Budget Fight Expected in 2017 Legislative Session

Measure 97 has been an expensive, contentious ballot measure and, win or lose, it will generate more contention in the 2017 Oregon legislature that must decide how to spend new tax money or fill the large projected budget hole.

Measure 97 has been an expensive, contentious ballot measure and, win or lose, it will generate more contention in the 2017 Oregon legislature that must decide how to spend new tax money or fill the large projected budget hole.

No matter what happens at the ballot box next week, Salem insiders expect a long and contentious 2017 Oregon legislative session revolving around budget issues. If Measure 97 is approved November 8, the debate will focus on how legislators allocate the expected $6 billion in additional tax revenues. If Measure 97 is defeated, advocates and legislators will struggle with deep budget cuts.

Passage of Measure 97 will mean higher taxes on larger businesses, generating an estimated 30 percent increase in state general fund revenues. The legislature would be politically obliged to spend a big chunk of additional funds on education, healthcare and services for seniors as promised by measure supporters. However, lawmakers are not obligated to do so and legally could spend this new funding in whatever way they deem appropriate.

Citizens can expect fireworks over just how much of the new revenue pie should be dedicated to education, healthcare and services for seniors and how much should be available for other programs. In at least one case, money will have to go to another purpose. 

Because companies such as Chevron would be subject to the Measure 97 gross receipts tax, a portion of their tax revenue would go into the Oregon Highway Trust Fund. The Oregon Constitution requires any tax revenue derived from fuel consumption to be dedicated to road and bridge construction and repair. The Legislative Revenue Office estimates as much as $300 million of Measure 97 revenues fall into this category. The new money for roads may dampen legislative interest in a transportation funding measure that would include transit.

Oregon’s seven public universities would also advocate for a piece of the budget pie. The funds allocated by the state for these institutions has dropped significantly over the past decade, resulting in rapid tuition increases. Slowing those tuition increases will be a key argument for more funding by universities and higher-ed supporters. Other areas that will seek more funding will be public safety and natural resource programs. 

An unspoken claimant for funding is Public Employees Retirement System (PERS) and its climbing unfunded liability. Higher PERS payments, estimated at around $885 million in the coming biennium, will affect most Oregon public agencies, putting pressure on existing programs and personnel levels.

If Measure 97 fails, the session would follow an entirely different and more desperate path. Across the board budget cuts of about 10 percent are expected without the additional revenue generated by Measure 97. The focus will be on where to cut funding and by how much. 

A small group of lawmakers already is looking at more modest Measure 97 alternatives, which could be in play even if the ballot measure passes. The big question would be whether business groups are willing to participate in Measure 97 replacement talks after spending millions to defeat it.