ON THE BRINK: Oregon timber counties facing insolvency could get a state match for raising taxes.
By Shelby Sebens | Northwest Watchdog
Decades of government subsidies handed to rural Oregon timber counties created a dependency on money that’s now drying up.
Who gets to pick up that tab? Local residents, to whom cash-strapped elected county leaders now turn.
And if they say no? Well, then the governor and county commissioners can say tough luck.
Legislation passed at the end of the regular Oregon session grants Gov. John Kitzhaber the unprecedented authority to increase taxes in no more than two counties at once in the event of a “public safety fiscal emergency.”
Several Oregon counties started receiving federal payments after the timber industry plummeted in the 1990s, in large part due to strict harvesting regulations to preserve the northern spotted owl. That money has dwindled recently, and during the legislative session it was unclear how much, if any, federal money would come through.
The spotlight was on Josephine County, where 911 calls for help were being turned away, and Curry County, where local officials testified they may have to shut down the jail and several government departments as they face insolvency.
But there are 18 counties in Oregon that are part of the Oregon and California Revested Grantlands, which have relied heavily for years on federal payments to make up for the lack of revenue from timber harvesting.
Kitzhaber must get the approval of a majority of county commissioners and has to “consult” the local sheriff and legislative leadership before he increase taxes. In turn, the state will match the revenue raised by the tax increase. Kitzhaber has not said if he plans to enforce higher taxes on a particular county, but he could if the local government fails to provide adequate public safety.
Although Curry County voters said no to a ballot initiative to raise taxes in May, they’ll be asked the question again.
Curry County commissioners in November will ask voters to OK a property tax increase. That could stave off state intervention, but in communities filled with mostly retired seniors living on fixed incomes, higher taxes could create a great burden.
And critics of the new law say it’s too broad and rife with harmful consequences.
Tom Huxley, a resident of Curry County for 10 years and member of the local tea party in Brookings, a town of about 6,300 people, has questioned the county’s financial practices and whether elected officials have spent taxpayer money wisely.
“Who knows what they did with the money?,” he asked. “It’s like what did you do with it, people?”
Huxley argues there are other solutions to the county’s financial problems, including cutting the Public Employee Retirement System.
Unprecedented power
While Huxley calls the power to raise taxes without a vote of the people unconstitutional and the signs of a “dictatorship,” other critics just say it’s dangerous.
State Sen. Doug Whitsett, R-Klamath Falls, one of seven lawmakers who voted against the legislation when it came to the Senate, said the law doesn’t define what constitutes a fiscal emergency and only says the governor must “consult” with the local sheriff.
“Ultimately, the sheriffs’ position is not reflected in the bill,” Whitsett said, adding he thought the sheriff should have more of a say in what constitutes a fiscal public safety emergency.
Despite concerns about the reach of the new law, it passed both chambers with little opposition. The House vote was 49-10.
State Rep. Bruce Hanna, R-Roseburg, said that’s because the legislation, pushed heavily by Kitzhaber in an effort to do something about counties facing potential financial collapse, was greatly amended from its original version. He said the new law is far from perfect, but it gives the state and counties more options.
Hanna, who voted for the legislation, said the original bill was untenable.
“Basically, it allowed the governor pretty much sole discretion,” he said. “When I first looked at it I’m like, whoa, folks, this isn’t gonna fly.”
He said by requiring a majority of county commissioners to agree to a tax increase, it puts power under local control. He said while Kitzhaber could start the conversation with a financially distressed county, it likely will be the county seeking help from the state.
Curry County Commissioner David Smith testified in June before the House Rules committee that if something wasn’t done the county would have to shut down departments including the jail, sheriff, taxation and assessment and more.
“Curry County is past the breaking point and action must be taken to ensure the livability of our county and the safety of our citizens,” he said.
Kitzhaber also testified at that time, urging lawmakers to pass the bill, saying , “unprecedented action is needed to tackle unprecedented circumstances.”
He also threatened to mobilize the Oregon National Guard if nothing was done.
But Curry County Commissioner Susan Brown told the Curry Coastal Pilot she doesn’t think state intervention will happen because she doesn’t think it will get to the point where Curry County can’t provide services.
Show me the money
That doesn’t comfort Huxley and others who question their local leaders. A push to recall the Curry County commissioners calling for a tax increase has gotten nasty.
Although Curry County has one of the lowest property tax rates in the state at 59-cents per $1,000 of taxation, Huxley said it’s not fair for the county to hold it over residents’ heads. He said empty threats of worker layoffs have been just one of the tactics used to get people to vote for a tax increase.
“This has been going on for years, years — and the people haven’t bought it,” he said. “It’s been fear mongering.”
If the county decides to enter into an agreement with the state, which would implement a local income tax on residents for a state match in return, there’s no telling where that state money will come from.
A legislative fiscal impact statement on the law put it this way:
“There is no source of funding, or mechanism for funding, the state portion of the costs in the measure, nor does the measure make an allowance for the cost to the state to administer the agreements or provide subsequent support for the agreements such as the collection and distribution of the surtaxes by the Department of Revenue.“
Too broad
That fiscal impact statement alludes to some of the law’s ambiguities. It states there is no definition for public safety and so it’s unknown what safety services would be provided if the state enters into a local agreement with a distressed county.
The vagueness of the bill is another reason Whitsett said he voted against it. He said there are too many variables from county to county to have one law that works for all. Lawmakers saw that play out during the session when it came to light that charter counties, like Josephine County where 911 calls have gone unanswered, do not allow for a local income tax without a vote of the people.
“There was no question in my mind that in the last month of the session that bill was made a lot better,” he said. “But from my perspective it didn’t get anywhere near specific enough.”
Hanna points out the tax legislation was just a piece of the crumbling financial puzzle caused by timber regulations. Lawmakers passed other bills pooling local and state resources to help counties with elections, building inspections and other services that could falter if they go into financial peril.
“This is a stop gap,” he said. “It’s a tool in the toolbox that they may use.”
Oregon doesn’t allow cities and counties to declare bankruptcy.
Hanna admits that it’s not a perfect law but that he and many other lawmakers felt they needed to do something.
“It would be irresponsible to just turn your head and say if they become insolvent so what,” he said.
Contact Shelby Sebens at Shelby@NorthwestWatchdog.org
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