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Oregon Policy - Making the Poor Even Poorer
Part 1: The Lottery
By Jacob Vandever
The lottery may create a few instant millionaires, but mostly it makes the poor even poorer.
Nationally, Americans spend over $70 billion a year on lottery tickets, the majority going to scratch-off tickets. While only a handful of states allow video lottery machines, Oregon included, those additional sales pump up the lottery total to around $80 billion nationally. In Oregon's Legislatively Adopted Budget for 2017-2019, more than $1.07 billion is allocated from the Lottery Fund.
Clearly, the state lottery is a big moneymaker for Oregon. No politician is going to scoff at another $500 million a year to spend on things like public education, economic development or parks. Most Oregonians would likely agree those are worthwhile areas to invest. But what is the cost to society?
Studies in other states such as Texas, South Carolina and Connecticut show that the average person playing instant lottery games is someone making below average income. The numbers reported by the Oregon Lottery do not provide a completely clear picture of the income of lottery participants, because 23 percent of them either didn't know or refused to report their income levels. But we do know that in 2015 the largest segment of lottery players -- 29 percent -- had incomes between $15,000 and $49,000. And a full 9 percent of lottery players have incomes less than $15,000.
Of the 77 percent of lottery participants whose incomes we know, about half have incomes less than the median household income in Oregon. The frequency at which lottery players at different incomes participate was not reported by the Oregon lottery, but if trends in other states are followed it is likely that a greater portion of Oregon lottery revenues are coming out of the pockets of low income households and individuals.
Studies have shown lower income households spend more money annually on lottery than their counterparts in higher income households. While a prize of several thousand dollars can be a great boon for folks of average or above average incomes, for those barely getting by, that amount of money can be life-changing. Those who need money the most are the ones with the highest level of interest in state lotteries, despite the fact that their odds of winning are minuscule. Additionally, when a middle or high income person plays the lottery they are doing so with a much smaller portion of their income, so they can afford to lose in ways that the poor cannot.
One study from 1999 even showed that households with incomes less than $10,000 spent $597 per capita on the lottery and high school dropouts spent $700. Another study showed that nationally black Americans spend almost five times more on lottery tickets than white Americans.
Lottery machines are mostly absent in the fancy restaurants and lounges frequented by the rich and famous, but video lottery machines take up disproportionate space in almost every little bar or tavern where working-class Joes go to blow off steam after work. Scratch-off tickets are widely available in corner stores and gas stations all across the state, even in some of the most impoverished areas, both rural and urban. The lottery's ubiquitous presence would be almost impossible to achieve for a non-state sanctioned enterprise.
Studies in states such as North Carolina show that lottery sales per capita are highest in some of the state's poorest counties. In Oregon, the counties with the most lottery retailers per person are:
The counties with the fewest retailers per person are:
The counties with the most lottery sales per person are:
Lottery retailers are generally more prevalent in poorer counties compared to the better off counties like Washington, which has the highest median household income, but the lowest ratio of lottery retailers to individuals. Malheur County, the county with the third highest lottery sales per person is also the county with the highest poverty rate in Oregon. Malheur County has a poverty rate of 25.5 percent, more than 10 percent higher than the average poverty rate of the state.
With massive lottery dollars coming into Oregon's coffers, and a disproportionate share coming from lower income Oregonians, the lottery is nothing more than a very effective tax on the poor.
Most states have become chronically addicted to lottery revenues. Only six states have chosen not to have lotteries: Alabama, Alaska, Hawaii, Mississippi, Nevada and Utah.
Speaking of addiction, here in Oregon we belong to an even smaller group of states who permit video lottery machines. Video lottery is known to cause even more problem gambling than other forms of lottery because of the fast pace, flashing lights and cheery sound that suck players into the machine and discourage social interaction. The vast majority of Oregon Lottery revenues come from video lottery machines.
Problem gambling created by these games can lead to a number of societal ills. Outside of the direct impact of money lost to gambling, there is also a serious problem with addiction and the things people do to feed that addiction. In January, The Oregonian reported on a bookkeeper who stole almost $70,000 from her job and gambled most of that money away. In June, The Register-Guard reported on a man who engaged in a fraudulent check-cashing scheme in order to fuel his gambling addiction.
In their article The Register-Guard wrote, "A manager at a Springfield deli told authorities that Hahm-Spencer regularly plays video poker on Oregon Lottery machines and that he is addicted to gambling, according to the affidavit. 'He spends large amounts of money,' she told detectives, 'and almost never cashes out or wins any money.'"
It is undeniable that the lottery acts as a regressive tax, taking a higher portion of income from some of the poorest Oregonians. And guess what? The Oregon Lottery has 217 "sales, marketing and retail services" employees whose job it is to keep pushing the lottery on more and more Oregonians in an effort to produce even more state revenue for Salem politicians to spend.
If a private corporation were running the kind of enterprise that inflicted the kind of disproportionate harm on the poor, the less educated and minority communities, there would be calls for more regulation, if not an outright ban. Think cigarettes or sugared sodas -- at least with those products they get something for their money. However, for all the platitudes about helping less fortunate Oregonians, many in Salem are more than happy to turn a blind eye as long as they keep getting to spend their precious lottery dollars.
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PERS 201
By Allen Alley
Oregon Public Employee Retirement System (PERS) is teetering on the brink of insolvency. The solution, quite simply, is to uphold the agreement we have with all existing employees benefits and move to a 401K type defined contribution plan for new employees. It isn't the fault of public employee union members that our elected officials lavished extraordinary unsustainable benefits on their patrons. It is our fault for allowing it to happen. If we implement a 401(k)-type system where contributions are made up front, the funds are managed, market rate returns are made, and the principal and earnings fund retirement, then we will have a simple, straightforward, fully funded and fair retirement system.
The current PERS system, Tier 1, Tier 2, and Tier 3 (aka OPSRP) is built on a foundation of a defined benefit system. That means that the government (on behalf of the taxpayers) promises to pay a certain defined benefit, a guaranteed salary for life, for every government employee.
PERS, as currently architected, makes financial promises (guaranteed lifetime incomes) to one set of people (government employees), while making investments and investment return assumptions that are insufficient to cover those promises. That, in the most basic sense, is the definition of a Ponzi scheme. Ponzi scheme perpetrators are jailed; the legislators that perpetuated this 60-year scam are reelected.
There are several myths that have been promulgated about PERS. Let's put several to rest.
Myth 1: Tier 3 (OPSRP) fixed the problem; it is self-supporting.
Tier 3 marginally lowered the defined benefit pledge from 1.67 percent to 2 percent per year of service to 1.5 percent to1.8 percent per year of service. It doesn't really matter what the pledge is -- a commitment decoupled from actual investment returns is the basis of a Ponzi scheme. It obfuscates the real liability that is created and dupes the unsuspecting victims of the scheme, the taxpayers of Oregon.
Myth 2: Tier 1 retirees are only 7 percent of the workforce so that isn't a problem.
The annual cash requirement to fund retirees, based solely on people already retired and existing employees, is forecast to rise from $4.5 billion a year today to $6.7 billion in 10 years. To put this in perspective, the entire payroll of all of the employees covered by PERS today (state, county and city employees plus police, fire and teachers) is about $10 billion. That means the current payments to existing retirees are already 45 percent of payroll. Furthermore, the $9.6 billion projected to be paid to existing retirees over the next two years is significantly more than the $8.1 billion the legislature approved for K-12 education in the two-year 2017-19 budget.
PERS is an enormous problem that needs to be addresses or it threatens the financial solvency of the state. People say, "Well, at least we aren't Illinois." If we stay on the current unsustainable trajectory, they will be saying, "Well, at least we aren't Illinois ... or Oregon."
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It's for the Children
By Eric Fruits, Ph.D.
Oregonians recently faced the bad news that the state took a step backward in reading, writing and math over the past year, according to recently released test scores. The exams are supposed to measure whether students are on track to be ready for college and the employment world. Fewer students met the standards this year, particularly in the elementary grades. No grade level showed substantial improvement from 2016.
The Oregonian reports that tech is Oregon's single most important industry, providing nearly 12 percent of all the state's wages, according to data from the Oregon Employment Department. Despite the importance of tech, roughly 60 percent of Oregon public school students fell short on their mathematics test scores.
From 2002 to 2009, Oregon graduation rates were roughly the same as the national average. Over the past seven years, however, U.S. graduation rates increased while Oregon's dropped. The latest data finds that Oregon's graduation rate is about 8 percent lower than the national average, putting us near the bottom of state rankings.
According to the National Education Association, Oregon ranks fifth in the country for the number of students per teacher, meaning the state has some of the largest class sizes. Oregon ranks 15th for average teacher pay. Add in PERS, health insurance and other benefits, and total compensation in Oregon public schools is among the highest in the country. For example, research from Portland State University finds that cost of health insurance alone ranged from $13,569 per teacher in Hillsboro to $18,713 in Lake Oswego.
Because of these high costs, Oregon can't afford to hire more teachers. Class size matters and Oregon students are paying the price.
Oregon's youth are suffering outside the classroom, too.
Unemployment for Oregonians ages 16 to 19 is more than 4 percent higher than the U.S. average.
This was not always the case. In the early 1990s, Oregon's youth had roughly the same rate of unemployment as the U.S. as a whole. Then, as Oregon's minimum wage rose relative to the federal minimum wage, Oregon's youth unemployment worsened.
It has been suggested that Oregon youth have traded education for work experience. In other words, they have opted to stay in high school or enroll in higher education instead of entering the workforce. The figure above, however, debunks the notion that education and employment are substitutes. In fact, 20 percent of students who are enrolled in school want a job, but cannot find one.
Part of the student debt problem in Oregon is really a student employment problem. Money earned while enrolled in school is money that is not getting racked up in student loans.
We need to have a serious conversation about the choices we are making as a state. The high cost of compensation in Oregon's public sector is pulling teachers out of the classrooms and hurting our students' performance and achievement. Our anti-employment policies are further hurting their chances to gain real-world work experience and save money for college. Whatever we're currently doing isn't working -- for us or for our children.
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Q & A with Tim Boyle, CEO of Columbia Sportswear
In a speech you gave to the Portland City Club in 2006, you spoke directly about our passive political culture: "Our government is what we make it. It is always easy to sit in the bleachers and complain ... We need to do more than sit in the bleachers. I have no interest in running for office. But I do believe we have an obligation to be involved, to encourage our employees to be involved in shaping our government, finding solutions, helping our city and region compete. It is not just about providing tax dollars, but about providing leadership, talent and ideas."
Do you think attitudes will change as our homeless, housing and traffic problems worsen? Ten years later, are you still counseling your employees to get involved in their community, or are they disheartened by our seemingly unsolvable problems?
Americans need to be involved, even if it's as simple as voting. Problems are solvable, if citizens work on them or vote for those who will.
How do you think Portland Mayor Ted Wheeler has performed so far, in particular on the critical and difficult issues of homelessness and traffic congestion? How much do you think the political challenges and hard left-leaning advocates in Portland impede his progress?
Some of the problems the city faces are highly complex and require time to solve. His focus is in the right places.
In our March "Q and A" Phil Knight said, "Left unchecked, PERS will just, very simply, sink the whole state." Do you think Knight is right in his assessment of the damage PERS will do to Oregon if left unchecked?
Solving the PERS issue is critical to the ongoing success of our state.
State Sen. Betsy Johnson recently said this about Gov. Brown in our newsletter: "The governor is pleasant and has enthusiasm, but she has yet to rise to the challenge of acting independently of the unions, or for that matter, her party politics." Your assessment?
With record revenues I would have expected to see record solutions to the state's issues.
This winter, you criticized President Trump for his proposed travel ban against members of seven predominantly Muslim countries. Unlike some CEOs who just painted the president in the worst light possible, your memo of criticism, though strong, was balanced.
Why do you think many in corporate America were so quick to condemn the president, however clumsy his "travel ban" order may have been, while not at least acknowledging the legitimate terrorist concerns that exist in our times?
I'm not good at opining on other's actions related to our president. I think his leadership is a joke and his actions are an embarrassment.
The U.S. economy grew by 3 percent in the second quarter, the largest gain in more than two years. In July, you told investors regarding Columbia Sportswear's 2017 second quarter financial report, "We delivered solid first half financial results featuring growth from three of our four brands and all four geographic regions. First half sales growth of 3 percent and earnings growth of 4 percent are on pace with full year expectations." Do you expect similar growth figures for the second half of 2017? How much does a vigorous American economy help Columbia Sportswear sales?
Our company has experienced its most significant growth in periods when the economy was in shambles. We have a widespread geographic footprint and significant opportunities for growth; we should challenge ourselves to grow despite current economic conditions.
On the issue of federal tax reform, the Wall Street Journal editorial page wrote this month, "House Speaker Paul Ryan has already conceded publicly that cutting the corporate tax rate to 15% from 35% is unrealistic and the rate might have to be in the 'the mid to low 20s.'" In your view, how important is cutting the federal corporate tax rate to the nation's competitive position?
While the U.S. tax policy and rates need to be globally competitive, we prefer surety of future tax policies so we can plan our business investments.
In 2015, Matt Ginella of Golf Advisor wrote that Bandon Dunes owner and founder Mike Keiser told him, "I might or might not be pursuing two new courses in Oregon," one at Camp Meriwether in Tillamook and the other the long talked about Bandon Muni. Two years later, word has it that Keiser has quietly dropped both projects because of the difficulty of doing business in Oregon. How often do you think entrepreneurs abandon business projects in Oregon because of the silent killer of government and land-use regulations? Is this an unreported Oregon epidemic?
Entrepreneurs have lots of options in where to place their bets. We were incredibly lucky that Mike found and fell in love with Bandon, Oregon. His investment in the Southern Oregon Coast has literally changed the face of that part of the state. Other areas, in other states, with equal natural beauty recognized what Mike's investment could bring to their communities and have embraced what he can do for them.
In the last few years, your company successfully introduced a number of high-tech clothing products, including the Heatzone 1000 and the OutDry Extreme Diamond rain jacket. What's your favorite technological innovation from your company's Performance Innovation Team lab?
Like trying to pick out your favorite child, all our innovations are important, but it's hard not to point out how successful Omni Heat has been.
Around the world, men and women young and old can relate to you and to Columbia Sportswear products, because they too were raised by "one tough mother." Tell us one thing you got away with in your youth that your mother never knew about.
She was, and still is, quite good at discovering secrets, but she probably didn't know I was in a singing group in high school.
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