Statement by Chuck Sheketoff on the September Oregon Economic and Revenue Forecast

One of Oregon’s most fiscally irresponsible policies is now set to rear its ugly head. Today, state economists confirmed that Oregon’s “kicker” is going to kick, depriving the Oregon Rainy Day Fund and essential services of some $464 million.

The kicker is an automatic tax cut triggered when revenue comes in 2 percent or more above what state economists forecast two years earlier. That’s a wafer-thin margin for error when predicting two years out the economic performance of a small state that is tied to the national and world economies. Oregon represents slightly over 1 percent of the national economy.

Right now, essential services like K-12 schools and childcare for low- and moderate-income workers suffer from overcrowding, waiting lists, and other problems due to a lack of funding. The funds being spent by the kicker could have filled some of these budget holes. In fact, Oregon could have funded an estimated 2,650 additional teachers with the kicker dollars for the two-year budget period. Instead, the legislature chose to let the kicker kick.

The most fiscally responsible course of action would have been to direct the kicker money to the Oregon Rainy Day Fund. We are in the midst of one of the longest economic expansions in the post-World War II era — a business cycle that sooner or later will end with a recession. A better funded Rainy Day Fund would protect more essential public services during the next downturn. Instead of saving for the inevitable, the legislature chose not to stop a tax cut that principally benefits the best-off Oregonians.

Oregon’s highest-earning taxpayers will get a significant tax cut, averaging $4,902 for the top 1 percent, or those with household incomes in excess of $389,400. The typical Oregonian, a household with income in the $30,000 to $35,000 range, will only save $89.

The 2017 legislature abdicated its responsibilities in failing to suspend the kicker. Ordinary Oregonians will now suffer overcrowded classrooms, wait lists for child care assistance, and a Rainy Day Fund incapable of protecting Oregonians during the next inevitable downturn.

Chuck Sheketoff is executive director of the Oregon Center for Public Policy.