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The architects of Multnomah County’s universal preschool program have rich-people problems.
After fiscal year 2025, the county’s annual financial report reveals, Preschool for All is sitting on $610 million. That nest egg, first reported by WW last week, makes it the envy of just about every other government agency—just $10.5 million would solve the county’s overall budget shortfall this coming fiscal year—and it fuels the enormous resentment felt toward the program by many of the executive class who bankroll it via their income taxes.
So it might come as a surprise that the people monitoring the program are making their chief concern whether Preschool for All will remain financially solvent a decade from now.
That’s because, as county economist Jeff Renfro puts it, Preschool for All tax revenue is “extremely, extremely volatile.”
That volatility is a result of collections based entirely on a marginal tax of 1.5% on income over $125,000 for single filers or $200,000 for joint filers, and an additional 1.5% on income over $250,000 for single filers or $400,000 for joint filers. High incomes are typically subject to more variation year to year, and taxes that hinge on them face the same challenge. That makes forecasting the tax difficult, and could leave revenue unstable in times of financial crisis.
“Dedicated savings, we’re planning to spend all of it,” Renfro tells WW. “At some point in the future when we don’t have this bucket that’s giving us flexibility as we go through these years of expected deficits…then we’ll have to have another conversation around, in the longer term post implementation, how we manage this volatility.”
Some observers scoff at the idea that revenues are going to plunge—especially since the tax isn’t indexed to inflation and will gain a pool of new payers each year. Bob Weinstein, a former candidate for City Council and a Preschool for All watchdog, says not indexing creates a “perverse situation” in which individuals are pushed over fixed income thresholds “not because they’re genuinely wealthier, but simply because dollars have lost value.”
“It’s one thing to have a reasonable fund balance; it’s another thing to ignore four years of data which shows that the county underprojects revenues, and overprojects spending, so that the surplus grows significantly every year,” Weinstein says.
Voters who passed Preschool for All in 2020 did so with the promise that the program would provide a taxpayer-funded preschool seat to any child who seeks one by 2030. Program officials believe the demand will reach 11,000 seats by then. Last fiscal year, when Preschool for All served about 2,225 students, the county spent around $90 million on human services, the category that encompasses most of Preschool for All’s operating expenses. (This year, the program serves about 3,800 students.)
The program has a steep climb ahead. And as WW has previously reported, scaling up the program to meet demand has proven challenging (“The Itsy Bitsy Project,” Nov. 8, 2023). Meanwhile, Gov. Tina Kotek and the boardrooms of Portland’s largest companies fear the tax is driving its largest payers out of Oregon, so they are pressuring the county to lower the tax rate (“Save the Whales,” WW, June 24). And none of this pressure eases when county residents hear the program is sitting on half a billion dollars.
Simply put, the program faces political pressure to deliver seats more rapidly before a taxpayer rebellion overwhelms it. (A county spokesman says officials anticipate providing a “much higher” number of seats next year than currently projected.) But the people closest to the program are hesitant to move too quickly to tweak the tax mechanism, fearing it could risk Preschool for All’s solvency if and when the economy worsens.
And the people who are weighing that calculus? Volunteers, who don’t seem any closer to making key decisions.
What managing tax volatility looks like long term is a question county officials have thrown to two advisory groups.
The county this year assembled a technical advisory group, or TAG, originally meant to advise whether the county should go through with a 0.8% tax increase that was part of the program’s rollout. The TAG’s role has expanded greatly since then, as the county has faced pressure from Kotek to develop strategies to “ease the current tax burden even if doing so may slow the timeline toward achieving universal preschool,” she wrote in a June letter to County Chair Jessica Vega Pederson.
The seven-member group in July zeroed in on indexing the tax, but couldn’t reach a consensus and did not recommend anything to commissioners. Nonetheless, it has now been charged with “reviewing the program’s ongoing revenue needs and issuing formal recommendations regarding the PFA tax,” according to the county’s website. The TAG is supposed to present its recommendations for long-term sustainability to the Board of County Commissioners in March.
That’s no sure thing. The group’s work has dragged on, two hours at a time, as competing interests debate what the goal ought to be. And a newer program advisory group, or PAG, has complicated the TAG’s task of balancing the program’s future budget, because that group is supposed to offer insight into how tax changes could hamstring Preschool for All programs.
Nobody agrees on much. Some members are more concerned about alleviating the tax burden on payers and evaluating the tax’s effects on the broader economy; others want to ensure the program has enough money to deliver what it promised to voters. They have questions about everything from demographic data the county is using to determine expenses, to immigration data and how that will affect the county’s labor force. Months in, they are still pulling at definitions of concepts, including sustainability—the concept they were charged with pondering in the first place.
The current working definition of funding sustainability for the program is that its fund balance in year 10 must be above zero, and that cumulative revenue must exceed expenditures from years 11 to 20.
At a Nov. 19 meeting, TAG members wondered if that definition set the floor too low. If there were an economic shock in 2034, TAG member Mark McMullen asked, would it be wise to build in a cushion?
“Right now, we have the dedicated savings bucket that we’re intending to spend down over a period of time,” Renfro said in response then. “Once we get through that implementation period, a 15% reserve and a 10% contingency is theoretically not enough. We think that at some point in the future we could see a 40% decline in revenues if there’s a financial downturn, which given historic data wouldn’t be completely unheard of.”
The TAG has explored some eyebrow-raising ideas to adjust the tax mechanism as well, like using property taxes to fund the program—a much more stable form of tax, but not the one voters approved. They’re also evaluating ideas that would adjust the program to stick closer to its ballot language, such as means testing families whose children attend 10-hour preschool days, and asking families who can afford those extra four hours to co-pay. (The county auditor in October 2024 flagged that Preschool for All guarantees six-hour preschool universally, but that 10-hour preschool was meant to be free only for families whose income did not meet Multnomah County’s Self-Sufficiency Standard.)
And across from TAG sits PAG, which has its own worries, mostly about changing the program so it actually serves all families. That would add more costs, such as better resources for children with developmental disabilities, a group many Preschool for All sites need more support serving.
Progress has been slow as individual members continue to get hung up on nuances and small details. There already appears to be some alarm about whether the groups can deliver recommendations on track and as planned.
“I want to do a real, clear reality check. We can continue to discuss scope or we can get to the objective,” facilitator Camille Trummer said at the Nov. 19 meeting. “We are in mid-November, and we still have a significant charge to accomplish on both sides of this project.”
Meanwhile, the business interests that pressed to end or scale back the program have largely gone quiet. In April, a group of power brokers led by real estate owner Greg Goodman polled voters about a repeal of Preschool for All. They never released the results of that polling.
And Kotek herself has rarely discussed Preschool for All in the months since her fiery warning this summer. In October, she told WW she has not discussed the progress of the TAG with the county chair. “County leaders have the responsibility,” she said then, “to ensure the program is sustainable, achieves its original goals, and works to mitigate any unintended consequences.”
