Why Oregon Could Be Staring at a Special Session

House Speaker Tina Kotek and Republican Leader Mike McLane aren’t on the same page when it comes to how to proceed on addressing Oregon’s $1.4 billion budget hole, which could result in Oregon lawmakers spending a chunk of their summer in Salem trying to find consensus.

House Speaker Tina Kotek and Republican Leader Mike McLane aren’t on the same page when it comes to how to proceed on addressing Oregon’s $1.4 billion budget hole, which could result in Oregon lawmakers spending a chunk of their summer in Salem trying to find consensus.

As Washington lawmakers enter their second special session, speculation has begun to build on whether Oregon lawmakers are in store for a similar summer sequestration to plug a $1.4 billion budget hole and pass a transportation funding package.

Oregon lawmakers have roughly six weeks to find a political solution, even as political priorities in the Capitol don’t seem full aligned. House Speaker Tina Kotek wants action first on a revenue package. Legislative Republicans favor moving ahead on cost containment.

The disagreements don’t stop there. Kotek prefers a Corporate Activity Tax, which would replace the corporate income tax, provide a small amount of income tax relief for low and middle-income households and generate a net revenue gain of $2.164 billion. Senate Finance Chair Mark Hass, who started working on a corporate tax alternative last fall after voters soundly defeated Measure 97, is touting a different plan that would net the state just under $1 billion in additional revenue.

Hass’ Senate office saw a flurry of activity last week as Governor Brown, Kotek and Senate President Peter Courtney tried to broker a compromise version of a corporate tax. There is no sign they reached agreement on the plan’s tax provisions and, more important, on how much revenue it would raise in the next biennium.

Meanwhile, Kotek has stopped the flow of major bills, including a provider tax to fund Oregon’s Medicaid program and a transportation funding package, a 300-page piece of legislation that will receive its first public hearing May 31, with public testimony to follow June 5, 7 and 12. A provider tax package is vital to balancing Oregon’s $900 million Medicaid budget deficit and negotiations continue furiously behind closed doors.

Big decisions, especially ones involving votes to raise revenue, often are jammed into the waning days of a legislative session when fatigue sets in and pressure builds inside the Capitol to go home. However, Republicans hold the critical 36th vote in the House and 18th vote in the Senate to approve any revenue measure under Oregon’s constitutional three-fifths majority vote requirement. At the moment, they appear to be locked up pending movement on cost containment.

"My priority right now is budget" and boosting corporate taxes to fund services, Kotek told reporters. "Our goal is to get a long-term solution to our budget problems and tax reform. So any other bill will just have to wait until we get that done.” House Republican Leader Mike McLane responded, “This is Tina Kotek on her own. If that’s what she wants to do, she puts in jeopardy all we’ve working on in a bipartisan fashion so far."

Disagreeing on the order of how bills move is roughly akin to diplomats arguing about the shape of a negotiating table. It may seem trivial to outsiders, but it is the ball game to insiders. Controlling the order of voting is the leverage that Kotek believes will deliver the votes she needs to pass a revenue measure. Withholding GOP votes on a revenue measure is the leverage McLane wants to exert to win spending concessions from Democratic leaders.

The political order and timing of voting has significant ramifications for wrapping up a legislative session. It is hard to finalize state agency budgets when you aren’t sure what numbers to plug into those budgets. There is an inevitable amount of time it takes to prepare the paperwork so budget bills are ready for voting. This reality means Oregon lawmakers don’t actually have six weeks to reach consensus on a revenue-raising and cost containment deal, but more like three weeks if they want to avoid sliding into a summertime special session.

Another complicating factor to consider is the education budget. Lawmakers reportedly will begin negotiating a K-12 budget this week, further destabilizing discussion around budgets in health care and public safety. Those three issue areas make up around 90 percent of state spending, so if legislators finalize an early K-12 budget at historic numbers, it will leave less money on the table for vital human service programs, public safety and other considerations.

As Washington lawmakers have shown, political differences don’t necessarily melt away just because you are in a special session. They spent an additional 30 days in the first special session and wound up in essentially the same place. Now they have until roughly the end of June to solve their political puzzle. Oregon lawmakers have until July 10 to balance the budget or face their own special session purgatory.

At a floor session at the end of last week, Courtney once again voiced pessimism about enough votes to pass a tax measure, a cost containment plan or a transportation bill. Lawmakers will non-refundable summer vacation plans won’t be happy if they are stuck in Salem.

The good news is that a stymied Congress is unlikely to move ahead with a replacement for Obamacare and steep cuts in federal Medicaid funding that would go into effect in time to impact Oregon's 2017-2019 biennium. It doesn’t appear any major tax legislation will move in Congress before the Oregon legislature adjourns, even with a potential special session.