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Newspaper Article

    Impact on Measure 41 State Agencies is At Core of Debate

    BY Steve Law
    10/01/2006
    by Steve Law on 10/1/06.

    Keizer conservative Russ Walker calls Measure 41 a "tax cut for the little guy."

    Silverton progressive Chuck Sheketoff calls the initiative, one of 10 on Oregon's Nov. 7 ballot, "fool's gold."

    Measure 41 supporters say it's a perfect time to cut state income taxes because Oregon's rebounding economy is causing state coffers to overflow with surplus cash.

    Measure 41 critics say it's a horrible time to cut taxes because schools, state police and other state services are limping from recession-induced cuts earlier in the decade.

    Welcome to another in a series of bruising political tussles about Oregon taxes and government spending.

    In one corner, there's a small but dedicated group of conservatives fighting to reduce the size and reach of government. Veteran initiative activist Bill Sizemore wrote Measure 41. His longtime financial backer, Nevada multimillionaire Loren Parks, paid for signature-gathering to put the measure on the ballot.

    Walker, the local leader of the national group FreedomWorks, took over the Measure 41 campaign from Sizemore, whose reputation soured after losing a $2.5 million racketeering lawsuit for questionable practices in past campaigns.

    In the other corner is a coalition of labor unions, big corporations, trade groups, and senior citizen and education advocates. They formed the Defend Oregon Coalition to oppose Measures 41 and 48, a state spending limitation.

    Different tax cut

    Unlike some past tax proposals tailored more to business and affluent taxpayers, Measure 41 benefits modest-income people the most, especially families with children, Walker said.

    "Our primary goal was to provide as many Oregonians with a tax cut as we could," said the father of four.

    Businesses are adept at working the Legislature to carve out their own tax breaks, Walker said. "I think the working families of Oregon deserve a tax cut."

    Measure 41 would reduce state income taxes for single adults by an average of $97 a year, and $340 for families filing joint returns, according to the nonpartisan Legislative Revenue Office.

    The measure does that by mimicking the federal tax deduction that, by next year, lowers taxable income by $3,400 for each personal exemption. Oregonians could use the same formula on their state income filings, if it provides a sweeter deal than the state's tax credit, which lowers the ultimate tax bill by $165 for each personal exemption.

    Nearly four of five Oregonians would get a tax reduction under the measure. On average, Measure 41 cuts state income taxes 7 percent.

    The measure slices a similar share from the state general fund, the discretionary portion of the state budget that mostly goes to schools, colleges, human services, prisons and state police.

    Impact debated

    Walker submitted one Voters Pamphlet argument that states Measure 41 "is a significant tax cut for Oregon families that will dramatically cut the amount of taxes they currently pay the state."

    But he minimized the impact on the state budget in another Voters Pamphlet argument: "The size of the tax cut is modest, so opponents can't credibly argue that the measure will devastate state budgets."

    Walker said his opponents always scare voters with dire predictions of cuts that never materialize, such as when voters rejected the 2003 Legislature's tax increase via the Measure 30 referendum of early 2004.

    "I don't believe anything will be cut," Walker said.

    Critics say such reasoning is illogical.

    "You can't just slash and slash and slash and say it's not going to have an impact," said Sheketoff, director of the Oregon Center for Public Policy.

    Measure 41 could undermine Oregon's economic recovery by shortchanging schools and shifting the cost of health care for the poor onto business and insured people, Sheketoff said, in a view shared by Intel, Hewlett Packard and other companies opposed to the measure.

    More than half of all senior citizens get no tax benefits from the measure, Sheketoff said, though seniors stand to lose in-home care and other services covered by the general fund.

    Oregon's largest state-workers union, Local 503 of Service Employees International Union, took the current share of the general fund that goes to various services and calculated the potential losses in each two-year budget cycle. Under that scenario, public schools could lose $337 million, human services $170 million, public safety $123 million, colleges $77 million, and other services $83 million.

    Oregon Education Association, the statewide teachers union, estimated Salem-Keizer schools stand to lose $23 million in the 2007-09 budget cycle if the measure passes, or the equivalent of three students per class.

    "This is a time when Oregonians should be reinvesting in education, in terms of decreasing class size and lengthening the school year, and making up for the cuts during the recession," said Becca Uherbelau, spokeswoman for the Defend Oregon Coalition.

    State police at risk

    The Oregon State Police seems particularly vulnerable. The department has lost half its state trooper positions since 1979, when it became dependent on the general fund. It now has fewer state troopers per capita than any state, said Jeff Leighty, president of Oregon State Police Officers Association.

    There were 19 troopers to patrol state highways in Marion and Polk counties when Lt. Mike Peterson assumed command of the Salem area in November 2003.

    "Now I have 10," he said.

    On Monday and Tuesday of this week, he could only field one patrol car during the daytime for the two-county area. After the bars close, there's not much state troopers can do to apprehend drunk drivers.

    "We have no police services available from 2 a.m. to 6 a.m. anywhere in the state of Oregon," Peterson said.

    Stranded motorists may have to wait hours to get help from state police in the early-morning hours.

    Oregon voters have heard so many threats of cuts in the past that such arguments have little impact. Critics also are shining a light on Sizemore and Parks, a medical equipment manufacturer who has been the largest single donor to Oregon campaigns in recent years.

    In a Voters Pamphlet statement, Parks said it shouldn't matter who puts up the money for a ballot measure. He declined to discuss the measure when contacted by phone.

    Sizemore said the debate shouldn't be about him.

    "That's just entirely a political ploy on their part to make the discussion not about the measure," he said.

    Oregon already is a low-tax state, but it may not seem that way. The state's income tax rate is the second-highest in the nation. But Oregon has no general sales tax, and property tax rates are limited. Overall, 40 other states collect more taxes per person than Oregon.

    That doesn't sway Salem retiree Bob Charlton, who noted that Oregon expects to collect $1 billion in surplus revenue in the 2005-07 biennium.

    "When you take money out of government's hands, and put it into private hands, you make more jobs, you make more taxes, you make more capital gains, and you make more income for government." Charlton said.