Glossary of School Finance Terms
Updated September 2009 (also available as a PDF)

A   B   C   D   E   F   G-H   I   J-K   L   M   N-O   P   Q   R   S   T   U   V-W-X-Y-Z

A

Accountability – Educational accountability is used in budgeting to tie funding to program performance and also to assess the financial accountability of school district spending through the audit process. The term has become politically loaded because it has been used as a refuge for those policymakers who resist increases to school funding. Accountability policies attempt to hold schools and educators answerable for student academic progress, despite problems in accurately measuring and isolating inputs and outputs. The term has also played a role in student testing, teacher evaluations, school completion, school report cards, and other means of measuring “outcomes”. See also Quality Education Model and Ballot Measure 1 [Property Tax Limitations].

Adequacy – One of several qualities economists and others use to assess any tax system. Adequacy is determined to be revenues sufficient to meet any taxing authority’s responsibilities under law. See also Centralization, Elasticity, Progressivity, Regressivity, and Stability.

ADMw – Average Daily Membership (weighted). Oregon’s equalization formula distributes the State School Fund, which provides the majority of public K-12 financing, to the state’s 197 school districts as well as to corrections education. Actual amounts per student are distributed according to estimated cost differentials, or “weights”. For example, a student who has an Individualized Education Plan (IEP) is counted as two students. Kindergarteners are weighted as a half. All the factors in the formula may be found in ORS 327.013. The daily attendance of each student, times his or her formula weights, constitute the dollar factor that is applied to the basic allocation that, in turn, determines the annual revenue that a school district will receive. See also Distribution Formula.

Ad Valorem Tax– A tax applied to the value of an entity or transaction, as measured by the number of units times the price paid per unit. This is one of several sales (or “consumption”) tax types. See also Consumption Tax, Excise Tax, General Sales Tax, Unit Tax, and Value-Added Tax.

AFT-Oregon – American Federation of Teachers-Oregon. One of two unions representing education personnel at the K-12 and community college levels. AFT-Oregon also represents health-care workers and child-care workers in the state.

Allowable Growth Factor – A forecasted formula for determining how much revenue school districts might reasonably assume would be needed to operate over a three-year period. It uses projected changes in the cost of personnel, services, supplies, and capital expenditures and incorporates forecasted local and state revenues and capital expenditures. This calculation, developed upon the criteria of the “School Revenue Forecast Committee”, assumes current law and is not meant to describe an “adequate” or “ideal” school budget as does the Quality Education Model or other measures. This procedure for determining the “current-services-level budget” expectations was created by Gov. John Kitzhaber in his Executive Order No. EO-99-15, subsequent to the 1999 legislative session. See also School Revenue Forecast Committee and Quality Education Model.

Appropriations – Legislative enactments that spend General Fund and lottery monies for programs explicitly identified in the bill. By contrast, programs that receive an “expenditure limitation” are authorized to receive funds from other sources, such as through fees or grants. Disappropriations, on the other hand, are legislative measures that take back money that has already been appropriated to state budget line items, done only in special sessions subsequent to regular sessions of the legislature.

Armatta Test – A legal theory advanced by the Oregon Supreme Court in 1998, in consideration of a victims’ rights ballot measure challenge. The Court ruled that the Oregon Constitution disallows any single ballot measure to make multiple, substantive changes to more than one section of the Constitution. This test was upheld and clarified further in a recent High Court ruling that upheld a lower court’s nullification of the state’s term limits law. The justices’ theory is that the Constitution prohibits ballot measure sponsors from forcing voters to cast an up-or-down vote for a package of amendments, rather than being allowed to cast separate votes on each issue.

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B

Ballot Measure 1– Passed in 2000, this measure called upon the Oregon Legislature to fund schools adequately and to produce a report of its budget for K-12, describing whether it met that goal and if not, why not. In the 2001 legislative session, lawmakers passed enabling legislation to implement this ballot measure, tying the measure of funding adequacy to the Quality Education Model or a statistically valid substitute measure. Legislators set a six-month deadline following the close of session to write and release this report.

Ballot Measure 5 – See Property Tax Limitations

Ballot Measure 47 – See Property Tax Limitations

Ballot Measure 50 – See Property Tax Limitations

Base Budget – The base budget is the starting point for determining a current-service-level (CSL) budget for the next biennium. It consists of the legislatively adopted budget (LAB), plus any other legislative funding actions, including grant-in-aid money, lottery revenue bonds, and Emergency Board actions. The base budget may also be reduced from the LAB if cuts are made to the State School Fund in special legislative sessions. In the School Revenue Forecast, the base budget is inflated for such factors as student enrollment and inflation to determine the succeeding biennial CSL budget. See also Current Service Level, School Revenue Forecast Committee, Enrollment Growth, Essential Budget Level, and Inflation.

Biennium – A two-year budget cycle beginning July 1 in odd-numbered years. The state budget coincides with a biennium. The Oregon Legislature meets only once every two years, unless in a special or supplementary session, and budgets begin roughly the same time as the Legislature adjourns.

Bond Levy – See General Obligation Bonds.

Business Activity Tax (BAT) – This tax is essentially the same as a value-added tax. A BAT tax is assessed on businesses’ gross receipts, exempting all items purchased from other businesses. Legislation to simultaneously introduce this form of taxation and reduce other tax classes was introduced in the 2001 legislative session and was strongly opposed by the organized business lobby. See Value-Added Tax.

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C

Capital Gains Tax – A tax imposed on income realized only when an asset (such as property or stocks) is sold for a profit. Assets that transfer upon the death of the owner, and that have appreciated over the period of ownership, avoid capital gains taxation altogether. The maximum federal tax rate on long-term capital gains is currently 20 percent, which is less than the maximum for regular income (at 38 percent). Analysts generally consider this tax to be volatile (unstable) because its revenues typically fall quickly in a weak economy.

Oregon taxes capital gains as regular income (at the same graduated rate). The state’s General Fund, therefore, experienced unprecedented growth during the late 1990s in part because of the stock market exuberance of that period. Capital gains outgrew wages nationwide for six straight years (1995-2001). This has been especially a boon to high-income taxpayers.

For example, a bill to cut the capital gains tax passed by the Oregon Legislature in 2001 (but vetoed by Gov. John Kitzhaber) would have given 55 percent of the benefit to the highest-income one percent of citizens. This group’s average tax cut would be approximately $13,400 – higher than the annual average income of the bottom 20 percent of Oregonians. Not only would this proposal have reduced revenues by $440 million per biennium (further constraining the state’s ability to address public needs), it would have exported much of that cut ($60 million) to Washington, D.C. in the form of higher federal income taxes.

Capital gains tax cut proponents argued that much of that revenue would be recaptured through generation of new business income tax revenues. Research by the Institute on Taxation and Economic Policy, in Washington, D.C., however, suggests otherwise. The national Center on Budget and Policy Priorities (CBPP), citing this research, states that a capital gains tax cut would not have the effect of stimulating the economy or of encouraging business investment. A recent report by CBPP concludes, “rather than providing a cure for what ails the U.S. economy, a capital gains tax cut would yield a bonanza for the highest-income taxpayers while doing little for the economy in either the short or the long run. Such a proposal is not only likely to be ineffective, but has the potential to weaken efforts by the Federal Reserve to stimulate the economy because it could place upward pressure on long-term interest rates or spook consumer confidence by fueling a sell-off in the stock market.”

Categorical Funds – Refers to federal funds for schools that are earmarked for specific purposes. Categorical funds generally may not be used to “supplant” funds that would otherwise be provided from the state General Fund.

Centralization –One of several qualities economists and others use to assess any tax system. Centralization refers to the concentration of administrative power in a central authority. Over-centralization of education is generally considered to be a poor policy outgrowth of state program funding that is supported mostly by state revenue sources, such as the income tax in Oregon. See also Adequacy, Elasticity, Progressivity, Regressivity, and Stability.

Circuit Breakers – Low-income property tax credits that are triggered by income. A circuit breaker gives relief proportional to the amount by which property taxes exceed a percentage of the owner’s income. Some states have this trigger only for the elderly, others for taxpayers by income class. See also Homestead Exemption, Property Tax, and Regressivity.

Common School Fund – Established in 1859 with the founding of Oregon, this constitutional trust was set up as a dedicated public school funding source for K-12. Between 2 and 5 percent of its annual earnings (from investments) are allocated to districts as local revenues; the remainder is reinvested in the “corpus” or principal of the fund. In 2009, Speaker of the House Dave Hunt sought to mandate that 5 percent be distributed as a matter of course. In an agreement with the Land Board (which oversees the Fund), Speaker Hunt withdrew his bill in exchange for the commitment by Fund managers that they would maximize distributions to the 5 percent level whenever it was possible to do so without eating into the Fund corpus.   The land holdings that comprise the greatest share of the state’s Common School Fund’s investments are managed by the State Land Board, which is made up of the Governor, State Treasurer, and Secretary of State.

Compression – The process of reducing property taxes so that the total tax paid falls within the Measure 5 limits of $5 per $1,000 of real market value for school districts and $10 per $1,000 for general government. Compression is performed on a property-by-property basis, not on a tax code area basis. When compression occurs on property, school local option taxes are the first taxes to be reduced, thereby reducing the overall revenues a school district would receive from its local option levy that year.

Consolidation – The merging of schools within a district or of contiguous school districts within a geographical area. After the passage of Ballot Measure 5, limiting the amount of local revenue school districts could receive from property taxes, lawmakers passed in 1991 a school consolidation law to reduce the number of school districts across the state by approximately one-third. The justification for this was the notion that merging districts would result in administrative and staffing efficiencies by reducing duplication of services, facilities, and personnel. In the post-Measure 5 years, revenues available for schools were expected to decline, and consolidation was implemented as a way to soften the blow of budget cuts. The trend toward consolidation has gradually grown across the nation. While total enrollment in elementary and secondary schools nearly doubled in the period from 1945 to 1980, according to one study, the number of schools dropped from 185,000 to under 86,000.

Constitutional Measures – Ballot measures that seek to alter the Oregon Constitution. These may come through referrals or revisions enacted by the state legislature, or they may come through initiative petition by citizens or groups. A higher number of signatures in support of citizen-initiated measures are required for constitutional measures than for statutory measures.

Legislative referrals may be either “amendments” or “revisions”. Those that amend the constitution require only a simple majority of each house of the legislature to move to the ballot, even if the proposal seeks to increase revenue. Revisions, on the other hand, require a two-thirds favorable vote by each body, irrespective of whether the revision raises revenue or addresses other content. Legislative referrals, like initiatives from the citizens, are subject to the single-subject rule and the Armatta test, whereas revisions are not. See Armatta Test, Single-Subject Rule, and Statutory Measures.

Construction Excise Tax – A tax charged at the time of permitting for new construction and remodeling for both commercial and residential building projects, with revenue going to local school districts for capital construction. This tax was created by the 2007 Legislature as a compromise between education allies who’d pressed for 15 years for Systems Development Charges for schools in high-growth areas on one side, and the building industry on the other. A district may opt to levy the tax without a vote of the people. Residential construction pays $1 per square foot and non-residential construction is 50 cents per square foot up to a maximum of $25,000 per permitted unit. Exempted are certain public, agricultural, religious, hospital, and non-profit elder-care facilities. Minor modifications to the 2007 law were made in 2009.

Consumption Tax – Consumption taxes are generally levied on goods and services at either the production or retail levels by states, counties, or cities. There is currently no national sales tax, though one has been, in the past, proposed. Fully 45 states have a sales tax (which represents an average of 36 percent of state revenue). See also Ad Valorem Tax, Excise Tax, General Sales Tax, Unit Tax, and Value-Added Tax.

COSA – Confederation of Oregon School Administrators. A statewide, professional organization for public school administrators at the K-12 level.

Current-Service-Level Budget (CSL) – The amount of money needed to operate state programs and education at the same level in the next biennium as in the current biennium. This number is roughly calculated to be the amount of the current appropriation, adjusted for inflation and enrollment (or caseload) growth. See also Essential Budget Level.

Cut and Cap – See Property Tax Limitations.

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D

Declining Enrollment – A term to describe the condition of schools experiencing less-than-projected and/or less-than-prior-year student census for the current school year. More than 160 of Oregon’s 197 school districts are experiencing declining enrollment. Given that the State School Fund distributes the K-12 budget on the basis of average daily attendance counts, schools that cope with precipitous or unexpected declines suffer financially.

Discretionary Funds – Refers to federal funds for schools that are not earmarked for particular purposes or programs. These are monies that are often considered “fungible”, which means that they can be used in place of state General Fund dollars – a practice that is referred to as “supplanting”.

Distribution Formula – After the passage of Ballot Measure 5 in 1990, which significantly reduced the money schools could generate locally and required a "backfill" of state dollars, the Legislature engineered the distribution formula for schools. Equalizing dollars-per-student across the state became a central feature of the distribution calculus, but other elements also were built in. For example, extra consideration is given for special education, poverty, teacher experience, transportation costs, remote small schools, and other factors. The formula creates "phantom students" by adding weights for these factors, multiplying them against average daily attendance of students.

The formula is imperfect and tends to work better for some districts than for others. Politicians typically propose legislation that tinkers with the formula in some way in order to advantage some districts at the expense of others. OEA has opposed such politicking with the distribution formula, supporting only those adjustments that appear to improve the overall fairness of distribution. When the total budget is too small to meet all needs, formula adjustments become a zero-sum game that creates a list of winners and losers. Another misunderstanding about the formula exists: some believe that it directs money to be spent at the district level exactly in proportion to the formula; that is not accurate. The formula attempts to predict need, but is not a budget mandate that overrides local decision-making. Also called the “equalization formula” or “funding formula”.

Double Majority – One feature of the 1996 Ballot Measure 47 (“Cut and Cap” Property Tax Limitation) was the constitutional requirement that any measure that seeks to raise property taxes must meet this new “double majority” standard in order to pass (this feature was included in the legislative rewrite of Measure 47, Ballot Measure 50, passed in 1997). Not only were revenue measures required to earn more than 50 percent of total votes cast in order to prevail, but more than 50 percent of registered voters had to turn out to cast votes in order for the victory to be valid. The exception was for those measures on a General Election ballot. Bond and local option levy elections often succeeded in getting a majority of “yes” votes for passage, but in off-year elections, low voter turnout often prevented passage of such measures. In effect, voter apathy trumped a “no” vote in guaranteeing the failure of a revenue measure under this requirement.

In 2008, voters approved a legislative referral to return to a simple-majority system for property tax increase proposals appearing on any May or November (regular election) ballot. Only those proposals appearing on a special election ballot will still be subject to the double-majority requirement.

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E

Economic Growth – From the period of 1995 to 1999, Oregon ranked #2 in the nation in economic growth, as measured by growth in real Gross State Product and in manufacturing sector employment.

Education Endowment Fund – This fund was established in 1995 to fund higher education and K-12 capital projects. Oregon’s Constitution originally directed 15 percent of lottery proceeds for use in capitalizing the fund each year. Modest earnings were legislatively appropriated to Opportunity Grants, technology projects, and other programs, but the corpus of the fund remained small. By the end of the 2001-2002 fiscal year, the fund contained $278 million. In September 2002, voters approved a legislative referral to “repurpose” the fund, creating an Education Stabilization (or “rainy-day”) Fund. $150 million of the corpus was appropriated to public education immediately to address the budget shortfall. Under the constitutional revision creating the education rainy-day fund, 18 percent of lottery proceeds flow to the fund. Once it contains 5 percent of the previous biennium’s General Fund value, it is capped from receiving more lottery monies. These resources are directed instead to a Capital Matching Subaccount for use in capital construction-related projects. A small amount of the resource also flows to the Oregon Growth Account for funding in-state venture capital projects.

Education Revenue Sources – For K-12 public school districts, approximately 70 percent of general operating revenues come from the state General Fund and the lottery. Another 30 percent comes from local revenues, especially property taxes and timber monies. A tiny proportion of district budgets comes from federal dollars, local option levies, bonds, and other sources. Community colleges get slightly less than 50 percent of their overall funding from the General Fund. The balance is composed primarily of federal funds, property tax revenues, and tuition. Pre-kindergarten programs in Oregon are funded by a combination of General Fund and federal dollars. Federal money funds Head Start, while Oregon contributes the money for its equivalent, the Oregon Pre-K Program.

Elasticity – One of several qualities economists and others use to assess any tax system. Elasticity refers to the ability of a tax to produce revenue at a pace faster than personal income growth for the state over time. In considering school finance reform, a system that relies heavily on inelastic taxes (that is, whose revenue grows more slowly than personal income) is less desirable than one that increases elastic taxes. On the other hand, highly elastic taxes are also less stable; in times of economic decline, revenue drops off precipitously. Income and general sales taxes are two examples of revenue sources that ordinarily have high elasticity. See Adequacy, Centralization, Progressivity, Regressivity, and Stability.

Enrollment Growth – Refers to numerical growth of student average daily attendance, which is reported to the state in order to determine the total State School Fund payment a district will receive. Schools experiencing high enrollment growth are financially challenged to keep up with this phenomenon. Because voters must approve bond levies in order to build or remodel schools in expanding population areas, enrollment growth is a costly – as well as political – proposition. Some have proposed a new funding source for aiding high-growth districts. See Tax Increment Proposal, Systems Development Charges, and Construction Excise Tax.

Essential Budget Level (EBL) – Refers to the rollup budget from one biennium to the next, accounting for cost drivers. ESL is the same as the Current-Services Level (CSL), but the term was invented to replace CSL by Gov. Kulongoski during a period of time in which Republicans in control of both legislative chambers took a position against (and therefore poisoned the term) “current-services budgeting” in favor of zero-based budgeting as a political, “smaller government” stance.

Excise Tax – A consumption tax on specific products, such as gasoline, cigarettes, and alcoholic beverages. Also called a “selective sales tax”. Excise taxes are imposed on a narrow band of goods, typically ones for which demand has a practical per-person maximum (e.g., one can use only so much gasoline). Also, most excise taxes are based on volume, not price (e.g., per pack, per gallon, per drink, per night of lodging). As a result, excise taxes are usually the most regressive kind of tax, because the rich and poor alike pay same rate of taxation for a finite consumable quantity of the product.

Expenditure Limitation – In state budgets, the expenditure limitation refers to the maximum amount legislatively approved for an agency to expend per biennium from its “Other Funds” sources. This is distinct from an “appropriation”, which is the amount of money allocated for expenditure from “General Fund” sources. A second definition of expenditure limitation is an overall “spending limit”, which is the formula capping total state spending for all programs. The state’s spending limit, set in 1979, was revised by the 2001 Legislative Assembly. It limits total spending per biennium to 8 percent of personal income growth in the prospective biennium. Excluded are programs passed by initiative.

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F

Fairness – See Tax Equity.

Federal Forest Fees – Rural, timber-revenue-dependent communities have historically received money for county programs and for schools through federal forestland revenues based on harvests from federal timber sales. In 1999, Congress passed a bill supported by the NEA, the County Schools Funding Revitalization Act, to guarantee federal forest payments to timber-cutting counties as an interim solution to the problem of declining timber revenues. The legislation ensured a predictable payment level to federal forest counties, 75 percent of which goes to counties and 25 percent of which goes to schools, allocated proportionally based on timber harvesting history. The schools portion is, under Oregon law, considered local revenue (like the property tax), and is offset from the State School Fund distribution formula when the state allocates the K-12 biennial appropriation. After the six-year program expired, timber receipts dried up for a year. Lobbying of Congress by county and school groups (including OEA) resulted in a modified four-year reprieve. Once this period lapses (after fiscal year 2010), federal subsidies are expected to permanently cease, which will leave a big revenue hole that local governments and school districts have not yet found a way to replace.

Federal Funds – Refers to money received from federal sources such as direct appropriations, pass-through monies, or grants for use on state and local government programs. In order to receive these funds, a budget must include a federal funds “expenditure limitation” as part of its overall, legislatively approved state budget. Most federal funds are “categorical”, which means that they may be used for specific, designated purposes only. See also Categorical Funds and Discretionary Funds.

Feedback Effect – The Legislative Revenue Office, which provides economic and revenue analysis for the Oregon Legislative Assembly and other policymakers, has developed a way to more precisely calculate the revenue impact of any policy proposal. This method is the Oregon Tax Incidence Model, or OTIM. One of the assumptions of OTIM is that tax cuts to business that are predicted to stimulate business investment and profitability will thereby increase tax revenue, based on the new business activity. This offset of any revenue losses that may be experienced by the tax reduction is referred to as the “feedback effect” of the model.

Fiscal Impact – Refers to the cost associated with new legislative or ballot measure proposals. In the legislative arena, state agencies are asked to help the Legislative Fiscal Office prepare estimates of fiscal impacts of legislation pending before the body and for ballot measure referrals.

Funding Equity – The amount of money necessary to give each student an equal educational opportunity.  Frequently, equalized funding – that is, appropriating the same dollar amount per student – is mistakenly used synonymously with equity funding. It is not the same, however. The concept of equity assumes that children require varied approaches – and therefore different cost levels – to educate, depending on school readiness, disabilities, socio-economic background, regional cost differences, and many other factors. Oregon’s distribution formula attempts to capture many of these factors by “weighting” certain cost drivers such as poverty and special education. See Distribution Formula.

Fungible – Refers to federal funds that may be used in a discretionary fashion to backfill General Fund reductions. See Discretionary Funds.

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G-H

Gap Bonds – District debt service obligations paid for with operating revenues, rather than with property taxes from a bond levy. Qualified tax obligations include principal and interest on any bond or formal, written borrowing of monies issued before Dec. 5, 1996 and backed by a pledge to levy property taxes if needed. This category of taxes was established in 1997 with Measure 50. Gap bond tax rates will eventually become part of each district’s permanent tax rate. Gap bonds get their name from the “gap” between Measure 5 taxes for schools (limited to $5 per $1000 real market value) and Measure 50 tax rates, which rolled back property taxes to 1996 assessed value (not real market value). The amount between these two rates represents the legally available opportunity for districts and community colleges to levy local option taxes and bonds. The gap amount is determined on a property-by-property basis.

Gaming – Refers to state-sponsored lottery games and tribal casino gambling. See Lottery.

General Fund – One of three funds that supply budget monies to state programs, and the one for which the legislature has the most discretion. It is composed primarily of personal and corporate income tax revenues. The 2009-11 General Fund (which are combined with undedicated lottery monies) appropriated more than $14.2 billion of the state’s $56 billion All-funds budget. Ninety-three percent of General Fund dollars support just three essential services: public education, public safety, and health/human services.   See Federal Funds, Other Funds, and Lottery.

General Obligation Bonds – One of two types of bonds (revenue bonds are the other type) issued to raise money for school districts, community college districts, and other government bodies. These may be either taxable or tax-exempt bonds, and they are backed by the general “faith and credit” of the state to ensure repayment. Voters must approve the sale of general obligation bonds to finance new capital projects, such as the building of schools or renovation of existing facilities. Bond levy elections are subject to the double-majority requirement of the Oregon Constitution on special election ballots.

General Sales Tax – A sales tax that applies to all transactions at a level of economic activity. Sometimes specific transactions are exempted, such as food. See also Ad Valorem Tax, Consumption Tax, Excise Tax, Unit Tax, and Value-Added Tax.

Grant-in-Aid Funds – Refers to state and federal money appropriated through the Oregon Department of Education for distribution to school districts on a grant basis, and not through the State School Fund formula. Grant-in-aid programs funded by the state General Fund include early intervention services, Oregon pre-Kindergarten, Talented and Gifted program, and low-performing schools program. Federal monies are designated for such programs as migrant education, low-income students, vocational education, and special education.

Gross Receipts Tax – A tax levied on the total annual sales of a business before deductions for returned items, allowances, and discounts. This would include money received for sale or exchange of property, the performance of services, or the use of property or capital (including rents, royalties, interest, and dividends) in a transaction that produces business income as recognized by the Internal Revenue Code.

Homestead Exemption – A homestead exemption excludes a certain amount of home value from property taxation as a way to make the property tax less regressive for lower-income homeowners. See also Property Tax.

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I

Income Tax – Income is defined many ways for tax purposes. In its broadest sense, income is the money or other gain received over a period of time by an individual, corporation, or other entity for labor or services rendered or from property, natural resources, investments, operations, and so on. Federal and state governments define taxable income more narrowly as wages, salaries, interest, stock dividends, rents, and royalties. The definition of income determines the level of revenue generated by tax-rate systems. A lower tax rate applied to a broad definition of income may generate the same revenue as a high tax rate applied to a narrow definition of income.

Oregon has three marginal income tax rates for individual taxpayers (5, 7, and 9 percent). No one actually pays 9 percent income taxes, due to deductions and exemptions. Only six states have no personal income tax; in these states, sales taxes represent 76 percent of tax revenues. Forty-five states have a corporate income tax. Oregon’s income tax threshold – the point at which one’s income is “high enough” to begin paying taxes on it – is among the lowest in the country.

Inflation – The overall upward price movement of goods and services in an economy. The U.S. Bureau of Labor Statistics measures this movement through the Consumer Price Index (CPI), which reports incremental cost growth that consumers experience in their day-to-day living expenses. The CPI is sometimes referred to as the “retail price index” for this reason. There are two basic CPI measures, indexed for two groups or populations of consumers: the urban CPI (CPI-U), which is most often cited by national media, and the CPI-W, for calculation of wage escalation agreements. In addition, there are regional CPI estimates, which can vary from the CPI-U, as a measure of local inflation trends. Inflation indexes also exist on distinct buying categories, so that unusual inflation in a particular sector may be measured. In Oregon state budgeting, there is an inflation calculation for “services and supplies” and a second, separate inflation number for “personal services” (personnel costs).

Inflators – The cost drivers that increase the size of a budget in order to meet current service delivery levels.

Intangibles Tax – Only a few states tax intangible assets owned by individuals, although many (including Oregon) tax corporations’ intangible assets. Intangible property includes stocks, bonds, copyrights, right-of-ways, and the like. This is considered a progressive tax because the well-off own a large share of intangible property. In recent legislative sessions, “centrally assessed” taxpayers (airlines, telecommunications companies, energy concerns, and railroads) sought exemptions from this tax. The legislation died due to revenue impact.

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J-K

Kicker – Each quarter, the state economist produces a revenue forecast that corrects past projections about current revenues, predicts the future performance of the Oregon economy, and projects how much revenue will be generated from taxes on that economic activity. The May 15 forecast in odd-numbered years is the final word on how much money the state believes it will have coming in to spend on General Fund programs for the coming biennium. When the economic forecast under-predicts revenues for the ensuing two-year budget period by two percent or more, the unanticipated revenue is paid out to taxpayers in the form of a "Christmas bonus". Corporations receive a tax credit instead of a check.

Though corporate and personal income tax revenues are calculated at different rates, and though one pot may be more closely predicted than the other, the kicker "kicks" if either one is off by two percent. The financial impact of ballot measures, court cases, natural disasters, or other funding emergencies has absolutely no bearing on whether the kicker is triggered. Only legislative action can overcome the otherwise-automatic refund. The 2001 individual kicker totaled $254 million (there was no corporate kicker because of the recession). This is 6 percent of total tax collections, and was mailed out despite advance knowledge of the $850 million budget shortfall that beset Oregon in 2002-03. Approximately $35 million of that money was exported to the federal government in the form of federal income taxation. In November 2000, the kicker law was made a part of the Oregon Constitution, making its repeal more difficult to achieve.

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L

Legislative Fiscal Office (LFO) – A permanent, non-partisan legislative service agency that provides research, analysis, and evaluation of state expenditures, as well as financial affairs, program administration, and agency organization advice for legislators, legislative committees, and their staffs. The LFO also provides fiscal impact statements on legislative measures. Legislative committees staffed by the LFO include the Joint Committee on Ways and Means (during legislative sessions), the Emergency Board (during interims), the Joint Legislative Committee on Information Management and Technology, and the Joint Legislative Audit Committee. 

Legislative Revenue Office (LRO) – A permanent, non-partisan legislative service agency that provides research and analysis on tax policy and school finance issues for legislators, legislative committees, and their staffs. The LRO also provides revenue impact statements on legislative measures that affect state or local revenue. Legislative committees staffed by the LRO are the Senate Revenue Committee and the House Revenue Committee.

Local Control – Refers to the authority of local communities to make educational, administrative, and funding decisions – in short, to run their own schools with local needs, culture, and priorities in mind. The passage of Ballot Measure 5 in 1990 marked the beginning of a struggle to retain local control when the primary funding source for schools shifted from local property taxes to the state income tax. With this change came the assumption of many policymakers that the state should have primary responsibility for education-related decisions.

Local Option Levy – A constitutionally provided right of local governments, including school districts, to pass temporary property tax levies to fund operating costs. A local option levy can be approved for any period of time between one and five years and may fund any service identified in the ballot title. If voters approve it, the levy can be extended beyond its original term. The local option levy for school districts must be within the Measure 5 limits of $5 per $1,000 of assessed value, and it may not exceed 20 percent of the district’s budget or $1,000 per student (whichever is less). The $1,000 threshold will rise by 3 percent each fiscal year. These ceilings, originally set at 10% and $500, have been increased by the legislature twice. Local option levies are subject to the double-majority requirement in special elections only.

Local Revenue – Taxes and other resources for funding government services, including schools, excluding fees, federal funds, and state dollars. Most local revenue for K-12 and community colleges comes from commercial and residential property taxes. Under Oregon’s State School Fund distribution formula, however, interest earnings on the Common School Fund as well as federal timber receipts are considered local revenue for the purpose of offsetting the amount of General Fund dollars that flow to individual school districts.

Lottery – Oregon entered the gaming industry after the public approved a Constitutional Amendment in 1984 by 66 percent of the vote. In 1991, video poker was introduced by the Legislature. In 1995, public education was added as a recipient of lottery proceeds, also as a result of a citizen-passed Constitutional Amendment, which established the Education Endowment Fund. That measure passed with 90 percent approval. In 1997, the public approved by 75 percent Measure 52, a statutory measure that authorized a lottery bonding program to finance public school education projects from lottery proceeds. What began in 1985 as only a scratch-ticket game, the Oregon lottery grew to include weekly and daily drawings, keno, sports betting, and national lotteries offering millions of dollars in prizes each week. (Sports betting was eliminated in 2005, in order to attract national athletic events previously boycotted because of this activity. Oregon lost approximately $9 million a year by eliminating sports betting.)

As a result of its popularity, lottery revenues have grown from $60 million in its first year to more than $1 billion in the 2009 budget. Of that, approximately $408 million was appropriated to dedicated programs. In all, Oregon depends on lottery resources for nearly 10 percent of its state budget. Likewise, the 3,300 retailers and restaurants that participate have become increasingly dependent on the revenue the lottery provides either directly through commissions or indirectly, by attracting bar and restaurant customers. A portion of all gross proceeds collected by the Oregon Lottery goes to gaming addiction treatment, prevention, and outreach to the approximately 2 percent of Oregonians estimated to have a problem. For years, the legislature resisted pressure to add line games to the mix, which are offered at the eight Indian casinos in Oregon. In May 1995, however, they were added, boosting lottery revenues significantly.

The level of commissions earned by retailers has been a controversial topic in recent years, because the Lottery is supposed to negotiate rates as a part of their overall mission to “maximize revenues” for recipients, such as public education, parks, and economic development. Retailers have pressured the lottery to keep their reimbursements high. OEA pursued a lawsuit against the Oregon Lottery for setting retailer rates higher than an amount that would maximize returns for budget purposes. The Association won on appeal at the Court of Appeals, but this ruling was overturned by the Supreme Court in March 2008. In 2009, the Lottery again reviewed and set rates, which have slightly decreased due to public pressure.

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M

Means Testing – Considering the income level of the applicant for a government service or a taxpayer’s liability. A means test to a benefit would reduce the eligibility of wealthier citizens, for example, while a means test to a tax levied would exempt or reduce the tax for low-income persons. See Circuit Breakers.

Medicaid Upper Payment Limit (MUPL) – This federal program for a time allowed states to pay publicly affiliated nursing facilities a rate equal to the maximum Medicare rate for all Medicaid nursing facility clients when the Medicare rate exceeds the rate the state would otherwise pay for its Medicaid clients. This let Oregon receive additional federal revenue (equal to the difference between actual and maximum levels) for deposit into the General Fund. The money, because it was not otherwise earmarked for any particular program, was appropriated to K-12 by the Ways and Means Committee in as part of its overall budget-balancing strategy.  When the federal government ended this practice of “overbilling” for Medicaid services as a revenue-generation strategy, the 2001 Legislature created a special “Other Funds” account for actual reimbursements. By removing the federal money from the General Fund, that year’s kicker calculation was reduced, so then-Senator Gary George sued the state. He lost his challenge, but the state’s win became a moot point once the kicker was made a part of the Oregon Constitution and was no longer a statutory question.

Multi-Stage Tax – See Value-Added Tax.

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OEA – Oregon Education Association, an affiliate of the National Education Association. A union representing 48,000 Oregon teachers, education support professionals, and community college personnel throughout the state. OEA focuses on professional issues, member representation at the district level, and education-related policy.

Oregon Tax Incidence Model (OTIM) – A means to more precisely estimate the revenue impact of any policy proposal affecting Oregon’s tax system. One of the most valuable purposes of the model is its ability to track the distributional impact of tax burdens for various policy choices regarding revenue. Information on OTIM may be obtained by contacting the Legislative Revenue Office at 503-986-1266. See Feedback Effect.

OSBA – Oregon School Boards Association. Represents Oregon’s 197 member school boards, 20 education service districts, and 17 community college boards on educational policy issues.

OSEA – Oregon School Employees Association. One of two unions representing education support professionals in Oregon’s public schools (OEA is the other).

Other Funds – One of three categories of funding that supply budget money to all state programs. Such funds include fees, fines, and other money sources excluding state and federal revenues.

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P

Progressivity – One of several qualities economists and others use to assess any tax system. Progressivity is the quality of a tax to impact income classes proportionally to their ability to pay it (by contrast, a “regressive” tax is one that disproportionately impacts poorer taxpayers). In strictly technical terms, a progressive tax is one in which the rate of taxation (and not just the amount) goes up with the income of the taxpayer. States with a progressive personal income tax that do not rely heavily on sales and excise taxes tend to be among the most progressive overall tax systems. In a more progressive system, tax changes made to the lowest rate have the biggest impact on revenue, whereas changes on the highest rate have much less impact because many fewer people are affected. See Adequacy, Centralization, Elasticity, Regressivity, and Stability.

Property Tax – A tax levied by governments mostly on real estate ownership, but also, in many states, on automobiles, business machines, and even (though rarely) on intangible assets such as stocks and bonds. This is the main source of revenues for local governments. In Oregon, the state no longer levies a property tax, though this tax used to be the only revenue source the state had to fund public services until a 1916 tax revolt. Property taxes are considered more stable than other taxing mechanisms, but are also somewhat regressive, depending upon housing patterns and the design of the tax with respect to how much business pays as a share of total property taxes.

There are two approaches for property taxation – tax “base” and tax “rate” systems. Under the base system, a local jurisdiction identifies the amount of revenue it needs to raise, and the tax levied on individual properties is calculated according to the percent of the total property value in the jurisdiction levying the tax. Under the rate system, however, the rate is fixed (as in Oregon: e.g., $5 per $1000 assessed value goes to schools). Under a rate system, changes in the market value of individual properties can cause the total revenue collected to vary widely and be difficult to predict. Also, under this approach, an increase in the value of one property does not reduce the tax burden of other properties. By contrast, in the base system, increased property values in one part of the district are offset by reductions in lower-valued regions of the jurisdiction. See Homestead Exemption and Split Roll Tax.

Property Tax Limitations – Three voter-passed measures have limited property taxes in Oregon. The first, commonly known as Measure 5, is a constitutional tax limitation passed in November 1990. It limits the total amount of property taxes allowed on each individual property owner. Schools may impose no more than $5 per $1,000 of real market value of each property in any tax code area and general governments may impose no more than $10 per $1,000. In November 1996, voters passed Measure 47, commonly called the “cut and cap” measure, which rolled back property values and limited value growth to a maximum of three percent per year. Because of technical problems, the 1997 Legislative Assembly rewrote the measure and sent it back to the ballot. Voters passed this version, known as Measure 50, in May 1997. It established a permanent tax rate for each taxing district in the state and established gap bonds, local option levies, and exempt bonds. Assessed values for the 1997-98 tax year were set at 90 percent of the 1995-96 assessed (not real market) value for each property in the state. Assessed value growth was limited to 3 percent per year and cannot exceed real market value of the property. A double-majority requirement, established in Measure 47, was also re-passed in Measure 50. See Gap Bonds and Double Majority.

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Quality Education Model (QEM) – A tool, first developed in 1999, to link education spending to student performance by offering a framework for analyzing funding decisions and by providing cost calculations for achieving educational performance goals. The model has undergone several rounds of refinement since it was first devised, and all education stakeholder groups have participated in these efforts. Additionally, consultants, focus panels, and public opinion have been added to the extensive research basis that supports the basic model. The aim is to take politics out of funding decisions to the extent possible, and to make budget decisions based on realistic projections of how much it costs to achieve educational outcomes. Or, alternatively, the model may be used to show how much student performance policymakers could expect to achieve given a particular level of financial investment. The 2001 legislature created a statutory Quality Education Commission to continue to revise and update the model over time. Read more about the Quality Education Model, including a link to the QEM website.

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R

Rainy-Day Fund – See Stabilization Fund.

Recession – There are various ways to define this term. A recession is a significant decline in activity spread across the economy, lasting more than a few months and visible in industrial production, employment, real income, and wholesale-retail trade. Two successive quarterly declines in the rate of economic growth is the customary, informal definition. Expansion of the economy – the normal state of the U.S. economic condition – is interrupted by such contractions (or “slumps”), which have historically been brief and somewhat rare in recent decades. The recessions of 2002 and 2009 markedly veered from this cyclical pattern.

Referral – A legislative measure that puts a policy question to the voters at an election. Legislative referrals may be either statutory provisions or constitutional proposals. A referral requires only a simple majority of each chamber of the legislature for passage, and it does not go to the governor’s desk for signature or veto. Some legislative referrals are sent to the ballot precisely for this reason. Also, Constitutional changes cannot be enacted legislatively, so these policy proposals must come in the form of referrals to the ballot. Finally, some proposals find their way to the electoral realm when legislators prefer not to vote on them straight up because of controversial or politically risky content.

Referendum – A challenge by citizens to a legislative enactment. In 1902, Oregon became the first state in the nation to enact its Constitutional “initiative and referendum” law. While initiatives allow citizens to initiate laws they desire enacted, the referendum device enables citizens to eliminate legislation by challenging a bill that has been enacted. This is accomplished by circulating petitions for signatures, and if enough are collected, the policy issue goes on the ballot for a statewide vote of the people. All legislatively enacted revenue measures may not have “emergency clauses” for this reason – bills to increase taxes await a 90-day period before becoming law in order to provide signature gatherers enough time to challenge the bill if desired.

Regressivity – One of several qualities economists and others use to assess any tax system. Systems that impose a greater share of the tax burden on middle and lower-income taxpayers than they do on wealthier citizens are said to be regressive. Strictly speaking, a regressive tax is one in which the tax rate goes up as income goes down. States that have a flat income tax or no state income tax at all, plus high sales and excise taxes are among the country’s most regressive in overall taxes, as measured by total tax share per family income. See Adequacy, Centralization, Elasticity, Progressivity, Stability, and Tax Equity.

Revenue – Funds received by governments (federal, state, local) to pay for public services. These are composed of taxes, user fees, charges, intergovernmental transfers, government borrowing, interest income, and state-run businesses (e.g., liquor and lottery). The largest source is taxation of wealth, income, or consumption (purchase of goods and services). Revenue may be altered either by enacting a new source, by capping or eliminating a tax source, by increasing or decreasing the rate of taxation on an existing revenue source, or by eliminating a tax expenditure.

Revenue Forecast – The Oregon Economic and Revenue Forecast is published by the Office of Economic Analysis (the “other OEA”) quarterly in March, June, September, and December of even-numbered years and March, May, September, and December of odd-numbered years. The June forecast is advanced a month in legislative years so that policymakers have a better sense of the revenue that will likely be available for the coming two-year budget cycle. This information becomes the bottom line from which all state appropriation decisions are made. It is also the basis of comparison for determining how closely economists predicted actual revenues when, in September following the biennium, a determination is made of what actual revenues were received and whether, therefore, the kicker will “kick”. A copy of the quarterly document is available on the Office of Economic Analysis web page at www.oea.das.state.or.us. See Kicker.

Revenue Impact – Refers to the impact legislation or a ballot measure may have – positively or negatively – on revenues to the state (or to local governments). Revenue impact statements are prepared by the Legislative Revenue Office.

Revision – A change to the Oregon Constitution. The legislature may send a constitutional-change proposal to the voters in either of two forms: an amendment, which must receive a simple majority of legislators’ support, or a revision, which requires a two-thirds vote of support for passage to the ballot. The advantage of the revision method is that it is not required to meet the Supreme Court’s Armatta test, whereas a legislative referral must meet that test. Complicated changes to the Constitution (such as reforming Oregon’s tax code) might not be achievable without amending more than one article of the Constitution and so would best be advanced as a revision.

Rollup – The amount of money needed to provide the same level of program or service in the successive biennium as is provided in the current two-year budget period, including all costs associated with inflation, growth, and other cost drivers. See also Current-Service-Level Budget (CSL).

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S

Sales Tax – Sales taxes, which have been defeated by Oregon voters nine times, can generally be said to have three common features: they are usually ad valorem taxes, they are not applied to wholesale purchases, and they encourage separate quotation of the tax in each transaction. Only Alaska, Delaware, Montana, and New Hampshire share Oregon’s distinction as no-sales-tax states. Nationally, the sales tax is the largest source of state government tax revenue and second only to the property tax as a revenue source for local governments.

School Improvement Fund (SIF) – Legislation passed by the 2001 Legislative Assembly to begin to fund the ideals described in the Quality Education Model.  The Fund was slated to receive $220 million to fund by grant allocation programs to accelerate student reading achievement through class-size buydowns, professional development, and other proposed enhancements. The first year of the biennium, the program allocated approximately half of the money. In the 2002 special sessions, however, the second half ($112 million) of the fund was disappropriated due to the state’s fiscal crisis. In 2007, the Legislature amended the School Improvement Fund statute and appropriated $300 million for the 2007-2009 biennium. Due to the recession-caused revenue gap in 2009, no School Improvement Fund was funded for 2009-2011.

School Revenue Forecast Committee – A committee first created by Gov. John Kitzhaber in 1999 to calculate the current-service-level budget for three years out, accounting for all cost drivers and other information that would affect school district costs. The committee, composed of Department of Administrative Services (DAS) officials, finance staff from the Dept. of Education, and staff from the Legislative Revenue and Legislative Fiscal offices, also includes all stakeholders and two legislators. DAS is directed to calculate an annual “allowable growth factor”, which contemplates the amount of money per student for general operating revenues (state and local) that may “reasonably be expected”. This includes projected changes in costs, forecasts of local revenue performance, and changes to current law affecting revenues and State School Fund distribution. This information is used by the governor to build the “Governor’s Recommended Budget” prior to each regular legislative session. In 2007, Gov. Kulongoski established a similar committee to determine rollup costs for post-secondary education.

Selective Sales Tax – See Excise Tax.

Single-Sales Factor Tax – A restructuring of the apportionment formula for corporate income taxation. Prior to the 2001 Legislative Session, Oregon’s corporations paid income taxes on a ratio of 50 percent in-state sales, 25 percent payroll, and 25 percent property. Proponents of a single-sales factor advocated for 100 percent (single or “super” sales factor) apportionment as a way to induce corporations to relocate to Oregon for the sake of economic stimulus. Opponents of the legislation pointed out that Oregon’s economic growth in the late 1990s, despite not having such a tax, was ranked #2 in the nation, ahead of all states with this form of corporate taxation – giving lie to the contention by its proponents that this apportionment formula would assure rapid state economic growth. The proposal would have cut taxes on 2,500 multi-state corporations whose sales are primarily beyond the state’s borders and would have raised taxes on 5,700 other businesses whose sales are primarily in-state. As amended by the legislature, the formula changed to 80 percent sales, and 10 percent each to the other income categories. Telecommunication and utility companies are offered either formula, depending on which is most advantageous to their tax position in any tax year. By 2005, Oregon phased in the 100 percent sales-only formula, resulting in an $80 million per biennium revenue loss to the state.

Single-Subject Rule – A constitutional requirement that no amendment to the Constitution is able to address more than one subject when put before voters. The rationale for this rule is that voters ought not to be compelled to cast a single vote for multiple issues or questions. It also prevents the practice of stuffing an unrelated “poison pill” into the body of another, perhaps more popular proposal, thereby forcing passage of the one in order to pass the other. This rule is often confused with the Armatta test, which bars multiple amendments to the state Constitution in any one ballot measure.

Spending Limit – See Expenditure Limitation.

Split-Roll Tax – A means of property taxation that levies separate rates for residential and commercial property. Oregon does not have such a system, though proposals have been advanced. In 1992, voters rejected a split-roll property tax proposal when opponents ran a campaign threatening job losses and higher prices for consumer goods should the measure pass. Businesses once paid nearly 60 percent of local property taxes; as of 2008, they paid just 42.5 percent.

Stability – One of several qualities economists and others use to assess any tax system. Stability refers to the ability of a revenue source to weather economic fluctuations without extreme volatility. See Adequacy, Centralization, Elasticity, Progressivity, and Regressivity.

Stabilization Fund – Also called a “rainy-day fund”, an account that accrues revenue for use in an economic or other state-funding emergency. Most states have such a fund, capitalized at between one percent and nine percent of General Fund expenditures. Oregon had not created a stabilization fund until September 2002. OEA supported creation of reserves and weighed in on such decisions as capitalization sources, fair thresholds for triggering its use, and other details. In addition to the Education Stabilization Fund, the 2007 Legislature also created a general-purpose rainy-day fund, which may grow to 7.5 percent of the value of the General Fund.

State School Fund – The monies distributed to Oregon’s 197 school districts, its state schools, and 20 Education Service Districts (ESDs) through the equalization formula. These funds constitute the lion’s share of K-12 support in any biennium. Some other statewide programs, such as funding for the Quality Education Commission and the Oregon Virtual School District, are also typically paid out of the State School Fund prior to district distribution.

Statutory Measures – Ballot measures that enact laws without altering Oregon’s Constitution. Upon passage, these laws are placed into the Oregon Revised Statutes at: www.leg.state.or.us/billsset.htm

Sumptuary Tax – Also called “sin taxes”, these are excise taxes applied to consumables whose excess consumption is discouraged, such as alcoholic beverages and tobacco products. See Excise Tax.

Super Majority – With respect to legislative enactments (revenue measures), the super-majority requirement is three-fifths vote of each chamber of the Legislature. This is required for passage of revenue-raising measures. Three-fifths is 38 of 60 House members and 18 of 30 Senate members. This constitutional measure was referred to the ballot by the 1995 Legislature and passed in May 1996. In 1998, a proposal to require super majorities for revenue measures on the ballot was introduced. In order to fight that measure, OEA backed a ballot measure requiring that any initiative calling for a super majority must itself be approved by the same super-majority threshold. That Constitutional amendment passed, while the measure it was responding to failed to become law.

Systems Development Charges (SDCs) – Fees imposed on local construction by some counties in Oregon to partially recover the infrastructure costs associated with residential and commercial development. Under Oregon law, local governments may impose SDCs for five services, such as water, sewer, and parks. Many education advocates believe that Oregon ought to permit school districts to collect systems development charges for schools (particularly in high-growth areas), but legislative efforts to pursue this have been vigorously opposed by the building industry. As support for this concept began to grow, building industry lobbyists worked with education advocates to develop an alternative proposal for capital funding, which passed in the 2007 legislative session and was revised again in 2009. See Construction Excise Tax.

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T

Tax Expenditures – Tax expenditures are known in lay terminology as "tax breaks." These include tax deductions, subtractions, credits, or other forms of revenue exceptions. One example is the now-abolished pollution control tax credit that corporations used to claim as a reward for complying with federal environmental laws (his loophole expired in 2007). In Oregon, 54 cents of every tax dollar is given away in personal and corporate tax breaks. Because of all the adjustments, deductions, exemptions, and exclusions available in the Oregon income and property tax systems, the “effective tax rate” paid by an individual is usually substantially less than the “statutory tax rate”.  Every biennium, along with the Governor's budget, the Department of Administrative Services (DAS) publishes a book, called Tax Expenditure Report, which details these billions of dollars in cuts. Citizens may obtain a copy of this report for free, by calling DAS. See Income Tax and Property Tax.

Tax Equity – A term referring to balance and fairness across the tax system. A pursuit of tax fairness is not necessarily also an effort to achieve funding adequacy or stability. Fairness discussions tend to focus either on the relative progressivity or regressivity of a given tax, or else, on how the system as a whole balances the tax burden across tax classes. For example, from a tax fairness perspective, the shift of the tax burden from business and to individuals is a crucial issue. In 1978-79, Oregon businesses matched all state and local taxes paid by individuals nearly dollar-for-dollar. By the mid-1990s, however, business’ share had dropped to only 65 cents for every $1 paid by individual citizens. A similar shift occurred in property taxation in the 1990s. Finally, businesses once paid about a quarter of state income taxes; now they pay less than 18 percent, while individuals pay 82 percent. Tax equity argues for restoring the balance among taxing classes.

Tax Increment Proposal – In an effort to stop legislation that would enable districts to collect systems development charges for schools, the building industry brought forth a counter-proposal to fund capital costs to school districts in high-growth regions of the state. This proposal, introduced and defeated three times from 2001 to 2005, was to capture the difference between a property’s value before and after its improvement – the “increment” – and hold the tax that would have been applied to that increment aside for use in school construction. The impact would be that millions of dollars of property tax revenue, otherwise offset from the General Fund distribution of money to all schools, would be removed from the table, in effect reducing school funding in less-prosperous, low-growth or declining enrollment districts. OEA opposed tax-increment legislation each time it was proposed.

Tax Shift – Refers to the decline in the proportion of tax burden paid by business in the past decade, shifting more of this obligation onto the backs of individuals. It is this shift—an increase by proportion, but not of rate—that leads to misunderstanding by citizens who contend that they are “over taxed”. In fact, by most measures, Oregonians are paying the same share of their income in taxes (approximately 5.5 percent) as they were paying more than 20 years ago. As far as overall tax burden, taxpayers pay roughly a 10 percent effective tax rate for all state and local taxes combined.

Total state and local tax collections in Oregon have trailed behind the state’s rate of economic growth. By contrast, the effective tax rate for Oregon businesses declined by more than one-third during the 1990s and was the lowest among seven western states in 1999-2000. According to the director of the Oregon Dept. of Revenue, Oregon households’ initial share of total state and local taxes increased from 51 percent in 1978-79 to 61 percent in 1996-97. Correspondingly, the share paid by business dropped from 48 percent to 39 percent in this same period, primarily due to the dual phenomena of property tax reductions and personal income growth. A recent study by Ernst and Young for the Council of State Taxation found that by 2008, business’s share of total taxes had fallen to 38.2 percent and their taxes as a share of Gross State Product was just 3.7 percent. Only North Carolina’s is lower. On the property tax side, businesses paid 57 percent of all Oregon property taxes in 1983-1984 and just 46 percent by 1997-98. In 2008, that share had dropped again, to 42.5 percent of the $4.47 billion collected statewide.

Also, Oregon’s working poor families of four had the eighth-highest state income tax burden in the nation in 2000. See Income Tax, Property Tax, and Property Tax Limitation Measures.

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Unfunded Mandates – A term used to describe laws imposed on smaller governments from on high – at either the state or federal level – without funding to cover the costs created by the new requirements. In the mid-1990s, voters passed a ballot measure that barred state government from imposing unfunded mandates on cities and counties, but the law specifically exempted school districts from this protection.

Unit Tax – Like an excise tax, a unit tax is a specific tax that applies only to the number of physical units bought or sold, such as motor fuel. Revenue from unit taxes (such as Oregon’s gas tax) does not necessarily change with inflation or with the change in value of the product. See Ad Valorem Tax, Consumption Tax, Excise Tax, General Sales Tax, and Value-Added Tax.

Urban Renewal District – Districts created with taxing authority to fund urban renewal projects, particularly in neighborhoods suffering “blight”. Urban renewal monies, which pay for street improvements, utilities, parks, and other projects, come from future property tax revenues by using tax-increment financing to fund redevelopment. In effect, money for urban renewal has come from all property taxes, including schools’ share. In 2001, however, the Oregon Legislature passed HB 3215, which exempts voter-approved bond issues and local option levies (but not regular property taxes) from tax increment revenue loss. Urban renewal legislation law was reformed in 2009 to make it more difficult to exclude affected parties from creation and renewal decision making and to tighten up criteria for developing these districts.

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V-W-X-Y-Z

Value-Added Tax (VAT) – This form of consumption tax is a form of “multi-stage tax” wherein a tax is applied every time a transaction occurs in a production-and-distribution process, rather than at the retail, consumer level. It varies from a “single-stage tax” in that the latter applies a tax to goods or services only at one stage in the production/distribution process. To determine the VAT, one takes price of goods minus cost of purchases made by the business from other businesses.

Viability – The ability of a concept to win enough support for passage, either legislatively or at the ballot box. A revenue measure’s threshold of viability must be higher than that for other concepts, due to voter-passed requirements for super-majority revenue votes in the legislature and double-majority revenue votes in some elections. See also Super Majority and Double Majority.

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