SALEM, Ore. – The state Supreme Court was asked Tuesday to give Oregonians $113 million in additional "kicker" tax refunds on grounds the 2001 refunds were miscalculated due to a legislative accounting maneuver.
A Supreme Court ruling against the state could punch a new hole in the state budget because refunds aren’t assumed in Gov. Ted Kulongoksi’s budget.
The high court heard arguments Tuesday in the state’s appeal of a state Court of Appeals ruling. If the state loses, it could mean an additional income tax refund, for example, of around $60 for taxpayers with income between $40,000 and $50,000.
The appeals court said that lawmakers’ moving of $113 million in Medicaid money from the general fund into a special health care account just before the budget period ended in mid-2001 didn’t shield those funds from being counted in figuring refunds.
The court said the kicker calculation is based on all money that had been "received" by the general fund.
Under the so-called kicker law, if general fund revenue at the end of each two-year budget period tops initial estimates by 2 percent or more – as it did in 2001 – all the extra money must be returned to taxpayers.
The Medicaid money transfer had the effect of cutting the 2001 kicker refunds by about one-third, from about $190 to about $133, for example, for taxpayers who make $40,000-$50,000 annually.
Lawmakers argued that it made sense to not include federal Medicaid money in figuring refunds.
Mary Williams, an assistant attorney general, told the Supreme Court that legislative fund shifting shouldn’t matter because refunds are based on the status of the general fund at the final day of each budget period.
She acknowledged, though, that the voter-passed kicker law "isn’t as clear as I’d like it to be."
Greg Byrne, a Portland lawyer representing anti-tax activist Bill Sizemore and several Republican Party officials who challenged the accounting move, said legislators "were trying to take $100 million from the kicker and not get caught."
He also argued that shaving the tax refunds amounted to a revenue-raising action that lacked the three-fifths approval by each house that is required under the state constitution for such measures to pass.
The move was "a blatant attempt to cook the government’s books by disguising a tax increase as an innocuous accounting entry," Byrne said in his written brief filed with the court.
Williams said the fund shifting was just reallocating revenue, not raising new revenue.