Multnomah County is contemplating major changes to the tax that funds its tuition-free preschool program.
The Board of Commissioners held the first in a series of meetings on Preschool for All Wednesday, with officials outlining the potential impacts of pegging the tax to inflation and offering tax credits to some of the high-income earners paying it.
“Today was really about kicking off this month-long process,” County Economist Jeff Renfro told The Oregonian/OregonLive.
This is the first step toward the county potentially approving a series of changes to the controversial program, which came under fire from state lawmakers and Gov. Tina Kotek in June and was most recently plunged into controversy after its former director was tied to a preschool flagged for wasteful spending of state funds.
Commissioners are first weighing whether to index the tax to inflation, making it so the threshold at which the tax kicks in is adjusted for cost of living increases. Under current rules, which voters passed in 2020, individuals pay 1.5% on any income earned 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.
As an example, if the tax were to be indexed next year with inflation at 2.5%, the new threshold for single filers would be $128,125. Commissioner Julia Brim-Edwards called on the county to adjust the tax last year, arguing that it isn’t fair to the taxpayers whose income rises solely to keep up with inflation.
The program, flush with cash thanks to higher-than-anticipated tax collections in its first three years, has been highly scrutinized for its underspending and slow rollout of new preschool seats. Despite its over $400 million in reserves, rough forecasts show the county program could run out of money by the 2034 fiscal year. But Renfro emphasized that forecasting out that far can be unreliable.
“It is something to be aware of and keep an eye on, but it’s not something we should be overreacting to now,” Renfro said. “When I come back and update the forecast again next time, some pretty minor adjustments could push that line back above zero.”
Indexing the tax to inflation could drain funds up to two years sooner, county forecasts show. Renfro said it would likely require the county to make changes to program.
Officials did not discuss what changes to the program, which aims to offer tuition-free preschool seats to 11,000 3- and 4-year-olds from families of all income levels by 2030, might look like to accommodate the tax adjustment. Board members were promised a more robust presentation on options later this month. Commissioner Shannon Singleton said in the board briefing that she couldn’t vote on a change for the tax until the impact is more clear.
“We’ve got to tie this back to the program and until we’re able to do that, I’m not going to be able to make a decision on any tax changes,” Singleton said.
As part of the initiative, the county convened an advisory group to monitor the program and recommend changes. In its third meeting Monday, the seven-member body did not decide on whether to move forward with recommendations to index the tax, with some members hesitant to make a choice without knowing the impacts.
Brim-Edwards said she would be adjusting her proposal for indexing so that the increased thresholds for paying the tax would accrue to benefit top filers. She also pitched a tax credit that would apply to families who pay the tax and apply for a Preschool for All seat but do not get in.
Singleton proposed a separate tax credit for people who pay the tax but don’t live in the county. That credit would kick in for people who have a 3- or 4-year old but can’t tap into the program because they don’t live within county limits.
Any changes to the Preschool for All tax need to be approved this month if they’re going to apply to the 2026 tax year, officials said.
The process comes after Kotek in June slammed the preschool initiative for underspending and low enrollment and called on the county to change the tax that funds it. She said the high taxes could be pushing high-income earners out of the county, jeopardizing Portland’s economic recovery. State lawmakers also lambasted the program, and at one point threatened to end it completely.
Preschool for All supporters came out in droves to defend the program they argue is benefitting the county both socially and economically. Thousands of people sent letters and emails to Kotek and legislators telling them to end their assault on the program.
Complicating things further, Preschool for All Director Leslee Barnes resigned under a cloud of controversy last week after she was tied to a preschool provider accused of wasting money provided by the state’s Preschool Promise program, which is separate from the county’s. It came after the Secretary of State’s Office released an audit which found that Oregon’s Early Learning Division wasted $1.4 million of Preschool Promise funds. The audit highlighted four Portland programs that had “chronic” underenrollment but nevertheless received hundreds of thousands of dollars between 2021 and 2024.
One of those providers, not shared in the audit report but later identified by Willamette Week, was Village Childcare, which state records show is owned by Barnes.
The county will continue working through changes to the preschool program this month. The advisory committee could bring forward additional recommendations on how to improve Preschool for All in December, officials said.
— Austin De Dios covers county politics, programs and more. Reach him at 503-319-9744, adedios@oregonian.com or @AustinDeDios.
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