Kicker, Rainy Days, and Double Dipping In Salem

Chuck Sheketoff

When the Legislature adopts a budget they project an ending balance. Throughout the 1990s the actual biennial ending balances were usually significantly higher than what the Legislature thought. The ending balance becomes the beginning balance for the next budget period. Thus, it is always a source of funds for programs and services Oregonians rely upon.

Take this budget cycle. The Legislature left town in  2003 and thought that their ending balance would be $56.5 million. By December 2004 when the Governor proposed a budget, the ending balance had grown by $34.1 million to $90.6 million. As of the May revenue forecast, the ending balance is now projected to be $292 million. That means the Legislature and the Governor have $202 million more available to fund the services Oregonians rely upon.

If revenue exceeds projections by 2 percent or more, the extra revenue is all "kicked" back to the taxpayer. In years that the kicker kicks the ending balance is one of the sources of the kicker refunds made in that next budget period. In the budget period ending yesterday, corporate tax revenue exceeded projections by 2% or more, so corporate Oregon will be getting a $62.6 kicker rebate.

Under the Oregon Business Association's so-called "rainy day proposal," SB 841, some funds in the ending balance are sent to the grossly misnamed Education Stability Fund the following budget period. So, if the kicker kicks, then the ending balance is tapped in the next budget period for both the kicker AND the deposit to the Education Stability Fund.

Take 1999-01. That biennium revenues exceeded projections by more than 2%, so in late-November 2001 (during the 2001-03 biennium) we sent a $254 million kicker refund to taxpayers (at time that the projected shortfall was $700 million, and later grew to about $2 billion during the course of the hellish special sessions of 2002). In other words, the shortfall was exacerbated by the kicker payment from the previous biennium's honest missed projection of anticipated revenues.  If SB 841 were in place, according to the LRO revenue projection, $192 million of the 1999-01 ending balance would have been deposited in the Educational Stability Fund after December 31, 2002, exacerbating the budget shortfall.

That's double-dipping. Why spend ending balance funds that are needed to fund the kicker refunds? Why would we want to deposit funds in the Education Stability Fund at a time when we recognize the that the current budget is out of balance?  When people get laid off and go on unemployment they stop making their monthly deposits into the xmas fund - shouldn't the state, as well?

The double dipping is even more frustrating given that the Legislature is sitting back and allowing a $62.6 million kicker for the most profitable corporations in Oregon. About half of the total tax cut will flow to only 50 Oregon corporations. Ninety percent of the total tax cut will be bestowed on fewer than four out of every 100 corporations. All of the money comes out of the budget for the next two year budget period that started today. If divvied up proportionally, that means about $30 million came from schools.

Go figure.

By Chuck Sheketoff July 01, 2005