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Thursday, May 19, 2011

Hard Times

Google has been a bit problematic the past several weeks and so I've had to hold back some comments I had intended to post.  Two posts went astray and I've yet to see them appear here.  So, I'll try to reconstruct one of the two, and will have a new one tomorrow.

It has been awhile since we chatted about HB 2456.  As you recall, this bill was heavily amended to affect only members retiring after 12/31/11.  It will remove the income tax subsidy that some of those retirees are entitled to.  The bill passed out of the House Business and Labor Committee unanimously without the required Fiscal Impact Statement. Apparently, the committee didn't feel it needed to know whether this bill would save any money or not.  Those of us with knowledge of the system and how the tax subsidy works knew that it couldn't possibly save much money.  Now, the Fiscal Impact Statement is out and has received virtually no coverage.  It is hysterical to read as it demonstrates the silliness and meanness of HB 2456.  In the 2011-13 biennium, the bill will cost almost $200,000 more to administer than the system will recover.  A new Legislative miracle - negative savings.  Even after 2011-13 when most of the sinking costs are over with, the estimates of savings are virtually nominal.  The estimates indicate net savings of about $100,000 per biennium - a true genius measure that barely recovers any money at all.

The bill sits before the House/Senate Ways and Means Committee where it will be considered any day now.  I know that members of the Legislature read this site.  Here's hoping that this bill - as badly botched a bill as can possibly be put together and that ends up being simply mean-spirited and nothing else - will be dispatched with the same haste as Osama bin Laden.  Man and woman guys of the Ways and Means Committee.  Pretend you are Seal Team 6 out to save the State of Oregon from stupidity.  I know times are hard, but surely not so hard that you would pass a bill to spend more than you save.  As a policeman on a snowy mountain pass once said to an idiot driver trying to pass a line of traffic going uphill - "get some intelligence".



Andrew said...

I'd be curious to see the assumptions that informed the fiscal impact statement. In particular, what was the basis for the projection of the number of retirees who would choose to live out of state after the enactment of the bill? Was it extrapolated from current numbers, or did it take into account the likely deterrent effect the bill would have for many who would otherwise choose to live out of state. I'm not sure how one could accurately build in assumptions about the impact of the deterrent effect without empirical studies, which I'm quite sure they didn't do. In any case, if they didn't take into account the deterrent effect, then we could expect net savings for PERS to be even less than the already negligible amount the impact statement suggests.

mrfearless47 said...

Having read the FIS it is not possible to divine the methodology used. I think it was obvious to anyone familiar with the subsidy that the initial reprogramming costs, staff time, and revenue department time would eat up all savings and then some in the first biennium. After that they seem to have assumed no further programming expenses and that the staff time and revenue time would be consistent from year to year. It is possible by my calculations that this bill will never save a dime but will lose about $100,000 per biennium. Wouldn't that be special?

mrfearless47 said...

I should probably add that the bill as revised would probably save some money, just not in the early years. This is typical for many statutory changes. The savings come after the bill has been in effect for some time. The savings are cumulative, not instantaneous.