Oregonians get Christmas gift from state

PORTLAND, Ore. -- Just in time for Christmas, Oregon taxpayers have gotten some extra spending money from an unlikely Santa Claus: their state government.

Checks have arrived in mailboxes all over the state, thanks to an only-in-Oregon law that requires rebates to taxpayers when income tax collections top projections by more than 2 percent.

All told, the state has doled out $1.1 billion in rebates.

Most people got about $600, but checks sent to the wealthiest residents, including Nike co-founder Phil Knight, averaged nearly $800,000.

"It is pretty well spent," said Portland resident Linda Stockton, who got a check for about $600. "And I bought $100 worth of canned goods, and gave it to the food bank. I bought about 20 pairs of mittens for foster kids."

The rest, she said, was spent on "clothes for me."

After struggling through a bitter recession in the early part of the decade, Oregon's economy roared back, starting in 2005 and outpacing most of the rest of the country. The boom was fueled by a run on real estate, and growth in the state's "Silicon Forest" technology sector.

The rampant growth pushed state income tax collections about 20 percent beyond the most optimistic predictions from budget officials and set the stage for this month's rebate, easily the largest since voters approved the refund system in 1979.

The last time the state was flush enough to hand out a December rebate it was 2001. That year's checks only totaled $250 million; before this year, the largest refund was $432 million in 1997.

The closest parallels to Oregon's system are in Alaska, which distributes dividends from oil and gas revenue to residents, and in Colorado, where a constitutional amendment, the Taxpayer's Bill of Rights, or TABOR, caps state spending and provides that excess revenue be returned to taxpayers. However, Colorado voters in 2005 suspended the rebate section for five years.

The Oregon rebate, known locally as the "kicker," also is written into the state constitution.

In the national consciousness, Oregon is firmly classified as a liberal state, whose residents were among the first in the nation to approve medical marijuana, and support strict environmental policies.

But when it comes to taxes, the state's residents are decidedly libertarian. Voters have shot down just about every proposal for a new tax in the last decade, from sales to gas to cigarettes.

That predisposition has made the "kicker" an untouchable sacred cow, especially because its backers timed the rebate to appear in mailboxes at Christmas, when bills are pilling up.

Still, the rebate is not without controversy, particularly since memories are still fresh of the 2003-2004 recession, when schools around the state shut down in early May because there wasn't enough money to keep them open.

Most of the Democrats who control state government are openly dismissive of the system -- Gov. Ted Kulongoski calls it "lousy fiscal policy" -- and say that they'd prefer to see the money saved for the proverbial rainy day.

Even some voters have trepidation about the program. About 12,000 people chose to send their rebate checks -- totaling about $6.7 million -- directly to the state-administered schools fund.

"As a former teacher, I don't get why the money isn't just reallocated to an area that has a tremendous need," Stockton said. "There are cheerleaders out in front of the supermarket begging for money to keep their sports program alive."

Others are staunch defenders of the rebate.

"I don't trust (government) to spend our money wisely," said Paul Hansen of Portland, whose family got a check for $1,161. "The private sector is smart enough to spend the money more wisely and more efficiently."

Hansen said about 20 percent of his check will go to charity, and the rest is earmarked for his daughter's private school tuition.

Charities could be particular beneficiaries of the kicker, since many families are accustomed to making their donations at Christmas time. Greg Chaille, president of the Oregon Community Foundation, which tracks charitable giving in the state, said the rebate checks could increase donations by $100 million or so this year.

Nonprofits have been aggressively soliciting kicker donations, taking out newspaper ads and setting up Web sites.

State economists say residents and charities should enjoy this year's kicker while they can, because there likely won't be another one for some time. As in the rest of the nation, Oregon's housing market has been slowing down and job growth has dwindled to a relative trickle. That's raised the possibility that the state might really need that $1.1 billion it just returned to taxpayers to pay for critical state services, like public safety and schools.

The kicker "has the potential to make life even worse," said Michael Kennedy, a senior state economist in Oregon.