Oregon remains unprepared for its next economic downturn despite the creation of a rainy-day fund during the 2007 Legislature, one of the state's leading think tanks warned Thursday.
The state's much-touted rainy-day fund, signed into law this year, redirected $290 million in corporate tax rebates into the state's first savings account to help avert, in future economic downturns, the type of deep funding cuts lawmakers made during the 2001-03 recession, when state revenues plummeted.
But a study released by the left-leaning Oregon Center for Public Policy shows that the rainy-day fund has no money available to protect state programs until July 2009. Should a recession be around the corner, the Silverton-based group found that all the state has at its disposal is the $237 million Education Stability Fund, which is fed by state lottery proceeds.
"As of today and through June 2009, the Legislature cannot tap a penny from the rainy-day fund," said Charles Sheketoff, the group's executive director and co-author of the report.
"The problem with recessions is that you don't know you're in one until you're in it," he said. "The Legislature hasn't and can't repeal the business cycle, so sooner or later a recession will arrive."
In an August interview with the Tidings, state Rep. Dennis Richardson, R-Central Point, warned that the amount of revenue that the state would squirrel away was "totally inadequate" to sustain state programs in the event of a serious recession like the one that hit the Beaver State in 2001.
He pointed to the slowing housing market, the subprime mortgage crisis and corporate losses on Wall Street to say that Oregon's next downturn might be closer than people want to think.
To prepare for future economic downturns, OCPP suggests that rather than the state returning unanticipated revenues back to taxpayers in the form of the so-called kicker rebates that it directs those funds instead into the rainy-day fund.
"We missed a golden opportunity to set our house in order," Sheketoff said. "Sometime in the future Oregonians will be kicking themselves for not saving this year's kicker."
Individual taxpayers will be receiving a kicker check in December equal to 18.6 percent of what they owed on their 2006 state income taxes before credits, such as the personal exemption allowance. The average refund is about $600.
House Majority Whip Peter Buckley, D-Ashland, has questioned too whether the state should continue returning revenue surpluses to taxpayers.
"We have got to decide if this is how we want to live, or do we want to invest in a stable state government?" the Ashland Democrat asked rhetorically in an earlier interview. "If we're serious about building a future for our kids, we've got to begin making some investments to fund what is essential for the state like education."
Buckley, chairman of the House Education Committee, has suggested that the so-called kicker law be amended to give just one-third of revenue surpluses back to taxpayers and direct the remaining money to the state's rainy-day fund and investments to Oregon's colleges and universities.
"That would be the wise thing to do," he said.
covers politics for the Ashland Daily Tidings. Reach him at firstname.lastname@example.org.