Oregon Public School Funding History
From OEA's "The Long Journey to Adequacy", available for download

OEA supports school funding that achieves long-term, stable, and adequate revenue streams for Oregon's 197 school districts, 20 ESDs, and 17 community colleges. That objective has been elusive even in recent prosperous times, due to a series of changes to the state's revenue system. OEA believes that the state's revenue structure is inadequate to meet the demand for high-quality public services. Oregon needs not only a less-volatile system, but also, one that delivers revenue sufficient to meet the needs of its citizens. Stability is only one of several important goals and is not enough as an end in itself.

1859	Public services were funded only by a statewide property tax (still in the Constitution; it is no longer levied, however).
1916	A tax revolt placed a 6% limit on the amount of property tax a local body could impose.
1923-1929	In the 1920s, Oregon instituted an income tax to fund a greater demand for public services as Oregon shifted from rural to more urban communities. It was enacted legislatively in 1923, repealed in 1924, proposed on the ballot three more times – each time defeated – and then passed once the Depression hit in 1929. It was designed solely to offset property taxes.
1933	The first sales tax was proposed and defeated at the polls.
1934	A second sales tax proposal was defeated at the polls.
1936	A third sales tax proposal was defeated at the polls.
1944	A fourth sales tax proposal was defeated at the polls.
1947	A fifth sales tax proposal was defeated at the polls.
1953	Use of the income tax was changed and redirected to the state’s General Fund and began funding schools, instead of simply funding property tax relief.
1969	- Oregon's income tax tied to the calculation of the federal tax – “connecting” Oregon’s taxable income to the IRS return and its more generous tax breaks, which threatened to reduce state revenues. To compensate, Oregon adjusted the tax brackets and rates. The brackets were narrowed and the rates generally adjusted upward, with a heavier burden falling on low-income taxpayers. The rate climbed to about the average household income and then decreased for the higher-end, making the state income tax particularly regressive. - A sixth sales tax proposal was defeated at the polls.
1973	Legislature passes a school finance program that included a limitation on how much of a taxpayer’s federal tax could be deducted from the state tax return. The limit was set at $3,000 for a joint state income tax return.
1970s	The Homeowners and Renter Relief (HARRP) and the Property Tax Relief programs passed. The HARRP Act provided property tax relief to low-income homeowners and renters. The Property Tax Relief Program limited growth of assessed value of all property in the state to no more than five percent per year and provided that the state General Fund pay up to 30% of local residential property taxes – capped at $800 per low-income homeowner and $400 per low-income renter. This 1978 measure was part of a three-part deal that also included the two-percent “kicker” and the first state spending limit law. On the income tax side, the measure increased the personal exemption from $750 to $1,000, adjusted it to the Portland CPI, and also increased the maximum federal deduction up to $7,000 of taxes paid.
1980s	- The expensive three-part tax package fell apart (see 1970s, above) during the 1980s because property taxes continued to grow and the legislature’s resources were severely reduced by a 1982 recession. The legislature responded by enacting a temporary income tax surcharge, which was not challenged by referendum and allowed policymakers to balance the budget. - The property tax relief payments were discontinued in 1985 (after Measure 5 passed, the 1991 Legislature eliminated the HARRP program).
1984	Oregon lottery was created by a vote of the people. Originally, the proceeds were dedicated only to economic development.
1985	A seventh sales tax proposal was defeated at the polls.
1986	An eighth sales tax proposal was defeated at the polls.
1990	- A sales tax “advisory proposal” was referred and defeated at the polls – the ninth such defeat on a retail consumption tax. - BM 5 passed, placing a rate limit on property taxes for corporate and residential property owners. This limit of $15 per $1,000 of assessed value routed $10 to local governments and $5 to schools. The intention of the sponsors was to limit the total amount of taxes collected on property. Two factors conspired to undermine this result. The first was the pre-existing constitutional provision that allowed up to a 6% increase per year in property taxes. The second was a rapid increase in overall property values during the 1990s, as Oregon’s economy boomed and the silicon forest industry moved in new high-tech workers, which corrected the housing market upward. Another impact of BM 5 was that it required the legislature to replace schools’ revenue losses caused by the rate limit.
1992	A split-roll property tax, which would have assessed corporate and residential property at different rates, was defeated at the polls.
1995	Voters pass a constitutional amendment allowing lottery proceeds to be used to finance public education.
1996-1997	- Voters passed BM 47, which reduced property taxes by 10% and limited future increases to 3% per year. It also created the “double-majority requirement”. - Because the measure was poorly written, the 1997 legislature rewrote BM 47 and sent it back to the ballot as BM 50, which passed in May 1997. It limited the assessed value of all property to a 1995 level minus 10% and allowed for short-term local option levies (for schools) up to the $15 per $1,000 of assessed value level. It retained the double-majority requirement for constitutional (property tax-related) revenue measures.
1998	Parks and natural resources are added as lottery beneficiaries in a vote of the Oregon electorate.
2000	- Voters passed a ballot measure that increased the amount Oregon taxpayers could deduct of federal taxes paid to $5,000. Another, more extreme measure sponsored by Bill Sizemore, would have made all federal taxes deductible, erasing the ceiling entirely at all income levels. That measure was defeated by voters. - Voters also defeated in the May 2000 primary a constitutional amendment to make certain local taxing districts’ temporary property tax authority permanent. - Election 2000 also ushered in a five-year era of spending limit proposals. The first of these, BM 86, constitutionalized the “kicker” statute of 1979, which in effect enacted a constitutional spending limit in that all unanticipated state revenues beyond a two-percent margin of error must be returned to taxpayers rather than appropriated for programs or put in reserves. A more specific measure limiting the state’s appropriations to a percent of prior personal income levels was defeated. - A measure to require voter approval of most tax and fee increases – and by a supermajority margin – was defeated in November 2000. - Ballot Measure 1 (now Article VIII, Section 8 of the Oregon Constitution) passed. This “Educational Equity and Accountability Act” ensured that the state would match local option levies that passed in low-wealth communities. It also mandated the legislature to adequately fund K-12 public education. A report to the people on the biennial appropriation was made part of the funding requirement.
2002	- In a September special election in the middle of the recession of 2001-2002, voters amended the Constitution to create an Education Stability Fund and capital subaccount for use in economic downturns on Pre-K through 20 public education budgets. - In that same special election, voters passed an increase in the cigarette tax, the proceeds of which were dedicated to health and related programs.
2003	- In the second of four consecutive special elections, a legislative referral to temporarily increase income tax rates across the board (all income groups) failed in January of this year by a vote of 575,846 to 676,312. - Legislative spending limit proposals (tied to inflation and population) were defeated in both the regular and subsequent special sessions.
2004	A second legislative attempt to rebalance the state budget after five special sessions and a portion of the 2003 session would have enacted a temporary personal income tax surcharge and also changed other taxes (including canceling some tax loopholes). This legislation was challenged by referendum and defeated in a February special election by an even larger margin than the 2003 budget proposal had been (481,315 Yes to 691,462 No).
2006	Two ballot measures with state funding implications were defeated in the November general election: - BM 41 would have enabled Oregon taxpayers to substitute higher federal exemption level as a substitute for the state exemption credit. - BM 48 would have imposed a Colorado-style “TABOR” spending limit. Taken together, these measures would have crippled General Fund resources and investments in vital services.
2007	- General-purpose rainy-day reserve fund created by legislature, to be funded on an ongoing basis with ending balances not to exceed 1% of General Fund. A one-time cancellation of the corporate “kicker” was also deposited in this fund. - A second tobacco tax increase dedicated to health care is defeated in an off-year special November election.
2008	Two ballot measures that would have reduced revenues for education were again on the general election ballot: - BM 59 sought to erase the ceiling on deductibility of federal taxes (as in the failed Election 2000 measure). - BM 62 meant to reroute 15% of lottery proceeds to public safety. Those monies – more than $6 billion since 1985 – are constitutionally dedicated to economic development, education, parks and natural resources, and the Education Stability Fund. Voters defeated both measures by nearly a two-to-one margin. - Voters revised the double-majority turnout requirement for property tax measures, reinstituting simple-majority as the sole threshold for regular (May and November) elections.
2009	The greatest economic decline since the Great Depression resulted in the loss of $4.2 billion of General Fund (GF) resources. Legislators balanced the budget for education, public safety, and health (95% of what GF resources pay for) by making strategic cuts, using increased federal funds, tapping reserves, and creating a modest gap-closing Tax Fairness package. Learning from previous recessionary tax proposal defeats, this tax package was designed to be fairer to middle-class and low-income families and made only modest and in part temporary rate adjustments to high-earning taxpayers and corporations. The package also corrected the unconscionable minimum corporate tax of $10, the amount paid by two-thirds of C corporations doing business in Oregon (instead of the annual profit-based rate of 6.6% of in-state sales). The flat fee of $10, set in 1931, was replaced with a sliding scale based on gross receipts. This measure was also challenged through the referendum process.
2010	On January 26 the statewide referendum vote on the legislature’s Tax Fairness package (measures 66 & 67) passed.