Capital Chatter: All sides waiting for Brown to lead

Only in Oregon could an infusion of tax dollars create a quandary for lawmakers who are … looking for an infusion of tax dollars.

That is what happened this week when the state economists released their quarterly economic and revenue forecasts, which are the fiscal bible on which the 2017 Legislature will build the two-year state budget that takes effect July 1.

The news was that Oregon’s economy is still growing, although the growth rate has slowed. State tax receipts are higher than previously estimated.

So, what had once been a $1.8 billion budget hole for 2017-19 is now down to $1.4 billion.

Meanwhile, an increased assessment paid by healthcare providers is expected to yield $575 million to $595 million. Then add in cost savings that the Legislature has been working on, and the budget hole is down to roughly $900 million.

That still is a sizeable amount. But remember three things:

1. The state budget is growing, so it’s a hole only in what state officials estimate it would cost to run all state and school programs at their current levels for the next two years.

2. The state might be able to squeeze by at that level, which undermines the case for significant tax increases. House Speaker Tina Kotek, D-Portland, and two colleagues have proposed raising $2.1 billion by ending the corporate income tax and instead taxing businesses’ gross receipts.

Yep. That would bring in twice as much as necessary to cover the $900 million hole. Kotek says the money is needed to invest in schools and other areas. Sen. Mark Hass, D-Beaverton, has been working on a similar but smaller tax.

3. Oregon will be giving away some of its tax bounty … to taxpayers.

That is because of the state’s unique kicker law. Oregon, like other states and the federal government, estimates how much tax money it will have for upcoming budget cycles. But only Oregon has the requirement that if too much money comes in, those extra taxes must be returned to taxpayers. That requirement kicks in – hence the “kicker” nickname – when tax collections exceed their projected amount by at least 2 percent, in which case all of the excess must be returned.

Unless you’re a corporation. Money from the corporate kicker goes to schools.

• Yay for my tax refund: Silence! The state economists expect a kicker, but they can’t guarantee it. That won’t be known until the state closes the books on the 2015-17 budget period, which ends June 30.

However, it would take an economic reversal for the kicker to disappear.

• Why does Oregon do this? Because in 1979-80, the Legislature desperately was trying to stop California-style tax revolt from crossing the border into Oregon. Legislative Revenue Officer Rich Munn and lawmakers came up with the idea of the kicker, so as to reassure Oregonians that the Legislature would not overspend.

Because times were good — although not for long — the Legislature also created property tax-relief programs. (By 1983, inflation was so high that my wife and I were happy to get a variable-rate mortgage with only 12.125 percent interest.)

Oregonians’ obsession with California politicians and politics was, well, obsessive. If you’re a longtime Oregonian, you might remember the bumper sticker, “Don’t Californicate Oregon.” In contrast, California barely knew that Oregon existed.

Then came 1990’s passage of Measure 5, which dramatically slashed property taxes and placed most of the school-finance burden on the state, via income taxes.

• The kicker: Good or bad? It is ridiculous to expect economists to forecast tax collections two years down the road within 2 percent accuracy. Few corporations can achieve that on their own revenue.

But as Oregon’s economists acknowledged this week, the kicker law forces them to be as accurate as possible instead of underestimating revenue so as to look good if taxes come in higher.

And the kicker can restrict state spending. Remember that $900 million hole? That assumes the kicker will kick, and close to $400 million will be returned to Oregon taxpayers instead of being available for the 2017-19 state budget.

• A sales tax is the answer: Shhh! Don’t say that aloud, or someone is likely to yank the “Native Oregonian” sticker off your car.

Oregonians have defeated a sales tax nine times. Some business leaders favor a general sales tax, even though they may not be hot on the proposed gross receipts tax, which is a business form of sales tax.

No governor since at least Tom McCall has been able to win voters’ approval for full-fledged tax reform.

Supporting a sales tax is deemed as disloyal to the Oregon way of life as favoring self-serve gasoline – which is getting closer since the Legislature allowed self-service during certain hours in isolated parts of the state.

• A business sales tax? The Joint Committee on Tax Reform is working on the gross receipts tax. The key variables are the percentage of the tax and the minimum amount of business sales before the tax kicks in. Speaker Kotek wants the Legislature to enact the tax instead of referring it to voters. Democrats don’t have a supermajority in the Legislature, so they would have to win support from a few Republican legislators.

The big question is whether to cobble together a budget for 2017-19, which is what the Legislature usually does, or do long-term reform that overhauls the tax system to improve its stability and fairness. For the latter, the question becomes not just tax reform but also tax increases.

• Praise be for pot and gambling: Not necessarily. American history shows that government lotteries eventually tail off. That trend is recurring.

Still, the Oregon Lottery remains a significant revenue source for schools and other state programs. The new Ilani Casino, operated by the Cowlitz Indian Tribe in Clark County, has had little effect on Oregon Lottery sales except at Portland-area outlets close to the Washington border.

As for recreational marijuana, its tax receipts continue to grow but are a tiny fraction of the state’s income.

• Legislature and governor — fellow Democrats — working together: Again, not necessarily.

Gov. Kate Brown’s staff acts as if the Legislature is proceeding with her budget proposals to close the Oregon State Hospital at Junction City and to open a new women’s prison in vacant space at the Oregon State Penitentiary in Salem.

Senate President Peter Courtney, D-Salem, has vowed to keep the Junction City hospital open. Speaker Kotek agrees with him. Meanwhile, legislators from both parties want to reduce incarceration of women — and the need for another prison — by instituting alternatives that combine punishment with substance-abuse treatment, family support and other programs that make people less likely to re-offend.

Piper Kerman, author of “Orange Is the New Black: My Year in a Women’s Prison,” on which the popular Netflix series is based, was at the Oregon Legislature recently to promote such initiatives. Joining her were former inmates at Oregon’s prison for women, Coffee Creek Correctional Facility, who participated in the YWCA’s Family Preservation Project. The formerly incarcerated mothers credited FPP with changing their lives and keeping their families together.

Kerman praised Oregon and the YWCA, saying such programs were highly effective yet still rare. The YWCA of Greater Portland stepped in after funding was cut in 2014 for FPP, which had been a partnership of the Oregon Department of Correction and Portland Community College.

• At least legislators agree: On some issues, yes.

Not on the state budget.

To illustrate that point, Rep. Sal Esquivel, R-Medford, distributed a short but effective email this week. He provided online links to the House Democratic and House Republican leaders’ responses to Tuesday’s economic and revenue forecasts, and added, “Thought you might like to see how two leaders respond to the same information.”

House Majority Leader Jennifer Williamson, D-Portland: “Today’s Economic and Revenue forecast reveals the extent to which our revenue system is completely broken and outdated. Because we depend so heavily on personal income taxes and have among the lowest corporate taxes in the nation, we’ve faced year after year of budget uncertainty and cuts to schools. Even with the economy outperforming the national average, we have far less than we need to pay for current services. Working families are shouldering the burden.

“Now that we have a clear picture from the May forecast, it’s time to shift full gear into solving our state’s long term revenue and budget crisis. Without bold action, we’ll face many more years of cuts that will lead to more overcrowded classrooms, shorter school years, and cuts to health care and senior services. It’s time for all sides to come to the table to find strategies that enable us to invest in a more prosperous future.”

House Minority Leader Mike McLane, R-Powell Butte: “Thanks to hardworking Oregonians and the businesses that employ them, our budget gap is nearly $200 million smaller today than it was yesterday. Government revenues are now expected to top $21 billion in the next budget cycle, a record high for the state of Oregon.

“These circumstances might be inconvenient for Democratic leaders, who continue to push a narrative that suggests current revenue levels are inadequate. But for most Oregonians it is just more evidence of the fact that our government needs to tighten its belt and get serious about slowing the unsustainable rate of spending in Salem.”

McLane said of the kicker: “Voters enshrined the personal income tax kicker in the Oregon Constitution as a means to protect against overspending by our state government. These dollars belong to Oregon taxpayers, not the government. House Republicans will not support any attempt by Democratic leadership to suspend the kicker law.”

Dick Hughes has been covering the Oregon political scene since 1976. Contact him at TheHughesisms@Gmail.com or follow him at Facebook.com/Hughesisms.