To have and have not

[April 25th, 2007] It's budget time again for our local pols, and Portlanders are hearing two very different songs coming from opposite banks of the Willamette River.

On the west side of the Hawthorne Bridge at City Hall, Mayor Tom Potter belted Broadway tunes and did head spins last week. Well, not quite. But the typically stolid mayor actually cracked a smile as he announced a $75 million surplus over the next five years—a windfall from the booming local economy.

Meanwhile, across the Hawthorne Bridge at Multnomah County headquarters, county Chairman Ted Wheeler sang the blues as he prepared to slash $15 million this year—a 4 percent cut. He says he'll slice another $10 million next year.

But wait, we all live in the same place. Why is the city flush with cash while the county holds its hat in the welfare line?

It all has to do with where the city and county get their money, and how they split up their workload in the region.

The county provides health and human services, which means it relies more on state and federal dollars for revenue—31 percent this year from Salem and Washington. The city hasn't done its math yet, but last fiscal year just 7 percent of its revenue came from the state and feds.

That's bad news for the county. Federal programs like Medicaid are getting cut. And while the state is doing better, it still fails to pony up enough to cover mandated programs like parole and mental health. The county must make up the rest—$7 million for parole and probation services alone.

"Across the board, the state doesn't give us enough money to perform the services they want us to perform," says County Commissioner Jeff Cogen, who worked in City Hall until last year as Commissioner Dan Saltzman's chief of staff.

The county also takes a hit because it relies more on property taxes than the city. Next year property taxes will supply 56 percent of its $367 million general-fund revenue. In the city, just 37 percent of the general fund comes from property tax.

Property taxes on your house can grow only 3 percent a year, thanks to Oregon voters approving Measure 50 in 1997. But the cost of doing government business—from paying contractors to buying fuel to insuring employees—grows 4 to 6 percent each year.

That's what county officials call a "structural deficit"—a shortage that's hard-wired into the budget. The county got a Band-Aid when voters approved a temporary personal income tax in 2003, but that expired after three years.

The Measure 50 property-tax cap didn't hit Portland as hard because the city has lots of other ways to raise money—like utility fees, business licenses and hotel taxes. Those shoot up when the economy booms, and Portland rides the wave—while the county gets left on the beach.

Both the county and the city collect business-income tax for 14 percent of their general-fund revenues. That's increased for both with the current economic upswing, but the county still winds up broke overall.

"It's like standing under a small umbrella," says City Auditor Gary Blackmer, who used to work for the county. "Something's gonna get wet."