17-03-2025
Oregon's 'kicker' tax refund could be eliminated, altered as lawmakers seek reform
Oregon lawmakers are revisiting proposals that could eliminate or alter the state's unique surplus refund, better known as the "kicker."
Passed by lawmakers in 1979 and approved by voters in 1980, the kicker returns money to Oregonians when the state's revenue is at least 2% higher than forecasted.
Oregonians passed Measure 85 in 2012, diverting the corporate kicker revenue back into the general fund for public education. Since then, more than $3.5 billion has gone to K-12 schools, according to a Department of Revenue report. The corporate kicker for the 2021-23 biennium totaled $1.8 billion, the largest in state history and more than twice the previous record.
There's been a similar historic increase in personal kicker refunds since 2011. Oregonians received part of a record-breaking $5.6 billion kicker when they filed their 2023 tax return. State economists estimate taxpayers will see a $1.73 billion kicker in 2026, according to the latest revenue forecast.
Supporters of reforming the law argue that the excess tax revenue could be used to fund essential services, especially as lawmakers aim to address an ongoing housing and homelessness crisis and poor student outcomes. Opponents, however, are fiercely protective of the credit and have made clear they would challenge any changes to the personal kicker.
Here's where kicker reform stands at this point in the session:
Sen. Fred Girod, R-Stayton, is the chief sponsor of Senate Bill 399. The bill would require Oregon's Department of Revenue to issue kicker refunds in the form of a check instead of a tax credit. Checks were the refund mechanism from the mid-1990s until 2011, according to the Department of Revenue.
The bill currently sits in the Senate Committee on Finance and Revenue. It has not been scheduled for a public hearing or work session.
Girod sponsored an identical proposal in 2023, but it stalled in the Senate Committee on Finance and Revenue. Senate Republicans attempted to pull it out of committee and onto the floor in 2023 with a procedural motion to withdraw the bill from committee, but the motion failed 12-16.
Sen. Lew Frederick, D-Portland, is also bringing back a proposal he introduced in the 2023 legislative session: ending the kicker altogether.
Senate Bill 573 would discontinue returning excess revenue to taxpayers beginning at the start of the 2027 two-year budget. The bill would not take effect unless Senate Joint Resolution 15 also passes and is approved by voters during the November 2026.
"The kicker is a uniquely Oregon creature and it is a unique burden on our state and the people of our state," Frederick said in 2023. Improved revenue forecasts do not mean more revenue to use in programs but instead go "right back out the door," he said at the time. The bill drew hundreds of pieces of written testimony, largely in opposition, in 2023. After a public hearing, the bill died in committee.
Frederick was not immediately available to discuss his 2025 proposal.
The bill is currently in the Senate Committee on Rules and has not been scheduled for a hearing.
A proposal with more bipartisan support is centered around the corporate kicker rather than the personal refund. House Bill 3360 is scheduled for a public hearing Monday afternoon.
Rep. Courtney Neron, D-Wilsonville, and Rep. Zach Hudson, D-Troutdale, are the chief sponsors. Rep. Emily McIntire, R-Eagle Point, and Rep. Mark Owens, R-Crane, have signed on as regular sponsors.
The bill would redirect the corporate kicker to the School Facility Improvement Fund instead of the State School Fund, meaning the excess revenue would go solely into funding grants for school construction and maintenance projects and for infrastructure improvements.
"School infrastructure is a big problem for many of our districts," Hudson said in an interview with the Statesman Journal.
A similar proposal died in committee in 2023, though it generated testimony from school officials who shared stories of aging facilities and no funding to maintain them.
The way Oregon's school funding model works, money each biennium covers day-to-day costs and staff but cannot cover significant projects like HVAC system replacements or a new roof, Hudson explained. Districts turn instead to passing general obligation bonds, an expensive option that can often be struck down by voters.
According to bond and local option election data tracked by the Oregon School Boards Association, 54 of 100 school district, education service district and community college bonds were approved in the last four years. In Silverton School District, a bond to replace Silverton Middle School and cover other major repairs failed in 2023. The last bond the district passed was in 2006.
In the Gervais School District, voters approved a $28 million bond last year to replace heating and cooling, improve accessibility, replace the high school roof, and make other improvements. It was the ninth attempt at passing a school district bond and the school board warned that it would vote to close the district had the bond failed.
"If we can help districts out with these infrastructure asks, we really should," Hudson said.
Hudson noted that under the current corporate kicker system, the excess revenue goes first into the general fund before lawmakers allocate the rest of the state school fund, meaning it does not necessarily provide additional funding for education.
"I think that most voters, in wanting their money to go to education, would see school infrastructure as definitely within the intent behind that bill, but it just doesn't end up working out that way," Hudson said.
Because the kicker is unpredictable, it makes sense to use the corporate kicker as a pool of one-time funding set aside for infrastructure, Hudson added.
To be eligible for a grant, a school district must have submitted general obligation bonds during the last three years, failed to receive voter approval for general obligation bonds in the last 10 years and have reserves of less than 8% of its adopted budget.
Hudson also said that the bill presents another opportunity to move the needle in helping student achievement in Oregon get back on track.
"There's a lot of good evidence that school physical environment affects learning," Hudson said. "Students don't learn as well when they're too hot. Students don't learn as well when they don't have good quality air, and students don't learn well when the ceiling is moldy."
The window to submit written testimony for HB 3360 will close at 3 p.m. Wednesday.
Dianne Lugo covers the Oregon Legislature and equity issues. Reach her at dlugo@ or on X @DianneLugo.
This article originally appeared on Salem Statesman Journal: Oregon tax kicker refund under fire as lawmakers seek reform
