Los Angeles -- Gov. Barbara Roberts yesterday proposed Oregon's first-ever statewide sales tax and other tax changes to help address a budget shortfall caused by Measure 5, a voter-approved limit on property taxes.
Gov. Roberts said the 3.5% sales levy and the rest of her restructuring proposal, known as the Oregon Tax plan, will at most close 85% of a projected $1.3 billion shortfall the state faces in its biennial general fund general that begins July 1, 1993.
Other cost-cutting measures, including the elimination of 4,000 state jobs, also will help close the budget gap, the governor said in a statement. She said the plan "also counts on continued cost cutting in state goverment.
Gov. Robert's proposal sets the stage for a special session beginning next week of the Oregon Legislative Assembly, which will consider referring the tax restructuring plan to voters in a Sept. 15 election.
Gov. Roberts said overall tax restructuring is needed because the current system "is out-of-date [and] does not provide the fairness, equity, and balance that Oregon must have."
Measure 5, approved by voters in 1990, poses a major concern for Oregon, poses a major concern for Oregon because the state must replace local property tax revenues lost by the public school system as a result of the initiative.
Gov. Roberts said her proposed tax plan offers all the property tax relief that Measure 5 promises, "but does it much faster."
Under the proposal, the property tax rate for owner-occupied housing would drop on July 1, 1993, to $15 per $1,000 of assessed value. That rate is divided to provide $10 for local government services and $5 for education.
The proposal also includes a small split roll, meainign that property taxes on income-producing property, such as businesses and apartments, would be set a higher rate of $20 per $1,000 of assessed value.
Gov. Roberts also proposed lowering personal income taxes for all Oregon citizens, resultin in a $150 million overall, resulting in a $150 million overall annual reduction from current rates beginning July 1, 1993. Lower- and middle-class Oregonians would get the largest tax relief as a percentage of their income.
To help the state replace those revenue reductions, Gov. Roberts proposed a statewide sales tax of 3.5%. The sales tax plan would raise an estimated $1.7 billion in the 1993-1995 biennium.
Revenues raised from the sales tax would only fund programs for local schools, from indergarten through high school and community colleges.
Only a vote of the electorate could change the statewide sales tax rate because it would be locked into the Oregon Constitution, the governor said.
The proposed sales tax would affect goods, not services, and would not apply to food, housing, utility bills, and medical care.
The governor lso proposed placing new limits on the ability of local governments to raise local sales taxes. Such increases would require local voter approval and would not allow local salels taxes to add more than four-tenths of a percent of the overall rate.
Rating agency officials are monitoring the state's efforts to adjust to Measure 5.
"Oregon still has the time and ability to develop a long-term solution for meeting school funding requirements," Standard & Poor's Corp, said this month in affirming its AA-minus rating on $4.8 billion of the state's general obligation bonds.
Standard & Poor's maintains a "stable" outlook, but said that "continuance of th rating depends on implementation of a sound revenue replacement strategy."
Moody's Investors Service and Fitch Investors service rate the state's GOs double-A.