Oregon Spends Big Money On Green Energy Instead Of Schools

Thanks to the newsletter from our Oregon State Senator Doug Whitsett who is serving on the “Joint Interim Committee on Department of Energy Oversight,” we have a high level look into the spending of taxpayer money on green energy programs.  

Remember tax credits are basically state spending before having to pay out the money (they often have a shelf life of 3-5 years).  The credit goes against taxes owed so that a company or individual will not have to pay taxes they otherwise would be paying.  It is as if they state is spending money to pay those taxes for the individual or company.   Republican’s tend to think of it in terms of spending while some democrats look at it differently.  In an Oregonian article by Harry Esteve on 3-11-2011 Rep Vickie Berger (D) is quoted as saying: “We’re not just giving money away, we’re using tax policy to drive private sector investment.”  Esteve goes on to say: “But records examined by The Oregonian show the program has been treated more like a state-sponsored ATM machine by hundreds of companies. Want to gamble on a solar megaplant? Get a tax credit that pays half the cost. Need a new heat pump? Cut your upfront costs by more than a third with a state credit. State documents show it doesn’t matter whether a company needs the help. Nor does it matter how speculative its plans are, or how much energy it saves or produces — the tax breaks flow.”  That sounds a lot like spending - spending that keeps money out of the general fund from which safety and schools are funded.

When non-profits and govt entities, which don’t pay state taxes, earn tax credits, those tax credits may be sold to other companies becoming income for the seller (non-profit or govt entities) and a credit as if the state was spending to pay the taxes (the buyer cashing in the tax credit).   The state government regulates what price for which they can be sold.  So while the govt agency gets less selling it, the agency that bought the tax credit gets to use the full value off its tax burden.  This ends up costing the govt money. Many agencies are still hanging on to them to be sold and used in the future.   That is provided the tax credit can be sold.  While this seems to work in theory, it has not been without its own problems.

We know the Oregon Department of Justice has been conducting an on-going fraud investigation looking into the tax credit program requested by Republican lawmakers.  It is not like a lot of people think there is any more likelihood of charges ensuing from of this administration’s inquiry than there was for the FBI inquiry into Hillary Clinton’s emails, Benghazi, Fast and Furious gun running, etc.  But, it has helped to give us an overview of the cost to taxpayers.

At the Dept of Energy, a lot of money has been spent without appropriate metrics to meet definable goals.  The Oregonian article by Hillary Borrud dated 6-27-2016 has an interesting quote by Michael Kaplan the director of the Oregon Department of Energy "From an economic development strategy, the program worked."  This juxtaposes oddly with the reaction of Rep Cliff Bentz (R): "The measure of success or failure of this program, what is it? It looks like we're here today just looking at the money." But is more easily understood with this insight from Senator Whitsett’s newsletter: “The agency has been directed to spend enormous amounts of public money to advance social/political motives rather than low-cost energy solutions. It’s worth noting that former Governor Kitzhaber’s girlfriend Cylvia Hayes claimed that "I don't work for the governor, I work for the Earth." “  It makes one wonder who was working for the Oregon taxpayer.

With all this in mind, let’s look at the spending:

 

Business Energy Tax Credit (BETC)

  • Started in 2000 (see Oregonian article by Ted Sickenger dated 2-10-2010 “Energy Credits Will Bring Untold Fallout”)
  • It was drastically expanded in 2007, It issued $20 million 2005-07, and nearly $70 million 2007-2009
  •  Over time it has issued more than 10,000 tax credits totaling more than $1 billion

Energy Incentive Program (EIP) tax credit

  • Started in 2011 from House Bill 3672 (in the aftermath of BETC)
  • Vote was House Democrats 28 Aye,2 Nay;  House Republicans 29 Aye, 1 Nay;  Senate Democrats Aye, 0 Nay; Senate Republicans 10 Aye, 4 Nay
  • It has three components: energy conservation, transportation, renewable energy development
  • It issued $94 million in tax credits for public projects and $5.1 for private projects
  • 95% of the projects were for govt entities and non-profits (no taxes to pay)

Small Energy Loan Program (SELP)

  • Started 1980 for small projects and became a govt venture capital investment tool
  • Provides low interest loans to projects where the market is unlikely to fund the project
  • Provided 874 loans totaling $611 million
  • “Due to accumulated bad investments of public money, SELP will be unable to meet its debt service obligations between the years 2020 and 2034.  The program will require at least $15.3 million of general fund money to recapitalize its fund sufficient to pay for the projected shortfall.” (from Senator Whitsett’s newsletter)  It was supposed to be self-sustaining.
  • For a time, companies were able to use BETC credits to qualify for SELP loans.

 Residential Energy Tax Credit (RETC)

  • Started in 1978
  • It has issued 570,000 tax credits worth $172 million
  • Could be used along with Energy Trust subsidies and federal tax credits
  • There is no data on cost savings as a result of the energy improvement for the homeowner
  • The Department of Administrative services memos indicate the purpose of RETC is to transform the market

Biomass Tax Credit (BTC)

  • Started in 2010
  • It has issued tax credits worth $29.8 million
  • Portions of BTC were amended and extended in the 2016 session unanimously by Senate Bill 1507 (the portions about animal manure and rendering offal).
  • Vote was House Democrats: 34 Aye, 1 Nay;  House Republicans:19 Aye, 6 Nay;  Senate: passed it unanimously
  • There is no data on the impact this program has on rural pollution or the rural economies.

 

Submitted by 

Roxanne Ross

Secretary, MCRP


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