Kotek Introduces Bill To Redirect Half Of Oregon's Record 'Kicker' Tax Refund

UPDATE (12:43 p.m. PT) — A day after state economists revealed the largest "kicker" tax rebate in Oregon's history might be flowing back to taxpayers next year, House Speaker Tina Kotek, D-Portland, is introducing a plan to cut it in half.

Related: Oregon Revenue Forecast Shatters Expectations, Largest-Ever Kicker On Its Way

In a bill

Kotek introduced Thursday morning — and which met early skepticism from Gov. Kate Brown — roughly half of the estimated $1.4 billion tax rebate would be kept by the state and spent on a set of transportation initiatives the speaker argues will benefit public safety, air quality, and job creation.

“It’s been something I have been sitting and thinking about for several weeks listening to all the needs and conversations in the Capitol,” Kotek told OPB on Thursday. “It is important that if there is any discussion to redirect any portion of that, that it has to be based on some very sound reasoning.”

Under the plan, $260 million would go toward seismic upgrades of the Abernethy Bridge on Interstate 205. Those upgrades are part of a transportation package lawmakers passed in 2017, but the bridge work is waiting on the possible implementation of tolling before it moves forward. Kotek said Thursday she’d like to begin sooner.

“It’s a seismic issue, it’s a safety issue,” Kotek said. “We need to upgrade the bridge and put people to work.”

Beyond the bridge, Kotek is proposing spending roughly $245 million on an existing "Clean Diesel Engine Fund" to help freight carriers in Oregon transition to cleaner-burning diesel engines. Both California and Washington have strict diesel standards, which have pushed higher-emissions engines into Oregon.

"If you look at Washington and California, they've only been able to make their transition because they put a significant amount of resource into it," she said.

An additional roughly $245 million would go into a new “Zero Emission Fund” which would create the infrastructure to help the state transition to zero-emission vehicles, like electric cars.

Both the diesel and zero-emission funds would be subject to annual audits.

The proposal has few precedents — the personal income tax kicker has only been redirected once, as lawmakers grappled with a budget shortfall in 1991. And it’s not an easy task to accomplish. In order for her bill to pass, Kotek needs two-thirds support in both the House and Senate. That means it would need support from Republicans, many of whom have been adamant that every dollar of the $1.4 billion kicker should be returned to taxpayers.

The kicker policy is unique to Oregon, and was enshrined in the constitution in 2000. It provides for tax rebates if actual taxes collected by the state in a given biennium are 2% or more above initial estimates. This year, in what the state’s economist called a “seismic event” the state was flooded with unprecedented income tax revenue in recent months, assuring that initial forecasts were far off actual revenues.

Kotek said Thursday she decided to move forward with her proposal after hearing the magnitude of the expected kicker refund. She contended that, even with half the money stripped away, the money flowing back to taxpayers would be comparable to other recent refunds. Oregon has triggered a kicker in each of the last three bienniums.

“This is a historic-level kicker,” Kotek said. “What I think the opportunity we have here is to have a conversation with voters of, ‘You’re still going to get a very sizable kicker.'”

The proposal is also the strongest effort yet to redirect the money for the current kicker. While Democrats were vocal Wednesday that one-time surplus money should be spent on targeted investments, all fell short of calling for using the refund money.

Whether there’s any support for Kotek’s idea remains to be seen. The speaker said she had not briefed the governor on the plan and had only mentioned it to Senate President Peter Courtney, D-Salem, in passing. Courtney's office did not respond to an inquiry Thursday morning.

"People I think will be surprised," Kotek said. "I've only mentioned this to a couple people."

The bill, she said, is written simply enough that it could easily be tweaked to accommodate concerns from stakeholders.

Related: PERS Plan Would Limit Tax Rebates, Affect School Retirement Benefits

Brown has already voiced support for diverting kicker money recently. In April, the governor released a plan to address the state’s ballooning public pension debt that would have redirected kicker money to that purpose.

In a meeting with reporters on Thursday, the governor reiterated her support for putting a portion of the kicker money toward the pension system. She was less enthusiastic about the spending priorities Kotek identified.

"It’s really important that if we are going to retain a portion of the kicker that it benefits the entire state, and paying down our [Public Employees Retirement System] unfunded actuarial liability does that," Brown said. "I think it has to be a solution that the entire state supports and benefits from."

But Republicans will likely be a hard sell. A statement issued Wednesday by House Minority Leader Carl Wilson, R-Grants Pass, is typical of their position on the matter.

“Let me make something else clear to the supermajority: every penny of the kicker belongs to the people, not to you,” Wilson said. “Any attempt by Democrats to take their hard-earned kicker away from working Oregonians and squander it all on growing government or rewarding their campaign donors will be met with strong opposition by House Republicans.”

A spokesman for Wilson, asked about Kotek's proposal, said that the statement still applied.