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In a letter sent June 10, Gov. Tina Kotek urged Jessica Vega Pederson to consider easing the tax burden on some of the county’s highest earners by restructuring the Preschool for All tax.
The letter comes amid growing dissatisfaction from some of Portland’s top earners around the levy, a marginal income tax (1.5% of income over $200,000 for joint filers, and another 1.5% on income over $400,000 for joint filers). The ballot measure, passed in 2020, was intended to increase preschool capacity across the county.
But in her letter to Vega Pederson, Kotek outlined a trend she saw as “unsustainable” in the county. Multnomah County’s high income earners shoulder the second highest income tax rate nationwide, at 13.9%, she wrote. She added the Preschool for All tax seemed to be discouraging these top earners from calling Portland—and Multnomah County—home.
“I am troubled by the overall decline in the total number of taxpayers filing for the PFA tax, a drop of more than 1,700 total filers since 2021,” Kotek wrote.
“I am concerned that the program’s current direction is not responsive to the economic realities of 2025,” Kotek continued. “And if Portland does not rebound in the way we think it can, the downstream impacts on our economy will end up costing our most vulnerable and lowest income Oregonians the most.”
In a response to Kotek dated Wednesday, Vega Pederson disputed the governor’s 1,700 number, saying that during tax year 2023, the county had not yet done any outreach to potential payers. “Based on updated data that we received in May, the total number of filers in Tax Year 2023 is now 38,370, a 5,429-filer increase from revised Tax Year 2021 numbers,” she wrote. (Kotek’s letter notes her data is from May 16.)
In response to follow up questions from WW, county spokesman Ryan Yambra says that the data presented to the Portland Central City Task Force Tax Advisory Committee (where Kotek pulled her data from) was from data provided in December 2024. Yambra says during that meeting, a presenter stated the data was still incomplete because it didn’t reflect city followup with potential taxpayers. “The City’s process had identified a number of payers who hadn’t yet paid, but often end up doing so, after getting a notice from the City,” Yambra says.
“On or around May 20, after the CCTF meeting, the City sent updated info to the County, including people who had filed late. That’s the data the Chair shared in her letter,“ Yambra says. ”With these filers included, the data shows an increase in our total filers relative to the first year of collections."
Vega Pederson also wrote that the financial health and well-being of Multnomah County was her utmost priority and concern. Preschool for All is continuing to deliver on its goals, Vega Pederson said. “Over 30% of PFA seats didn’t exist before the program started. And together with state and federal investments in preschool, there will be enough publicly funded seats for 40% of children in Multnomah County next year,” she wrote.
She added the decline in total revenue from the tax could be explained by inflation caused by “macroeconomic factors.”
“I will be finalizing a plan to revise the tax in the coming weeks, working closely with my colleagues on the Board of County Commissioners to take our best collective next steps,” Vega Pederson wrote. “My goal in continued stewardship of PFA is collaborative revisions that both preserve and advance this successful, wealth-building program and are responsive to the economic health of our county, cities, region, and state.”
Kotek also outlined concerns that Preschool for All has been underspending its budget. The program had $485 million left in its coffers after fiscal year 2024. To be sure, the county has long projected that anticipated revenue would outpace anticipated expenditures in the program’s early years. But it forecast ending the latest fiscal year with $260 million left, $225.4 million less than what actually went unspent.
Amid underspending, the county ultimately delayed a planned 0.8% increase in the tax by a year in September, complying with a call from Kotek to avoid local tax increases. It has created a technical advisory group to evaluate the program’s financial needs “and issue a recommendation on the need for the 0.8% tax increase,” Yambra told WW in November.
Kotek expressed worries about the group’s progress in her letter, urging Vega Pederson to speed up its timeline. “Based on my concerns about near-term impacts, I do not believe the TAG’s timeline meets the urgency of the moment,” she wrote.
Kotek then outlined a number of strategies she thought could help ease the current tax burden on county taxpayers, including suggestions like clarifying what is financially necessary to achieve the original goals of the program, pausing tax collection for three years to focus on strenghtening the program, or reducing the tax rate.
“I ask for your consideration of approaches that ease the current tax burden even if doing so may slow the timeline toward achieving universal preschool in Multnomah County by 2030,” Kotek wrote in the June 10 letter.
She added: “Acting now with such an approach would allow for maintaining services currently provided by the program, create space for more deliberate and strategic focus on implementation, and responsibly draw down existing reserves that can ensure progress remains sustainable and equitable over the long term.”
Andrew Hoan, president and CEO of the Portland Metro Chamber, praised Kotek for calling for a pause, evaulation of the program’s scope, and rate reduction on the Preschool for All tax.
“We have still not recovered all the jobs lost in the pandemic in Multnomah County. Our population outlook is stagnant. Local governments are struggling to fund core services. Businesses are relocating or downsizing,” Hoan said. “We are in a structural economic crisis, and one of the main drivers is the PFA tax.”