Oregon Democrats say no to big budget cuts, yes to slashing taxpayer 'kicker'

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With billions in federal dollars flooding the state, Oregon Democrats are taking big budget cuts off the table while slashing millions in taxpayer rebates.

Under the $1.9 trillion American Rescue Plan passed by Congress this month, the state is set to receive $4.2 billion in federal aid. About $2.6 billion of that total is bound for state coffers which Democratic state lawmakers want to stay filled.

The two-year budget framework released by Democratic lawmakers this week is largely free of the cuts last seen in Gov. Kate Brown’s proposed budget from December. The $27.2 billion plan amounts to about $2 billion more than Brown’s wishlist and preserves state services across the board. Medicaid would go untouched while the state school fund would see a $102.5 million increase in line with Brown’s budget.

Contrary to the governor’s proposals last fall, Democrats’ budget would fund the promised addiction centers included in Measure 110 and put $195.6 million towards summer learning programs backed by Brown, who originally sought $250 million for the programs.

The most controversial bullet point in Oregon Democrats’ budget framework lies in a bill which would cut some $15 million from the ‘kicker’ money flowing back to taxpayers this year.

Oregon’s tax rebate, or kicker, is a rebate calculated for individual and corporate taxpayers when state revenue exceeds state forecasts by 2%. This tax season, the kicker is expected to total $571 million if the state’s current projections hold. Under Senate Bill 846, $15 million of that total would be redirected to the state’s Department of Justice and Insurance Fund.

Opponents of the kicker law say it prevents the state from achieving better fiscal footing and leaves it at risk of cutting invaluable state services, but supporters say the rebate amounts to faster financial relief.

The idea of more taxpayer rebate cuts is a sticking point for Oregon Republicans still sore over the state’s decision to cut $108 million from the state’s $1.4 billion 2019 kicker.

“Our budget is doing better than expected but that is obviously of no consequence to Democrats,” said Senate Minority Leader Fred Girod, R-Lyons. “Oregonians are struggling. Taking money that constitutionally belongs to them is unacceptable and wrong.”

The rest of the Democratic budget framework is noticeably conservative with the federal dollars it sets aside for the “unprecedented challenges” Democrats say lie ahead. The plan would have the state to sit on $520 million or about 20% of its total federal funds and pour another $250 million into the state’s rainy day fund.

“Our document is sufficiently flexible to respond during budget negotiations,” said state Sen. Betsy Johnson, D-Scappoose. “However, it also prudently anticipates potential challenges for the 2023-25 budget.”

Under federal law, state lawmakers cannot use any of that federal money for tax breaks, which the Oregon Legislature is resisting this session with regards to the local timber industry.

Under the state constitution, Oregon must operate on a balanced budget, so small cuts could still be on the horizon. According to their budget framework, Democratic-controlled committees are set to explore superficial cuts of no more than 1% to state services.

Brown, who wields the power to line-item veto budget bills, unveiled her own 10-point plan on Tuesday with fewer details than her Democratic peers. The three-page document contains more campaign slogans than proposals, which include the goals of “supporting resilient rural communities” and “safely reopening Oregon’s economy.”

As the vast majority of Oregon counties reopen again, the state is expected to see an uptick in employment and wages as frontline workers vie for hazard pay in the form of a state-level stimulus.

The Oregon Legislature has just over three months to pass a budget before it is set to adjourn on June 28.

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