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JAMES MAYER – The Oregonian Dave Hogan and Janie Har of The Oregonian staff

contributed to this report.

SALEM The Oregon House, defying its Republican leaders, narrowly approved an $800 million tax increase Wednesday to seal the deal on a plan to balance the budget.

The vote also signaled a turning point for lawmakers who have struggled since Jan. 13 — resulting in the longest legislative session in state history — to patch a state financial picture battered by falling tax collections.

House Speaker Karen Minnis, R-Wood Village, predicted the Legislature could finish the drawn-out session next week. She expected members would work through the weekend to wrap up their business.

House Bill 2152 — approved by the Senate a day earlier — passed 36-22 with exactly the three-fifths majority needed to pass tax increases. The outcome remained in doubt throughout 2-1/2 hours of tense debate, and the bill passed only after Brad Avakian, D- Beaverton, changed his vote from no to yes.

Avakian said he wanted to protect school funding, but he didn’t want to raise taxes.

“In the end, I was not willing to take a risk that we would not end up with enough for kids,” he said.

Said Rep. Rob Patridge, R-Medford, a leader of the moderate group that crafted the compromise plan: “Some people felt it was the right thing to do, and we need the services. Others felt it was time to bring this thing in for a landing. I had at least five people go back and forth.”

Gov. Ted Kulongoski said he would sign the bill, despite repeated statements that he did not support a general tax increase.

“It contains a temporary income tax increase, which I said in January I would not support, but it is a last resort to secure a full school year for our children,” the Democratic governor said in a written statement. He said he applauded the courage of lawmakers who voted for it.

The House debate reflected the deep differences that divide the Legislature and the state on government spending and taxes. It also revealed the anguish particularly felt by Republicans who voted for a tax increase that Minnis vigorously opposed.

“Don’t be deluded. This is not an easy vote for anybody,” said Rep. Lane Shetterly, R-Dallas, revenue committee chairman.

Republicans control the House 35 to 25, but a coalition of moderate Republicans and Democrats provided a momentum that GOP leaders could not stop. In the end, 11 Republicans and all Democrats voted yes.

Minnis: Free to vote

Asked whether she was disappointed that so many in her caucus voted for the plan, Minnis said they were free to vote their conscience.

“I’m the speaker, not the dictator,” she said. “I have no plans to take anyone out and flog them.”

The bill raises about $800 million for the general fund in 2003- 05. It includes a three-year graduated income tax surcharge with rates based on a sliding scale up to 9 percent, increases in corporate taxes, a decrease in the discount payment of property taxes, and new taxes on health care providers.

The surcharge raises $545 million in the current two-year budget period and $157 million in 2005-07. A third year of the surcharge would not take effect if the economy recovers sufficiently.

The rest of the budget plan is expected to meet swift approval. It includes about $400 million in additional nontax revenues; a $5.2 billion K-12 school budget, with the potential for $100 million more if the economy improves; and $2.4 billion in social service spending.

Shetterly said the plan results in an $11.6 billion general fund budget, which he said was 5 percent less than the budget lawmakers approved two years ago.

The income tax surcharge would cost about $38 a year to the typical Oregon household with about $40,000 to $50,000 in adjusted gross income on a joint return, according to the Legislative Revenue Office.

“We are not overburdening Oregonians’ ability to pay,” Shetterly said.

Tax activists seek vote

Tax activists who want to overturn the tax increase vowed to collect the approximately 50,000 signatures needed to put the plan on the ballot, where voters could reject it.

To deal with the possibility that a referendum signature drive could succeed, the Legislature is working on a bill to set Feb. 3, 2004, as the date for a special election.

“This will be the easiest campaign I’ve ever worked on,” said Russ Walker of Citizens for a Sound Economy.

Republicans said their colleagues who voted for the tax increase were caving in to the temptation to adjourn and abandoning their principles. Rep. Jeff Kruse, R-Roseburg, and others said lawmakers could find the money by running a more efficient government.

Supporters cited the absence of other budget-balancing proposals with a chance to pass.

“Bring out the secret plan,” said Rep. Floyd Prozanski, D- Eugene.

Several lawmakers, citing voter rejection of a similar tax increase in January, said they planned to join the ballot fight to defeat the plan.

“What part of ‘no’ don’t you understand?” Rep. Jeff Kropf, R- Sublimity, shouted into his microphone during the debate.

“I don’t think we solved anything today,” said Majority Leader Tim Knopp, R- Bend.

Rep. Bob Jenson, R-Pendleton, said lawmakers were forced to raise taxes because they had not lived up to campaign promises of protecting students and senior citizens while reining in wasteful spending.

“Because we failed to do our job,” he asked, “are you going to sacrifice those people on the altar of our failure to find the efficiencies we promised?”

Dave Hogan and Janie Har of The Oregonian staff contributed to this report.

James Mayer: 503-294-4109; jimmayer@news.oregonian.com


Caption: Sidebar – How they voted A breakdown By name