Living with Oregon's Measure 5: The Costs of Property Tax Relief in Two Suburban Elementary Schools. (1995)

Citizens in Oregon and other states who are considering modifying tax structures that have traditionally supported schools need to look beyond the savings they may realize in their own pocketbooks and consider the consequences for their communities. The movement to reduce the taxpayers' burden of supporting schools through local property taxes has become widespread. Since the passage of Proposition 13 in California in 1978, an effort to shift education funding to other sources of revenue has been growing. In the past year, seven states - from Idaho to South Carolina - have seriously considered reducing or diminishing the role of property taxes in school funding.[1] The most radical step in this direction was taken in Michigan, where the governor and the state assembly completely eliminated property taxes as a source of school support and left it to voters to increase either the state income tax or the state sales tax. Michigan voters chose to tax themselves more heavily at the cash register, opting for a tax that is fundamentally regressive and unstable, though less visible than taxes on their homes or incomes. Schools in Michigan, however, are guaranteed an adequate and more equitable level of support, at least for the near future. In Oregon the passage of a property tax limitation measure in 1990 has not led to such a positive outcome. The experience of educators in this state, as well as of those in California, demonstrates the importance of making sure that a shift away from property taxes is accompanied by the development of adequate school funding from other sources. Without the provision of such support, the consequences for children and for those who educate them can be severe. Oregon's Ballot Measure 5 In 1990 property and income taxes in Oregon were among the highest in the country, with the state ranking 12th in the amount of personal income devoted to state and local governments. These high tax rates coupled with rapidly rising property values led to dissatisfaction among voters about the cost of state government and the personal sacrifices required to fund community services. The stage was set for a tax revolt. That revolt came in the form of Ballot Measure 5, the brainchild of anti-tax activist Don McIntire. The measure proposed to limit property taxes for nonschool government operations to no more than $10 per $1,000 assessed market value and to gradually reduce property taxes for schools to $5 per $1,000 by 1995-96. Revenue for education that would be lost under Measure 5 was to be replaced from the state's general fund during the first five years of the new law.[2] Measure 5 was quickly seen as a significant threat to public education in the state and denounced by such nationally prominent figures as Matthew Prophet. who was then superintendent of schools in Portland. Unlike many urban systems, Portland's schools had been blessed with a solid history of financial support, largely derived from property taxes, levied at the rate of $16.77 per $1,000 assessed market value in 1990. Cutting that rate by more than two-thirds in the course of five years - even with the guarantee of state support - threatened to undo the positive strides that educators in Oregon's largest city had made in building a system that was noted for its responsiveness to an increasingly diverse student population. Nor were schoolpeople the only ones concerned about Measure 5 in 1990. Leaders in the state government realized that, if the state were required to pick up a greater share of the costs for public education, fewer dollars would be available for other state-supported services.[3] Their warnings, however, had little effect on an electorate eager to reduce its tax burden. In the four years since the passage of Measure 5, the tax revolt it represented has had a profound impact on state institutions. In 1994 public schools and community colleges ate up 43% of the state budget, up from 27% in 1989. …