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Where Public Policy and Small Business Meet
Every time we have to choose between options, we face a decision-making point between immediate gratification and long-term consequences. For example, buying the cheaper printer with the more expensive ink cartridges or eating that treat that you know will add bulges to where you want them least. There is a dedicated part of our brain (the frontal cortex) devoted to making choices and recognizing the consequences of our actions. However, the frontal cortex does not inherently distinguish between short and long-term consequences. That is a learned behavior.
We, as a country, are beginning to factor the impact of our choices on global climate change. Individuals may choose to walk or bike rather than drive or to bring a reusable bag to the grocery store. Large organizations, including both businesses and governments, are choosing to purchase energy from renewable sources and purchase products with recycled content. Analysts are refining methodologies that allow us to quantitatively compare short and longer term costs. These methodologies are variously called Life Cycle Costing or Life Cycle Analysis, but the concept is the same regardless of what it is called. (you can see some of City of Portland’s life cycle costing policies here).
I find it surprising how infrequently these same methodologies are applied to funding the public sector. As a public budget wonk, I have heard the same conversation repeated every year since I took my first budget and finance class in 1995. The year is important because I have only watched the budget process in a post-Measure 5 Oregon. A typical conversation begins with an explanation of how funding scheduled preventive maintenance is much more cost-effective than emergency repairs or replacement. Or that schools need adequate funding that includes education in the arts in order to produce a skilled workforce for the future. The vast majority of politicians understand this argument, and try to sell it to their constituency. All too often, citizens only consider the short term and complain about wasteful spending.
In Oregon and California, voters have tried to reign in public spending through tax abatement ballot measures. It took a couple of decades, but now education and public infrastructure are so badly deteriorated that they require impossibly large budgets to correct. California’s Proposition 13, the progenitor of Measures 5, 47 and 50 in Oregon, has placed the 8th largest economy in the world on the verge of bankruptcy, and forced them to pay their creditors with IOU’s. I am not the only one who has connected the dots, so has Peter Aldous in New Scientist:
…the pernicious effects of Proposition 13, passed in 1978. A populist constitutional amendment that capped property taxes, it has created a hole in state finances that gaped wide this year as recession bit into tax revenues. By limiting local school boards’ ability to raise funds from property taxes, it also turned a public education system that once led the nation into one of the worst in the US.
Just as Proposition 13 destroyed California’s exemplary public K-12 and higher education system, Measure 5 destroyed what was once an excellent public K-12 system in Portland.
We need to take a deep breath and remember that government’s role is one of stewardship. Government is supposed to function as our frontal cortex and consider the long-term consequences when expending public resources. It is not sound fiscal management to circumvent the process and manage tax policy through citizen initiatives and referenda. Our role as citizens is to actively engage with our government and elect people we trust because we are the primary check on the system. Those that complain about inept or corrupt politicians should take action with their votes. That is the core of democracy.
We should use California’s fiscal crisis as an object lesson and consider both the long and short term implications of tax reform. Change won’t happen overnight, but it can happen over time. Just as we have started down the road to reduce the impact of global climate change, we can apply the same strategies to adequately funding our public infrastructure.