Tough times call for smart spending

By Eric Fruits

, Jan 7, 2009, Updated Oct 30, 2009

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This is not a good time to be a state legislator.

In Oregon, state revenues are now projected to be $1 billion short of paying for existing services in the next biennial budget. At the same time, the economic downturn is putting pressure on all levels of government to hand out help to households and businesses.

The governor has pitched a package of gas and tobacco tax increases to fund road and rail projects as the state’s own “stimulus” package. Other proposals include a tax on private health insurance and hospitals to fund public health insurance and a tax on real estate transactions to fund affordable housing.

Finding places to spend money is easy. Finding funding is more difficult. Too often policymakers take a “tax it because we can” approach to funding. This approach forgets that every dollar of spending gain comes at the expense of taxpayer pain. As Oregon households and businesses see their incomes shrink over the next year or so, state and local governments will be challenged to explain to taxpayers why they should open their wallets wider for more taxes.

By adopting principles of “smart spending,” the incoming Legislature can fund valuable services and calm taxpayer jitters. The principles of this concept allow for increased spending, even in a recession. However, smart spending puts a burden on policymakers to evaluate critically benefits against burdens.

Current proposals to increase transportation funding rely on increased gas and tobacco taxes. At the same time, Oregon has set ambitious goals to reduce gasoline and tobacco consumption. Such contradictory policies, taken together, are fiscally unsustainable.

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