The Truth-O-Meter Says:
Wand

Says "Every time the Legislature 'suspended' the kicker, most recently the corporate kicker in 2007, Salem spent every penny and failed to stabilize the state's revenues."

Matt Wand on Sunday, August 28th, 2011 in guest column

Rep. Matt Wand says using kicker money has failed to stabilize the state’s revenues

Correction appended: An earlier version of this item used the word "economy" instead of the word "revenue." The error does not change the ruling.

The state’s surplus refund law, better known as the "kicker," requires a refund to taxpayers if actual revenues exceed projections by at least 2 percent. The idea is to force the state to stick to a budget, but some people argue the law makes it harder to save money for bad economic times.

Last month, former state Rep. Brent Barton, a Democrat, argued we should repeal the "kicker" and build savings in order to improve the state’s bond rating. In response, current state Rep. Matt Wand, a Republican, argued that Oregon should leave the kicker alone and, instead, require state government to save 1 percent of its general fund dollars if it craves a piggy bank.

"Repealing the kicker may impress some Wall Street bankers, but it'll do little to stabilize state finances and absolutely nothing to improve our economy and put people back to work," Wand wrote, adding: "Every time the Legislature ‘suspended’ the kicker, most recently the corporate kicker in 2007, Salem spent every penny and failed to stabilize the state's revenues."

Every time? PolitiFact Oregon wanted to know how many times the kicker had been tapped, and under what circumstances. As for stabilizing revenues, we wanted to know whether kicker money was meant to do that and in how much time, especially when Oregon relies so heavily on income taxes that go up and down with the economy.

The kicker has been suspended three times since the law was approved in 1979. Legislators voted to suspend the law authorizing the personal kicker for tax year 1991 and the corporate kicker for 1993. Both times, they needed to plug financial holes due to lost revenue from 1990’s Ballot Measure 5, which curbed property taxes.

Measure 5 required state replacement of lost local school revenue at $362 million in 1991-93. That grew to $1.6 billion in 1993-95 budget.

Then Salem left the kicker alone, for the most part, until 2007, when the economy was pretty plush. Legislators, with backing from business, voted to start a "rainy day fund" to shelter the state should the economy sour going forward. They started with a one-time suspension of the corporate kicker, totalling $319 million.

But they didn’t get a chance to let that kicker money grow. In 2008, the recession hit. Lawmakers withdrew $225 million to balance the 2007-09 budget (which had grown to $338 million, including interest and leftovers from the previous budget period). Then they took $116 million to balance the 2009-11 budget, leaving a paltry $10 million in the pot. (Paul Warner, Oregon’s legislative revenue officer, said he expects the fund will grow to $46 million for the 2011-13 budget.)

So Wand’s not technically right about spending it all down, but we get what he’s saying. In 2007, legislators took the corporate kicker and they used most of it in the following years even while increasing taxes and fees for other state needs. Not very fiscally conscious of Salem.

Yet the "failed to stabilize the state’s revenues" continued to bug us. Wand dings lawmakers for taking some kicker money -- not all of it, mind you -- in times of emergency, as was the case with Measure 5. Furthermore, he criticizes the Legislature for taking corporate kicker money to start a rainy day fund, only to have the fund brutalized by a recession that continues to hurt. He was leaving out context.

After all, the bigger reason for Oregon’s revenue instability has to do with our heavy reliance on income taxes.

The kicker law just exacerbates the swings, say some economists. In a 2009 guest column in The Oregonian, University of Oregon adjunct professor and economist Tim Duy wrote that:
 

"(W)e have a ridiculous fiscal system that accentuates the peaks and troughs of the business cycle. When the economy is growing, we return hundreds of millions of dollars to taxpayers, but then find it necessary to raise taxes or reduce spending when recession hits --exactly the opposite of good policy, but the only option available under Oregon's unique ‘kicker’ law. We need to move forward with the development of a more aggressive rainy day fund. Optimally, but perhaps politically impossible, we would also reform tax policy to reduce dependence on the income tax."


We asked Wand what he meant by his statement. Did he blame the state’s instability on the kicker? Did he think we should never use the kicker? Did he really think the kicker was supposed to stabilize the budget?

It turns out he was responding specifically to claims that Democrats have made, that if we suspend Oregon’s kicker, "magically the state budget will be stable and everything will be fine. And nothing could be further from the truth."

He said, "I’m calling foul on the other side for pretending that they’re serious about savings, and my proof of that is look at what’s happened in the past when we have suspended the kicker. The unicorns and rainbows have not appeared."

(For the record, Wand is not opposed to taking kicker money for savings -- so long as state government also puts aside money every year.)

Wand is right that taking away the kicker isn’t the only way for state government to save money. Nothing has prevented the state from socking away dollars on its own. But the assertion that suspending the kicker should have stabilized revenues  -- but didn’t -- is flawed.

"These examples of when the kicker was spent are not good examples," said Duy, the economist. Ultimately, "you'd want to be saving money when the economy is doing well and using that savings when the economy is doing poorly. It’s very hard to accomplish the savings when you're in a recession."

It’s true that the state has suspended the kicker three times, although it’s not true that the state has spent "every penny" in those instances. Using the kicker did not stabilize the state’s budget, but that’s largely due to an unreliable revenue base as well as extenuating circumstances: loss of revenue from a ballot measure and a recession.

The statement contains an element of truth but ignores critical facts that would give a different impression. We rate the claim Mostly False.

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Published: Saturday, September 10th, 2011 at 6:00 a.m.

Subjects: State Budget, State Finances, Taxes

Sources:

Former Rep. Brent Barton, "AAA credit: Oregon could save millions by gaining 1 little letter," The Oregonian, Aug. 13, 2011
Rep. Matt Wand, "Don't kick the kicker: Improving economy beats improving bond rating," The Oregonian, Aug. 28, 2011,
The Oregonian, "Tax refund money to go for education," June 23, 1991
The Oregonian, "With new law, Oregon starts saving for a rainy day," Mar. 16, 2007
The Oregonian, "Leaders tinker with kicker," Mar. 4, 2009
Tim Duy,  "Better business climate needed to create jobs," The Oregonian, Sept. 26, 2009
Former state Reps. Lane Shetterly and Tony VanVliet, "Where Oregon must go from here," The Oregonian, Jan. 27, 2010
Steve Buckstein, founder of Cascade Policy Institute, "A better way to reform the ‘kicker,’" The Oregonian, Feb. 1, 2010
State of Oregon, Legislative Revenue Office, "Oregon’s 2% Surplus Kicker: 2001 Update," September 2001
State of Oregon, Legislative Committee Services, "Background Brief on … Surplus Kicker," November 2006
State of Oregon, Legislative Revenue Office, "Oregon’s 2% Surplus Kicker," Research Report #2-07, January 2007
State of Oregon, Legislative Fiscal Office, "Budget Highlights: Legislatively Approved 1993-95 Budget," September 1993
Oregon Department of Revenue, "Oregon Corporate Excise and Income Tax: Characteristics of Corporate Taxpayers," Appendix D (2010)
Oregon Department of Revenue, "Oregon Personal Income Tax Statistics: Characteristics of Filers," Appendix A (2011 Edition, Tax Year 2009)
Interview with Paul Warner, Legislative Revenue director, Sept. 1, 2011
E-mail from Paul Warner, Sept. 2, 2011
Interview with Matt Wand, Sept. 6, 2011
Interview with Tim Duy, Sept. 8, 2011

Written by: Janie Har
Researched by: Janie Har
Edited by: Therese Bottomly

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