Call it a glitch, a snafu, a state legislative oversight or a governmental error, but the buck stops with Wallowa County Education Service District Superintendent Ed Jensen (and his counterpart in Grant County) who will be left with nearly $1.4 million in tax revenue with no legal means of spending it.

The Oregon Legislature, before it closed its marathon session of 2003, eliminated state equalization in Oregon, but gave no direction on the assessment of tax money raised by ESD districts.

Only Wallowa and Grant counties from among Oregon's 36 counties are taxed through ESDs with the money passed through to the various school districts within the two counties. In the other 34 counties local school districts assess their own taxes.

Jensen's dilemma is that the state dictates how much tax he is required to assess, and now they have eliminated his mechanism for distributing the money. The state has decided to fund schools through the state school fund and equalization was effectively eliminated July 1, 2003. Yet the taxing mechanism remains in place for the two ESD counties and neither Jensen nor his counterpart from Grant County have the authority to change the law.

"I thought about not telling the state about this situation," said Jensen facetiously to his ESD board at a recent meeting, "But I don't like to look through bars."

ESD auditor Jeff Edison of Edison & Co. PC in Enterprise suggested to the local administrator that he create a special fund and hold the money until the state determines what he should do with it.

A representative from state government first recommended that Jensen pass the money along to the local school districts via the 90-10 rule. After hearing objections from the ESD boss that the state would eventually demand an accounting from the schools and want the money back, he suggested that Jensen consult with an attorney.

Jensen has since hired an attorney from Portland to help find direction. He doesn't knows whether that direction will come from the Department of Education, Attorney General's Office or Administrative Services.

The 90-10 rule is a formula used by the ESD to distribute pass through dollars. Ninety percent of the revenue raised is spent through resolutions initiated by the school districts and 10 percent for programs initiated by the ESD.

Jensen told his board that the superintendents from the Joseph, Wallowa and Enterprise school districts have been apprised of the situation and agree with his conclusion that the money should not be passed through to their districts.

Though admittedly strapped for dollars with the budgetary problems witnessed throughout Oregon, and in need of additional funds, the fear that the state would come back later to demand repayment would offset any benefits.

Wallowa County Treasurer Ernestine Kilgore, who sits on the ESD board, said that the school districts would realistically be unable to pay back large sums of money because of Measure 5 which limits any increase in annual property taxes to 3 percent.

So Jensen finds himself in a catch-22.

"By law I am supposed to distribute that money when it comes in," he said. "But I don't know how to distribute it so that the schools will not have to pay it back."

As suggested by the state, he has hired an attorney.

Rocky Wilson is a reporter for the Wallowa County Chieftain based in Enterprise.

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