POLICY PROPOSALS

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Kicker Reinvestment:

Collaboratively identifying bipartisan alternative uses of kicker funds.

 

Currently:   Whenever Oregon’s “kicker” is ready to kick unanticipated revenue back to taxpayers, the State Legislature has the opportunity to redirect that refund into other budgetary priorities through a  supermajority vote.  However, due to the high vote threshold as well as what has essentially become an institutionalized tradition, the kicker is now almost uniformly sent back to taxpayers.  

 

But according to the original supporters of the kicker, the initial impetus behind it was not to create a tax refund but to even out the biennial-to-biennium budget and prevent the type of “boom and bust” budgeting cycles that Oregon — the state most heavily reliant on the volatile income tax — might otherwise fall into.   Nevertheless, by institutionalizing the kicker as a refund to taxpayers, the State has lost a great deal of otherwise prudent financial investment.

 

Jeff's Plan: As State Treasurer, I will establish and formalize an ad hoc Surplus Redistribution Advisory Committee whenever the kicker appears ready to kick.   The committee will be made up of appointees representing a bipartisan cross-section of industry, workers, local governments and other interests, as well as delegates from the Legislative Assembly.  

 

The committee will be responsible for, with the assistance of staff, advising the State Treasury in issuing an official recommendation to the Legislature as to how kicker funds might be allocated in a way that prudently maximizes the financial effects.  This may be a combination of a tax refund, debt buy-down, capital investments, targeted grants, or any other one-time payments that yield long-term benefits.   The Legislature will, of course, not be obligated to follow such advice, but I believe that with the right people at the table willing to work towards common goals we will have an opportunity to begin institutionalizing measured deliberation of our spending, rather than a reflexive and unreflective non-decision. 

 

This way, the intent of the kicker to control state spending is maintained, but while allowing us to make investments that will actually help maximize our resources and capacity.  This is something that can be done without a Constitutional Amendment; we just need the willingness to have the tough decisions and come together across the aisle.

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Investment Transparency:

Making investment actions transparent and easily accessible to the public.

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Currently:  While all relevant Oregon Investment Council (OIC) materials are made available online, the average Oregonian trying to track investment decisions has to pour through hundreds of pages of uploaded analysis and meeting information in order to glean information about a single vote.  In contrast, the Legislative Assembly has a very transparent “Oregon Legislative Information System” website that presents a crystal-clear picture to the general public of what is queued up, what votes have been taken, and what determinations have been made.  

 

Our State Treasury can do better.

 

Recently, the State Treasury took a good step forward by making records of corporate governance actions more transparent, but there is still much more to be done, particularly when it comes to the state’s initial investment decisions.

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Jeff's Plan: I will instruct the State Treasury to develop and launch an online investment information tool that allows Oregonians a clear view of what is occurring at the public OIC meetings: Records of proposals, testimony, supporting documents, and perhaps most importantly, actual records of OIC votes for fund commitments and policy items.  

 

Although much (if not all) of this information is available to people who attend public OIC meetings currently, not everyone has the time to attend such meetings, or to thumb through the mountains of information online in order to find what they are looking for.  Greater access to transparent information about OIC decisions can help better inform the public as well as policymakers.

 

And since the cost of this system can be borne by existing unused resources, it does not require any additional appropriation from the Legislature.

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Property Tax Rebalancing:

Incentivizing housing construction by reforming our tax structure.

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Currently:  Property taxes are assessed on two components of a property asset: The underlying land value, and the value of improvements on the property such as a house or office building.  Both of those components are taxed at the same rate; that is to say, the assessed values of those components are added together to get the total assessed value of the property, and then a tax is imposed based on that total (the rate varies according to where the property is located).  

 

This tilts the consideration for landowners in urban areas towards leaving vacant lots vacant instead of building on them, since an improvement would drastically add to the assessed value and therefore tax liability.

 

Jeff's Plan: Although the State Treasurer has no direct say over property tax policy, as Oregon’s Chief Financial Officer the Treasurer does have a “bully pulpit” through which they can propose and rally support for certain financial reforms.  

 

The current system of property taxation is biased toward land speculation, and rewards real estate investors who want to sit on a parcel of land with a low tax liability until they feel it has appreciated in value enough to re-sell or develop.  

 

But with the State’s housing crunch making housing more and more expensive, we shouldn’t have a tax structure that rewards that kind of inaction.  Instead, we should have a tax structure that impels people to put those parcels to the highest and best use.  

 

As State Treasurer, I will urge the Legislature and Counties to reform the methodology of assessing urban property taxes by lowering the rate for improvement value and raising the rate for the underlying land value.  In this manner, individual homeowners or other landowners with existing improvements wouldn’t notice a change, as the respective raising and lowering of those rates would be designed to cancel out.  However, urban property owners of unimproved lots would see an uptick in their tax rate, and be incentivized to build improvements in order to set revenue against their tax liability.

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Debt Buyback Program:

Taking advantage of high interest rates to extinguish some debt at lower rates.

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Currently:  With interest rates high, many private sector lenders are looking for opportunities to extinguish their outstanding low-interest loans so that the money can be loaned out at a higher rate.   At the same time, Oregon has billions of dollars of prudently-managed debt being slowly paid off, but which might be able to be settled now for a lower interest rate. This would free up additional debt capacity.

 

Jeff's Plan: When the State has available capital, the State Treasury should evaluate whether it makes sense given the interest rate environment to buy down the State’s debt at an advantageous rate, as creditors look for available capital.  

 

Sometimes, it might not make sense.  But when it does, the freeing up of that debt capacity provides advantages to the State budget as well as other infrastructure needs.  If we have infrastructure needs, we might not want to use that freed up capacity while interest rates are high, but the option exists and we’re no worse off.  More importantly, the state budget is  released from making associated debt service payments on that borrowing, which frees up money that could be applied to any number of programs or projects.  

 

Think of it as a way to refinance in a high interest rate environment by negotiating with our creditors in exchange for an influx of capital.  

 

Given the amount of capital required, this is not likely to be a common occurrence, but in scenarios where the kicker is expected to provide billions of dollars of surplus while interest rates are high, this approach should be on the table for consideration by the Surplus Advisory Committee described previously.