The recession is forcing Oregon to reexamine how we raise and spend money for public services. On the revenue side, Oregon's tax system continues to suffer from tremendous volatility and instability, thanks in part to our one-of-a-kind "kicker" law and our failure to develop adequate reserves. I sponsored legislation in 2011 to redirect some of the kicker into a constitutionally-protected "rainy day" fund. This plan stalled in committee, as did every proposal to reform the kicker. I remain committed to this issue. It simply doesn't make sense for Oregon to be giving away tens of millions of dollars, largely to out-of-state companies and high-income individuals who don't need the help.
2011 did see positive changes to Oregon's tax credit structure. Tax credits can play a useful role in promoting desired activity and stimulating economic growth, but they also have a tendency to be used too readily and to outlive their usefulness. With our 2011 changes, some ineffective tax credits were allowed to expire, while others were drawn more narrowly. As a result, the state will save $368 million between now and 2017 in wasteful tax credit spending.
Another key element of putting Oregon's fiscal house in order is to reform the initiative system. Today the initiative process operates without any fiscal discipline at all; initiative petitioners can propose new programs and mandate the expenditure of public dollars without being required to propose any method of paying the costs. This "free ride" system destabilizes our budget and distorts the way we spend taxpayer dollars. In the 2011 session, I proposed an amendment to the Oregon Constitution that would require every ballot measure proposing to appropriate money to identify a revenue source. This "pay as you go" requirement would give voters critical information that they don't have today. HJR 40 did not pass that session, but we built some significant momentum for the objective of a fiscally responsible initiative system.
Finally, Oregon is taking a very hard look at the amount of money we are spending on prisons. The runaway growth in spending on incarceration since the mid-1990s has put enormous pressure on the state budget. As the economy suffers and revenues slow, we have done very little to reduce the costs in our public safety system. In July 2011, I was appointed by Governor John Kitzhaber to the Commission on Public Safety. I was joined on the Commission by Chief Justice Paul J. De Muniz, former Governor Ted Kulongoski, and three other state legislators. Our task was to review and propose changes to Oregon's sentencing laws in time for the February 2012 session.