This is likely to be my last post on BlueOregon for a while – I’m starting a new job tomorrow that will keep me pretty darned busy. But before taking a hiatus, I wanted to draw people’s attention to what I think is an important and sometimes overlooked fact: Oregon school districts and local governments in 2011 will have $2.7 billion a year - $5.4 billion a biennium – less in tax revenue than they would have had, collectively, under the tax structure we had in 1990. Since the State and local governments – especially school districts and counties – are so financially intertwined, that fact also has a huge impact on the State government.
In 1990, school districts and other local governments collected the equivalent of 5% of total state personal income in property tax revenues. In other words, if you added up all the property taxes collected, and looked at the total amount of personal income everyone in the state made, the first figure used to be about 5% of the second. The property tax measures Measure 5, in 1990, and Measures 47 / 50, in 1996-97, have driven that down to about 3%. Total personal income in Oregon is about $135 billion a year; so a 2% drop is about $2.7 billion a year. I guess you could factor out the annual revenue from measures 66 and 67, about $365 million; if they had not been passed, but neither had Measures 5 and 47/50, there’d be a bit over $2.3 billion a year – or $4.6 billion a biennium - in additional tax revenue. Other than 66/67, there have not been other significant changes to the tax structure.
Much of the pre-Measure 5 property tax money went to schools. So it’s no surprise that since 1990, K-12 school funding, as a percentage of personal income, has declined, according to figures given me by economist John Tapogna, from 4.7% of personal income to 3.8% - or about $1.2 billion a year. To give an example of what that means, Portland receives about 8% of total state K-12 spending; so Portland schools are down by over $90 million a year from the way things were. Actually, it’s doubtless more than that, because Portland used to be an unusually rich school district, and the city now exports a great deal of revenue to other school districts in the name of equalization. (OK – again, I guess we should adjust for 66/67, which I think postdated the figures I got from John; I guess Portland gets about 8% of 40% of $365 million, or $11.7 million, so maybe PPS is ‘only’ down $80-plus million a year, when you don’t factor in the effects of equalization.)
At the local government level, according to the Multnomah County Tax Supervising and Conservation Commission, a rough estimate is that if we still had the pre-Measure 5 property tax rates on real market value, there would be $450 million, within the city limits, for city and county services like mental health and police and community corrections and housing and parks and libraries and so on. Just eliminating Measure 47/50, and taxing up to the Measure 5 limits, would raise $150 for local government services within the city limits.
I should make it clear, at some point, that in making the statewide comparisons, I am not talking about restoring the entire pre-1990 property tax system, under which –given the overall increase in property values since 1990, which despite the past couple of years still, I am confident, has outstripped increases in personal income – total property taxes as a percentage of personal income would doubtless now be far above 5%. I am in effect assuming a system that would have resulted in maintaining total property taxes (both commercial and residential) at a fixed rate of personal income.
It’s important to remember, I think, that we never, as a state, spelled out to voters what exactly we were going to do as a consequence of the dramatic reduction in property tax revenues. We never said “we hereby announce that we are going to expect less out of our public schools”; instead, we continued to say that we were going to provide a quality education for every child. We never said “we are going to shrink our university system”; instead, we just raised tuition and relied more on out-of-state students. We never said “from here on out the streets will be a lot more dangerous”; instead, we passed mandatory minimum sentencing laws. We never said “we are going to stop trying to take care of frail seniors and people with disabilities”: instead, we periodically adjusted the ‘disability level’ at which people were entitled to aid.
In the 1990’s, the economic boom to some extent masked the effects of 5 and 47/50, as booming state income tax revenues allowed the state to replace some of the lost schools revenue. But even in the 1990’s, schools – especially the previously rich schools, like Portland’s – felt the pinch. Since the end of the ‘90’s boom, we have gone from huge cuts to mild recovery to huge cuts again. But it seems to me that there has not been a general recognition that there is now, post-1990, a ‘new normal,’ an age in which we just don’t invest as much in public services as we used to.
I’m not offering up any policy suggestions here. All I would suggest is that our state and local candidates, and journalists, occasionally make mention of this big fat fact – whatever conclusions they might draw from it. I think that a lot of people out there have a vague sense that twenty years ago they were getting more in terms of public services, and now they’re getting less (and/or paying more in non-tax fees, like tuition), and they’re not clear on why. I think political leaders – regardless of whether they support rolling back 5 or 47/50 or any other major tax initiative – could help clear up the confusion if they occasionally said, Listen, we used to collect, in taxes, a significantly larger share of our state’s resources for public services than we do now, so there’s an argument that you shouldn’t really expect public services to be equivalent to what they were in 1990.