Monday, August 31, 2009

a budget neutral economic stimulus for Oregon

I've been meaning to write this post for a couple of days now since the State of Oregon Economist Tom Potiowsky issued his report on the state of the Oregon economy on Thursday indicating that recovery may be particularly slow in Oregon.  Collins, Snowe, Specter, and Nelson put States in a real bind by negotiating a lot of the aid to States out of the stimulus bill back in February.  This put States in the position of having to cut spending or increase taxes in order to balance their books, creating what Krugman termed, "the problem of the 50 Herbert Hoovers."  The road to full recovery is likely to be slow to begin with, and if Oregon lags behind the rest of the nation, it could be an awfully tough road back.  It seems that while a second stimulus would be very useful from the federal level, a State-level stimulus package in Oregon would be particularly useful, but there's no way it can happen given Oregon's budgetary situation.  That's why I was taken with an idea I originally bumped into in the the Washington Monthly about a month ago of taxing College Endowments as an economic stimulus (I for the life of me can't seem to find this post).  The point being that because College Endowments have become a status symbol, they're holding on to them instead of spending them.  Last time I checked the endowment was supposed to be sort of a "rainy day fund," and if now is not a rainy day I don't know what is.  In defense of Universities, there has been a sizable dropoff in the size of endowments recently due to the fact that donors are tightening their belts.  A policy that could force Universities to spend their endowments rather than holding on to them would be very beneficial to those communities.  As a result, college endowments being currently tax free nonprofits, I propose setting a temporary tax on college endowments in the State of Oregon to force them to put some of that money into the economy, there are a number of beneficial uses that this money could be put towards.

Students-Have been hit with an enormous tuition increase this year, if Universities dedicated some of their endowment to not increasing tuition then students would both not be forced to drop out due to affordability, which is a long term positive and increases the likelihood that Universities will be able to rebuild their endowments in the future, as well as allowing those students who do stay in college to engage in more discretionary spending locally, this helps local businesses.

Infrastructure-Invest in new buildings and/or more maintenance on campus, this allows plumbers, carpenters, drywallers... to stay in business, keeping unemployment down and leading to more local spending.

General Operations-Kill all spending freezes and layoffs, keeps people employed and allows departments to operate as they did two years ago, once again (are we noticing a theme here?) this means more spending in the local economy by not forcing academic departments to do things like not using any more paper, and keeping people employed.

The circumstances surrounding the money reserved in college endowments is a tricky issue, and some of that money can't be spent.  Without a thorough study of the status of endowments in Oregon I can't speculate on how much they can actually start spending in the near future, but any policy that forces them to spend more seems to me like it would be a good idea.  The following are the total amount of the endowments for Oregon Colleges and Universities, so we can imagine what 1/2 or 1/4 of that put into the local economy would do for Portland, Corvallis, Eugene, or Salem.  And the best part is, its not only budget neutral, but budget enhancing, as the State gets a chunk of whatever doesn't get spent.

University of Oregon-$498 million
Oregon State University-$476 million
Willamette University-$283 million
Lewis and Clark College-$231 million
University of Portland-$95 million
Linfield College-$71 million
Portland State University-$47 million
Southern Oregon University-$20 million
Western Oregon University-$10 million
Eastern Oregon University-$3 million
*list not based on who has the biggest endowments, but who I thought about

That's a lot of money out there that could be boosting the economy and is instead sitting in a bank account somewhere, there are very good ways it could be spent to help students, faculty, and the university itself.  Any policy that gets them to spend a chunk of that is a net good, tax them for this year (and this year only) and see what they decide to use rather than give back to the State, and what they do give back to the State helps prevent cuts to education, infrastructure, or the Oregon Health Plan.

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