Oregon economic question: Do public works work?
By RYAN KOST
The Associated Press
Monday, December 1, 2008 10:04 AM PST
PORTLAND — Last week, House Democrats unveiled an ambitious economic plan to help Oregon weather the economic storm ahead.
Spending hundreds of millions of dollars on state-funded construction projects could create thousands of jobs, they said.
The House Democrats are the latest in a stream of politicians calling for expansive public works projects.
Gov. Ted Kulongoski is pushing a $1.2 billion transportation package. Before that, Senate President Peter Courtney suggested a construction package worth $2 billion.
On the national level, President-elect Barack Obama has called for an infrastructure package that some estimate could cost $700 billion.
Public works, it seems, is the latest political craze.
Economists — and even Oregon Republicans — generally agree that these projects ‘‘do have a simulative impact,’’ but economist Bruce Blonigen of the University of Oregon said there are uncertainties.
One is how quickly they begin to spread economic relief.
Sometimes it takes so long to launch them that by the time they are established, the economy has already recovered.
It ‘‘could be several months or even a year from when the (projects) are first planned’’ before hiring begins in earnest, said Oregon’s state economist Tom Potiowsky.
Potiowsky said the surest bet is a mix of long-range work with projects that could begin immediately. ‘‘There are also capital work projects which are maintenance, and those can be done rather quickly,’’ he said.
House Democrats targeted those sort of public works, saying their first step would be to fast-track the start dates on projects already planned and financed.
Kulongoski seized on these sorts of projects when he said he would ask the Obama administration to fund the backlogged maintenance projects at all state universities — the list runs to $650 million in Oregon.
To what extent any of this stimulus would be felt, however, is another public works intangible.
Generally, these sorts of projects offer a higher net gain when they are funded by the federal government, Blonigen said. That’s largely because the federal government doesn’t need to balance its books, so it can pay out-of-pocket for the construction.
Oregon, however, isn’t allowed to operate in the red. As a result, where these billions of dollars come from and where they’re going is key.
‘‘Suppose I said that I’m going to tax everybody then I’ll redistribute it through a refund check. Was there any stimulus?’’ Blonigen asked. ‘‘Probably not.’’
That’s why lawmakers talk about a variety of financing methods: bonds backed by the general fund and by lottery proceeds, user fees and increased taxes.
If the taxes and fees are targeted, Blonigen said, the plans could work.
Kulongoski’s transportation program is pinned to driving-related fees and an increased gas tax, while Courtney suggested that residence halls at some campuses could be funded, in part, by the fees students pay to live there.
‘‘It is my desire this time around to really push that list, to make it as large and as comprehensive as we possibly can so we can get these projects going,’’ Courtney said. ‘‘If people work, (the economy works).’’
Estimates of an Oregon public works project vary, although $2 billion is a price tag that has emerged more than once.
More difficult to say is how many jobs that much money would create. House Democrats estimated that for every $100 million spent, 1,650 jobs are created, both directly and indirectly. With a $2 billion investment, that could mean 33,000 jobs for the state.
The majority would be construction-related, but the ripple effect would extend to hotels, restaurants and other sectors.
‘‘I actually think it’s not a bad idea,’’ Blonigen said. ‘‘For Oregon, it does make a lot of sense.’’
There’s also a certain investment in the future that comes with infrastructure improvements, Blonigen said.
‘‘There are things that are going to pay off over the entire lives of these projects,’’ he said.
Republican Leader Bruce Hanna, whose House minority caucus shriveled in the last election, doesn’t dispute some possible benefits of a large-scale public works project.
Still, he doesn’t think it’s prudent to spend so heavily when the state faces a revenue shortfall.
‘‘I think you need to examine whether you can borrow your way out of an already heavily debt-laden position,’’ he said. ‘‘There’s a place for bonding, and there’s a place for project works projects.’’
Hanna would like to see the projects coming from the private sector rather than the government.
‘‘To say this is going to fix the economy,’’ Hanna said, ‘‘I don’t think so.’’
