Oregon School Funding


Oregon schools are funded through two mechanisms: the State School Fund, carved primarily from state personal income tax, and local property taxes from homes, businesses and other properties within a school district’s boundaries. The majority of Oregon’s tax revenue (82%) comes from personal income tax, which is a volatile basis for education funding. This biennium, schools narrowly dodged massive cuts with Oregon’s sagging budget. We asked two prominent education advocates to share their vastly different views of how Oregon schools should best be funded.

Holly Pruett

Oregon executive director of Stand for Children

At a time when most new jobs require at least some post-secondary education, students are less likely to graduate from high school than their parents. Yet our schools are being asked to do more with less.

When adjusted for inflation, state funding for K-12 in Oregon has declined by 20% since 1990. Funding is now more than $1 billion short of the level specified by the state’s Quality Education Model. Even when the budget was relatively flush, K-12 got the smallest percentage funding increase of any government sector.

Stable funding is important, but not a silver bullet. We also have a responsibility to make our schools more effective in accelerating student achievement.

That said, there are three things we can do in the next year to make incremental improvements in how our schools are funded.

First, the state Lottery Commission needs to uphold its constitutional mandate to maximize benefit for schools and other public services. Nearly 24% of lottery dollars go to tavern owners and other lottery retailers—even though the Lottery’s own studies show that 5-15% would be adequate. A phased reduction in retailer profits should be a central part of to be a part of the six-year contract the Lottery Commission is currently negotiating.

Second, Oregonians need to uphold the legislature’s decision to raise the $10 corporate minimum tax and increase revenue from people who make more than $250,000 a year. If that decision is overturned through a referendum vote that will likely be on the ballot next January, education, healthcare and public safety will face a $733 million cut.

Third, voters need to reform the state’s irresponsible kicker law which prevents us from saving money for downturns. In 2007, the kicker sent $1.1 billion to taxpayers. Had we set aside all or some of that money, we could have avoided many of the cuts that are now compromising education and public services across the state.

Rob Kremer

Founder of the Oregon Education Coalition

Can anyone remember a budget cycle in Oregon in which the K-12 school establishment didn’t say it needed more money in order to avoid cuts? For decades now, whether Oregon was in boom times or bust times, whether the state budget was flush or flat, one thing remained-our schools were in fiscal crises.

There’s actually a good reason for this. A few years ago, an Oregon School Boards study on school spending revealed the problem—the cost structure of Oregon’s school system is unsustainably high.

The study showed that the year-over-year cost increase in Oregon’s K-12 school system averages about 6%. Collective bargaining contracts lock in higher payroll costs each year, and the combination of Cadillac health insurance policies and an out-of-control PERS system has made Oregon number one in the nation in the cost of fringe benefits.

So if the schools don’t get 12% more in each biennial budget, they have to cut programs or lay off staff. The Oregon state budget, by contrast, has increased on average by about 7.55% a biennium since 1999. It’s easy to see that “fully funding” schools to cover their annual 6% structural cost increases would eventually require that the entire state budget be devoted to schools.

The simple fact is, Oregon’s school cost structure can’t be sustained. It has to change. In a state politically dominated by the powerful teachers union, this change won’t come easily.

In Oregon, charter schools—including “virtual schools”—are a good laboratory for operating schools that can thrive in a budgetary environment of 3% annual cost increases. President Obama is pushing states to embrace charter school innovations.

If Oregon doesn’t listen, we can look forward to exactly what we’ve experienced for the last two decades—perpetual crises.

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