NW Week; Interview with Barbara Roberts on Tax Reform in Oregon; 6.0

92. Our topic tonight is the direction Oregon is heading toward tax reform and our guest is Governor Barbara Roberts. Thank you for joining us Governor. It's good to be here, thank you. Well ever since the 1990 election Measure 5, which is now a constitutional property tax limitation, has been the defining fact of the state budget process. Now more than ever the effects of the measure are being felt. The amount of money it directs to schools beginning in 1993 could cause a one billion dollar shortfall in the state's coffers. At the same time, citizens groups are mobilizing with their own tax reform measures which they're seeking to put on the November ballot this year. It's a fairly dramatic backdrop for governor Roberts, who spent much of her life in Oregon involved in politics in some fashion. Tonight, perhaps, will shed some light on where we've been and where we're going in this tangled maze. Governor, again thank you for joining us and also welcome Bill Lunch, our political analyst, who joins us in our studios tonight. Thank you Morgan. Well Governor, I want to jump right in and ask you to go back to November of 1990 and help us with a little bit of evolution in your thinking on tax reform. I was there that night when you accepted the victory and talked about a sales tax proposal and since then a lot has changed. I wondered if you could trace your evolution of thinking on the whole

issue of tax reform since your election. Well I think two things really became clear in a short period of time after my election, after I put together the first budget. And that was that the frustration and anger I think is probably the correct word that Oregonians were feeling about government and about the tax structure was more than just the ballot measure 5 issue. It was much broader and much deeper than that. And since in Oregon we can't solve taxes without going to the ballot, it's not something the legislature can do or the governor can do. You really have to have a vote of the people to get it done. It was very clear we were going to put those voters into the decision making role. We had to find some way to do it that included both the voters, if you will, the public and the politics together, and I felt strongly that if we wanted to succeed at the ballot that we had to find a way to begin to include our citizens in the process. And as you recall, that resulted in my making a decision not to go to the legislature with any kind of a tax measure but rather to take the

time to spend the effort and energy to get out to talk to the citizens of this state about our tax structure - how it works, where we spend the money, where we get the money. What ballot measure 5 will do in the state long term and to find some way of harnessing the anger that Oregonians were feeling and the frustration that voters were feeling. And finding a way to harness that into a setting in which we could use that energy to become a positive force, and that meant being willing to trust the voters and being willing to listen to them. And that meant really being willing to do the kind of job of educating and informing that made them part of the decision making. So we did the conversation for a couple of months on the air. We brought the messages back to Oregonians about what we'd heard from them and what I felt was part of the solution from that point forward. And we have been doing in government since that time what the message clearly stated to us and to me at that time, and that was if you want

to do tax reform in Oregon you've got to convince us that you can do government better, that you can do government smarter, that you can do government smaller, and that you can bring the efficiencies in the state government that will make us feel good about the dollars we send to you. Then we'll be willing to talk about tax reform. So it is change not only the timing of what we're doing but the method of finding a way to make the government different and to make the tax structure different. So it's been a long, arduous process, occasionally frustrating, remarkably enlightening for me as both a politician and a citizen in the state to find out how excited Oregonians were to be part of a process they've never been real participants in before. So I'm absolutely convinced we've made a difference in Oregon long term and short term, not only in the efficiencies in government but in the attitude voters are beginning to feel about their participation in finding solutions. Were there any particular factors, or how did you know within those first few months that the voters

weren't going to be receptive? How did you detect that level of frustration. Well I've been traveling around the state almost constantly for the last 10 years. I've listened to voters a long time and in all parts of the state and the level of frustration became more and more clear. You didn't have to go very far to hear it. Yeah. It was not just that that typical anger, I don't want to pay taxes kind of anger or it wasn't just the typical incident related where they're mad at a particular incident. It seemed to be much broader than that. It was, you know, I don't know whether I can believe anybody in politics anymore. I don't know whether I can trust my government. I don't want to vote anymore because it doesn't make any difference. And it got to be a broader and broader message around the state. And of course what we heard here in Oregon is what is being heard all across this nation. As citizens grow continually more frustrated with government at the federal level and then translate part of that frustration back into their own states. The minority leader in the state house, Peter Courtney, and a number of

others have argued that one of the disadvantages of the approach that you've taken in directing your approach as you have, is that it has framed the issue, that is to say it has structured the understanding of this issue around the whole question of how much government takes in and how much it spends. In other words, how much it costs. The other side of that coin is how much government does for people, that is to say the services that it provides. Have you had any second thoughts about framing the issue in terms of cost rather than focusing on services provided? Well I think that Representative Courtney may not remember well how the conversation went. It really started out saying: how do you feel about your government, how do you feel about the job your government is doing, what services are the most important to you, which services do you think are the least important, and what level of services would you like to have in Oregon? And when we got through with the conversation with Oregon, and did that television opportunity for them to participate, they said to us that they wanted the same level of services that we

now have in Oregon. So they got there by deciding, at least in that process, that they really didn't want to live in what I would refer to as a state like Mississippi. They were very clear. So I don't think they actually came out and were being negative about government services. In fact, many people were highly supportive of things like education and human resources services for senior services and for the handicapped, that kind of issue. They were very supportive of some of the things we're doing in economic development and in transportation. So it wasn't a negative process, for the most part. But even in the most supportive citizens, they wanted to know we were using their dollars effectively so that we could deliver good services. They wanted the delivery of services to be the major focus we were doing in government. So I don't think it really made people say, you know, I want more services but I don't want to pay. I don't think it caused that. It said I'm willing to pay, but you've got to give me the most efficient government you can give me, and then I'm

willing to talk about tax restructuring. So I think that's a positive message when you think about how it could have come out in possibly another state that didn't have such a strong orientation to the quality of life as I think Oregonians have. Kind of as a follow up to that, do you think there's any danger then, in throwing around this number - as even I did earlier - this billion dollar shortfall? Do you think that there's any danger in framing it that way to Oregonians? That somehow they might adopt this notion of oh, we're cutting a billion dollars out, how badly is that going to affect us? Well, we've tried to do two messages during this period of time, both which I think are equally important. To show that we're not afraid to change in government, that we don't have to do things like we've always done them, there may be much better ways to do them, that we're willing to find efficiencies, that we're willing to cut the administrative level which is very high in state government, that we'll do those things. But in order for citizens to make a decision they've got to know that not only do they have a better government when we're through, but they also have to have some indication of what happens if we don't do tax reform.

So, to be quiet about the billion dollars and not tell people that it is the reality that we will face in 1993, is to give them less than all of the tools they need to make good decisions. And I really believe that if every citizen in Oregon had the same information I did, and I do, I think most of those citizens would come to the same decisions I would. And what we can't be afraid to do and what we can't be hesitant to do, is to give citizens the same information that I have as governor. And part of the information I must work with every day is that if we are not able to do the kind of quality government people want to pay for, and if we're not able to convince Oregonians to do tax reform, that we will indeed cut a billion dollars out of the state budget. And that is a blow to services, to people, to Oregon's future and to our ability to invest. So I think you have to give them all the facts even when they're painful, and you have to be willing to tell them what will happen when they make either side of that choice.

Another aspect of questions about the approach you've taken has come from a different direction. Mark Nelson, who led the opposition at least in Salem to Measure 5, as he had done on some of the previous property tax limitation measures, has argued subsequently that the approach that would be most likely to prevail to deal with the problem is what he calls vote early and vote often. And I know you heard that recently. Yes I have. The question is what's wrong with the approach to voting early and voting often and finding out what the voters like and don't like in various tax proposals that might be put in front of them? Well first first of all always be a little suspicious of people who earn their living polling because they like to go to the ballot a lot because they get to poll a lot, so that's the first premise you always have to start with. But the vote early, vote often premise has no basis in fact. We've been 70 years since we've changed the tax structure in the state of Oregon. We've had almost everything on the ballot you can think of in that period of time. Each time

those major changes and minor changes have failed at the ballot. There's nothing to indicate that any success comes from arriving at the ballot. The difference in that approach is that the more you go to the ballot, if people turn you down and you put up something back on the ballot, and they turn you down again, and you go back a third time, it's going to begin: Didn't you get the message? Read my lips I guess is the way I would describe that. You're not going to move people who have no reason to move, no matter what the measure is, no matter what the tax structure is. If people don't believe they're buying something of value they're not going to change the tax structure. And so I think the the danger in that is that you, that you assume if you keep hitting people often enough with some new tax option that they'll choose the tax option eventually. I think what you have to do is to first help them understand why it's important to restructure Oregon's tax system. What the need is for it. And then I think you move them in a very different way than just trying to get taxes or more money.

(Interviewer) Well, you've talked about persuading people and your sense that they are beginning to be persuaded. And we wondered if you could share with our listeners the evidence that you have that public attitudes in the state of Oregon post conversation have begun to shift. (Roberts) Well, I travel all over the state all the time and the kinds of things that help me believe that the messages are stronger than they were are that more and more people now understand what measure 5 does. They understand that it takes money off of the local property tax rolls and eventually over five years diminishes the cost of property taxes and hands that cost directly to the state pick up with no new revenues. They understand that piece. That's a very significant understanding. The second thing I hear more and more out there that tells me there is some understanding is that we try to show people where the tax money came from and how it was spent in Oregon. And we now could hear on a daily basis: so why don't you do it with a lottery? Because in

all of the the visuals we did, all the charts we showed Oregonians during the conversation and since, we show them what a small part of the state budget the lottery was and that the people of Oregon, the citizens, had dedicated it to economic development and it couldn't be used for other things. I will now hear citizens in Oregon in a public meetings. Some citizen will stand up and say, well why don't you use a lottery to fund education, and a citizen across the room will say the Governor showed us that you can't do that. So I think there is a lot of new knowledge out there, broadened and heightened knowledge, about how the tax system actually works. And the other thing people are saying to me is when are you going to go to the ballot, when are you going to go to the ballot, when are you going to go to the ballot? And that means there is more and more feeling on the part of Oregonians that we have to do the ballot eventually, and when citizens begin to push you toward the ballot that's very different than politicians beginning to push you towards the ballot. So there's lots of evidence of that kind of change as I move, move through the parts of Oregon and I think even in the Oregonian

Poll said if you went to the ballot today you couldn't pass tax reform. But if you looked at those numbers to compare to what you saw a few months ago, you would see a growing understanding of the distinctions within the tax system. And that's the understanding we have to have before Oregonians are going to give us any kind of tax overhaul. Let me tell people once again they're listening to the Election '92 call-in on Oregon Public Broadcasting radio our guest is Governor Roberts. Starting in about 10 or 15 minutes we will take some calls from our listeners and we'll give you that number in a few moments, but I want to continue on this the same thread,this discussion we've been talking about. As you've mentioned, you've traveled around the state, you hear from these people. You're sure you're hearing from all the right people that are going to be voting, and you know, there's a faction of people that that are active and that vote a lot and that are concerned enough to get out there, but they don't necessarily represent all of the people who are going to be checking that box, as it were, for tax reform. Well I don't think anyone can guarantee that, a pollster can't guarantee that. You know they just take a look at-random poll. They may be getting people who are not registered or people who don't

frequently vote, so you don't really know from that. And in a poll is only a snapshot. The difference between the knowledge I believe I'm finding, and the knowledge you get in a snapshot, is that people begin to talk with a different kind of information. And I don't just go out and talk to the people who show up at public meetings. I mean we go into senior citizens establishments, and we go into seniors in high schools classrooms, and we talk to teachers in large groups, and we talk to citizens who show up at functions, and we talk to people in shopping centers. I mean, it's a very broad base kind of thing. I talk to workers at plants. And so I think that if you just keep talking to a broad enough audience you can begin to see people's understanding, and I think the thing that people have said to me frequently that tells me there is a listening going on and a paying attention happening, is that people say to me, the 4,000 cuts in state workers - I know it

was hard but it was important that we saw that willingness to change. I mean so that means that the 4,000 number stuck it meant something to people. And people know that even though they don't like some of the other proposals that are under discussion: should we touch the board of CPA's, or should we touch the hairdresser's board of the barber's board.. They may not like all these discussions, but they know that they're taking place. And it's when that information begins to be translated that you're going to change and that things are going to be different, and people understand that. Then you have touched a part of of understanding and comprehension that wasn't necessarily there before about how state government works. (Interviewer) You mentioned a moment ago that you're beginning to hear from citizens "when are you going to go to the ballot?" But before you can go to the ballot, you've got to call a special session of the legislature in order to get to the ballot. When do you anticipate calling a special? Well, it is my hope that we get to the ballot before the end of this year, and I will continue to do the ground work I think is necessary. We'll continue to do the efficiencies we've been

working on so hard in state government, we will continue to make more announcements - they're coming soon, about some of the other changes we'll be proposing in making, about some of the other things we would like to do very differently in state government. Those things will all continue to be announced and we'll, we'll continue to spend a great deal of time here in the metropolitan area of Portland, where we found the message has come with the least understandin. If I'm in southern Oregon or eastern Oregon or central Oregon there seems to be a real understanding of the message. In the metropolitan area of the state, in the tri county area, that is not nearly as clear. And I think it may be that you have a lot of very large settings. You have a large city of Portland, a large Multnomah County, a large Washington County, and they're focused in very different ways. And the press is very different because it's not the hometown paper but rather a state wide media and press, and so we have a lot of work to do yet in the in the metropolitan area before we're ready to go. But before this year is out I expect we'll arrive at the ballot

with some kind of a tax reform measure after we have finished the job of really laying out the design for a more efficient state government. (Interviewer) Are you concerned at all about kind of the coincidence and the timing of this, because if you, it seems like if you go to the ballot too late in the year - that is, more towards November, you risk being sort of overshadowed by a presidential election. And you also risk maybe being on the losing end of a lot of that voter frustration that may be coming out in that election - not just for president but for the state offices, the congressional offices. Is it, is there..have you given any thought to sort of trying to stay away from that risk, and trying to go for, for a safer vote maybe than the November one? (Roberts) Well, the difficulty is that, that it - and I didn't say November, I just said before the year is out, it might be well before that. But I think the risk is that if you go to the ballot too early you haven't finished your job and you fail. If you go too late in the middle of the November frustration, you risk that frustration which is there now, it will be there in June, it will be there in September at the ballot. In each of the elections I think that frustration will be there because I think it's so

strong. But I think there's some other messages that we we have to make very clear between now and the time we go to the ballot. One, I think a lot of Oregonians believe that the Measure 5 cuts that we're starting to talk about are ways to create pain in order to get tax reform. We have to demonstrate that that is not the reason for the cuts. You can't take a billion dollars out of state government and not create pain. We're not creating pain on purpose. We're not creating pain in order to get tax reform. But when you look at the state budget, there are three major areas where the money is and this is almost the total budget. They are human resources, which are things like nursing home beds and disabled children and aid to dependent children - that kind of thing. They are programs of Public Safety like state police and corrections, and they are education at both the local level and higher education community colleges. That's where almost all of the state money is. So if you make a major cut in state government you cannot protect education or public safety or human resources.

And so I think a lot of times Oregonians think you cut in those areas because that's where the loudest cry of pain will come, and then you'll get what you want the ballot in terms of tax reform. And that's absolutely untrue. It's just that you cannot cut state government and not cut into those most sensitive and important programs. And I think we've got to make that clear, so that people don't think we're trying to frighten them or, or make hysteria in order to get tax reform. That's not the reason we would ever cut into programs that touched human beings in the way that those programs do. (Interviewer) Let's look at the calendar. We notice that we're already in April of 1992. You need a special session, you need to go to the ballot. Assuming that that doesn't work out as you would like and we get to the January 1993 opening of the next legislative session, what would be your priorities in the 1993 - 95 biennium for budget cuts, assuming the replacement revenue is available?

(Roberts) I think the most honest thing I can tell you is, is there won't be able to be any way to do priorities, and I don't mean that we won't have priorities. I mean that if you ask me my highest priority in state government, I'd tell you it was education. But we will cut education and we will cut it dramatically because we won't have any choice. If you ask me about the other kinds of priorities I had, I would tell you human resources programs of all kinds. But we will make dramatic cuts in human resources programs. I feel very strongly that Oregon has too few state police. We have many, many fewer state police than we did when we were a much smaller, smaller population. But we will cut state police. So, I think the thing that's hard about the priorities, is when you take a billion dollars out, everybody has to share part of the cuts. You cannot hold any area immune from those cuts without asking another part of the budget to pick up extra cuts. So I think the issue that's going to be most hard to make clear is that there are no choices when you operate with a balanced budget, like we in state government must do - unlike the federal

government who can operate in deficit - you can only spend what you have. And when you don't have it, you cut. There's no place else to go and we will do that. (Interviewer) In just a few minutes we will take a few calls for our guest, Governor Barbara Roberts. I'll give the number now - it's 452-4373 in Portland. If you're calling from outside the Portland area, please call us collect and we'll again start taking those calls in about 5 or 10 minutes. The number is 452-4373. Call us collect if you're outside the Portland area. I would ask you another question, too. This just a couple of days ago, of course, the article in The Wall Street Journal kind of outlining the things that you've gone through with the conversation and that type of thing. But it got me to thinking about how the nation perceives Oregon. Last year we saw a couple of examples when states ran into budget troubles and they were all over the front pages and, you know, selling out the state workers, cutting state budgets, and that can't be good for business in the state, it can't be good for the morale of the people in the state. Obviously we want to avoid that here. (Roberts) Absolutely. (Interviewer) ..And have you given any thought to that? (Roberts) One of the things I've been saying to audiences lately

if you think back to Governor Tom McCall's remark about visit but don't stay. That's been over two decades since he stated that and it has lived in the minds of people all over this nation. Every place you go people say, aren't you the state that doesn't want people to come? Now think of that for two decades. I try to think of that in.. in now, in relation to Measure 5 and what kind of a story does it leave in people's minds if we close colleges and close state prison facilities, and take people out of programs that protect them in nursing homes and other kinds of places? What is the image on CNN and C-SPAN and public broadcasting, and NBC when that story comes out? And how long will live in people's minds who want to move here, who want to invest here, who want to educate their children here, who want to become a college professor here as vs. some other state? We will pay the penalty of that message. Now, it won't be the only message like that in the country, because you are going to see as the defense industry closes down companies and

bases all over the United States, you're going to see other states in desperate financial straits. But, interestingly enough, this is not a bad economic time for Oregon, generally speaking. Our economy is relatively healthy. We're more diverse economically than we've ever been in this state. We have one of the best trained workforce and educated workforce in the nation. We have good schools and we have good colleges. We're a wonderful state to live in and invest in, and yet we have almost a self-inflicted wound now. And that story may be the one that's told across the nation. And it is quite contrary to the other half of the Oregon story in the rest of the country now. We're receiving awards for education reform in Oregon, a great deal of attention on the Oregon Health Plan. I just accepted an award the week before last in Washington D.C. - the third on our new Workforce Quality Council. The benchmarks where we're measuring Oregon's future and how to get to that future are receiving national attention and so is the conversation with Oregon.

So we have a very positive image right now across the nation, and we can turn that around in a single legislative session, a single budget. (Interviewer) Congressman Mike Kopetski, who was a state legislator, has proposed a plan - put a plan on the table as it were - that would reduce income tax rates in Oregon, increase the corporation tax some, and institute a sales tax. And I wondered if you have had an opportunity to have a look at Congressman Kopetski's plan, and if you have any comments on the elements that are involved in it. (Roberts) Well, I think that plan like many others is a partial plan. It has a piece of the components that are necessary to do the kind of tax reform we looked at in Oregon. I think the difficulty with any of the plans, and there are number of them being discussed and a number of people working in back rooms and at conference tables building plans right now, is that when you look at Oregon's tax structure, you need to look at where we are. We've basically got a 70-year-old tax structure, and it's not working anymore. Our

property tax system, I don't think anyone would say it's good - before or after Measure 5. We've got an income tax system that's basically not been revised in 30 or 40 years. We don't have any kind of a sales tax, not even a small one, dedicated to any particular purpose. We have a moderate-priced corporate income tax in Oregon. We don't have an inventory tax, we don't have a luxury tax. We don't have much of an inheritance tax. I think we need to look at Oregon's whole structure - basically take what we have and back-burner it - and start over, and do it right. And I think if you did that we could design a far superior property tax in Oregon that gave property tax relief, that was that recognized that you can't tax people out of their homes, and that did the job right for local government. We could take the income tax system and make it more fair and more equitable than we do. We could look at a sales tax. Oregonians have never voted for a sales tax. They've never supported one. Would they support a small sales tax, maybe 2 percent or something, that was dedicated to education? We don't know that yet. But I think it's a discussion you have to have with Oregonians, and then we have to look at our corporate

income tax and we ought to look at some of the taxes we don't have, and say should Oregon have those, or can we make stability for the long term in a, in a smaller more compact system? So I think the difficulty is a lot of people want to do Band-Aids and they want to do quick fixes and they want to take a system that's basically out of whack and try to repair it, rather than starting over and saying if we were designing a new tax structure what would it look like? That would be my objective, is to start over and do the thing right and to look for equity, for fairness, so people pay based on their ability to pay, that we all carry our share of the load no matter what our income level is, and that we also look for stability, for a tax system that will hold us probably for the next 50 years. And if we could design that along with this more efficient government we're designing now, I think Oregonians would help us invest for the future. (Interviewer) This is the Election '92 call-in here on OPB, where our guest is Governor Barbara Roberts. We'll start taking a few calls from our listeners now. All the lines are busy, but I'll give that phone number again, it's 452-4373. If you're calling from

outside the Portland area, please call us collect. We'll take our first caller now. Good evening, you're on the air with us. (caller) Oh hello. (Interviewer) Can you tell us where you're from? (caller) Tualatin. (Interviewer) Ok, and your name is..(caller) My name is [Kathy Neucomb?] (Interviewer? Hi. What's your question? (caller) Well, my question is really a request for clarification. Governor Roberts? (Roberts) Yes. (caller) You were referring to the cuts in school government. But my understanding of the cuts are really general fund cuts and there are other funds for things like better [inaudible] and the highway and insurance and finance and so on. And those areas are not really being cut. Measure 5 only touches on general funds so when you were talking about a serious cut that Measure 5 requires- I think you're talking about general fund only - Isn't that correct? (Roberts) Predominantly they are general funds. There are some places that we're asking agencies to make cuts that are not general fund, that are funded - some with federal funds and from other kinds of fees -and that's basically at the administrative level. Oregon has one manager or one

administrator for every six employees in government right now. I think that's too high a management level. Too much administration. So whether the monies are federal or whether they're fees or whether they're state income tax dollars, I think we can manage with a less administrative load. So we've asked for that change to happen, whether they're general fund dollars from the income tax, or whether they're other kinds of fees and dollars, and I think that kind of efficiency should happen in every part of state government. (Interviewer) There aren't any constitutional problems with that kind of thing are there? Or statutory problems? (Roberts) No. You can demand efficiency in administration regardless of where the dollars come from and the Transportation Department, for instance operates on highway funds - a lot of highway funds, both gas tax, federal and state, and I don't think there's anything in the expenditures of those dollars that in any way stands in the way of our being efficient about the management level in that arena. And what that does is obviously release more dollars to build highways and put people to work in Oregon, so I think that's a good idea no matter where the dollars come from.

(Interviewer) Ok, the number is 452-4373. Let's take another call. Good evening. You're on the air with us. Can you tell us who you are and where you're from? (caller) Hello? (Interviewer) Yes, go ahead. (caller) I live in the Portland area. I know the Governor said that we don't understand the, maybe as much as other parts of Oregon, the impact of Measure 5. I'm would suggest another area that hasn't really been discussed enough and that is that I don't think all of the voters that voted for Measure 5 understood