Top of the roller coaster.

Byline: The Register-Guard

Oregon's government gets to play Santa Claus this year, mailing more than $1 billion in refunds to state income tax payers. The size of the refunds points to the difficulty of projecting state revenues two years in advance. It also points to an opportunity to stabilize the state's volatile tax system, if only Oregonians would take it.

The refunds are triggered by Oregon's unique kicker law, which requires that when actual income tax revenues exceed projected amounts by 2 percent or more, the entire amount over the projection must be rebated to taxpayers. The baseline projection was prepared at the close of the 2005 Legislative session. The state's Office of Economic Analysis announced Friday that personal income tax revenues exceeded the projected amount by $1.071 billion. December's kicker checks will amount to 18.6 percent of each Oregonian's 2006 tax bill.

It's ridiculous to expect two-year revenue projections to be accurate within 2 percent. In the 14 biennia since the kicker law took effect, the forecast has been within 2 percent of the target only once. Projections of corporate income tax revenues have never been within the target range.

Over time, however, the amounts by which the projections exceed and fall short of the projections even out. In five biennia between 1979-81 and 2003-05, personal income tax revenues fell $1.9 billion short of projections. In nine other biennia, revenues exceeded the projections by a total of $1.7 billion. If Oregon had been able to use excess revenues to offset shortfalls, the state's budgetary road over the past three decades would have been much smoother.

The $1 billion-plus excess in the 2005-07 biennium is by far the biggest ever, and adding it to the totals causes the long-term excesses to exceed the shortfalls by $800 million. Yet it's possible, even likely, that a shortfall soon will bring the numbers closer to balance. The record excess being refunded now is still smaller than the $1.25 billion shortfall of 2001-03.

There has been only one fundamental change in Oregon's tax system since then. Corporate income tax payers would have been eligible to receive kicker refunds of $344 million in December. Instead, the state's leading business organizations agreed to let the state keep the money, and the 2007 Legislature placed it in a budgetary reserve. The corporate kicker money, along with funds from other sources, gives Oregon something it has never had - a substantial cushion against an economic downturn.

The cushion still may not be substantial enough. The income tax system magnifies the effect of economic fluctuations on state revenues. Billion dollar surprises have come in two of the past three biennia. This year, the surprise is a pleasant one - big checks in December. Four years ago, the result was rounds of budget cuts that shortened the school year, cut thousands of people from the Oregon Health Plan and shrunk the state police.

It's already too late to bank any of this year's scheduled kicker refunds. Oregonians will welcome the money, and the injection of more than $1 billion into the economy will have some beneficial effects.

Stability in state finances, however, should be a continuing goal. Businesses recognized this when they agreed to divert their kicker refunds into a reserve.

The diversion, though supported by business, is not voluntary. Similarly, few individuals check their tax forms to donate their kicker refunds to the State School Fund, an option made available by legislation approved in 1999.

The reason is simple: Taxes are a collective burden that should be fairly distributed. People understand that if they donate but others do not, the cost of public services is borne by a few while the benefits are enjoyed by all.

The 1999 legislation is like putting a tip jar on the counter. It's no way to run a government.