Saturday, January 17, 2009

Getting Kicked by the Kicker

State Economist Tom Potiowsky had bad news, better news and bad news for the state in his report to the Oregon Legislature yesterday.

Posted By on Sat, Jan 17, 2009 at 10:39 AM

State Economist Tom Potiowsky had bad news, better news and bad news for the state in his report to the Oregon Legislature yesterday.


The first bad news was that, thanks to the deepening recession, he expects state revenue to shrink by as much as $2.6 billion over the current biennium and the one following. That's more than double the $1 billion drop he predicted just two months ago.

The better news, as reported by Oregonian blogger Jeff Mapes, is that "although tax revenues are dropping quickly now, that could change over the 2009-11 budget cycle. With all the economic stimulus in the works, there could be actually be a very robust recovery in, say, 2010," Potiowsky said.

The bad news is that if the revenue picture does improve the state could be forced to give all the extra money back, thanks to Oregon's unique "kicker" law, which requires the state to refund all the excess if revenue surpasses the economist's prediction by more than 2%.

"Supporters of the tax rebate will see this as a good thing, checking the growth in state spending and giving back taxpayers something after the tax increases they're likely to face in the current recession," Mapes writes. "But I suspect that this scenario is going to increase the determination of Democratic leaders to put a proposed measure on the ballot to rewrite the kicker law. ...

"The proposed measure would divert most of the kicker into a reserve fund to protect schools and other public services in a downturn. I think legislators see a real window of opportunity to push this onto a ballot later this year, particularly since there won't be any kicker checks going out in 2009 anyway because revenues are down from projections."

The crazy kicker law is long overdue for rewriting. Conservatives are always saying that governments should be like families and learn to live within their means. That's all fine and good. But doesn't prudent family financial management also require saving a little spare cash for a rainy day?

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