Antitax Lobby Offers Oregon a Budget Ax

In what is being portrayed as the latest test of antitax sentiment in the country, Oregon voters will decide Tuesday whether to accept an $800-million tax increase adopted by the Legislature to patch gaping holes in the state budget.

The outcome, the governor and others say, will determine whether Oregon will continue to have the shortest school year in the nation, whether there will be enough money to prosecute low-level criminal cases and whether the state’s poorest patients will receive medications.

If this all sounds familiar, it’s because Oregon held a tax increase vote just last year. That measure failed, and Oregon became the poster child of struggling state economies.

A key difference in this year’s battle over taxes is the lead role played by Washington, D.C.-based Citizens for a Sound Economy. The group led the effort to get the measure onto the Oregon ballot with the goal of getting voters to override the Legislature.

Last fall, it helped defeat a $1.2-billion tax increase in Alabama.

To fill budget deficits created by the recession that followed the economic boom of the 1990s, Alabama and other states, including Nevada, Ohio and Virginia, passed or proposed tax increases. All have been challenged by citizens’groups.

In October, California voters overwhelmingly elected an antitax governor in Arnold Schwarzenegger, who has since proposed bond sales as a way of closing the state’s projected $30-billion budget gap.

“People across the country are rising up against taxes,” said Dick Armey, former U.S. House majority leader and national chairman of Citizens for a Sound Economy. The advocacy group opposes tax increases and wants less government regulation.

Armey, in an interview from his Texas home, said Alabama was one victory and Oregon would be a second in an ongoing “tax revolt.”

“When people in other states see what happened in Alabama, what happened in Oregon, they’ll think twice about trying to raise taxes in their own states,” Armey said.

Oregon’s Measure 30 gives voters a choice between accepting an $800-million tax boost or having state legislators cut spending by roughly that amount for services such as education, public safety and healthcare. Passage requires a simple majority. The key element of the tax package is a temporary income tax surcharge that would cost state income taxpayers an average of $133 annually, the Oregon Legislative Revenue Office reported.

Oregon legislators, in a last attempt to balance the state’s $11.5-billion general fund budget for 2003-2005, approved the tax increase in August at the end of a grueling eight-month legislative session. The package was approved by a supermajority of the Republican-led Legislature.

But antitax activists, led by Russ Walker, director of the Oregon chapter of Citizens for a Sound Economy, quickly gathered 148,000 signatures -- a state record -- to force a referendum.

There has never been a voter-approved increase in the state income tax since it was adopted in 1930. Unlike most states, Oregon does not collect sales tax.

Recent polls suggest Measure 30, like its predecessor Measure 28, will be defeated, although a late surge in support has energized the pro-tax campaign. Supporters of Yes on 30, among them public employee unions, have poured more than $400,000 into their cause in the last month, mostly on radio ads.

“I don’t think Oregonians are going to listen to lobbyists from Washington, D.C.,” said Morgan Allen, director of the Yes on 30 campaign. Allen said Citizens for a Sound Economy represents the interests of big business.

The campaign against the measure has raised less than $200,000 since paying signature-collectors at the start of their effort.

Walker said Citizens for a Sound Economy doesn’t want to spend more than necessary. He said the group has 12,000 members in Oregon, most of them volunteers for various conservative causes, and they’ve played a crucial part in the fight against Measure 30.

During a recent debate at Portland State University, Walker reiterated his basic argument that the answer to budget deficits isn’t more taxes but less spending. State governments, he said, must streamline and spend money more judiciously.

“We need to live within our means,” he said.

But supporters of Measure 30, among them Gov. Ted Kulongoski, say Oregon can’t afford to cut or streamline anymore. He and others have described the state budget as cut to the bone. Failure of the measure, Kulongoski said, would result in “tremendous consequences.”

Oregon’s schools used to be funded primarily by local property taxes, but citizens’nitiatives in the 1990s limited the use of such taxes for schools. Funding public education became the responsibility of the Legislature. Failure of Measure 30 would mean a shortfall of $338 million in the education budget.

Last year, nearly half the state’s school districts had to shorten their school year, some by as much as three weeks. Cuts also resulted in teacher layoffs -- Oregon schools lost 1,400 school employees over the last year -- and the reduction or elimination of sports programs.

“We’re definitely at rock bottom,” said Steve Drake, athletic director for Portland-area Hillsboro High School, which cut 17 days from its school year in 2003 .

The school no longer funds swimming, tennis and golf and has cut several coaching positions. This year, Drake said, the school might have to cut or eliminate major sports, such as football and basketball.

Defeat of Measure 30 would also mean an automatic cut of $13 million from the state court system’s budget, meaning possible layoffs, early closures and delays in the prosecution of low-level crimes.

Paul Lipscomb, presiding judge of the Marion County Circuit Court, said that “something would have to give.”

Lipscomb said he would do everything he could to avoid laying off any of the 90 court employees, but that courthouse counters may close at 3 p.m. instead of 5 p.m., and no jury trials would take place on Fridays. Like other courts in the state last spring, Lipscomb’s had to close for a day to save money.

Crimes would be addressed according to priority, with offenses such as murder and assault at the top, and property crimes, civil violations and small-claims cases at the bottom. Lipscomb said cases toward the bottom could be significantly delayed. Some criminals could be released to ease the backlog.

Failure of Measure 30 would mean cuts totaling $180 million from the Oregon Health Plan, which provides coverage for the state’s poorest residents. About 1,800 jobs in mental health, public health and drug and alcohol treatment were cut last year, according to the Assn. of Community Mental Health Programs.

Most dramatically affected were low-income patients who depended upon the health plan for medications.

In a highly publicized case, Douglas Schmidt, a 37-year-old Portland man, suffered a massive seizure after the state denied him funds for his epilepsy medicine. Schmidt spent eight months in a coma before dying in a hospital. His medical bill in the end, paid by taxpayers, totaled nearly $1 million.

Gretchen Kafoury, a public policy expert, predicted that between 50,000 and 80,000 people would lose coverage if Measure 30 failed.

Oregon is one of only five states without a sales tax and relies heavily on the income tax for its funding. Previous governors and legislatures have tried and failed at instituting major changes in the state’s tax structure. Since 1990, voters have turned down 20 attempts to change the system, including seven measures to create a state sales tax.