The Governor and legislators are difficult to understand. They tell us they have to make deep and painful budget cuts in everything from human services to public safety because there is not enough revenue for the coming biennium. At the same time, they are moving full-steam ahead with plans for a massive tax cut that primarily benefits the most economically comfortable Oregonians. What gives?
If the Legislature does nothing, taxpayers will get a tax cut later this year from unanticipated revenues collected during the current biennium. The Legislature should be responsible and use the windfall instead to prepare for the inevitable economic downturn and to prevent cuts in public services. The March Economic and Revenue Forecast projected that, without taking any action, the Governor and Legislature will need to cut public services by $100 million more than proposed by the Governor last December.
The March forecast provided an educated guess about revenue Oregon will receive through June, 2003. Oregon is expected to bring in $102 million less in revenue than forecast last December. Because the December forecast was the basis for the Governor’s recommended budget, now the lawmakers must decide what public services should be cut beyond the tens of millions in cuts outlined in the Governor’s proposed budget. If the May 15 final legislative forecast yields more bad news, the cuts will go deeper yet.
Oregon’s short-term situation is an entirely different story. The March forecast predicts that, by June 30, 2001, the state will have taken in $337 million more personal income tax revenue than the educated guess made in May 1999. This added revenue is about $154 million over the 2 percent trigger for the income tax “kicker.” So, while legislators and the Governor are struggling to figure out which public services to cut, to date they are choosing to do nothing to stop a $337 million giveaway under Oregon’s infamous “kicker.” The typical Oregonian will receive about $100 in kicker funds. Those who are at the top of the income ladder will receive about $4,200.
Even though the Governor and legislators face cutting state services for Oregon’s most vulnerable, using the kicker appears to be off the political table. Republicans and Democrats alike cite the vote last November to place the kicker in the Constitution. They argue that the voters locked-up the money.
Not true. The new constitutional measure empowers the Legislature to use the kicker funds with a two-thirds vote. If the slim majority of the 1999 Legislature that referred the measure wanted the voters to tie future legislators’ hands and lock up the kicker, the override provision would not exist.
Importantly, the new two-thirds requirement does not go into effect until July 1, 2001. This session, 36 members of the House and 18 of the Senate can choose to be fiscally and socially responsible and prevent deeper cuts to important public services. So far, families losing their child care subsidies and Oregonians losing the help of 157 State Police officers haven’t found the 54 legislators willing to stop these and other reductions to important and popular public services.
Oregonians must give permission to Governor Kitzhaber and to the Legislature to use this biennium’s unanticipated revenues. With a reduced revenue forecast for next biennium, they might choose to save some of the unanticipated funds in a “rainy day” fund as suggested by the Oregon Business Association and others. If they don’t, and the economy continues to turn sour, Oregonians likely will see more important public services cut and a tax increase at the worst possible time, during an economic slump. It happened in the early 1980s’ recession; there is no reason to believe it won’t happen again.
Fiscally responsible legislators would pay off Oregon’s court ordered debts in a timely fashion, limiting the interest payments. Fiscally responsible legislators would also not raid one-time tobacco settlement funds for on-going programs. If they couple these changes with the creation of a rainy day fund, fiscally responsible legislators would help Oregon better weather the inevitable economic storm.
The kicker is fair game to address Oregon’s budget woes. It is time for Oregonians to give permission to our legislators and our Governor to act in a fiscally and socially responsible manner.
Source: OCPP analysis of March 2001 Revenue Forecast and 1998 ODR Personal Income Tax Statistics.
|Approximate Adjusted Gross Income (AGI) of Group
|*Estimated Average 2001 Kicker for Income Group
|Percent of Total Kicker to Income Group
|Lowest Income Quintile
|Between $8,000 and $18,000
|Between $18,000 and $32,000
|Between $32,000 and $55,000
|Top Ten Percent
|Top One Percent