Fiscal Flow Analysis

Oregon’s fiscal system is a major engine for redistributing income among different regions of the state. The state general fund comes primarily from personal income taxes which disproportionately arise from the Portland metropolitan area. A majority of general fund/lottery fund spending goes to two programs: K-12 state school support and the Oregon Health Plan. The recipients of these funds are disproportionately located outside metropolitan Portland. This system redistributes a net of about $550 million annually in revenues raised in the Portland metropolitan area to pay for education and health care in the remainder of the state.

The principal sources of revenue for the general fund are the personal income tax and corporate excise tax. The Portland metropolitan area, defined as the five Oregon counties in the federally designated metropolitan statistical area (Clackamas, Columbia, Multnomah, Washington and Yamhill), accounts for 55.2 percent of the state’s personal income tax revenues, 53.6% of its corporate excise tax revenues, and 56.7 percent of its net lottery revenues.

The Portland metropolitan area accounts for about 45% of the state’s population, and accounts for a smaller than proportionate share of state spending on education and health care. The region receives about 40.6% of state aid to K-12 education, and about 43.6 percent of spending on the Oregon Health Plan.

The Portland metropolitan are contributes about $1.72 billion annual in personal and corporate taxes and lottery revenues for K-12 education expenses. It receives about $1.27 billion annually in state support for K-12 education. The difference, about $450 million annually represents revenues from economic activity in metro Portland that support schools in the rest of the state. Similarly, the metropolitan area contributes about $432 million toward the cost of the Oregon Health Plan and receives about $335 million, for a net outflow of $97 million annually.

These data suggest a high degree of interdependence between the economic and fiscal conditions of urban and rural Oregon. Financing of key public services in rural Oregon is dependent on the continued economic success of the Portland metropolitan area. Stronger economic conditions, and especially higher incomes in rural Oregon would lessen the fiscal burden borne by metropolitan Portland.