SALEM — Lawmakers said Tuesday that they’re ready to take on one of Oregon’s most sacred cows: the kicker tax refunds.
A bipartisan group of legislators unveiled a bill to siphon off all or part of any future surplus and put the money into the state’s rainy-day savings account rather than sending it back in checks to taxpayers.
If approved by the Legislature, the issue would go to Oregon voters in a general election. Kicker refunds are locked in the state constitution, which can’t be amended without a statewide vote.
Supporters say they think voters are ready to exchange the possibility of every-so-often refund checks for a more stable state government.
“Any time you mess with the kicker, you do it at great travail,” said Sen. Frank Morse, R-Albany. “But what is the right thing to do? The right thing is to build stability.”
Efforts to change the state’s unique-in-the-nation kicker law face intense opposition from anti-tax groups who see the law as one of the few checks on state spending.
“We knew they were going to do something like this,” said Russ Walker, Oregon director of FreedomWorks, a national group that raises money to oppose tax increases. “They just don’t get it. They want to create a rainy-day fund off the backs of taxpayers instead of doing it the way they should — by saving some of the general fund every session.”
The kicker debate comes during economic upheaval for Oregon, which has seen revenue projections plummet by billions of dollars in recent months. Less than an hour after Tuesday’s announcement, the Senate approved a bill to fill an $855 million hole in the current state budget by spending federal stimulus money, shifting money from state agencies and trimming tens of millions of dollars from state services.
“This is a bill about shared pain and shared responsibility,” said Sen. Margaret Carter, D-Portland, before leading all Democrats and a handful of Republicans in approving the budget rebalance. It moves to the House, where it is expected to pass later this week.
Among the bill’s effects: Some schools would close early; state courts would close every Friday from March 13 to June 30 (court employees would take unpaid “furlough” days); and the hiring of 39 state troopers would be delayed until next year.
Legislative attention now turns to the 2009-11 budget, which is projected to come in more than $3 billion shy of what’s needed to continue state services at their current levels. The steep downturn is the best argument for revising the kicker, said Sen. Ginny Burdick, D-Portland, who chairs the Senate Finance and Revenue Committee.
Diverting surplus tax collections into a savings account instead of refunding them to taxpayers would give the state a cushion against the next big recession, Burdick said.
“So when hard times hit, we’re not closing schools, we’re not closing courts, we’re not taking state police off the road,” she said.
Under the current kicker law, if revenues exceed the official forecast by 2 percent, the entire surplus is refunded to individual and corporate taxpayers. Under the new plan, kicker checks would not go out unless revenue exceeds the forecast by 6 percent for individuals and 36 percent for corporations. Any surplus up to those amounts would be placed in the state’s main reserve account.
Once that account is full — about $1.5 billion — surplus revenue collections would again be refunded to taxpayers.
Oregon taxpayers have received kicker refunds eight times since the law was established in the late 1970s, for a total of $2.6 billion. Corporations have received $527 million in six kicker refunds.
The kicker began as a credit against income taxes. But in 1995, then-state Sen. Gordon Smith, a Pendleton Republican, pushed successfully for the refunds to be mailed as checks, which typically arrived between Thanksgiving and Christmas. In 2000, voters placed the kicker law into the state constitution.
Under the new plan, kicker refunds would become rare, said Steve Buckstein of the Cascade Policy Institute, a free-market think tank.
“The effect would be to permanently transfer billions of dollars from the private to the public sector into the foreseeable future,” he said.
The general concept comes from a 30-member task force that during the past year looked into ways to change how Oregon collects money to run its programs. It has the support of a variety of interest groups, including the Oregon Business Association.
A secondary effect of the bill would be to place the state’s rainy day fund into the constitution, which would help ensure it grows and isn’t subject to easy tampering by lawmakers, said Lane Shetterly, a former state representative who led the task force. He said the change would stand a good chance at the ballot box.
“I think voters get that — saving during the good times to spend in the bad times.”