Statesman Journal

Will Oregon face a $1.4 billion deficit? It depends.

State agencies submitting budget requests for the next biennium are facing the challenge of planning for both growth and cutbacks, according to George Naughton, Oregon's chief financial officer and acting chief operating officer.

He said the state may face a $1.4 billion discretionary spending deficit in the next biennium — give or take $500 million. Officials have said that whether cuts occur depends in part on if voters approve a new corporate tax.

As acting COO, Naughton is the governor's primary state government manager. He sat for a wide-ranging interview last week with the Statesman Journal at the Executive Building in downtown Salem.

Expenditures are rising in part because Oregon's expanding population means higher demand on state services. Also boosting costs by billions are an Oregon Supreme Court decision limiting cuts to public pension benefits and the state paying an increasing share for Affordable Care Act services.

The corporate tax measure on the ballot is called Initiative Petition 28, and would create a 2.5 percent tax on corporate sales exceeding $25 million.

The tax would raise an estimated $6 billion in revenue each biennium, according to estimates from the Legislative Revenue Office. That's more than enough for agencies to hire new employees, expand programs or create new ones.

Along with submitting budget requests in August and September, agencies produce "reduction options" outlining their service levels under a hypothetical 10 percent budget cut, Naughton said.

Those plans are sent through Naughton's agency, the Department of Administrative Services, to Gov. Kate Brown, who will release a proposed balanced budget on Dec. 1. The state Legislature approves the final budget.

This budget is unfolding like all others; agencies always plan for expansion and cuts, creating wish lists for what to fund if new revenue is found, along with who and what to slash if cuts are necessary.

Yet this cycle is different because the possible growth or cuts are at further extremes than usual, said Naughton.

Naughton has worked with the state budget for 20 years, at first in health care policy, and was promoted to CFO by Gov. Ted Kulongoski in 2006. He became acting COO and DAS director in March 2015, when DAS Director Michael Jordan abruptly resigned amid questions about the agency's handling of Gov. John Kitzhaber's private email server.

As Naughton assumed the CFO and COO roles, Clyde Saiki, a long-time state administrator, was tapped by Brown to lead DAS. Saiki took over for two months until Brown reassigned him as acting director to the struggling state Department of Human Services. (Saiki has since been confirmed by the Senate as the permanent head of DHS.)

Naughton went back to being COO and CFO. He hasn't been shy about his desire to serve exclusively as CFO following the November election. In the meantime, there is much to be done.

As acting DAS director, Naughton has a hand in much of state business. Along with the budget, DAS handles state procurement, IT and data security, asset management, bond administration, HR and labor relations, real estate, risk management and more.

Naughton chairs biweekly meetings of the Enterprise Leadership Team, a group of 20 or so state agency directors or chiefs of staff. The group started meeting several years ago to talk about state government and encourage cross-agency communication. Naughton said it's working, albeit slowly.

Similarly, the state — which is "probably behind the curve" in its use of technology, according to Naughton — is modernizing computer systems to communicate with each other, he said. Major state computer systems, like those that handle accounting, taxation and human resources, are being updated from decades old technologies.

As for Brown, who is seeking reelection for the first time, Naughton said he's known the governor for years and praised her affable demeanor.

"When you spend time with Gov. Brown you really get the impression that she cares about you as a person," he said.

Naughton's agency works in close concert with governors and their staffs as they make budgetary value judgments: who gets how much money, and for what.

He called the process "messy," especially when it comes to the hypothetical budget cuts. "It's always a painful process. Every agency hates going through it ... If it's your job that's on that hypothetical list, it's very unnerving for folks," he said.

Oregon's economic forecast looks good, Naughton said. But the state's revenue is more volatile than elsewhere because of its reliance on income taxes, which can reflect tumult in the markets.

Naughton said analysts will have a better idea of the true budget situation when revenue forecasts are released in September and November.

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Oregon Hospitals Report Lower Infection Rates

Oregon hospitals outperformed the national average in preventing health care-acquired infections, one of the 10 leading causes of death in the Unites States. That's according to a recent progress report from the Centers for Disease Control and Prevention.

Oregon hospitals report lower infection rates

Oregon hospitals outperformed the national average in preventing health care-acquired infections, one of the 10 leading causes of death in the Unites States. That's according to a recent progress report from the Centers for Disease Control and Prevention.

The progress report, which was published on March 3 and contains 2014 national data, showed the rates for every listed type of health care-acquired infection. Health care-acquired infections are preventable infections contracted by patients receiving treatment in a medical facility. The number of reporting hospitals varied, depending on the type of infection. Between 44 and 58 Oregon hospitals reported their infection rates to the CDC.

According to the report, rates for potentially deadly MRSA infections at Oregon hospitals were 35 percent lower than the national average. Hospital-onset C.diff infections were over a quarter lower than the national baseline. Surgical site infection rates from procedures like hysterectomies and colon surgeries were also below the national average.

Many infections, such as catheter-associated UTIs, were not only below the national rate, they were lower year-over-year at hospitals statewide.

Despite being 52 percent lower than the national average, bloodstream infections from central venous catheters at Oregon hospitals increased 40 percent from 2013 to 2014.

According to the CDC, health care acquired infections cost Americans upwards of $33 billion a year. Oregon is one of 10 state health departments participating in a CDC program which allows for increased surveillance and research of healthcare-acquired infection contraction, prevention and treatment.

"Health care-acquired infections are serious and harmful to patients. They are also preventable," Diane Waldo, associate vice president of quality and clinical services for the Oregon Association of Hospitals and Health Systems, said in a statement. "This report shows how hospitals are committed to patient safety as demonstrated by their effort to improve outcomes. Hospitals will continue to work closely with all partners on the health care team, including patients and families, to make hospitals a safe place to receive care. The goal is to eliminate hospital and health care-acquired infections entirely."

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Forecast: Oregon revenue on the rise, but outlook uncertain

The State of Oregon's revenue is growing, according to the most recent forecast, but the future is still uncertain.

Gov. Kate Brown called the forecast "more than a number," but rather a measure of Oregon's ability to support essential services and businesses.

"While the forecast is stable through this biennium," she said, "I am watching carefully to make sure we are able to respond nimbly and appropriately should the landscape change."

General Fund revenue is forecast to be $31 million larger this biennium, according to the Office of Economic Analysis.

Personal income taxes, the main source of revenue for the General Fund, have remained steady with predictions. Corporate tax collection has been bullish, rising from $450 million collected each year to $650 million — their pre-recession levels.

It's expected corporate taxes will generate a kicker amount of nearly $35 million.

State forecasters said economic volatility injects risk into the calculations. Oregon's revenue depends on personal income taxes tied to capital gains, which are risky because of the unpredictable nature of investors, according to the OEA report.

Senate President Peter Courtney said it's good that the revenue forecast is up, but that challenges may lie ahead.

"We can’t afford to take our eyes off the ball. Things can change quickly," he said.

House Republican Leader Rep. Mike McLanesaid the state should approach the numbers with "cautious optimism."

"While our state’s economy continues to expand, it’s now doing so at a slower rate. And with key economic indicators warning of potential problems ahead, the prospects of continued growth are anything but certain," McLane said.

The next revenue forecast will be released by the Office of Economic during the February legislative session.

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Most voters want GMO food labels, poll finds

A majority of American voters support mandatory labeling of food containing genetically engineered ingredients, a new national poll commissioned by labeling supporters shows.

Eighty-nine percent of the 800 voters surveyed last month said they support mandatory labeling. Six percent said they oppose such a requirement, while the remainder said they do not have an opinion.

The poll comes as some Congressional lawmakers are pushing to add a provision to the omnibus spending bill that would block states from implementing their own GMO labeling requirements.

It also comes less than two weeks after the U.S. Food and Drug Administration approved the sale of unlabeled genetically engineered salmon.

The poll was commissioned by Environmental Working Group, Consumers Union, Food and Water Watch, Friends of the Earth and Center for Food Safety.

“This is yet another poll that shows broad and deep support for clear GMO labeling at a time when the issue is more important than ever,” said Scott Faber, executive director of Just Label It. “Food manufacturers and lawmakers should work together to give Americans a more transparent food system by crafting a non-judgmental, mandatory GMO labeling system that is easily found on the packaging.”

The poll also asked voters whether they would choose GMO labels printed on the package, or bar codes or QR codes that could be scanned with a smartphone, as suggested by U.S. Secretary of Agriculture Tom Vilsack.

Consumer and environmental groups say scannable codes discriminate against those who can’t afford smartphones or live in areas without reliable cellphone service.

“QR code labeling discriminates against the poor, minorities, rural populations and the elderly. They are a completely unacceptable substitute for clear, concisely worded on-package labeling,” said Andrew Kimbrell, executive director of Center for Food Safety. “The right to know is a right for all, not just those who can afford it.”

Eighty-eight percent of poll respondents said they preferred printed labels, while 8 percent preferred scannable bar codes.

The groups also raise the concern that food manufacturers could gather information about customers, such as their location and product choices, when they scan food packages.

Eighty-two percent of poll respondents said such data collection should be prohibited.

Washington, D.C.-based pollster The Mellman Group conducted telephone interviews Nov. 16-19. The poll has a margin of error of plus or minus 3.5 percent at a 95-percent level of confidence.

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Lobbying spending is up. Where does the money go?

The money companies and organizations spent on lobbying in Oregon jumped by more than 50 percent compared with this time last year. Since 2010, lobbying spending has increased by more than 94 percent.

But some lobbyists say despite the spending and public opinion of their profession, it’s more innocent than it seems. And, both sides of nearly every issue have representatives lobbying politicians.

“Everybody has representation in Salem for almost any conceivable interest or business,” said Paul Cosgrove, a lobbyist and head of government relations at Lindsay Hart, a Portland law firm.

Quarterly data from the Oregon Government Ethics Commission shows $20.8 million has been spent on lobbying activities so far in 2015. Half way through 2014, $13.7 million had been spent, but $26.8 million was spent by the end of 2014.

Lobbyists and the organizations they represent are required to register with the Oregon Government Ethics Commission. The commission collects the total amount spent by lobbyists and their clients, although the state “does not require any detail as to what that total contains” according to Government Ethics Commission program manager Virginia Lutz.

“I don’t think anybody would call it itemized,” said Gary Conkling, lobbyist and co-founder of CFM Communications, a strategic communications firm.

Brian Doherty, a lobbyist who represents the Western States Petroleum Association, BP America, Obsidian Renewables and Amazon, said lobbying money is spent on a litany of day-to-day government relations activities. Doherty’s clients have spent more than $330,000 on lobbying so far in 2015.

Most of the expenditure is payroll, Doherty said. But it also goes towards researching legislation, finding experts to testify on those bills and media campaigns that help shape public opinion about a client’s interests.

“Think of it as billable time,” Conkling said. He said other than payroll, most of a client’s expenses are on daily administrative needs like parking or printing at the Capitol. But it wasn’t always that way.

“It’s not so much that you’re hanging out in the bars with legislators, but back in the day when I started that was pretty typical.”

Conkling said that now lobbyists are tied into technology and servicing their clients almost 24 hours a day. When the legislature is in session, they’re spread thin.

Much of a lobbyist’s time is spent figuring out which bills will have the biggest effect — positive or negative — on their client and discerning where votes stand on those bills. Lobbyists then speak with coalition groups, committees, legislators and their aids to voice their position on a bill’s language (and sometimes attempt to change it to reflect the client’s interest) or to rally a group to look at voting one way or another.

According to Doherty, lobbying is about communication, not favors or hand outs.

“I can’t remember the last time I bought a legislator anything,” he said. “There’s no Blazers tickets or big treats.”

Doherty has no reported personal spending this year, according to expenditure reports from the Oregon Governmental Ethics Commission.

Conkling said the rules have changed for the better since he began working as a lobbyist.

“Many years ago I actually had personal Blazers tickets, and when legislators were able to accept invitations to dinner and a game I did take them,” Conkling said. “But the legislature changed those rules, and as a general rule we don’t entertain legislators at all.” He also does not have any personal lobbying spending reported this year.

Now, when a legislator meets with a lobbyist for a meal, they pay separately.

“It seems awkward. It’s like a bad date, but those are the rules,” Conkling said.

Although the legislature has reformed what lobbyists can spend on, total spending is still up. One theory as to why is that this year’s longer legislative session may have meant more spending just because of payroll.

“The length of the session compared to short sessions obviously makes a difference just in terms of bills considered,” Cosgrove said.

The data show longer sessions tend to coincide with more spending. In 2013, a long session, $20.1 million had been spent by the end of quarter two and $33.9 million by the end of the year.

On the other hand, Doherty said, regardless of its length, this legislative session was especially contentious and the “seriousness of the issues” may have prompted increased spending. “We’re spending more now because we’re getting into business issues,” he said.

“I would attribute the rise in overall cost to the number of the players, the intensity of working out some of these issues and for that matter the complexity of the issues themselves,” Conkling said. “I would look to those things more than the length of the session.”

Cosgrove agreed, and said because there’s more lobbyists in Salem, spending will naturally rise.

Conkling also said as time has gone on and there are more lobbyists, one thing has been central to his work: integrity.

“I can tell you when I first started, things were a little more slippery than they are today,” Conkling said.

“If a lobbyist is found to have misspoken, let alone lied, and I distinguish that one might be accidental and the other intentional, they’ve lost all their credibility,” Cosgrove said, adding that most ethics complaints at the Capitol are filed by lobbyists, not politicians.

“The thing is, the public doesn’t have a very high opinion of lobbying regardless of what the reality is, and we care enough about what we do that if someone steps over the line they’re taught that won’t work and that’s not acceptable.”

To him, the whole point of lobbying is to develop a sense of trust when it comes to information. Lobbyists are essential when it comes to informing legislators on the hundreds of bills they vote on — without that, he said the system simply wouldn’t work.

“More often than not, they’d be making decisions in a vacuum,” Cosgrove said.

Conkling said the Oregon lobby has respect for the state’s political institutions and that even divisive political disagreements have generally been handled with tact.

“We fight hard, but everything tended to fight fair,” he said.

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