deficit, Finally, active management will create thousands of jobs and produce net revenue for American taxpayers while ensuring county governments can provide essential county services, like law enforcement, education, health, and transportation.
MYTH: The plan would make it more difficult for private landowners to access and manage their own lands.
FACT: The plan preserves and protects all existing and valid rights of neighboring land owners, including tail hold, road access, and right-of-way agreements.
MYTH: O&C Lands will be sold to Wall Street speculators.
FACT: No O&C Lands will be sold. All O&C Lands will remain in public ownership and the public will retain access privileges.
MYTH: This plan has few conservation components.
FACT: The plan includes 90,000 acres of new wilderness, 150 miles of new Wild and Scenic river designations, and provides the first legislative protection for mature and old growth forests. The plan also excludes environmentally sensitive areas, parks and recreation areas, wild and scenic corridors, and wilderness areas from the O&C Trust lands.
MYTH: This will make it more difficult to control wildfires.
FACT: The plan would maintain the existing cooperative fire protection agreements for the O&C Trust, Forest Service and adjoining private lands.
MYTH: The Act does not provide any protection for the Northern Spotted Owl.
FACT: The plan specifically mandates that the O&C Trust Lands be managed in compliance with federal and state laws as those laws apply to private forest lands. This includes complying with ESA provisions that prohibit harm or take of threatened or endangered species. Consistent with the intent of the Northwest Forest Plan and Owl Recovery Plan, old growth forests, which serve as the best habitat for the Northern Spotted Owl, will be excluded from the management trust
MYTH: The Act undermines the Northwest Forest Plan
FACT: The intent of the Northwest Forest Plan was to provide a sustainable supply of timber while protecting habitat critical to the survival of threatened species, such as the Northern Spotted Owl and salmon. The plan strives to accomplish these intended goals – which the Northwest Forest Plan failed to achieve – by providing greater certainty about what lands are eligible for sustainable logging and what lands are to be set aside to sustain threatened species.
MYTH: OCTCJA sweetheart deal for rural Oregon counties so they don’t have to raise property taxes.
FACT: There are constitutional limitations on property tax increases in Oregon. As a recent Oregon State University study confirmed, even if counties were able to obtain voter approval to increase property, lodging, and real estate taxes, rural Oregon counties would only be able to make up 8-24 percent of the funding gap. The plan fulfills a historical commitment to federally forested communities in Oregon by creating thousands of jobs in our forests and mills, and providing a sustainable and more predictable level of revenues in perpetuity to support basic county services like law enforcement, education, health, and transportation.
MYTH: Millions of acres public forests will be converted into industrial plantations.
FACT: Private industry lands in Oregon are typically managed on a 30-40 year rotation. The plan requires at least half of the landscape to be managed on a long rotation of between 100-120 years and to be geographically dispersed across the landscape to provide ecological diversity. The plan also minimizes the use of pesticides and provides protections for old growth.
MYTH: OCTCJA would increase logging exports to China.
FACT: The plan explicitly prohibits exporting raw logs from the O&C Trust lands. The plan would continue the ban on exporting unprocessed logs from federal lands and impose penalties on businesses that violate the law and send family-wage jobs overseas.
MYTH: Revenues from logging cannot support rural counties because the timber market is so bad.
FACT: While there is still current demand for timber, it remains far below historic levels. The proposed O&C Trust would not be fully operational for two years after enactment thus providing some time for timber markets to recover. The plan requires the Board of Trustees to capitalize a Reserve Fund to balance payments to counties in years of market volatility. Finally, the plan requires the Board of Trustees to offer timber sales on a competitive basis.
MYTH: The Board of Trustees will be exempt from federal lows and the public process.
FACT: The O&C Trust Lands will be managed in compliance with federal and state laws as they apply to private forest lands in Oregon, including the Clean Water Act and the Endangered Species Act The :general public will be represented on the Board of Trustees and meetings of the Board involving :management decisions will be open to the public.
MYTH: This plan does not address the “checkerboard” nature of the O&C Lands that have created significant management challenges-
FACT: The plan expedites land exchanges between the federal government, the O&C Trust lands, and private landowners to create larger contiguous blocks of forested land in western Oregon and to improve management efficiencies of both federal and private land.
Oregon’s once proud education system is sorely in need of repair
The erosion of efficient, effective education in our public schools concerns me greatly because it means there are fewer skilled workers entering into the workforce. As a small business owner, this tells me that I will have fewer and fewer of the skilled workers I depend upon to build my company.
The perceived decline in education throughout the United States has resulted in record numbers of parents opting to educate their children in private or charter schools, and in many cases, homeschools.
These refugees from traditional education fear that, despite the presence of many dedicated, concerned teachers, their children might not even graduate from high school. And their fears are justified. Recent statistics tell us that the percentage of students who earn their high school diplomas in four years is just 66.4% and in five years only 69.1%. For non-Asian minorities this figure is a pitiful 49.8% to 55.2%. For students with disabilities, the graduation rate is an even more dismal 41.8%. (1)
Many in our State Legislature advocate increased funding for Oregon’s schools without addressing serious structural issues imbedded in the system itself. Instead of searching for ways to set the bar higher and challenge students and educators to perform at the peak of their capabilities, these legislators have opted to lower the bar so that more children can clear it by any means possible.
Looking forward, I fear that the result of a lowered bar will be an endless cycle of diminishing returns wherein each successive generation will perform at a level at or, more likely, below the previous generation.
What to do? Let’s begin by asking the right questions. First let’s look at how we’re using the resources already in the system. With a current budget of approximately $10,000 per student per school year, we need to look carefully at how these funds are allocated. With a classroom of 25 students, what competent administrator could not provide an effective and efficient learning environment with $250,000 per classroom? This leads us to ask if the right people are controlling the allocation of funds.
If Federal and State control of our local education systems were significantly reduced and authority restored to local school boards and educators, more money could be given directly to schools and administrators, enabling them to use their judgment, based on their knowledge of local conditions, to hire the very best instructors and provide the very best educational resources for our children, who must be prepared to face an ever more complex and competition driven economy.
As the system is set up now, the stakeholders – educators, parents and children – have minimal control over the education system for which they are nominally responsible. As the system is set up now, a distant, detached bureaucracy makes life-shaping decisions for countless educators and children to whom they are not accountable. As the system is set up now, it will continue to erode the foundation of our free market economy.
The education crisis currently facing Oregon is not terminal if the challenges we face are addressed immediately. However, it will take organized and strategic efforts to unclench the fist of an increasingly sclerotic education system and return to local communities the responsibility, authority and resources required to provide educational excellence.
Chris Gergen is a Springfield based financial advisor and is the author of The Quality Paradigm: Why You and Your Business Need it to Succeed. He blogs at Be Epic.Daily. He can be reached via email at [email protected].
(1) Source: http://www.ode.state.or.us/news/announcements/announcement.aspx?ID=7273&TypeID=5
VanGordon: Four Ways to Turn Land Into Lane County Jobs
Lane County has lived with terrible economic news for the past three years. This recession has been deep, devastating, and personal. The recession exposed some serious, local economic flaws, but they are not new. They were already there. During the housing boom making money was easy, and it created strong economic growth. Either the economic boom hid our problems or we chose not to do anything about them.
We can’t fix the national economy, but we can make Lane County more competitive. Our economy is in the process of changing. Goods, services, and capital can move almost seamlessly between markets and regions. We are in a competition, and we have to make Lane County more competitive to succeed. Lane County is at a cross-roads. If we don’t do anything, then eventually the economy may grow enough to create low-wage jobs and the unemployment rate will go down. Our other choice is to work on creating smart economic policy that allows our private sector to be competitive for family wage jobs.
Jobs are created in the private sector. However, government policy impacts a community’s ability to create jobs and attract new businesses. In a series of articles I will share my thoughts on how to transform Lane County into an export-focused economy. I want to focus on manufacturing goods and providing services outside of Lane County. If we sell more goods outside the area, we create jobs.
Proper land use planning is the basis for solid economic growth. In the metro area there is a shortage of land to site businesses and residences on. Even if we attracted an employer requiring a large lot of land the metro area would have a tough time finding a location for that business. Lane County is less competitive in attracting new businesses because we don’t have locations that are ready for businesses to locate to. This is a serious disadvantage. Local governments have a variety of land use plans and procedures which can be used to address these problems.
Here are land-use issues that I believe will have an impact on our ability to build new businesses in the area, and my thoughts on them. These are all in the process of being completed. In the short term, effective land use planning provides certainty to the business community that there is space to locate or expand in the area.
- Springfield’s expansion of its Urban Growth Boundary to add 600 acres of commercial land to the city
By developing along I-5 Springfield businesses will be able to move goods to markets cheaply, which translates into a competitive advantage. From an economics perspective it makes no sense to continue to add larger industrial lots farther east. In the long term, I would like to see Springfield include part of Seavey Loop. If Springfield expands towards Seavey Loop it may make more sense for Springfield to also serve the Lane Community College (LCC) basin. Springfield may serve LCC cost effictively, and in the long term the LCC area may offer flat land for the city. A major challenge to growth in Springfield is the availability of flat land that isn’t farming land. Ideally, we would choose to expand in such a way so as to protect agricultural interests.
- Springfield’s completion of the Glenwood Refinement Plan including the Franklin Blvd. Expansion
The Glenwood Refinement Plan is the land use plan that outlines development guidelines for Glenwood. Without completing the plan extensive development of the Glenwood riverfront is impossible. While currently underdeveloped, it is centrally located in the metro area between downtown Springfield and the University of Oregon. It will provide an ideal multi-use location to live, work, and shop. It also provides a natural freeway entrance to the University of Oregon. As the University of Oregon continues to expand I hope it takes advantage of the opportunities that Glenwood provides.
- Eugene’s completion of the Envision Eugene Project
The Envision Eugene Project is Eugene’s review of its urban growth boundary. My opinion is that Eugene should expand toward the airport. I want Lane County to be able to compete for aviation and export businesses. Additional commercial land near the airport could open Lane County up to those type of businesses.
- Lane County’s work to develop Goshen
Could a freight-rail terminal be built in Goshen? Imagine moving our goods from trucks onto trains or vice versa. Freight rail isn’t as politically popular as passenger high speed rail, but it makes sense. Rail is a very cost efficient way to move commercial goods to the market. When businesses have more options for moving heavy freight it will lower the impact on our road system.
For local governments, completing these land use planning projects is a critical economic policy. It is the first step toward re-inventing our local economy. We will have available land to expand our business and commercial base. We will have the room to attract the types of businesses that create family wage jobs, provide benefits, and protect the middle class. Like I said, this is the first step.
In future articles for Lane Solutions I will discuss the importance of education, the University of Oregon, Health Care, and international trade in creating Lane County jobs.
Sean VanGordon
Springfield City Council, Ward 1
Misjudgments Haunt PERS
The misjudgments of the past continue to haunt Oregon’s Public Employees Retirement System (PERS). Days ago the Oregon Supreme Court issued the last word on years of litigation that goes back to 2000, when the PERS board tried to credit member accounts with outlandish 20 percent earnings.
PERS was originally created in 1945 to provide retirement benefits to Oregon’s public employees. Now legislators had changed the law so that they could retroactively join PERS and judges automatically became PERS members. This represents a possible conflict of interest to PERS reforms. To compound this conflict of interest, essential services from local municipalities such as prison beds, law enforcement, and school days, are being sacrificed while PERS expenditures skyrocket.
Public employers objected and a court later set the earnings at slightly over 11 percent. But the higher credited earnings already had been deposited in the accounts of more than 28,000 people who retired between 2000 and 2004, and these “window retirees” had fought ever since to keep for themselves the overpayments that now tally more than $150 million.
However, on Dec. 30, the Supreme Court ruled again that PERS is obliged to recoup the overpayments. Starting in April, the retirees have to give the money back, either in lump sums or through deductions from their monthly benefit checks. That’s as it should be. The money was never theirs to begin with. A PERS error in their favor is still an error — not an opportunity to pocket additional benefits at taxpayers’ expense.
Oregon’s Public Employee Retirement System is between $14 and $16 billion underwater. The future unfunded liability to Oregon’s public employees in excess of current investments is so large that it exceeds Oregon’s biennial general fund budget. Worse still is that, at the behest of the public employee unions, the Oregon legislature adopted a provision that requires that payments to the PERS system be made before any other money is spent. For taxpayers this means that before any service is delivered by the State of Oregon, current PERS obligations must be funded.
But $156 Million is nothing to sneeze at. Okay, it’s only about one percent of the unfunded future liability, but it’s $156 Million that PERS didn’t have last week. That is if PERS actually collects it. When the Legislature convenes in February, PERS advocates are planning to pressure it to respond to recent rulings by arguing that they should be able to keep the overpayment of benefits.
Beyond pressuring the 2012 Legislature, the public employee unions are ready for the 2012 elections. Under the guise of their unified political arm – Our Oregon – the unions have taken a page from Bill Sizemore’s political playbook and flooded the initiative process with THIRTEEN separate ballot measures. But whereas Mr. Sizemore had to go out to the general public to find signatures and funding for his efforts, the public employee unions, with their nearly $130 Million biennial war chest – collected for them by the State of Oregon and its political subdivisions – have more union members than signatures required to qualify for the ballot. Mr. Sizemore would take six to nine months to collect signatures while the public employee unions can do it in less than a week as the union stewards walk through government offices pressuring their members in the workplace.
The most pernicious among the thirteen Our Oregon initiatives are Measures 42 and 43 which embed in the Oregon Constitution the right of public employee unions to utilize the payroll check off system for their political activities. While the unions widely criticized Mr. Sizemore for trying to burden the Oregon Constitution with matters better left to the legislature, those same unions apparently think it’s just fine to embed their issues in the Constitution.
In addition to the $130 million available to Oregon’s public employee unions from mandatory member dues each biennium, unions have the vast resources of their sister public employee unions on both state and federal levels because national public employee unions move money to and between states to support and oppose political issues.
Public employee unions represent their members, not the public or taxpayers. You can understand their motivation. But the Legislature and Oregon voters must answer a different question: What’s in the public interest?