Time is up for the personal kicker
The following "in my opinion piece by Oregon Treasurer Randall Edwards was published in the Statesman Journal today. Download a PDF of the column.
For some time now, a yellow kickball has rested on a shelf in my office at the state Capitol. Scribbled on the ball are the words: "Stop Dodging the Kicker!"That phrase is haunting me more than usual these days as it looks more and more like the country is heading toward a recession.
To me it's déjà vu all over again. At the end of my first year as state treasurer in 2001, the state sent out $254 million in personal kicker checks at the exact time Oregon went into a deep recession. And last month, just before Christmas, we sent out a record $1.1 billion kicker even as signs of a recession were on the horizon.
I have no doubt that most Oregonians who got kicker checks were delighted. But the kicker, which no other state implements, is a crazy way for government to do business and certainly throws a kink in our financial system. For example, this last kicker was so large that we had to borrow money to keep the state government afloat, costing the state an additional $23 million in interest.
The Legislature showed real foresight when it diverted last year's corporate kicker to create the Rainy Day Fund. But a one-time deposit is not enough. Although we did set up some cushion to help us through the next recession, we missed a golden opportunity to better stabilize our long-term future when we failed to address the more popular personal kicker.
About the only consistent argument kicker supporters have offered is that it stimulates holiday shopping when the checks go out in December. However, despite the last kicker being a record $1.1 billion, economists say Oregonians spent less on gifts this past holiday than they typically do.
We'll better know where the state economy stands when the next revenue forecast comes out Feb. 8. But regardless, I will raise the issue of the kicker from my position as a member of the Task Force on Comprehensive Revenue Restructuring. We've dodged this issue far too long.
Randall Edwards is the Oregon state treasurer. Contact him at [email protected], (503) 378-4329 or www.ost.state.or.us.
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Jan. 26, 2008
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Jan 26, '08
Unfortunately, Treasurer Edwards should get ready for an inbox full of furious Oregonians...and the line goes something like this: "That is MY kicker...the government STOLE it from me."
It is surprising how few people actually know what the kicker is, and the completely irrational method used to determine if it will be issued. But who can expect these irate citizens to act rationally when they can't get past the emotional feeling that it is their "stolen" money.
It is too bad that there is massive political fallout from politicians that take this position, because it is truly the right position to take.Fortunate for him, he isn't up for re-election - perhaps the willingness to stick his head out.
I hope others have the courage to do the same and save Oregon from once again financially ruining itself with poor policy that is completely within its control.
Jan 26, '08
The personal kicker is about the dumbest idea ever promulgated by government to solve a non-problem. Why the state economist is held to this standard eludes me. In no other state is the state economist required to predict revenue two years' out with this kind of accuracy and these kind of consequences. The legislature has never asked the state economist what kind of confidence intervals exist around any estimate of state revenue. In talking to former state economists it is my observation that the 2% forecast limitation is less than the degree of confidence placed in a single point estimate of revenues at any given time. So the solution to this problem is not to automatically refund everything in excess of 0%, which is what the kicker does, but to keep everything less than, say 4%, and deposit it in a rainy-day fund for times like the present. If the state feels compelled to refund anything, let them offer the surplus (in excess of 4%) as a credit against future taxes, not as a check issued in the first 6 months of a new biennium. Dumb, dumb, dumb.
Jan 26, '08
So, if the Oregon Kicker is part of the constitution, then any attempt to fix the kicker would necessarily require an intiative, probably referred to the voters by the Legislature. Would the most likely shape of a fix generally be to transfer kicker funds into a rainy-day fund?
2:09 p.m.
Jan 26, '08
I really appreciate that Randall Edwards is distinguishing himself as an elected official who is willing to speak out about the insanity of the kicker and who understands that it is Oregon's greatest impediment to having an adequate rainy day fund and being well prepared for a recession.
5:55 p.m.
Jan 26, '08
I remember when I first moved to Oregon and heard about the kicker, thinking, "this is the most insane thing I have ever heard of."
We have got to find a way to get rid of it. And it won't be easy, because everyone enjoys getting a nice check at a time of year when many people are strapped. But as much fun as it is to get a check in the mail, it's time. For it. To go.
Jan 26, '08
I agree with mrfearless47, except that I would make the margin of error at least 6% instead of 4%. That's 3% a year -- a fairly exacting standard. It's tough enough to forecast two years out at that level. The current 1% a year is idiotic.
As much support as there appears to be for this idea, why hasn't anyone at least attempted to mount an initiative campaign to get this on the ballot?
The case is easier to make during a recession, because people can see the effect of cuts in services. As the economy slows, it seems like this would be a good time for someone to at least make the case and test public opinion.
1:00 p.m.
Jan 27, '08
Thanks, Randall, for saying what we must say over and over again until the kicker is redirected to a real rainy day fund.
Not only does Treasurer Edwards have to borrow now to keep the bills paid until our revenue catches up, but in January or February of 2002 the state had to borrow almost the same amount as the November 2001 kicker just to make ends meet. Over the next 18 months Oregon borrowed a great deal more than that, money we will be paying back for many years. It wasn't enough. We had to also cut budgets seriously crippling the Oregon Health Plan and putting off paying for schools. We have not recovered the OHP cuts and k-12 schools have just last year returned to pre-recession funding levels - still well short of what our kids need.
The one good thing about the kicker law is that it establishes an upper limit on state spending in a very good biennium, but the dollars saved need to be put into the rainy day fund to pay for basic services for Oregonians during the next recession.
If we are very very lucky, there may be no serious downturn in state revenue this year and next, but with the economic situation, there will be huge unmet needs we cannot pay for. If we are not so lucky, we have the reserves to pay for only a very small downturn without cutting the budget, but once those reserves are spent, they are gone until the kicker problem is fixed.
This issue is so important to Oregon's future, I hope many other officeholders will join Treasurer Edwards determination to end kicker refunds and save the money instead. To get the constitutional change we need requires that many more voters understand that they are actually better off with a reserve fund in the state, than an unpredictable check in hand. That will happen only if we effectively expose this issue.
Thankfully, many more people and not just progressives are getting it.
Jan 27, '08
Thank you Randall and Phil. It is time this debate is out in the open. The Republicans who talk about fiscal discipline AND fully funding the state police AND sending rebates to tax payers should be challenged over and over again for line item details on how they plan to do that.
Reagan and Bush created deficits, Measures 28 and 30 caused budget cuts, no one should be allowed to use those generalities anymore. If all Democrats would verbally demand line item or other specific numbers as forcefully as Speaker Minnis drove many of us crazy by saying ad nauseum "the voters have spoken on Measure 30, therefore no one is allowed to discuss taxes this session", we might get a great public debate going.
And such a debate might pressure Mannix to explain in line item detail how he thinks his ballot measure should be paid for. Kevin LOST when he campaigned on "tough on crime no new taxes" and it is time to get serious about honest debate about these issues!
Jan 27, '08
Mrfearless seems to be on to something. If the kicker is offered as a rebate on NEXT year's taxes, which I would assume would not violate any constitutional issues considering it is still being returned. Then in 3-5 years, once people have gotten used to the checks not rolling in, the "kicker" aka "rebate" can be eliminated at the ballot box on a vote. Its kind of like that $50 off mail-in-coupon on your new hairdryer that so many of us forget to mail back. I rarely think of it as MY $50 that I just lost b/c I didn't get around to it.
The kicker is a stupid idea, and although I did have a little "oh that would have been nice" moment this year when I saw my monster kicker check memo labeled "donated to state school fund" I'm much happier that the money goes to restoring cuts to schools rather than a new... (insert Moroccan item here) ...
Another idea would be to make the kicker "super (supra?) progressive" and reverse the percentages so if one makes over 100K they get 0% back, over 50K they get 30% back, between 20-50K 100% back, under 20K 120% back, under 10K 150% back. Make Keynesian economics work in the best possible way.
Oh wait, I forgot about all the low income folks who voted AGAINST measure 28 - even though it was a tax on people richer than them. Nope, we need to change the paradigm from "its my money" to "it benefits all of us". Which means the Legislature better continue being very careful about what programs it funds - no wide eyed boondoggles.
I believe a straight up or down vote will fail because of the fact that so many people just got a HUGE check.
James Mattiace Live from Morocco - where it isn't snowing.
12:37 a.m.
Jan 28, '08
Randall and Phil, to join the chorus, thank you for this. You do a nice job distinguishing yourselves from those worried about the political consequences of talking common sense.
I'd call your actions courageous, but that's obviously an exaggeration; it's only the cowardice of those who shy away from the issue that make such a statement appear courageous.
One little consequence of this op-ed: because it's published in a known newspaper, and written by someone with professional knowledge of the subject, it will make an excellent, and long-needed, source for a forthcoming Wikipedia article on the kicker.
1:32 a.m.
Jan 28, '08
All I can say is, james mattiace must have a MUCH nicer hairdryer than I do.
Jan 29, '08
Do your homework. The state of Alaska has been issueing kickers for years. Oregon is not the only state to do this.
2:37 a.m.
Jan 30, '08
We got the kicker laws courtesy of Don McIntire, a very easy initiative system, and a rabid bunch of right wingers whose whole approach to government is to strangle it. The very same crowd elevated the personal kicker into the state Constitution fairly recently.
Of course the personal kicker is one of the dumbest part of our tax system. But remember, we got the personal kicker via mob rule. The republican form of government, embedded in the US Constitution as a guarantee, is the only alternative to mob rule and that's precisely why the founders chose it as the mode of government.
Mob rule via the initiative process was discussed in The Oregonian recently. Kevin Mannix -- the man who gave us measures 5 and 11 -- is for it for obvious reasons. If he's for it, we are all entitled to be against it. AFSCME's Joe Baessler supports suggestions for changes in the initiative system by The Portland City Club in a 76-page report.
Baessler ends his argument with a suggestion that judicial review should be moved "to the front end of the process." That would be the least we could do to restrict mob rule. The best would be to substantially increase the number of signatures required to achieve mob rule via the initiative process at minimim or to require a super majority to pass.
Any changes in the mob rule initiative system would be opposed by those who call themselves Republicans but who really despise the republican form of government just as much as they despise government itself. And they desperately want to keep on crippling government with laws like the personal kicker law.
Jan 30, '08
Do your homework. The state of Alaska has been issueing kickers for years. Oregon is not the only state to do this.
Based on oil revenues.