Portland audit on controversial arts tax says the city needs to do better

The Portland Arts Tax was passed by voters in 2012. It requires those 18 or older to pay the city a flat $35 if they make $1,000 or more a year and live in a household above the federal poverty line. Residents pay online or by mail separately from their other taxes. Since it was enacted, the tax has drawn criticism for the collection mechanism and how the funds were distributed to public school districts and large and small arts organizations. As OPB recently reported, the tax has generated a fund of 9 million that has not been spent, even as many local arts organizations lost federal grant funding and are in dire need. Today, the city released a new audit of the tax, with recommendations for improvement. We sit down with Audit Services Director KC Jones to get the details.

Note: The following transcript was transcribed digitally and validated for accuracy, readability and formatting by an OPB volunteer.

Dave Miller: This is Think Out Loud on OPB. I’m Dave Miller. The Portland Arts Tax was passed by voters in 2012. It requires that most Portlanders 18 and over pay a flat $35 a year. The tax has drawn criticism over the years for its collection mechanism, and the relative amounts of money that have been distributed to public schools and to small and large arts organizations.

Today, the city auditor’s office released a new audit of the tax, along with recommendations for improvements. KC Jones is the audit services director for the city auditor’s office. He joins us now. Welcome back to the show.

KC Jones: Thanks, Dave.

Miller: Can you remind us what the promise to voters was when the Arts Tax was on the ballot 13, 14 years ago?

Jones: So in 2012, the ballot asked voters if they should restore arts and music for schools and provide money for the arts. Ballot material said the tax would pay for one arts teacher for every 500 Portland elementary students, and the remaining money would be granted to nonprofit arts organizations and schools to improve arts access for students and underserved communities.

So our objective was to determine if the city has managed the arts access fund that the money goes into, to assure high quality arts education and arts access for students in underserved communities.

Miller: In the big picture, the tax brings in an average of about $11 million a year. In general, what’s the breakdown of where that money goes?

Jones: The year we looked at was fiscal year 2024-25, so $11.9 million came in and an additional $300,000 from investments. First, $2 million of that goes to the city’s revenue division for collection costs. Then $7.8 million of that goes to six Portland area school districts for that high quality arts education. And then after that, $2.1 million goes to the city’s two grants programs managed by the Office of Arts and Culture, the general operating support and the small grants program.

Miller: I was struck by how much of that Arts Tax money stays with the city’s revenue division. As you said, about $12 million was collected; $2 million went toward tax collection and administration costs, 17%. Is that normal?

Jones: That’s something that we didn’t look at as part of this audit. It is something that the revenue division has looked at themselves and actually estimates that they are backfilling with general fund money to cover the overall cost. Like you said up top, a lot of people qualify to pay this, it’s collected differently from any other tax.

Miller: It’s completely separate from our income taxes.

Jones: So you can imagine collection for that is more complicated.

Miller: Let’s turn to the schools piece of this. You note in the audit that according to the city’s Office of Arts and Culture, there were 31 full-time equivalent arts teacher positions in Portland area schools before the tax and 111 two years ago – a huge increase. Is that directly attributable to this tax?

Jones: That is managed by the districts. We did note that the Arts Tax has expanded arts education and support for arts organizations that wasn’t there before. How that is managed on the other side is largely up to districts. We focused on the things that the city could control and found a couple of areas where they could improve.

Miller: The city entered into agreements with school districts saying that the districts had to provide “high quality arts education,” but you note that “high quality” is not defined. So what are the repercussions of that?

Jones: So that means that arts education is different for students, depending on their school and district, in terms of hours, what they may be doing. And that may be fine for culturally specific reasons, all sorts of things like that. But the city can’t assess if this wide range or difference is a problem, or otherwise effectively monitor arts education supported by the fund, because it didn’t set metrics or goals for what high quality arts education means or looks like. It could look like a variety of different things, but not until 2024 did they start a pilot to set up a framework for what that would look like.

Miller: So right now, the city is working to establish goals and metrics for what high quality education even means. What is that going to entail?

Jones: They worked with Portland State on some metrics for what that could be. Those metrics would be reported back to the city. Like we note later on, there are various oversight and monitoring responsibilities within the city that also need to get better defined. We are hopeful that the areas that need to be further clarified or defined can be shared back with the city in a way that lets people know where their arts tax money is going.

Miller: There’s a really big variation that you found in how many minutes of instructional time in arts students in the various Portland area school districts get, what the teacher-to-student ratios are, the types of classes offered. If the goal is for this to be standardized, I’m wondering how prescriptive the requirements at the city level would have to be?

Jones: Sure. We’re not experts in what a high-quality arts education would look like, so we didn’t want to dictate what that would be. Luckily, the city has worked with experts. Portland State has folks on staff in the Office of Arts and Culture steeped in arts education. And then there’s district folks who also have expertise in that area. So like I said, we want to account for those differences. But the wide variation that we saw kind of indicated some common themes, or maybe maximums, minimums in certain areas would be helpful.

Miller: The city made a commitment to voters to improve arts access for students and underserved communities, but you say the city has not ensured that its grants do that. Why not?

Jones: The city administers two grant programs from that second level of money that I mentioned. So the general operating support goes to certain arts organizations, generally with larger budgets that meet a set of qualifications. There is no requirement right now that they provide access for underserved communities …

Miller: Even though that was what voters said … that the money that wasn’t going to schools would go to arts education or arts to serve underserved communities. You’re saying that in city code right now, that’s actually not required.

Jones: Correct. It is specified in the small grants that come after that, that are more project-based, and it’s a smaller chunk of money. Further, underserved communities in terms of arts access is not defined anywhere.

Miller: Can the city prioritize underserved communities right now without running afoul of the Trump administration?

Jones: The city had done quite a bit of work on an overall arts strategy and that work paused when the mayor issued an executive order in response to the federal administration. So my understanding is that they’re working on what they can and can’t do in that area. In a lot of areas across the city, disparity studies are necessary. So like I said, defining what underserved means in terms of arts access is something that they have to take a look at.

Miller: What do you see as the overall deficiencies in the oversight of money from the Arts Tax that is going to districts and to grantees?

Jones: Lack of definition. There are different divisions, bureaus within the city that have responsibilities for different aspects of the program, and those responsibilities around oversight and reporting are not as detailed. We’re in a period where we’re consolidating better communication, bureaus working better together, so we had some recommendations there. And then the city has a dedicated oversight committee for the Arts Tax, these are volunteers. We saw a kind of flowing from all the other areas that we identified: a need for better clarity, definitions of information, a need for defining their role, and what should be reported to them and how they can report out. And also what independence, support and authority looks like for them.

Miller: What stands out to you in the response from the city administrator?

Jones: The biggest thing is, I think, the highlight about sustainability. The issues that jump out to people with the Arts Tax is we want money available for the aspect of this that matters to us. Fixing something at $35 that’s not indexed, while all of the costs associated with teacher salaries, any arts program or organization, rises with inflation.

Miller: Meaning, it’s $35, it has been that way for 14 years, but the costs, payroll, PERS, everything has gone up, right?

Jones: Right. So the city administrator highlighted kind of before they got into any of the recommendations, we have a sustainability issue here. And the way I described the money going out, those smaller arts organizations are at the very end. So I think we’re hearing from them the most first.

Miller: KC Jones, thanks very much.

Jones: Thank you.

Miller: KC Jones is Portland’s audit services director. He joined us to talk about the new audit of the Portland Arts Tax.

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