SALEM — Oregon’s projected “kicker” tax rebate will decrease by $108 million under a bill passed by Democrats in the state Senate on Monday.

For individual taxpayers, that would translate to a 14.5 percent reduction to their kicker rebate when they file their taxes in 2020, if state economists’ most recent revenue forecast holds.

In February, economists predicted the kicker could reach $748.5 million. It represents the amount of taxes collected above and beyond what state officials projected they would take in before the start of the two-year state budget cycle.

“The kicker was put in by the citizens of Oregon as kind of a bumper for not over-expanding our budget,” Senate Republican Leader Herman Baertschiger, R-Grants Pass, said in a floor speech. “But yet we chew away and we chew away.”

House Bill 2975 already passed the House and is now headed to Gov. Kate Brown, who must decide whether to sign it into law. Brown’s deputy communications director Kate Kondayen declined to say whether Brown plans to sign the bill.

Under Oregon's Constitution, the state’s unique kicker rebate is triggered when the general fund — largely tax revenues —comes in more than 2 percent above economists' forecast made at the start of the budget cycle.

Despite Baertschiger and other Republicans’ objections to the bill during Senate and House floor votes, they went out of their way to thank Democrats for personally notifying them that the bill would reduce the kicker.

Legislative analysts made no mention of the impact on the kicker in write-ups of the effects of House Bill 2975, and Republicans on the Joint Committee on Ways and Means — with the exception of two who were excused — voted unanimously with their Democratic counterparts to pass the bill. After the committee vote, Democrats told Republicans how the bill would cut the kicker. In floor votes, Republicans all voted “no.”

The kicker cut is the upshot of legislative budget maneuvers going back to the 2017 session, when lawmakers were looking for money to patch a budget hole that loomed despite rising state tax revenues. As part of balancing the current budget, they scheduled $108 million from a handful of sources including a state insurance fund and legal settlements won by the Department of Justice to transfer to the state general fund in May 2019.

But state tax revenues have exceeded expectations throughout the two-year budget, and Rep. Dan Rayfield, D-Corvallis, told House lawmakers last month that the state no longer needs that $108 million in the current general fund budget.

The catch is that lawmakers expect they will need the money in the next budget cycle that begins in July. Despite having 5 percent more revenue to work with compared with the current $22.5 billion budget, the Democrats who lead the Ways and Means committee proposed 5 percent cuts across much of state government in an effort to get the state on a more sustainable budget trajectory.

Rayfield, who is co-chair of the Ways and Means committee, told lawmakers last month that he and other co-chairs of the committee already plan to use the $108 million in personal income tax that won’t be paid out in the kicker “to fund critical services such as K-12, community colleges, higher education” in the 2019-2021 budget.

The Democratic co-chairs’ high-level budget plan calls for the state to spend $100 million, or about 1 percent, more than legislative budget analysts have said it would cost to maintain current K-12 services.

It also calls for $141 million less than necessary to maintain current service levels for all other education offerings, including higher education, which could lead to large tuition increases. If the state keeps $108 million socked away in the state insurance fund, DOJ settlement fund and other accounts for the current budget, it could be recycled to help patch higher education or other budgets for the next two years.

“If the governor signs (the bill), we will re-evaluate those accounts and see if there’s even more,” Legislative Fiscal Officer Ken Rocco said on Monday. “We would assume the bulk of this would still be available … And we will be looking at other funds, too.”

— Hillary Borrud | hborrud@oregonian.com | 503-294-4034 | @hborrud

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