Tax hike repeal would create revenue loss for schools

Union and Wallowa county school district officials have reason to be alarmed — again.

The bad news was presented by Oregon School Boards Association representatives Tuesday in La Grande and Island City. The OSBA is projecting that school districts in Union and Wallowa counties would lose $2.62 million in revenue during the present biennium if $733 million in new tax increases approved by the Legislature this year are repealed by voters in January, according to Tanya Gross, OSBA communications director.

Initiative petitions have been filed with the Secretary of State’s office asking that voters be given the chance to repeal the tax increases. The date for a repeal election would be Jan. 26.

Should the initiative petitions go to voters and the tax increases are repealed, an estimated $285 million in revenue for public schools (kindergarten through 12th grade) would be lost, Gross said. According to the OSBA, based on the state’s present school funding formula, a $285 million cut in state K-12 education funding would cost the local school districts the following amounts in 2009-11:

• La Grande School District: $1.096 million

• Cove School District: $150,919

• Elgin School District: $240,266

• Enterprise School District: $245,368

• Imbler School District: $171,055

• Joseph School District: $150,038

• North Powder School District: $162,689

• Troy School District: $12,639

• Union School District: $250,044

• Wallowa School District: $148,212

The loss of revenue would come on the heels of major cuts almost all of these school districts had to make this spring due to a reduction in state funding caused by the recession. The La Grande School District, for example, had to cut its budget by about $2 million.

Now the good news for educators and students. The OSBA believes there is a solid chance voters will not repeal the tax increases.

“We are optimistic that once the details of the tax increases are understood that voters will support the revenue package,’’ said the OSBA’s Randy Tweten, who also is a La Grande School Board member.

Tweten is an OSBA board member, representing OSBA Region 1, comprised of Union, Wallowa, Baker, Grant, Malheur and Wheeler counties. Tweten is one of two OSBA representatives from La Grande. Fellow La Grande School Board member Michael Frasier was recently elected to a position on the OSBA legislative policy committee, and is also speaking out against the possible repeal of the tax increases.

Frasier, Tweten and Gross spoke at a meeting Tuesday night in Island City with school board members from Union, Wallowa and Baker county school districts. The Union-Baker Education Service District hosted the meeting.

OSBA representatives pointed out that the tax increases called for under House Bills 2649 and 3405 would have no impact on low-income and middle-income Oregonians.

House Bill 2649 would raise taxes only for Oregonians in high income brackets. Presently, married couples making between $250,000 and $500,000 pay a 9 percent income tax rate. This would be raised to 10.8 percent for taxable income between $250,000 and $500,000.

The rate for individuals with a taxable income between $125,000 and $250,000 would also be raised from 9 percent to 10.8 percent under HB 2649 for taxable income over the $125,000 and $250,000 levels.

Married couples making more than $500,000 and individuals making more than $250,000 would see their tax rate jump from 9 percent to 11 percent. The increase would also apply only to taxable income over threshold levels.

Tweten said some people mistakenly believe that the tax increase would apply to all of their income, when in fact it would only apply to income over a certain threshold. He noted, for example, that an individual making $165,000 annually would pay increased taxes only on the $40,000 he or she made over the $125,000 threshold.

Gross said that the Legislative Revenue Office estimates these new personal income taxes would affect 28,000 Oregon taxpayers. Oregon has a population of about 3.5 million.

House Bill 3405 would raise corporate taxes but in far from dramatic fashion, Tweten said.

The minimum corporate tax in Oregon would jump from $10 to $150 annually. This has not been changed since 1931.

HB 3405 would also impose a tax on corporations that do not report profits generated in Oregon. The tax would be one tenth of one percent of sales in Oregon.

Tweten noted that there are now corporations making money in Oregon that do not have to report them here for tax purposes because their home offices are outside the state.

Tax rates for all corporations that report profits in Oregon of more than $250,000 would also increase under HB 3405. The percentage increase would not be dramatic, according to the OSBA. For example, if a corporation reports more than $250,000 in Oregon profits, it would pay an additional 1.3 percent (up from 6.6 to 7.9 percent) on profits above $250,000.

An announcement on whether there will be an election giving voters a chance to repeal the HB 3405 and HB 2649 tax increases will soon be made. The Secretary of State has until Oct. 25 to determine whether opponents submitted the required 55,179 valid signatures per bill to refer them to the ballot. It appears likely, Gross said, that the petitions will be approved since twice the number of petition signatures needed were reportedly sent to the Secretary of State’s office for both bills.