Oregon’s kicker offers chance to address pressing problems

The state’s most recent revenue forecast should be celebrated by anyone concerned about homelessness in our state or the sad fact that our state’s drug and alcohol addiction rates are among the highest in the country. 

Instead of state revenues falling below biennial or two-year economic projections, personal income revenues have skyrocketed 17.9% or $4 billion above expectations, the largest revenue windfall the state has ever had.

What this means is the state has the cash on hand – there’s no need to raise tax rates – to actually address some of our most immediate and pressing problems like housing and behavioral health.

But there is a catch. To use even one cent of that critical unanticipated revenue, two-thirds of our state lawmakers in both the House and the Senate must vote to suspend a law which requires all unanticipated monies be sent back to taxpayers if our state economic projections are off by 2% or greater. This quirk in our law is known as “the kicker,” and since it was approved by voters in 1980, it has cost the state $7 billion in revenue that was returned to taxpayers rather than being spent on needed programs. If lawmakers sit on their hands as they have in all but one biennium and pretend they can do nothing to stop the massive giveaway this time, the new total will be $11 billion. 

There is a reason no other state in the nation has a spending policy anything like the kicker. Other states understand that windfalls, when and if they come, should be preserved in rainy day funds or used for long needed projects such as buying up and getting land shovel-ready with infrastructure for affordable housing or crisis intervention centers, or water storage, or flood and fire control. Businesses in Oregon and elsewhere understand the same thing; you don’t just give unanticipated money away without making deliberate decisions about its best use. 

But somehow the idea of using already collected revenue to fund critical issues in this state is foreign territory to our lawmakers. 

The kicker has been triggered 13 times in the 21 budget periods since it was passed in 1980, yet lawmakers have suspended the giveaway only once, in 1991. Each and every other time, taxpayers received either a check or a tax credit which may have been needed for some, but far less so for the majority of recipients. 

About two-thirds (68%) of this biennium’s $4 billion kicker will be spent on the top 20% of taxpayers, and about a quarter of the funds, close to $1 billion, will be go to the top 1% of earners, those earning more than a half million dollars a year. The typical or median income taxpayer will get about $785, while those in the top 1% will on average get $42,000. 

Josh Learner with the Oregon Office of Economic Analysis notes that the funds going to the upper income households will not cycle into the Oregon economy as well as funds that go to the lower income households. That’s because the unanticipated cash is not critical to those at the top. Studies show the wealthy do not spend their kicker dollars at the local market, or dining out more frequently. Instead, that money becomes just another deposit in their investment portfolios. 

Those who support the kicker claim that returning the tax revenue somehow lowers government spending, but that’s false. The money is in the budget, and lawmakers will spend it, but their spending will lack scrutiny, judgment, public hearings and debate. It will lack a way to measure its outcomes to determine if the spending helped the state or just ended up in out of state investments. 

But it doesn’t have to be that way. Look at the corporate kicker.

From 1983 to 2011, the state spent $889 million on the corporate kicker. Giving money back to profitable corporations did not sit well with voters, so in 2010 they voted to put all future corporate kicker dollars into the General School Fund. The popular decision demonstrated that voters understood what lawmakers need to understand now. Instead of spending money on people or corporations who don’t need it, spend it on programs people are clamoring for.

Gov. Tina Kotek wants to spend about $155 million of general fund dollars to address the homeless crisis, but that is chicken scratch compared with what is needed and what is possible. Kotek should call on the Legislature to channel at least the $934 million from the kicker that we will otherwise pay to the top 1%, or better yet the $2.6 billion that’s going to the top 20%, to address the statewide housing crisis 

Each and every lawmaker campaigns on homelessness and behavioral health problems, promising to do something. Now they have a chance. Our state has a $4 billion pot of cash it can put to work helping with these critical problems. The question is, do our lawmakers have the will to choose to use it wisely or will they continue their irresponsible ways?