News Center

Measure 97: Schools solution or regressive tax?

By CONNIE POTTER

Is Measure 97 a solution to a nearly three-decades-old funding problem for Oregon schools or a blank check to state legislators?

Both sides are ramping up for a contentious and expensive effort to persuade voters in November about the controversial proposal, which would impose a gross receipts tax on large corporations. If approved, Measure 97 is expected to raise about $3 billion per year in additional funding for Oregon schools, health care and senior services.

The campaign, expected to be one of the most spendy in Oregon history, has already generated more than $9.5 million in donations to fight it; supporters have raised over $2 million.

Gov. Kate Brown and other supporters – including former governors Barbara Roberts and Ted Kulongoski – say the measure is a long-awaited and viable solution to finally funding K-12 education at the level needed to maintain high-quality schools.

Opponents contend the measure is not constitutionally binding and that legislators could allocate funds however they want. Approving Measure 97 would be like "writing a blank check to Salem," said Rebecca Tweed, statewide campaign coordinator for the Defeat The Tax on Oregon Sales campaign.

Underscoring that concern, the state Office of the Legislative Counsel issued a report Aug. 30 stating that about $250 million of the annual revenues would have to be dedicated to the state Highway Fund. That is because Oregon has a constitutional provision requiring that taxes generated from motor fuels be used for highway projects. The $250 million is the amount that state officials estimate could be generated by transportation-related sales at gas stations, convenience stores and other locations.

Katherine Driessen, spokeswoman for the proponents, Our Oregon, acknowledged that the courts may need to weigh in, but said that doesn't change the measure’s overall positive impact. Additional revenues are desperately needed for schools and social services, she said, and Measure 97 could make the difference.

The OSBA Board of Directors has taken a neutral position on the measure, largely because the proposal doesn't guarantee any funds specifically for education, said Jim Green, OSBA's deputy executive director.

"They would like to see comprehensive revenue reform," Green said. "They don't want to oppose, but this didn't meet their criteria for support."

Measure 97 would levy a 2.5 percent gross receipts tax on large corporations that have Oregon sales of more than $25 million. For the 230 Oregon-based corporations that are subject to the new tax, their annual tax bill would jump from an average of $200,000 to $2.2 million, according to a report by Oregon's Office of Economic Analysis. Businesses would be required to pay the tax on their total revenues, regardless of whether they make a profit.

That would result in a ripple effect, where companies of all sizes would have to raise prices and lay off workers, said Jeremy Rogers, vice president of the Oregon Business Council. He said the measure would add a new tax at each step in the production process for many products. An item could be taxed multiple times as it goes from a manufacturer to a distributor and then to a retailer. Ultimately, consumers would end up paying hundreds of dollars per year in higher prices on gasoline, utilities and other purchases, he said.

"The impacts will be hardest on low-income Oregonians," Rogers said. "If you think about things sold in largest quantities – food, gas, electricity – those are services subject to the highest amount of tax. Low-income people spend the highest amount of income on those things, so it will have a disproportionate impact on (them)."

Driessen counters that large companies such as Bank of America, Comcast and Wal-Mart make hundreds of millions of dollars in Oregon, but pay among the lowest taxes in the nation.

Impacts of the measure have been analyzed by the state's Legislative Revenue Office (LRO) and by Northwest Economic Research Center (NERC) at Portland State University. The LRO report was requested by state lawmakers to determine how the tax would affect Oregon's economy. The NERC report was funded by Our Oregon, the driving force behind the measure.

The two studies align in a number of areas, but offer different estimates of private and public sector job impacts. The LRO study estimated that the tax would cost 38,200 private-sector jobs while increasing government employment by 17,700 jobs. In contrast, NERC anticipates a loss of 13,000 private-sector jobs, with an increase of more than 30,000 public-sector positions.

For Otto Schell, legislative advocate for Oregon PTA, the only argument that carries weight is that it's past time to adequately fund public schools. He cites this evidence: Oregon has one of the shortest school years in the nation and some of the largest class sizes. Because of layoffs, Oregon has 2,000 fewer teachers today than in 2008, even though enrollment has gone up.

Voters can't keep waiting for a more perfect solution, he said.

"Parents and people who deal with education are tired of waiting and are ready for a real investment in schools," Schell said. "My board said this is exactly the kind of game-changing action we've been waiting for."

He said the $3 billion in annual revenue generated by the tax could fill Oregon's K-12 funding gap in one fell swoop.

PTA members were among 6,000 volunteers who gathered signatures to put the measure on the ballot, and Schell said they'll be making phone calls and going door-to-door to generate voter support.

"We have a pretty amazing grass-roots campaign," he said. "We will never be able to match those gigantic corporations in terms of funding, but we think we'll be able to win the day in November."

Opponents want to make sure they don't.

"It's the largest tax increase in Oregon history, and there's no guarantee for where that money will go," said Tweed, spokeswoman for the opposition. "That's quite an ask and quite a risk for Oregonians to take."