Democrats have plan to even out spending

SALEM — House Democrats unveiled a plan Wednesday to fix the state’s financial problems by creating a rainy-day fund and capping the growth of tax breaks.

“The state’s fiscal management is abysmal,” said Minority Leader Jeff Merkley, D-Portland.

The Democrats want the Legislature to put two constitutional amendments on the ballot in November 2006.

One would create a reserve fund with money from the budget’s ending balance and capital-gains tax receipts. The other would limit the growth of tax breaks to the rate of inflation.

The Democrats also proposed requiring that all tax breaks be renewed at least every 10 years, which would not require a constitutional change.

They argued that the amount of money given away through tax breaks has grown faster than general fund spending in the past decade. This “spending” through the tax code goes largely unexamined by lawmakers, said Rep. Mark Hass, D-Raleigh Hills.

“We spend three weeks on the hairdressers’ board, but the tax breaks go on year after year without scrutiny,” Hass said.

The plan joins a variety of others that have been proposed to deal Oregon’s volatile tax system, which floods state coffers with more money than expected during good economic times but drains them when the economy turns bad. Oregon is one of a handful of states with no reserve fund.

The Democrats’ plan will run into tough sledding in the House, where Republicans have a 33-27 advantage. House Republican leaders support a rainy-day fund with a strict spending limit.

In the Senate, the majority Democrats are considering proposals to use the kicker refund on surplus income tax to build a reserve.

Also this week, the tax activist group FreedomWorks filed four versions of a spending-limit ballot initiative with the secretary of state’s office. Two of the proposed measures would limit spending to increases in personal income, or to a combination of population growth and inflation. The other two would impose flat limits of 8.1 percent or 10.25 percent over a two-year budget period.

Russ Walker, Oregon director of FreedomWorks, said the group hadn’t decided which of the initiatives to pursue. They would be aimed at the fall 2006 ballot.

James Mayer: 503-294-4109;

©2005 The Oregonian