A few weeks ago I was re-elected to represent Lake Oswego and nearby areas in the Oregon House of Representatives. The situation now differs greatly from when I was first elected in 2002.
Just four years ago a recession gripped Oregon. As economic activity slowed, the income of individuals and corporations dropped. Because it depends heavily on income taxes, the state lost a quarter of its general fund revenue.
This loss of revenue forced the Legislature to make deep cuts in 2002 and 2003. Sick people were dropped from the Oregon Health Plan. State police were laid off. Schools closed early for the year.
Since then Oregon's economy has rebounded. Unemployment is down. Wages and profits are up. The taxes collected on this income are flowing into the state's general fund.
This changed situation raises the question - what should the state do with the unexpected revenue? Advocates for various state services are pressing for an increase in funding.
One reality of legislative service is that unmet needs run well beyond the state's available resources, even in good times. We could spend every nickel of the new revenue on current services and still not accomplish everything that arguably should be done.
But those of us who remember the hard times of 2002-03 see another need - to set resources aside for the next economic downturn. Like a roller coaster, state revenue rises to a peak and then plunges into the next valley. Unless we save at the top, the next drop is bound to produce another round of stomach-churning cuts.
But Oregon's unusual 'kicker' law makes it harder to save. In May of each odd-numbered year, state economists must predict how much income tax will be collected in the next two years. If the actual amount collected exceeds the prediction by more than 2 percent, all the excess must be paid out rather than saved or spent on public services.
The kicker includes a separate calculation for individuals and for corporations. According to a recent update by state economists, the kicker payments for the 2-year period ending next June will total more than $1 billion to individuals and $275 million to corporations.
Most of the corporate kicker will go to companies headquartered outside Oregon. There is little reason to believe that these corporations were expecting kicker payments when they invested in Oregon operations.
Last spring I asked readers of my electronic newsletter, The Mac Report, about the corporate kicker. By a wide margin, they favored placing it in a 'rainy day' fund to maintain public services when revenues drop in the future.
The current corporate kicker can be suspended by a two-thirds vote of the Legislature. Because the kicker was amended into the Oregon Constitution several years ago, committing future corporate kickers to savings would require a vote of the people. The 2007 Legislature should vote on whether to place the current corporate kicker into savings and refer to the people a proposal to do the same with future corporate kickers.
The personal kicker presents different issues because nearly all of it goes to Oregon residents and some of them may be counting on it. Whether to suspend the personal kicker and to commit it to savings deserves a separate debate.
Rep. Greg Macpherson, Lake Oswego, represents Oregon House District 38.