What Oregon can Teach Washington About Dealing With Budget Shortfalls

Visiting family in Portland over the weekend, I got to witness firsthand the difference between how Oregon and Washington are handling their budget crises in the midst of a recession. On Tuesday, Jan. 26, Oregon voters look set to approve ballot Measures 66 and 67, reasonable tax increases on wealthy individuals and businesses, to help fund their budget shortfall and support crucial public services.

Measure 66 raises the state income tax (Oregon has an income tax but no sales tax) 1.8 percent on individuals making over $125,000, and households making over $250,000. The measure also lowers taxes on the unemployed by exempting the first $2,400 of unemployment benefits. Measure 67 raises the minimum business tax for the first time since 1931, from $10 to $150, and adds a 1.3 percent tax on corporate profits over $250,000. The measures are public referendums on bills passed by the legislature last year, and pollsters show both passing.

So, Oregon, facing a budget nightmare, is set to pass bills providing $727 million in crucial funds. Washington's budget, on the other hand, remains a nightmare. In December, Gov. Gregoire delivered the all-cuts budget she was legally required to by state law (thanks, Tim Eyman!) to close the $2.6 billion shortfall in the current biennium. According to the Seattle Times's Jim Brunner, "That budget, to close a $2.6 billion budget hole, would eliminate subsidized health care for 70,000 individuals and 16,000 children. It would eliminate pre-school for 1,500 children and grants for 12,300 low-income college students. All-day kindergarten also would be chopped."

Gregoire isn't in favor of such drastic cuts, of course, and earlier this month in her State of the State address, she said she wanted to "buy back" around $780 million in proposed cuts by finding new funding sources. That's in the same range as Oregon's $727 million, but whereas Oregon is finding the funds locally, Washington state is relying on the other Washington to shell out most of the cash. According to the Washington State Budget and Policy Center, a liberal think tank, Gregoire's "Book 2" proposal (as opposed to the all-cuts "Book 1") is only developing around $100 million in new state revenues through targeted tax increases, and most of that is just through loop-holes.

And even that's dependent on the legislature amending I-960, Eyman's 2007 initiative that requires a two-thirds majority in the legislature or a public referendum to pass any new tax increases. The legislature can tinker with it after two years, and Eyman's already on the war-path to make sure it's permanent.

This all isn't to say that Oregon's that much better at supporting its crucial services (like health care and schools)--as a New York Times article yesterday pointed out, in 2007 Oregon was still sending out $1.1 billion in "kicker" checks to taxpayers for collecting too much revenue. And Oregon has had its fair share of anti-tax nutjobs like Eyman (oh, I remember you fondly Bill Sizemore). The point is, Oregon's getting something done, and not half-measures. Washington's government could learn from their example.