ESTIMATE OF FINANCIAL IMPACT
This measure increases General Fund revenues for the state budget between $217 million and $242 million per year for fiscal years 2010, 2011, and 2012. The measure increases revenues by approximately $180 million per year thereafter, depending upon growth in personal income and federal tax liability.

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 $472 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 in two ways. The measure adds two new income tax rate brackets for single taxpayers who have more than $125,000 of taxable income ($250,000 for joint filers). The measure also phases out the federal income tax deduction for taxpayers who have more than $125,000 of adjusted gross income ($250,000 for joint filers).

Roughly 3% of personal income tax filers (38,000 to 60,000 returns) will see higher taxes due to the new tax rates and/or the federal tax subtraction phase out. Following are average increases for those affected in the first year and in 2013 when the changes are permanent.

The measure also exempts the first $2,400 of unemployment benefits for tax year 2009 only. Approximately 15% of filers (270,000 returns) will see lower taxes due to the exclusion of the first $2,400 of unemployment benefits. The average reduction is roughly $120.

EXPENDITURES
Oregon personal income taxes are about 85% 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 $472 million from this measure. If the measure fails, expected resources will be reduced by this amount - about 3.5% 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.