by Gov. Tina Kotek slammed Multnomah County’s Preschool for All tax earlier this month, raising concerns that the burden it places on high-income earners may be prompting them to leave the Portland area.
In a letter dated June 10, Kotek told county Chair Jessica Vega Pederson that she was concerned the preschool tax “is not responsive to the economic realities of 2025.” In the letter, first reported by Willamette Week , Kotek suggested reducing the tax rate to ease the burden on wealthy residents, or even pausing it until the county finds a more sustainable solution.
Kotek said if changes aren’t made quickly, it could hurt the economic recovery of Oregon’s most populous county.
“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,” she wrote.
The program, approved by voters in 2020, aims to create 11,000 tuition-free preschool seats by 2030. Individuals pay 1.5% on any income they make over $125,000. That same rate applies to any income couples make over $200,000. That tax rate jumps to 3% on income over $250,000 for individuals and over $400,000 for joint filers.
Multnomah County’s high income earners have the second-highest top income tax rate in the country at 13.9%, Kotek wrote. She said she was troubled by a Portland report that found the city had shed more than 1,700 tax filers since 2021. The letter also said that county data showed a nearly $55 million decline in collected revenue from top taxpayers between 2021 and 2024.
In a response to the governor sent Wednesday, Vega Pederson said she was receptive to Kotek’s suggestions and that the county Board of Commissioners is actively working on indexing the tax to inflation. But Vega Pederson defended the program, which she championed and pushed to bring to the ballot.
“One thing we know for Multnomah County is that Preschool for All is working,” she wrote.
Vega Pederson said Kotek was using outdated data for the number of Preschool for All tax filers in the 2023 tax year. The county pulled updated data in May, she said, that actually showed a 5,429-filer increase from 2021 to 2023. She said the change was caused by a lag in tax payments.
Vega Pederson also said the decline in revenue between 2021 and 2024 was expected due to uncharacteristically high collections during the pandemic years in 2020 and 2021.
“The county’s financial assumptions always assumed that this level of collections was anomalous and that collections would decline to a more sustainable level,” she wrote.
Kotek called on the county to clarify the financial needs of the program “to achieve the original goals,” reduce the tax rate or pause the tax for three years and instead focus on maintaining the existing preschool seats.
She thanked the county for “rising to the occasion” to serve families through Preschool for All. But she pointed out that there are competing programs, like the state’s Preschool Promise, that overlap with the county’s work. Kotek suggested that the county partner with the state to merge the initiatives and find a solution to offer tuition-free preschool options statewide.
Vega Pederson said she was open to the idea, but added that she’s not convinced the state has the funding or resources to pull it off.
“I also appreciate your suggestion of working on a statewide program that would align with (Preschool for All),” Vega Pederson wrote. “But I am worried about the likelihood of this as well.”
The county has a task force to monitor the program’s taxing methods and deliver recommendations. The group was originally asked to produce a report on whether the preschool program needs a tax increase or modification by 2026, but the county board voted in September to push that deadline to 2027.
Kotek slammed that delay, saying the group needs to move forward with recommendations immediately and that it is working too slowly.
“I do not believe the (Technical Advisory Group’s) timeline meets the urgency of the moment,” Kotek wrote.
Multnomah County has routinely raked in more cash than expected for the preschool program. In its first three years, it brought in $213 million more in tax revenue than planned while also underspending its revenue by $67 million, according to a report from the county’s auditor. The program also aimed to have a higher number of spots available in the program, but it lowered those expectations in 2022 due to COVID-19 complications.
Preschool for All currently has roughly $480 million on hand, according to county Economist Jeff Renfro. Kotek pointed out that the program’s operating costs for the 2025 fiscal year were just over $106 million. That is largely by design, officials have said. The county intended to save surplus funds early on to account for instability in the future and it plans to spend down all its dollars, Renfro said.
Board members have criticized the burden Preschool for All puts on the county’s top-earners at meetings in the past. The commission agreed to delay a 0.8% tax increase in September, at the behest of Kotek. Commissioner Julia Brim-Edwards pushed the board to raise the income thresholds that determine who owes the tax in step with inflation – a method called indexing. But she did not secure enough votes to make the change.
Vega Pederson said the county is working to finalize revisions to the tax “in the coming weeks,” with public work sessions scheduled for July and August.
“In initial conversations with my colleagues, I am confident that the board can identify consensus around possible next steps to index the income threshold,” she wrote.
Kotek applauded the program for the projected 3,800 seats it plans to open next year, but said she’s “concerned the scope of the program has grown beyond what was proposed in the ballot measure.” Those changes, she wrote, are making the program’s costs unsustainable. Kotek pointed out that the county now offers full-day 10-hour slots to county residents regardless of income, and said the original ballot measure only called for full-day seats for low-income families.
The governor said her concerns are not solely with the preschool program, and that she is talking with the Metro regional government about changes to the homeless services tax Multnomah, Washington and Clackamas county residents pay to curtail homelessness.
Kotek is not the only state official scrutinizing Preschool for All. In a Senate committee meeting on finance and revenue Wednesday, legislators voiced similar concerns about the high tax rates and “duplication of efforts” to deliver tuition-free preschool.
“What happens in Multnomah County, what happens in the city of Portland most certainly impacts the whole state,” said Sen. Kathleen Taylor, D-Portland. “There’s just a lot of questions about some of the taxations that are occurring. I want to make certain that we have affordable child care to those who need it the most available throughout the whole state.”
— Austin De Dios covers Multnomah County politics, programs and more. Reach him at 503-319-9744, adedios@oregonian.com or @AustinDeDios.
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