Cliff Bentz

A Challenge and a Legacy Lie Ahead for Legislative Democrats

Oregon’s Democratically controlled 2019 legislature will have its work cut out for it with a $2 billion revenue challenge for education, an $800 million hole to patch for Medicaid and passage of legacy legislation to curb greenhouse gas emissions through a cap-and-trade program.

Oregon’s Democratically controlled 2019 legislature will have its work cut out for it with a $2 billion revenue challenge for education, an $800 million hole to patch for Medicaid and passage of legacy legislation to curb greenhouse gas emissions through a cap-and-trade program.

The Democratically controlled 2019 Oregon legislative session will address a “once in a generation” challenge to boost education funding by $2 billion and a potential legacy-making bill dealing with climate change.

Expectations are high heading into the session, which begins in January. Neither will be a cake-walk to achieve, despite Democratic supermajorities in the House and Senate.

Some of the complicating factors are:

  • Oregon lawmakers also have to find more than $800 million to sustain the state’s Medicaid program.

  • The Public Employees Retirement System unfunded liability is expected to grow by possibly as much as $4 billion, with no strategy in place to reduce it.

  • There are signs the US economic recovery is facing headwinds caused by an escalating global trade war, political unrest in Europe and a weakening economy in China.

Passing major tax legislation – and avoiding a referral to voters – is never easy, whether for schools or cleaning up the environment. For example, despite polls showing general support for climate legislation, Washington state voters have twice rejected carbon tax proposals. Oregon’s approach, which involves capping greenhouse gas emissions and allowing carbon trading in a state or regional marketplace, is different, but will still be cast by opponents as a tax.

Governor Brown has called her $2 billion challenge for education an opportunity that lawmakers can’t pass up because of the state’s robust economy and the needed Democratic votes in the House and Senate to approve tax bills. Brown also has called the Clean Energy Jobs bill “absolutely a legacy issue.”

Senate President Peter Courtney has endorsed the legacy label for the Clean Energy Jobs bill. "As a 75-year older person – you know I'm going to go to the children and grandchildren – I cannot think of a more serious issue," he said.

While it might be legacy legislation, it also has been introduced and failed to pass in the previous two legislative sessions. Part of the reason is its inherent complexity. Ted Sickinger filed a report for The Oregonian that outlined some of the complexity, which includes exactly what emissions will be capped and what emissions will be exempted.

In the 2019 session, advocates for the Clean Energy Jobs bill have apparently cut a deal with utilities that say their ratepayers are already footing the bill for greenhouse gas emission reductions baked into their future energy plans. Even that compromise isn’t without some debate over whether the utility plans should accelerate emission reductions. Timber and agriculture also may be exempted.

Another complicating factor is “leakage,” which boils down to manufacturing operations relocating to another state to avoid the cost of a cap-and-trade system. Republican Senator Cliff Bentz points to Ore-Ida Foods in Ontario. "I do not want to drive it 150 yards away into Idaho," Sickinger reported. "It will be devastating."

A report unveiled last week confirms Bentz’s fear that the potential for leakage in the manufacturing and industrial sectors is substantial, which if it happened to any degree would throw shade on the legacy of the legislation. “It would also eliminate a big chunk of allowance revenue [advocacy] groups are expecting to reinvest in carbon reduction and climate change adaptation programs,” Sickinger said. 

Rural interests have expressed concern that the increased price of fuel for cars and trucks will disproportionately hurt them at the pump. Then there is a constitutional question about whether any tax revenue collected from cars and trucks can escape the Oregon Highway Trust Fund. In anticipation of that question, Senator Michael Dembrow wants to include a provision to fast-track a challenge to the Oregon Supreme Court.

There is the need to put the program, if created, some place in the state bureaucracy. In her recommended 2019-2021 budget, Brown calls for elimination of the Department of Energy. She proposed creation of a new agency – the Oregon Climate Authority, which would assume the role of the existing Oregon Global Warming Commission. Creating a new agency and identifying who will sit on its advisory board can produce legendary backroom legacies.

Finally, in a system that involves carbon credits, you need a marketplace to trade them. Backers of the legislation and some industry groups favor linking the Oregon cap-and-trade program to the Western Climate Initiative, led by California. Bentz worries Oregon will be like a flea on a dog’s tail without much influence on the direction of the marketplace. 

Neither the $2 billion education challenge or the Clean Energy Jobs bill figure to be among the early bills to move in the 2019 session. Their destiny inevitably will be as part of 11th-hour legislative maneuvers to clear a path to adjournment, probably sometime next July. That’s often how legacies are born.



Steady Recovery Shadowed by Steady Decline

Oregon's economy continues its steady improvement, but rural economic fortunes reveal a steady, continuing decline as young workers head to the city to find good-paying jobs.The latest quarterly Oregon economic report didn't contain any splashy news, but it does reconfirm that many Oregonians, especially in rural areas, continue to slip on the U.S. economic treadmill.

The main message is that overall economic recovery — and the tax revenue it generates — is proceeding at a steady, if slower-than-hoped-for, rate.

The report also showed a steady downward spiral in the economic fortunes of poorer Oregonians and of Oregonians that may be tumbling out of the middle class s a result of the aftershocks of the last recession.

Nowhere is the steady decline more apparent than in rural parts of Oregon, according to state economists Mark McMullen and Josh Lehner. They say younger rural residents who are entering their prime earning years are choosing to move to urban areas to chase their fortunes. That, in turn, the economists explain, could lead to a death spiral for the areas they leave.

Rep. Cliff Bentz, R-Ontario, said the exodus is already underway. He blamed federal and state natural resources policies for squeezing the life out of rural economies and leaving rural wage-earners with "nothing to do."

Jobs Bills in the Mix

In a short legislative session dominated by budget concerns and Governor Kitzhaber's ambitious reform efforts in health care, education and early learning, jobs bills have taken a back seat. But that doesn't mean they won't make it to the finish line.

There are major bills to coordinate the state's economic development activity, create more enterprise zones and reduce temporarily Oregon's capital gains tax rate. And there is legislation to clarify how and when to tax data centers such as Facebook's that were prize catches by previous economic development recruitment.

Here is a quick overview of some of the significant jobs-related legislation in Salem:

House Bill 4040: Drafted by two influential legislators — Reps. Tobias Read, D-Beaverton, and Cliff Bentz, R-Ontario, along with State Treasurer Ted Wheeler, the Oregon Investment Act seeks to align state economic development programs and incentives to make them more inviting to private sector companies. The measure has passed out of the House Transportation Committee, so remains alive.

Read, Bentz and Wheeler co-authored an op-ed in The Oregonian explaining their intentions:

"Oregon spends significant Oregon Lottery profits and other funds today to enhance business development. Yet those tools are scattered across multiple agencies and have little strategic connection, and sometimes have little accountability to measure results.