Stateline Story

Oregon Voters Reject Tax Hike, Face Cuts

Oregon voters have rejected a ballot measure that would have raised their taxes for the next three years to head off planned cuts to education, law enforcement and other state programs. The measure failed by a margin of 55 percent to 45 percent, according to news media projections with more than 80 percent of the ballots counted Tuesday night.

The vote means that state agencies will begin cutting $310 million from programs already identified by the state legislature unless lawmakers and the governor agree to reopen the battle to look for alternatives, something some lawmakers said was unlikely.

"There is no magic bullet to save us,'' said House Democratic Leader Deborah Kafoury of Portland. ``We're looking at tough times.''

Governor Ted Kulongoski, a Democrat and Senate President Peter Courtney, also a Democrat, have said they don't intend to reopen the issue and instead will focus on the next two-year budget cycle that begins in July.

"Measure 28 was a short-term fix to a long-term problem. We need to face up to the fact that Oregon is in a recession and our tax structure is such that when the economy takes a downturn, state services take a hit," Kulongoski said in a statement. "... I will not ask the citizens of Oregon to raise taxes for the General Fund in this biennium. I have also said that government must live within its means. " I look forward to working with the legislature and the citizens of Oregon to pass a balanced budget very soon," the governor said.

Republicans who control the state House already are working on an ``emergency care package'' to soften the blow, said Majority Leader Tim Knopp of Bend.

``I don't think Oregonians voted tonight to cut seniors and throw them out on the streets,'' Knopp said.

Oregonians will see the results of the vote immediately in some areas. Multnomah County, which includes Portland, will release 114 inmates from county prisons today to cover a $1 million shortfall, said Sheriff Bernie Guisto. Nearly 130 state troopers also face layoffs, according to the Oregon State Police.

School districts across the state have said they will cut days from the current school year due to $95 million in planned cuts to K-12 education programs. Human services programs face cuts totaling $90 million and tuition hikes are likely at state universities to cover $27 million in cuts to higher education programs. Community colleges face $14 million in cuts.

Closer Than Expected

The state legislature decided last September to let voters decide whether to raise taxes or cut services after failing to resolve a budget impasse during five special legislative sessions.

The state's budget has taken a hit during the last two years as the economic slump has depressed income taxes receipts. Oregon does not have a sales tax so more than 80 percent of the state's discretionary spending is funded by individual and corporate income taxes.

If it had passed, the measure would have raised the top personal income tax rate to 9.5 percent from 9 percent for the next three years. The cost to the average taxpayer would have been $114 for the 2002 tax year, according to the Oregon Secretary of State's Office.

The measure would have raised taxes on corporations to 6.93 percent from 6.6 percent for the next three years before both the individual and corporate tax rates would have reverted to current levels in 2005.

Few observers gave the tax proposal much of a chance when it was first proposed in the fall. Early polls showed opponents with as much as a 25 percentage point advantage and the state had not enacted a general tax increase since 1982.

Supporters, led by public employees unions, launched a grassroots campaign to persuade likely voters that the proposed cuts would be devastating and newspapers across the state ran stories about planned closings of mental health wards, prisoner releases and other affects.

A statewide poll released on Jan. 20 by KATU television in Portland showed that the vote on the measure, known as Measure 28, was too close to call.