Thank you Speaker Kotek, President Courtney and the entire Oregon Legislature for having me here today.
Let me start by taking a moment to recognize a distinguished Oregonian, a man who has served his state and his country for over five decades. Major General Raymond F. Rees will complete his third and final tour of duty as Oregon's Adjutant General in July of this year. General Rees has served with great distinction and honor, commanding our national guard, overseeing Oregon's emergency management response and serving as my homeland security advisor. General, on behalf of all Oregonians I extend to you our thanks for your outstanding service to Oregon and to the United States of America.
I also want to acknowledge and thank Jim Willis, who is retiring as director of the Oregon Department of Veterans Affairs after almost a decade of service. And to our veterans -- and to all the men and women who wear the uniform of our country -- we extend our gratitude, and especially to those serving overseas: our thoughts and prayers.
Also with us here today we have some of Oregon's finest first responders. Like all Oregonians, I was shocked and saddened by the tragic Clackamas Town Center shooting in December. We have learned from the horrifying details that if it were not for the courageous and immediate work done by local and state first responders, this incident could have been much, much worse. Please join me in recognizing Clackamas County Sheriff Craig Roberts, State Police Superintendent Rich Evans, State Fire Marshal Mark Wallace, and Fairview Police Department Chief Ken Johnson, President of the Oregon Association of Chiefs of Police.
There are not words to express my sorrow for the families who lost loved ones, their friends and the broader community impacted by this tragedy, a sorrow that extends to the people of Newtown, Connecticut. Please join me in taking a moment of silence for the victims of gun violence everywhere -- and a prayer that, together, we can lift this stain from our land.
Today we welcome Oregon's 77th Legislative Assembly, and I am reminded of the rich history of this institution. It's a history that winds all the way back to Champoeg in 1841 and the first conversations about the formation of a Provisional Government. In the retelling, the tendency has been to elevate certain dates and events, creating a narrative -- however incomplete -- for Oregonians, as Oregonians. From statehood in 1859, to the Progressive Era and the creation of our initiative and referendum system at the turn of the 20th century, to more recent legislative history, like the oft-told stories about the Bottle Bill and the birth of land use planning -- these have been touchstones that help define this state and our image of ourselves.
Much has been said and written about our state's record of landmark legislation, but too little about the legislators behind it. Because the real history of this body and the true strength of this institution is that for more than 150 years, this has been a place of citizen legislators. This is the people's institution, and it has represented well the hopes and dreams, the priorities, and yes, the prejudices, of Oregonians.
The very first Legislative Assembly was a group of ranchers, shop owners, and farmers -- so many farmers, in fact, that the very timing of the sessions was influenced by harvest schedules. Those early citizen legislators did not check their day jobs at the door. And it has been the same ever since.
Betty Roberts was one such Oregon pioneer, relying on her own experience to guide her and using her time in the Oregon House and Senate to champion equal rights for women.
As the Oregonian's Susan Nielsen wrote in a tribute after Betty's death: "She tackled everything, large and small: the ability to keep one's name, the power to make financial decisions without a man's permission, the option to escape an abusive marriage -- and yes, the right to reproductive choice."
Another pioneer was Representative Paul Hanneman, who served for 13 consecutive terms -- 26 years. It is not possible to fully understand the history of the Bottle Bill and the motivation for its passage without knowing the story of Hanneman and his constituent, Richard Chambers (the father of Representative Vicki Berger). They spent fours years fighting for the bill's passage. Hanneman, a Dory Fisherman, brought Tillamook County with him when he came to this building, and Oregon is the better for it.
The giants of this institution, the heroes, have been those who caucused as Democrats or Republicans, but legislated as Oregonians. Astoria and Pendleton and Ashland and Portland were in their bones, but Oregon was in their hearts.
The 77th Oregon Legislative Assembly has that potential. You are farmers and ranchers and small business owners. You are educators and caregivers -- doctors and dentists, teachers and librarians. You are parents and you are retirees, from law enforcement and fire fighting and the military, and your unique experiences and wisdom are critical to tackling the challenges we face in getting Oregonians back to work and strengthening our communities.
The state of our state is strong in large part due to the courage and commitment of its citizen legislators. You defy cynicism -- all too common today -- about a government somehow divorced from its people.
And more than at any other time in Oregon history, this Legislative Assembly lives up to the ideal of being representative of all Oregonians. That's not a guarantee of perfection, and it certainly is not a guarantee of agreement, but it does ensure a debate more inclusive of the diverse voices and needs of communities across the state. Do not underestimate the significance of this body continuing to look more and more like the state and the people you represent.
When I was Senate President, I often drew inspiration from John F. Kennedy, who said, "Where nature makes natural allies of us all, we can demonstrate that beneficial relations are possible even with those with whom we most deeply disagree."
Over the past two years, you have shown that it's not only possible to disagree agreeably, it's also possible to move beyond what divides us and build instead on what unites us: a shared vision of a strong middle class, equal opportunity for every Oregonian in every community in the state, good schools and good jobs and a government that is fiscally disciplined and efficient.
With this common vision, we have made much progress on behalf of Oregonians. It was just two years ago that our state faced a $3.5 billion revenue shortfall, double-digit unemployment, and an uncertain future. And here at the Capitol, we faced a divided Legislature, prompting many to say that any significant progress was unlikely.
But then we discovered that our divided Legislature wasn't that divided after all.
Setting an example for the nation, members from both parties, and from both chambers, came together and did not shy away from the hard decisions necessary to set Oregon's economy on an upward trajectory. We erased one of the largest per capita budget deficits in the nation with civility, not rancor; with bipartisanship, not gridlock --and we did it with a balanced budget that was built on priorities, not programs.
Reforms in education and health care -- and key investments in innovation -- embody the change necessary to accelerate Oregon's economic recovery and restore our shared prosperity.
Today -- compared to where we were two years ago -- Oregon is clearly on the right track. We have gone from a $3.5 billion budget deficit in January 2011 to a balanced budget today and improved our state credit rating from AA to AA+. We have cut our unemployment rate more that two points and created nearly 40,000 jobs while being home to the second fastest growing economy in the nation.
We have come a long way since 2011, and we should celebrate our progress because we did it together, and it did not come easy. But at the same time we must acknowledge that in spite of our efforts we are still leaving far too many of our fellow Oregonians behind.
Our great challenge is to ensure that the next phase of Oregon's economic "recovery" reaches all Oregonians and ends the income stagnation that continues to erode the middle class, exacerbates inequality, and for the first time threatens a generation of Oregonians with the prospect of a declining standard of living.
We cannot settle for an uneven, unequal and hesitant "recovery." The word "recovery" loses any useful meaning if it describes a state where the Portland metro area returns to pre-recession employment levels, while much of rural Oregon continues to suffer the economic and social consequences of double-digit unemployment, outdated infrastructure and an aging workforce. The word "recovery" is warped if it is used at a time when the unemployment rate for white Oregonians is falling, but for African Americans and Latino Oregonians it continues to rise. The word "recovery" is the wrong word to use for a state with a 24 percent child poverty rate.
We still have much work to do. Oregon will not be a great place for any of us to live until it is a great place for all of us to live.
There may be no quick fix, but you can be sure there can only be a fix with an intentional strategy that is not limited to getting Oregonians back to work. It must also include raising per capita income and reducing poverty in all communities in Oregon. This is the legislative session to ask and answer the tough questions about what it will take to deliver that
* How do we ensure more of the jobs created in Oregon are living wage jobs?
* And how do we get more of those jobs in rural communities?
* What will it take to put people in poverty on a path to living wage jobs?
* How can the state help to eliminate barriers to growth and success for our homegrown small businesses?
* How do we better align our fragmented workforce training programs to deliver better results for more Oregonians and better meet the needs of expanding businesses?
The Oregon Business Plan, which has guided our work over the past two years, is built on three pillars: creating 25,ooo jobs per year through 2020; raising Oregon's personal income levels above the national average by 2020; and reducing Oregon's poverty rate to 10 percent by 2020. These three pillars recognize that private sector job creation is the foundation of an enduring prosperity -- but they also recognize that prosperity must lift people in every community in every corner of our state; and that without reducing poverty, all Oregonians will not have their shot at the American Dream.
And that means that over the next two years, our commitment to these second two pillars must be no less than our commitment to the first.
Far too many Oregonians continue to struggle with unemployment, debt and the rising cost of health care. That is the urgency you bring with you to the 77th Legislative Assembly. And that sense of urgency is at the core of the budget I sent you last month -- a budget that reflects the priorities that have guided us over the past two years: putting children, families and education first; investing in jobs and innovation; and reducing the cost of government. It is also a budget built on the assumption that even with constrained resources, we cannot wait to begin reinvesting in children, in families and in education.
When I first came to the Legislature in 1979, kids could drop out of Roseburg High School in the 10th or 11th grade and get jobs in the woods and the mills with good wages and benefits. Those days are long gone -- and over the past few decades, the economic benefits of education have steadily grown. In 1979, the average college graduate made 38 percent more than the average high school graduate. Now, the average college graduate makes over 75 percent more. And more than 60 percent of the jobs in the next decade will require at least a technical certificate or associates degree -- yet only 67 percent of our students are graduating from high school, taking them off the path to economic security.
If, as I believe, it is the promise of equal opportunity that lies at the heart of the American Dream -- the promise of upward mobility; the promise that if you work hard you can build a better life for yourself and your family; the promise that each subsequent generation will be better off than the last one -- then public education is the vehicle through which the American Dream is most directly fulfilled today.
Although we have made huge progress -- moving toward a seamless integrated educational system from early childhood through college and career -- we've not yet had the resources to seriously invest in our 40-40-20 goals. It is clear to me that the entire enterprise of public education is underfunded at all levels. And it's also clear that we can't meet our 40-40-20 goals without a significant reinvestment of resources into the classroom.
To make that happen, a couple of things are required. In the long term, we need comprehensive reform of Oregon's system of public finance. That's going to take time, it's going to take a strategic approach, it's going to take discipline -- and over the past eight months, we have begun to build the coalitions and the infrastructure necessary to make that happen.
But we can't wait for comprehensive revenue reform to begin to reinvest in the classroom if we hope to achieve the educational and economic goals we have set for our state. It will not be an easy task but it is an urgent one. We may have succeeded in erasing our budget deficit, but we continue to face severe fiscal constraints -- which means we need to make room in our current budget to being reinvesting in the classroom and other in other crucial public services today.
I am prepared to stand with you in making the difficult choices that will be necessary to do so, which include: reducing the cost of health care and corrections; reducing the cost drivers that are diverting resources from the classroom; and undertaking serious review of Oregon' tax expenditures.
Let me start with health care, which is perhaps the fastest growing cost for individuals, families, businesses and state government. The new care model being developed by our Coordinated Care Organizations is projected to hold medical inflation in the Medicaid program to 3.4 percent starting in the second year of this biennium. That will save $100 million in the general fund in 2013-15; nearly $200 million in the 2015-17 biennium and $400 million the following biennium. In other words, the delta created by holding medical inflation constant creates a huge and growing opportunity for reinvestment as we go forward.
Therefore, our long-term ability to reinvest in public education depends to a large extent on our success in proving up this care model in the next biennium and then to extend it into the private market. If, for example, we could move public school teachers and state employees into the same kind of high quality, low cost care model being developed by our CCOs, the estimated ten year state savings could be as much as $5 billion. This would be a game changer for state finances and could lead to a huge competitive advantage for Oregon businesses both large and small.
Corrections is the second area where cost reduction is both needed and possible. Along with the cost of health care, the relentless growth in the Department of Corrections is one of the major reasons we cannot adequately invest in education; or in community corrections and other proven crime prevention measures at the local level.
It cost $10,000 a year to keep a child in school but $30,000 a year to keep someone in prison. Our prison forecast predicts the need to build 2,300 new beds over the next decade at a cost of $600 million -- and that most of those beds will be occupied by non-violent offenders. And the fact is that this $600 million -- if spent on public education -- would keep hundreds of people out of the criminal justice system in the first place.
That is why Oregonians deserve the careful and objective consideration of the policy options forwarded by the Public Safety Commission to keep our communities safe while reducing the cost of corrections. There is an opportunity here to find alternative and effective ways to sanction non-violent offenders, invest in proven crime prevention and community corrections strategies instead of additional prison beds.
I recognize that the politics around public safety reform are often difficult -- the fear of being labeled "soft on crime" in the next election cycle. But I am asking you to find the courage and the honesty to recognize that if are unwilling act on this issue we will, by default, be choosing prisons over schools and condemning untold numbers of today's students to a future in our system of corrections rather than in our system of postsecondary education. We can do better -- and the need has never been greater for the thoughtful deliberation of citizen legislators.
Let me turn now to the need to reduce the cost drivers that are diverting resources from the classroom. I am well aware that my proposal to cap the cost of living adjustment for PERS retirees is controversial. At the same time, however, if we are serious about reinvesting in the classroom, we cannot ignore the fact that the crisis in school funding -- as well as the crisis in funding things like child protective services and home health care -- is not jus a revenue problem: it has also become a cost problem.
In this next biennium, the cost of primary and secondary education is going to increase by more that $1000 per student. Half of that $1000 --$500 per student -- is accounted for by the increased cost of PERS alone; salary and other benefits account for another $430 per student. In short, we are faced with a situation in which we are going to increase our per pupil expenditure by $1000, and yet for this huge investment we will not see a reduction in average class size; we will not see the restoration of lost school days; and we will not be adding back programs like the arts or vocational studies.
Let me be clear: this is not about the value of our teachers. It is not about the value of our public employees. It is also not about a major overhaul of a retirement system that continues to be one of the best funded in the nation. It is simply about trying to have a conversation that allows us to strike a balance between the cost of our retirement system and our ability to put dollars in the classroom today to ensure that our students are successful tomorrow.
Like public safety, this issue, too, needs thoughtful deliberation by citizen legislators.
Finally, with regard to tax expenditures, I am prepared to work with you to pursue opportunities to boost revenue. It is easy to aggregate the billions of tax dollars now going out in credits, incentives and deductions. It is more difficult to find opportunities for significant revenue. However, I think a compelling case can be made to reconsider and reassess the policies of the past in light of current fiscal realities and the need to make a significant reinvestment in public education and in other crucial public services. I would include the Senior Medical Deduction; the level of state deductibility of federal Schedule A income; and the possibility of capping total deductions and credits as areas worth further discussion.
Again, this is yet another issue that can benefit from the thoughtful deliberation of citizen legislators.
It will take all of us working together to reinvest in education, create jobs today while positioning Oregon to be more competitive in the global economy of the 21st century. It will take all of us working together to drive the state's per capita income back up above the national average. And it will take all of us working together to erase the troubling income disparities, which have existed for far too long in our communities of color and between our urban and rural communities.
Which brings me back to where we began: the simple premise that everyone in the state deserves their shot at that vision of Oregon we all share: a state with a commitment to equity and opportunity for all, with secure jobs with upward income mobility, and with safe, secure communities where people have a sense of common purpose and commitment to one another.
The same common purpose and commitment we see here in this building; and in this chamber today. And that should give us hope. In the words of Wallace Stegner:
"One cannot be pessimistic about the West. This is still the native home of hope. When it fully learns that cooperation, not rugged individualism, is the quality that most characterizes and preserves it, then it will have achieved itself and outlived its origins. Then it has a chance to create a society to match its scenery."
Here in Oregon, our Legislature -- the men and women gathered together in this chamber today --is living proof that cooperation is the quality that best characterizes us; and that through cooperation, through trusting and relying on one another; and through hope, we can we "create a society to match our scenery."
It's easy, I think, for hope to fade when confronted with the list of all we have yet to accomplish. So for all of you in this grand room, and to people throughout our state, I want to leave you with this story. It's a story that I think offers perspective -- both on how far we've come, but also on how far we still have to go.
When I was in Coos Bay last November at the Annual Government to Government Summit between the State of Oregon and our nine federally recognized tribes, Diane Teaman from the Burns Paiute Tribe rose to speak. Now, the Burns Paiute is a relatively poor tribe in some ways they don't have the wealth of the Grand Ronde or the land base of the Warm Springs. But they have something else
Diane told the story of her grandmother -- then a pre-teen--who, after the Bannock war of 1878, was marched to Fort Boise, and then more than 300 miles to a reservation in Yakima. Shortly thereafter, she and another young girl escaped, swam the Columbia River, and made it another 300 miles back to Burns. It was there, where they no longer had any land or any resource, that they began to rebuild their tribe, and it is where Diane lives today.
Diane said that when she looks out at the other tribes that are better off than the Burns Paiute, she is not envious. She remembers her grandmother and thinks: look how far we have come.
There is a lesson here for us -- and for our state. It was a long hard path from January 2011 to here, and a difficult and challenging road stretches out before us. So let us leave this place today -- committed to partnership and a shared vision -- so that when we gather together again in this chamber two years from now we can say once again: look how far we've come.