But is the measure all it’s cracked up to be?
By J.L. Wilson
Associated Oregon Industries
Initiative Petition 35 is a proposed ballot measure – slated for the November 2012 ballot – which seeks to eliminate the corporate kicker and devote those resources to K-12 education.
IP 35 has been approved for circulation by the Secretary of State. It is a constitutional measure which will require 116,000 valid signatures to the Secretary of State by July 6.
The signature gathering effort, and the subsequent campaign, will be run by “Our Oregon,” the public employee union-backed organization that directed the campaigns for the Measure 66 and 67 tax hikes.
IP 35 simply adds a sentence to the Oregon Constitution that says that corporate kicker proceeds shall be “retained in the General Fund and used to provide additional funding for public education, kindergarten through twelfth grade.”
The corporate kicker is a tax credit for Oregon C corps when corporate revenues are realized in excess of 2% more than the close-of-session legislative revenue forecast. If corporate tax revenues come in more than 2% higher than projected, then the extra tax revenue is rebated back to C corp taxpayers in the form of a credit. Critics of the corporate kicker note that most of all corporate kicker tax credits go to C corps located outside of the State of Oregon.
History of the Corporate Kicker
1979 – 81 No kicker
1981 – 83 No kicker
1983 – 85 $13 million (10.6% of corporate liability)
1985 – 87 $7 million (6.2% of corporate liability)
1987 – 89 $36 million (19.7% of corporate liability)
1989 – 91 No kicker
1991 – 93 Suspended by Legislature ($18 million)
1993 – 95 $167 million (50.1% of corporate liability)
1995 – 97 $203 million (43.2% of corporate liability)
1997 – 99 No kicker
1999 – 2001 No kicker
2001 – 03 No kicker
2003 – 05 $101 million (35.9% of corporate liability)
2005 – 07 Suspended by Legislature ($344 million)
2007 – 09 No kicker
2009 – 11 No kicker
2011 – 13 No kicker is projected
In summary, over the past 16 biennia with the corporate kicker law:
There has been no corporate kicker in eight biennia;
The Legislature suspended the kicker for two biennia ($362 million total);
Oregon corporations have received a total of $527 million in kicker tax credits over the past 32 years;
The amount of total corporate kicker monies in question is $889 million over the past 32 years (Avg. of $27 million per year).
AOI Policy Regarding Kicker
AOI supports Oregon’s 2% “kicker” law, but will support a portion of “kicker” monies directed to the Rainy Day Fund contingent on regular General Fund deposits into the fund.
AOI supports full return of “kicker” monies to taxpayers contingent on fully funded Reserve Fund.
IP 35 contravenes AOI’s public policy positions on the kicker for a number of reasons, primarily because it directs corporate kicker monies into the General Fund, not the Rainy Day Fund. AOI supports using kicker monies to fund a State Reserve Fund that would mitigate the need for tax increases when the economy turns sour. AOI has traditionally opposed efforts to funnel kicker monies into the state’s General Fund, which would pump up government budgets and roll-up costs in a way our state’s economy is unable to sustain.
Policy Considerations for IP 35
The kicker is an unpredictable revenue source. AOI members should ask the following question, “Would Oregon have been better off with $527 million more in the baseline budget prior to the recent recession?” The $527 million in added baseline costs, which does not account for roll-up costs, would have exacerbated Oregon’s current revenue shortfalls.
The Legislature already has the ability to suspend the kicker law, which it has done so twice. In 2007, the Legislature suspended the corporate kicker in order to provide $344 million in seed funding for the state’s Reserve Fund. Putting corporate kicker proceeds into a state savings account is a much more prudent policy for shielding services from cuts during lean years. Plugging corporate kicker monies into the General Fund only exacerbates the cuts during lean years.
IP 35 is a non-solution to school funding. While the measure does earmark corporate kicker monies for K-12 education, it does not prevent the Legislature from backing out current K-12 resources to backfill other budgets. In other words, IP 35 merely enables a budgetary “shell game” that may very well result in no appreciable net benefit for K-12 funding. Whether K-12 receives any benefit at all under this measure will depend fully on the Legislature.
AOI has long supported a comprehensive revenue reform package that includes reform of the kicker laws. In 2011 and again in 2012, AOI supported Senators Frank Morse (R-Albany) and Ginny Burdick (D-Portland) in their attempt to create a more robust state Reserve Fund by using the kicker. AOI hopes the campaign over IP 35 is focused on legitimate issues and provides a long overdue statewide discussion about tax reform that would lower Oregon’s high taxes on income and investment and provide greater budget stability through an enhanced state savings account.
AOI is disappointed with the anti-business rhetoric that has been used to promote the measure thus far. What Oregon doesn’t need is for IP 35 to be the vehicle for Oregon’s public employee union groups to attack Oregon’s job creators for the next six months.