Another envelope from the Arts Tax

A long-overdue conversation

By Bob Weinstein

If your mailbox recently received the familiar notice from the Portland Arts Tax, you are not alone. The annual reminder is arriving just as new reporting highlights that the program is sitting on roughly $9 million in reserves — raising a fair question: Is it time for Portland to take a fresh look at how this well-intentioned tax is working?

Let me be clear: Critiquing the Arts Tax does not mean opposing the arts. Quite the opposite. I am a passionate, lifelong supporter of the arts. In Alaska, I developed an arts program for small rural schools that brought artists of all disciplines — musicians, visual artists, writers, performers — into communities that otherwise would have had no access to them.

That program earned a Governor’s Award for the Arts. As an elected official, I supported increased public funding for our local arts council. Here in Portland, I support small theater companies like Coho Theater and Third Rail Repertory Theater and organizations like PDX Jazz, which help make this city culturally vibrant.

The arts are not an abstraction to me. Arts access — especially for young people — is essential civic infrastructure.

Which is why Portland’s arts tax deserves honest scrutiny.

Well-intentioned beginning

The Arts Education and Access Income Tax — better known as the Portland Arts Tax — was approved by voters in 2012. The concept was simple and appealing: a flat $35 annual tax on every Portland adult earning $1,000 or more (with poverty-level exemptions) would fund arts and music teachers in K-5 public schools and grants to local nonprofit arts organizations. Administrative costs were promised at no more than 5% of revenues.

Dedicated funding for arts education matters. In an era when creative programs are often the first cut, Portland chose to protect them.

Between 2007 and 2011, arts education had been gutted across the region. By 2011, only 31 arts specialists remained in Portland public schools, and thousands of elementary students attended schools with no art, dance, drama or music instruction at all. The arts tax helped reverse that. Today there are more than 100 arts specialists in Portland schools. The fund has raised over $147 million since its inception, directing nearly $85 million to school districts and more than $35 million to arts organizations.

But more than a decade later, it is reasonable to ask whether the mechanism is delivering on its promise as efficiently as it could.

Something has gone wrong

Two problems suggest that the program needs serious rethinking.

• Administrative costs. The promised cap of 5% for administration has never once been kept. In the first year, administrative costs ran around 7% of revenues, increasing to 13% the next year and 16% today. This suggests the problem is structural.

All Portland adults must file their own annual return just for this $35 tax. It generates massive compliance headaches: late payments, collection referrals, penalty letters, widespread noncompliance.

In 2015, the city auditor found that 200,000 Portlanders either didn’t pay their first bill or file for an exemption. Of Portland’s estimated 482,000 adults at the time, about 75,000 were exempt, but fewer than 8,000 submitted the proper forms. In other words, most non-filers simply didn’t pay.

In recent years, the city has even been unable to report what percentage of taxpayers pay on time in a given year.

• Reserves. Recent reporting revealed that the Arts Access Fund has quietly accumulated nearly $9 million in unspent reserves. In fact, the fund has carried between $6.5 and $8.5 million in reserves every year since voter approval.

No city code language authorizes a reserve of this size, and no policy directs its use. A city budget office presentation stated that reserves “should not be used as a ‘holding place’ for unprogrammed funds” — yet that is precisely what has happened.

Meanwhile, the $35 flat tax has been static since 2012, losing nearly 30% of its value to inflation. Portland has fallen from 47th to 120th in national rankings for government arts support. Small and mid-sized organizations — particularly those serving underrepresented communities — are cutting programs and staff and questioning how long they can survive. City Council President Jamie Dunphy called it bluntly “a perfect storm of failure” and said “the entire tax needs to be rethought.”

A path forward

Fixing a program that has drifted from its original promises could involve:

• Folding the tax into Oregon income tax returns or existing city of Portland tax filings, dramatically reducing compliance and administrative overhead.

• Spend down the reserve immediately and responsibly. The $9 million sitting idle could support arts organizations now, when many face financial strain. Establishing a firm reserve cap — the Revenue Division has suggested $3 million — would prevent this from recurring.

• Put teeth in the administrative cost cap.

• Strengthen oversight. The Arts Education and Access Fund Oversight Committee should have meaningful authority. Annual reports should be prominently published, and compliance and cost data should be easily accessible.

Portlanders are more likely to support the tax when they can easily see its impact.

Fix the Machinery

The Arts Tax was born from a sound civic impulse: Protect arts education for children and sustain Portland’s cultural ecosystem. That goal remains broadly shared.

But good intentions do not substitute for good governance. When a $35 tax costs millions to administer and continues to frustrate residents, it is reasonable to ask whether the system can be improved.

Portland prides itself on both creativity and competence. The arts deserve both.