Tax bill repeal would cause shortfall

When Oregon lawmakers passed an $800 million tax-increase package last month, they also approved a bill detailing where the ax would fall if residents referred the tax increase to the ballot and voters rejected it.

But it turns out that those automatic budget cuts would fall about $225 million short of making up the $800 million gap.

This mismatch between the budget bill language and the tax referendum muddies the financial effect of the referral and creates a problem for Attorney General Hardy Myers in crafting a ballot title.

The gap almost assures that repeal of the tax package would force lawmakers back to Salem for another budget-balancing special session next year.

“You figured that out, huh?” said Kevin Mannix, chairman of the state Republican Party and a backer of the referendum effort.

Mannix said that if the referendum gets on the ballot, he and other opponents of the Legislature’s plan will have an opportunity — and a responsibility — to come up with a credible alternative.

“I don’t think we can talk about a secret plan,” he said, referring to vague budget proposals that never quite saw the light of day during the past legislative session.

Rep. Randy Miller, R-West Linn, co-chairman of the Ways and Means Committee, said he hopes the tax measure is repealed, and lawmakers return to deal with it.

He said the budget cuts his colleagues approved amount to scare tactics. “It s not something that binds us at all.”

Miller opposed the tax package, but he and other Republican leaders were outvoted by a coalition of GOP moderates and Democrats who pushed through the combination of increases in personal and corporate income taxes and property taxes.

Anticipating that critics would mount a signature-gathering effort to put the package on the ballot, lawmakers also adopted a law that outlines two scenarios.

The first lists $792 million in cuts to schools and large state agencies if the entire tax bill were referred. The second details $544.6 million in cuts if only parts of the bill were referred. The second figure refers to the revenue raised by an income tax surcharge, the biggest piece of the package.

Opponents of the tax bill chose to seek referral of not quite all of the tax bill. They left out provisions dealing with medical provider taxes that were duplicated in another bill. Voter rejection of the tax bill would trigger the $544.6 million cut list.

Ken Rocco, legislative fiscal officer, estimated the shortfall at $225 million if the tax measure is defeated.

Rocco said budget writers knew they couldn’t account for every possibility. “We would have had a phone-book-sized bill,” he said.

Options in the event the tax measure is repealed include a special session between the Feb. 3 election and May 1, when the cuts would take effect. Or legislators could wait until the first week in June, when they are scheduled to meet to consider tax reform.

Or lawmakers could do nothing, allowing Gov. Ted Kulongoski to use his authority to make across-the-board cuts to keep the budget balanced.

Gap complicates title fight The budget glitch has raised the level of difficulty for the attorney general, who by law must write the ballot title, the official description voters would see on the ballot. “It’s a real problem,” said Kevin Neely, Myers’ spokesman.

Tax activists and their foes frequently clash about the wording of ballot titles for money measures. In general, supporters of government spending argue that the ballot title should include explanations of their budget effect, while opponents maintain that such information is speculative and political.

Historically, the attorney general has sided with tax activists on these issues, reasoning that the future legislative response to a tax cut could not be known.

But because the Legislature adopted a law detailing the cuts in this case, Neely said Myers is determined to include the financial effect in the ballot title. That list falls far short of describing the actual cuts that would be needed to balance the budget if the measure is defeated.

The result is a proposed title that supporters of the tax package don’t like because it inadequately describes the budget realities, and backers of the referendum don’t like because it mentions the budget situation at all.

Myers has until Oct. 22 to certify the ballot title. His decision in this case is not subject to appeal.

Lawyer Steve Novick, a veteran of many ballot title fights, argues that it should leave out the budget number and instead go into more detail about the specific services supported by the tax increase.

It’s more important, Novick said, to get across the point that the tax measure prevents cuts to schools, public safety and services for senior citizens. “The average Oregonian does not walk around with the details of the state budget in his head,” he said.

But that is the kind of message that opponents of the measure say is political, and should have no place in the title.

The ballot title should be limited to what is in the tax bill, and not what might happen with the state budget, said Russ Walker, Northwest Director of the Washington, D.C.- based Citizens for a Sound Economy, and a sponsor of the referendum. “I don’t think that has anything to do with the bill that’s sitting before us,” he said.

James Mayer: 503-294-4109;