ESTIMATE OF FINANCIAL IMPACT
This measure increases revenues for the state budget between $118 million and $138 million per year for fiscal years 2010, 2011, and 2012, primarily for the General Fund. The measure increases revenues by approximately $123 million per year thereafter, depending upon growth in corporate profits and sales.

Revenue from this measure is included in the 2009-11 state budget. Failure of the measure will reduce revenues expected to be available for expenditures in the 2009-11 state budget by $255 million. This could result in reduced state-shared revenues to schools and local governments. Failure of the measure also may result in a reduction of federal funds that are used to pay for some state services.

Failure of the measure may limit the state's ability to borrow money. It also may have a negative impact on the state's credit rating which could increase the cost of future borrowing by the state and local governments.

EXPLANATION OF ESTIMATE OF FINANCIAL IMPACT

REVENUE
The measure raises revenue by:
* raising the corporate income tax rate;
* establishing a flat $150 minimum tax for S-corporations, limited liability companies and partnerships, and C-corporations with under $500,000 in Oregon sales; and
* adopting a minimum tax of approximately 0.1% of sales for C-corporations with over $500,000 in Oregon sales.

The corporate income tax rate will initially increase from 6.6% to 7.9% for net taxable income exceeding $250,000. Starting in 2013, the rate increase will apply to net taxable income exceeding $10 million, and will drop to 7.6%.

The new minimum tax will affect approximately 74% of C-corporations, most S-corporations and businesses filing as partnerships. S-corporations and partnerships will pay the $150 minimum tax.

Beginning in 2013, taxes that come from the new income tax
rate will go into the Oregon Rainy Day Fund.

EXPENDITURES
Corporate taxes are about 6% of the state General Fund. In the current two-year state budget (2009-11), this fund is used to pay for:
* Education - including elementary schools, high schools, community colleges, and state universities: $6.8 billion (51%);
* Services for children, the elderly, and the disabled - including medical insurance: $3.5 billion (27%);
* Public Safety - including prisons, courts and local jails: $2.4 billion (18%);
* Other programs - including business regulation, natural resource management and state administration: $0.5 billion (4%).

The current budget anticipates $255 million from this measure. If the measure fails, expected resources will be reduced by this amount - about 2% of General Fund resources. State law requires a balanced budget. Future legislatures may decide how this reduction will affect spending. Options include spending cuts, use of reserves, raising revenue, or any combination.

Many state and local government programs are jointly funded with "matching" money from the federal government. Federal funds will be reduced if state spending for these programs is cut.

BONDING AUTHORITY
The state of Oregon borrows money by issuing bonds. Oregon's credit rating affects the cost of borrowing. A good credit rating lowers borrowing costs. One of the factors that affects Oregon's credit rating is the amount of state revenues available to pay for essential services. If the measure fails, Oregon's credit rating could be adversely affected.