08 Aug

One more dead end for revenue reform suggests a different route

It took 10 years of legislative effort, Mark Hass points out, to get Oregon to a policy of full-day kindergarten.

So, the Beaverton state senator insists, to have another legislative session slip by without revenue reform is no cause for despair.

Still, like a kindergartener who keeps eating the crayons, it’s not exactly encouraging.
For decades, one of the rituals of the opening of the Oregon legislature, along with electing leaders and assigning parking spaces, has been the announcement of the difference between what the state expects to collect and what it would cost to keep doing what it’s been doing. The egislature then has six months, calling on luck, imagination and occasionally skill, to make up the difference – although over the years of the legislature’s maneuvers, Oregon schools have also seen a widening difference between the school programs and class sizes the state used to have and what it manages to finance now.

Not to say fewer crayons.

This past session, Hass, chairman of the Senate Finance and Revenue Committee, and the leadership across the building in the House set out to make revenue reform happen. There were large Democratic majorities, if not quite supermajorities; unhappy memories on all sides of last fall’s multi-multi-million-dollar initiative battle over the business receipts tax Measure 97; and, as usual, a budget shortfall, this time estimated at $1.6 billion.

And, as usual, revenue reform didn’t happen.

There are limited places that more state revenue could come from. Oregon’s personal income tax is already at nosebleed levels, paying for virtually all the state budget – with the help of a vital, let’s-not-talk-about-it pipeline from the state’s jingling video poker machines.

Initiative measures of the 1990s constitutionally cut property taxes without replacing the money, giving Oregon shortfalls ever since.

Sales tax? Wash your mouth out with soap.

That leaves a business tax – and businesses, Hass points out, have gone from covering 18 percent of the state budget in the 1990s to paying 6 percent today.

During the Measure 97 battle last fall, there were hints that if voters defeated its sizable gross receipts tax, there might be interest in a more moderate version. Rep. Barbara Smith Warner, D-Portland, of the House Revenue Committee, points out that in Ohio, a similar tax – at a considerably lower rate than Measure 97 – was enacted by a Republican legislature and a Republican governor.

But when the legislature gathered, all that anyone remembered was the bitterness of the initiative fight, and who won.

“The reason we had so much opposition,” says Hass, “was the hangover from Measure 97.”

Of course, the winter was a time of other weirdness. Smith Warner recalls, “The Trump election threw everything into disarray,” and in the legislature it doesn’t take much to achieve that.

And the legislature did have other things on its mind. It passed a provider tax to bolster the Oregon Health Plan (and keep the federal dollars flowing), and an $8 billion transportation tax and investment package – something that the legislature has been trying to do for years, or even longer than it takes to get across the Interstate Bridge. Crucially, the package managed to get the necessary Republican support.

And the legislature once again managed to close up the budget gap and get out of the building, a tactic involving some cuts, some rearrangements, and a better-than-expected revenue forecast, the legislature’s version of Batman’s utility belt. So the state’s fiscal problem is resolved – until the shortfall forecast before the next legislature.

At the end of the session last month, House Speaker Tina Kotek, D-Portland, declared, “We fought like hell to get to a long-term budget deal so we could finally stabilize our finances and make meaningful investments in Oregon’s schools. We couldn’t get it done, but we did lay the groundwork for success in 2019” – but it’s not clear just why the prospects would look better then.

Still, the 2017 legislature did manage the major transportation package, which could be an inspiration – and maybe a model.

“In 2015, the legislature fumbled the bill over a transportation tax. So we started a process, a task force holding hearings around the state,” points out Hass.

We could do that again. I’m happy to do it that way.”

That approach still might not work. Revenue reform has a long tradition of not working in Oregon, and there’s a good chance of more initiative measures next November, to redraw the angry lines and pump money into the cash registers of television stations.

But the early launching of an effort seems a minimal requirement for a reform drive that might succeed. Because one thing we’ve learned over a quarter-century is that this problem can’t be solved in the last weeks of a legislative session.

You end up with a strategy written in crayon.

NOTE: This columnn appeared in the Sunday Oregonian, 8/2/17.

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