Stateline Story

More Bad Budget News in Oregon

Oregon's deep revenue slide continued Thursday (Aug. 26), when the state economist announced that a new $378 million shortfall has opened up in the state's current two-year budget.

The announcement comes three months after the last revenue report disclosed a $577 million shortfall in the current budget, forcing Governor Ted Kulongoski to make immediate, across-the-board spending cuts of 9 percent. It also comes seven months after voters tried to stem Oregon's revenue bleeding by approving a pair of ballot measures that hiked personal and corporate income taxes by $727 million. As Stateline reported earlier this month , the political fight over the two ballot measures is still fresh in mind for Oregonians, particularly given the state's worsening budget outlook and a sense in many corners that the measures didn't do what they were intended to do.

Unlike the last revenue estimate, which caught many lawmakers and the public by surprise , Kulongoski warned last week that the revenue news Thursday would not be good. The Democratic administration also mitigated the news - or tried to - by announcing that most of the new shortfall would be filled primarily using federal money and reserve funds.

One development, however, is likely to further upset many of the voters who approved January's income tax hikes: Corporate incomes in Oregon are exceeding expectations, and under the state's unique "kicker" law, corporations could see tax rebates this year, even as public education, health and human services and corrections have absorbed deep cuts. The "kicker," which is enshrined in Oregon's constitution, requires the state to provide rebates to individual or corporate taxpayers whenever actual tax revenues exceed expectations by 2 percent or more.

"State economists predicted when the 2009 Legislature closed its session that corporate income taxes would come to $832 million," The (Eugene) Register-Guard reported . "But with profits on the rise, that figure is now up to $874 million — enough for Oregon's kicker law to trigger a $42.3 million tax credit to corporations if the latest projections hold up."