Inching Closer to the "K" Word

Unexpectedly strong job growth pushed up state tax revenues in the latest quarterly forecast, which is good news that could turn into not-so-good news for state budgeteers.It's amazing how quickly you can forget something like the personal kicker, the obscure Oregon income tax provision that can suddenly rain on the parade of an economic recovery for state government.

State economists gave lawmakers this week their latest quarterly estimate of economic progress and state tax collections. The news was good, maybe a little too good. Net proceeds for the State were projected upward by $54 million as a result of more people working, especially on housing. That means no budget cuts to existing state agency budgets.

But the latest uptick in state revenue is precariously close — about $72 million — from the trigger that would require the return of the entire surplus of $290 million or more to state personal income taxpayers, leaving an unanticipated hole in budget planning.

The personal and corporate income tax kickers were instituted by lawmakers to prevent lawmakers from spending "surplus" revenues that exceeded by 2 percent projections on which spending bills were based. The kickers were akin to a financial chastity belt to avoid legislative spending sprees during economic good times that couldn't be sustained in the inevitable economic bad times. 

Even though taxpayers are usually surprised when they receive a kicker payment, the voter in taxpayers has been loathe to give up the occasional surprise.

Attempts have been made to convert some or all of the personal and corporate kicker into contributions to a rainy day fund, providing a financial shock absorber when the economy crashes and tax revenues plummet. The corporate kicker has been diverted. But the personal kicker remains and is now staring lawmakers who will head to Salem next January in the face.