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Governor Robert D. Holmes' Administration

Governor's Message, 1959

Source: BIENNIAL ADDRESS OF ROBERT D. HOLMES GOVERNOR OF OREGON TO THE FIFTIETH LEGISLATIVE ASSEMBLY JANUARY 12, 1959 SALEM, OREGON

Ladies and Gentlemen of the Assembly:

Again I address you with humility and gratitude, as I have been privileged to address two previous legislative assemblies: with humility nurtured by the challenging and awesome responsibilities that face a chief Executive, and with gratitude to so many people who have done so much for the State of Oregon and for me during the two years of my administration. I am grateful too, to the people of Oregon who bestowed the honor of the governorship on me.

I have tried to keep faith with the people and to carry forward those ideas I suggested in my inaugural address two years ago. I have endeavored to meet every problem with boldness and bigger; I have tried never to equivocate, not to procrastinate. I have neither wanted to dodge responsibility, nor to shrink from doing my duty.

It has been gratifying to represent the people of this state in Washington, D. C., in Florida, in New York, in New Orleans, in Los Angeles, in the new state of Alaska, in Colorado and in Hawaii, and to carry the message of the scope and the richness of this great land to others.

Though we in Oregon have been beset by a national recession not of our own making, our promotion of Oregon, particularly though the work of our department of planning and development, has worked toward the broadening of our economic base. We have made progress.

We have moved forward in other directions, too. Our whole system of public education has profited both in terms of increases in basic school support and in monies for increased salaries for the faculties in our schools of higher education. Our road building program has kept abreast of federal monies granted under the federal-state highway program. We have met welfare programs without lowering standards of service. We have continued, according to our means, to improve state institutional programs. Our attack on the problems of the aging has been vigorous and we continue to make gains in this field. The state administration in the past two years has worked more closely with our great agricultural economy than did any previous administration.

The Oregon Centennial celebration plans have taken definite shape and are in excrescent order. We have sought more equitable east-west freight rates as a boon to our lumber agricultural industries. Programs for the wise use of our natural resources have been expanded and the people’s interest in these resource has been jealously guarded at all times. Departments in the executive branch have operated for the general interest and have not been agencies of special interests. Our fiscal position have remained sound, and in the past two years Oregon has enjoyed the unique position of being the only state in the Union to reduce taxes.

Through coordinated effort by all state agencies involved in the problem, we have stepped up the traffic safety program, reducing accidents and highway deaths. Our tourist business has increased percentage-wise by a greater amount than in many neighboring states. We are all, I know grateful for these things. But I know that the chief concern of this assembly and of the people of Oregon is with the program that my successor will outline. And so I shall make my remarks as brief as possible. I have presented for you consideration a general fund budget of 299 million dollars, a budget balanced without new taxes.

It will use the surplus estimated to be on June 30, 1958, $30,500,000, and recommended new revenues of some $16,700,000. Necessary bills for some of the additional revenues have been drafted for you consideration. The others can be put into effect by administrative action.

These budget figures have been, of course, public information for some time. The budget has been allied “an austerity” budget. But I feel that the people of Oregon clearly demonstrated last November, both by their actions on almost every measure involving new tax money, and by their approval of the economy platform of my opponent in the election, that they wished to live within existing revenues. I have tried to prepare a budget, then, which would translate their expressed wishes into action.

In order to live within revenues, to determine budget needs, I applied a yardstick of existing standards of service. Recommended increases are needed primarily to take care of growing state agency work loads measured by this yardstick. There is provision for modest salary increases for state employees, and for an upward adjustment of about 8 percent in teacher salaries for higher education. In some high priority areas, allowances have been made for stepping up standards, either because exiting ones are unreasonably low, or because early benefits can be secured from a small additional appropriation investment.

To achieve these budget levels, requests from agencies for general fund appropriations were cut by $62,000,000, 49 million of this being for building programs. But because of the backlog of need for building both for institutions and for higher education, I am recommending a bonding program for financing major building needs over the next six to ten years. This program, in my judgment, should be for not less than 70 million dollars nor for more than 80 million. I feel that only in this way can we actually meet expanding needs, especially with respect to higher education, and catch up with a program that has lagged in the past four years because of cuts made by succeeding legislatures in the overall building program budget.

I would urge that such a bonding program go to the people at a special election to be called at the earliest date practical. And I feel that if the people of Oregon have all of the facts with respect to the needs of the state, they will approve such a program. Moreover, I urge that this assembly memorialize the Congress in behalf of a realistic and sufficient aid to education program.

This general fund budget still calls for increases totaling over $36,000,000, excluding building programs. And there is little reason to believe that growth requirements for 1961-63 will be significantly less. Furthermore, over $40,000,000 for financing 1959-61, which consists of surplus and non-recurring revenues, will not be available for 1961-63. Thus, by 1961 the legislature may be faced with having to provide over $70,000,000 in new revenues without considering major building fund requirements. The most careful tax study then is mandatory if this issue I to be resolved by this legislature.

Purposely I am not including recommendations based on the Sly report in my budget message. This report was available only after the budget was substantially settled and the members of the legislature have had no opportunity to study it carefully. As I have said, in my judgment, the people voted for a balanced budget without new taxes. My budget has bee prepared on this basis.

Many of you heard Dr. Sly’s comments on his tax report. You have all received copies. I urge you give it careful study. I particularly commend to you attention those portions of the report relating to the establishment of a better tax climate for business and industry. The proposal to reduce the income tax on c capital gains would require, under the most optimistic budget outlook, a tax increase in other areas. The report suggests two sources to which this could be shifted: a real estate transfer tax or a cigarette tax, or a combination of both. I think it appropriate to point out that if my recommendation to the special legislative session had been followed, it would have been possible to reduce the tax on capital gains during the coming biennium without imposing new taxes.

Apart from Dr. Sly’s study, the State Tax Commission, at my request, has been studying Oregon’s tax structure and tax administration. Out of its studies have come the recommendations in my budget message to plug some loopholes in the utility corporation excise tax law and to eliminate installment payment of income tax.

But the major recommendation which the staff of the State Tax commission is prepared to discuss with out simplification and improvement of our Income tax laws outside of the context of revenue requirement, or of broadening the tax base. Our income tax laws have become more and more complex through legislation, administrative action and court decisions. The taxpayer is perplexed and his advisors are frequently uncertain as the application of the laws. Their administration is also expensive to the state. Income tax simplification might save upwards of $1,000,000 per biennium in administrative costs alone.

To my knowledge, there has never been a study of the state income tax form the point of view of giving it direction, making it more workable and competitively more desirable. Legislation is being prepared to implement simplification and improvement. I commend it to you careful consideration.

So that you may have, for what it may be worth, by best judgment grown out of my experience as governor during the past two years, I would also make the following suggestions: 1) Oregon needs a compulsory liability law. 2) A fulltime, paid parole board, as recommended in the report that was made during the biennium by the National Parole Probation Association of the United States, would help our whole parole and probation program and would eventually save the state money. 3) The excellent legislative interim committee report on governmental reorganization has recommended several improvements for efficiency in state government.

I commend these to you, particularly the suggestion that the chief executive --- subject to legislative veto --- be giving broad powers to reorganize the departments, boards and commissions under his office; and, though the committee did not make this recommendation, I still feel that institutional management, both in the area of correctional institutions and hospitals, would be greatly improved by abolishing the Board of Control and establishing a Department of Institutions whose director would be appointed by the Governor, wand who would function with advisory committees covering correctional, health, and child and youth services.

I am also convinced, after consulting with all of the governors at two Governors Conferences and two Western Governors Conferences, that the most effective way to obtain desired reorganization in state government is through constitutional revision. Certainly financial reorganization, clarifying the functions of the executive for financial management and control, and the creation of a post auditor function responsible to the state legislature cannot achieved without constitutional revision.

Therefore, I urge this assembly to take appropriate steps to call a constitutional convention for this purpose.

One of the most important tasks assigned to any group was that tied to the experience and rating advisory council for the Oregon Unemployment Compensation Commission. Some 17 members representing industry, labor and the public worked diligently to re-evaluate the states of Oregon’s unemployment compensation fund. I have been gravely concerned, as was the council, with the present insolvency of the fund. Since 1948 there has been almost uninterrupted decline of the fund balance. Each year since 1948 --- with the exception of 1951 --- more has been paid out in benefits than has been received in contributions, and in spite off diminishing fund no effective e action to halt a parallel decline in the average tax rate was taken until the 1957 legislative session.

I commend the excellent job done by the distinguished Oregonians on the council in making this report and commend a careful study of the report to this assembly. Though time does not permit full discussion of all phases of the report, I do recommend that coverage be extended to employers of one person; that the unemployment compensation commission be separated from the industrial accident commission and be headed by a single commissioner; that the tax base be raised from its present $3,600 to $4,200, and that the so-called floor be increased, under which all employers would pay the 2.7 rate, from the present 3% to 6% of taxable payrolls; that an employer’s tax be based on his ability to maintain a stable payroll from year to year, and that a claimant’s benefits be based on his most recent earnings.

You have each also received a copy of the Western Interstate Corrections Compact developed by the Western Governors’ Conference. This would permit participating state to send prisoners of various types to the state where the most specialized treatments and institutional care might be provided. I urge you approval of participation in such a compact.

I urge you understanding an approval of such needs as may be presented to you by the Oregon centennial Commission. The celebration of our state’s 100th birthday can, in my opinion, be the catalyst for moving our economic expansion ahead many years. With between 6 and 10 million visitors coming to Oregon during this historic year, it is of paramount importance that we provide whatever is necessary to made the Centennial worthy of our history, heritage, and our potential for the future.

I recommend that this legislature create and interim committee to study specifically the problems relating to our agriculture industry. We have never had such a committee, and in a state so dependent on agriculture, certainly we need to pint up our problems with respect to the production, processing and marketing of agricultural commodities.

While the highway program on the federal-state system has been moving forward, some of Oregon’s other arterials vial to an expanded economy have lagged in improvement.

I would recommend that a bonding program be considered in sufficient amount to begin immediately to correct his situation. Highest on the priority list, in my opinion, is a modern highway to connect 99 with 101 in Southwestern Oregon. Immediate improvement of Highway 42 would pay rich dividends in an expanding economy for that whole area.

The work on Highway 101 should be completed, with the bottleneck at Astoria being removed through the cooperative effort of Oregon and Washington to build the bridge for Astoria and to the Washington side.

Other vital projects should be included, but it seems to me that these tow have the top priority.

Since 1931 Oregon has been the only state in the nation which regulates its public utilities and agencies of transportation by means of a one-man commission there are distinct advantages to this system, which avoids the delays, buck passing and feuds so often observed in the commissions of other states. But wit the growth of our state and its attendant utility problems, the burdens of the Public Utilities Commissioner have become almost impossible for one man to bear without some from of relief.

I suggest that the legislature should combine the best features of our present system with the best features of the system used in other states by providing a minimum of three deputy commissioners, without a normal vote on decisions of the office.

I also recommend that our utility laws should be changed to provide that appeals from decisions of the Commissioner may only be brought before one court --- the State Supreme Court. Under our present system many baseless and essentially frivolous appeals from PUC decisions are brought before a multiplicity of state courts by lawyers who are too often interested only in delay, and who are candidly in search of a judge who may be totally unfamiliar with the complexities of utility regulation and who is too busy to read a voluminous transcript of the original case before the P. U. C,

And no one final work. . . As I have said to you, it has seemed to be the will of our people that we undertake no programs calling for new taxes of more taxes. To front this will is not in our natures, I know. But I would be less than honest were I not to say what I said so often during the months prior to November: we live in a more complex, no a simpler world; we live in a more dangerous, not a less dangerous world; our obligations are more, not less serious, and our choices are clearer, not less clear.

The amount of money we are spending for education is woefully inadequate now. We not only lag behind Russia, we lag behind our own faith in the value of education in a democracy. We are not providing the money necessary to strengthen community services in the areas of health and welfare and to revise old and costly programs of vast institutions centrally located for the care of the physically and mentally ill. We are not building the roads we ought to build to accommodate our own communities and our own economy. We are not facing up to accommodate our own communities and our own economy. We are not facing up to the fact that the preservation of our cultural and political freedom is costly --- terribly costly, and that it will cost us more and more for a long time to come.

I believe the budget I have proposed is one we can live with, but I do not claim that it is an ideal budget, or a far-seeing budget. Eventually we in Oregon will choose between paying the taxes we ought to pay, or of suffering a decline both in education and in all other state services. I recommend then, that you abide by this budget in order to keep faith wit the voters’ expression at the polls, but that you do it with your own eyes open and your voices clear to tell the people that sooner or later we must face up to our real obligations and our real duties as citizens.

I want to say again to you that these two years have been a wonderful and a rewarding experience for Marie and me. I am proud that we were permitted to serve Oregon in the highest office in the state. The breadth and scope, the beauty, the majesty and greatness of this land of Oregon we so love is unlimited.

God’s blessing on our state, on you, and on you deliberations in behalf of the people.

Oregon Secretary of State • 136 State Capitol • Salem, OR 97310-0722

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