Medicaid Bill Clears; Tax and Transportation Bills in Limbo

Oregon lawmakers have passed a Medicaid funding measure, but appear stuck on a corporate tax increase and a transportation funding package with only three weeks left before the deadline to adjourn. Things are starting to get wild in Salem.

Oregon lawmakers have passed a Medicaid funding measure, but appear stuck on a corporate tax increase and a transportation funding package with only three weeks left before the deadline to adjourn. Things are starting to get wild in Salem.

Oregon lawmakers have cleared a bill to raise $550 million to prevent cuts in the state’s Medicaid program, but have no clear path on a corporation tax increase or funding for a major transportation package. Time is running out as the legislature faces a July 10 deadline to adjourn.

The House and Senate approved legislation that increases an existing hospital tax and adds a new tax to health insurance plans to pay for Oregon’s Medicaid program that covers more than 1 million Oregonians, 40 percent of them children from low-income households. Reduced federal funding for Medicaid was a contributing factor to Oregon’s projected $1.4 billion hole in the 2017-2019 biennium, which begins July 1.

House passage of the Medicaid funding measure came after Democrats defeated a Republican alternative with a smaller tax increase that would have funded the program for one year at current spending levels, but allow time to confirm the eligibility of Medicaid enrollees before funding the second year of the biennium.

After some backroom negotiations, Rep. Sal Esquivel, R-Medford, provided the necessary 36th House vote for a three-fifths supermajority to pass the Democratic Medicaid funding measure in the House. The Senate voted for the Medicaid funding bill by a 20-10 margin.

Lack of consensus on a general revenue increase sparked a variety of actions so far this week:

  • House Democrats voted along party lines to stall a vote on an $8.2 billion K-12 school budget until June 27. The Senate has already approved the public school budget, but House Democratic leaders believe delaying a vote in the lower chamber could be leverage to swing a deal on a revenue measure. One House Democrat called the maneuver a “Hail Mary pass."
  • The Oregon Education Association took the first steps to place two corporate tax measures on the November 2018 ballot that would seek to generate $1.75 billion annually for K-12 and higher education. One measure would impose a corporate gross receipts tax. The second measure would make it easier for the legislature to raise corporate taxes to pay for education.
  • The joint committee looking at a revenue measure entertained a passel of amendments to a compromise reached by Senator Mark Hass and Speaker Tina Kotek to raise $900 million in the next biennium. The compromise would initially increase the current corporate income tax rate, then phase in a commercial activities tax based on sales in Oregon, which would function like a gross receipts tax, but contains different rates for different kinds and sizes of corporations. At least one House Republican has signaled his potential support for this approach – if it can pass in the Senate. For now, Senate Republicans are reportedly locked up in opposition.

Frustrated by inaction on the joint committee’s bill, House Revenue Chair Phil Barnhart, presumably with Kotek’s approval, said he will pursue a separate revenue-raising bill, possibly one that makes it harder to qualify for lower rates on pass-through income. Even though this measure would generate only $200 million – far less than the $900 million in the compromise corporate tax bill, it has the procedural advantage of requiring only a simple majority, not a three-fifths majority to pass. House Democrats may force a floor vote on a larger corporate tax hike before the postponed voting next week on the K-12 school budget to put Republicans on the record. If it fails, they then can pass the smaller measure.

Also looming in the legislative bill stack is a cost-saving measure estimated to trim the projected budget deficit by $270 million.