WORK TO ESTABLISH RAINY DAY FUND

June 06, 2003 12:00 am

Every time the state of Oregon runs low on general fund dollars, a group of legislators brings up the idea of replacing the 2 percent kicker with a rainy day fund. It's time to look at some possibilities concerning both a kicker and a rainy day fund.

Oregon's kicker law sends refund checks to taxpayers in the event revenues come in at least 2 percent higher than projected when the state budget is approved. The kicker was established in 1979 and made part of Oregon's constitution in 2000 in order to limit the ability of legislators to grab the cash and run.

The idea of a rainy day fund is to create a pool of money that would be used only when the state is in dire financial straits like it is now. Liberals and conservatives in the Legislature are now discussing the idea of creating a fund that would be used only in emergencies. Rep. Linda Flores, R-Boring, proposed that personal and corporate income taxes could grow by 5 percent from one two-year budget period to the next.

Revenues over the limit would be split three ways: 40 percent to taxpayers, 40 percent to a rainy-day fund and 20 percent to the general fund for spending on schools and other state services. Another plan authored by Sen. Frank Morse, R-Albany, would reduce the threshold from 2 percent to 1 percent, with extra revenue going into a reserve fund. The fund would be capped, and once the cap was reached, additional surplus tax collections would go back to the taxpayers.

Earl Blumenauer, 3rd District U.S. representative from Portland, recently promoted the idea of a rainy day fund for Oregon in a column in The Observer. Blumenauer said it is time to establish the fund and to create safeguards so the money could only be used in poor economic times. He also suggested that the voters should decide each time when to use the money.

The rainy day fund should be set up in the constitution with triggers that release money without a vote of the people when the general fund gets low. Triggers like high unemployment, reduced tax revenue, wage freezes, basic cost-cutting programs, hiring freezes and using only the interest accrued, not the principal, should be in place. This money should be put into play only when budgets, all state budgets, are severely compromised. It shouldn't be only for education, but should include health and human services, public safety and all the other state agencies that have been affected negatively since the inception of Measures 5 and 50. The Department of Transportation and lottery should be excluded.

The idea would be to create an endowment of $15 billion to $20 billion over time that would be managed aggressively to create enough interest to sustain Oregon's needs when the next recession strikes. After that, send the excess tax money back to the consumers so we can spend it to improve the economy. Maybe we could even encourage taxpayers to save some of their tax returns for their own rainy day. It just makes sense not to get caught in a downpour.