PERS reform

Deal Ends Senate Walkout, Lets Student Success Act Pass

After massive demonstrations and a Senate Republican walkout, Governor Brown stepped in to cut a deal that allowed Senate passage of the Student Success Act at the expense of two other high-profile bills – eliminating non-medical exemptions for vaccinations and strengthening gun laws. The deal annoyed some and didn’t produce any Republican votes for the education funding measure. (Photo Credit: AP/Rich Pedroncelli)

After massive demonstrations and a Senate Republican walkout, Governor Brown stepped in to cut a deal that allowed Senate passage of the Student Success Act at the expense of two other high-profile bills – eliminating non-medical exemptions for vaccinations and strengthening gun laws. The deal annoyed some and didn’t produce any Republican votes for the education funding measure. (Photo Credit: AP/Rich Pedroncelli)

The Oregon Senate, on a party-line vote, finally approved the $1 billion per year Student Success Act after Governor Brown negotiated a deal that scuttled high-profile vaccination and gun control legislation.

Senate Republicans ended their walkout that denied Democrats a quorum to conduct business on the Senate floor, delaying the approval of the education funding measure that was a top priority for the 2019 legislative session. But it wasn’t the only top priority and Democratic champions of the sacrificed measures expressed anger and frustration publicly. 

Republicans weren’t celebrating a victory. House Democrats were irate. Democratic Senator Betsy Johnson, the 18th vote to ensure passage of the Student Success Act, declared her vote was conditioned on leadership promises to approve substantial PERS reform legislation. If PERS reform legislation doesn’t pass, Johnson vowed to support and campaign for a voter referral of the business tax that will pay for Student Success education investments.

The deal reportedly only scuttles the vaccination and gun control bills for this session. They are expected to return – and most likely pass – in the 2020 legislative session, which begs the question of what was actually won and lost as a result of the deal.

The Student Success Act was destined to pass, despite the Republican walkout, as even GOP senators conceded. Senators couldn’t remain absent for the rest of the session. Senate Democratic leaders could have outlasted the walkout. They might have won public sympathy by ordering the State Police to round up at least two senators to reach a quorum, an action that was seriously considered.

Commanding the State Police to corral senators would have required permission of Governor Brown. She had other ideas and took the lead on Sunday evening to cut the deal that ended the walkout and put a stake into the vaccination and gun control bills. Democratic lawmakers weren’t active participants in the negotiations, based on their reactions in media interviews.

Speculation in Salem is that a robust quarterly economic forecast due out on Wednesday may have prompted Brown’s move to take over the negotiations. Increasing state tax revenues – and a larger personal income tax kicker – may have complicated the narrative around the need for a new tax incorporated in the Student Success Act.

If Senate Republicans couldn’t declare victory with a straight face, the “winner” may have been their tactic. Holding the Senate hostage worked and will likely embolden future legislative minorities to adopt the same hostage-taking tactic. It could even happen this session in the House. 

The “loser” may be legislative leaders who were undercut by a governor brokering a deal. Sometimes lawmakers ask governors to broker deals. But legislative leaders need to retain the ability to work out arrangements across a wider spectrum of legislative issues. This deal short-circuited two bills whose sponsors said their bills had the votes to pass in the Senate.  

Another "loser" may be businesses relying on Senate Republican leadership to protect their interests by stopping the revenue mechanisms contained in HB 3427 and HB 2020's cap and trade bill. Businesses may be upset that Republicans traded away opportunities to reduce the financial impacts from those two bills in an effort to stop social issues like vaccines and guns.

The political maneuvering to pass the Student Success Act this week doesn’t fully eliminate the legislation’s peril if referred to voters. A referral seems likely, even though Oregon Business & Industry, the state’s largest business lobby group, took a neutral position on the tax. Nike, which supported the Student Success Act, has already donated $100,000 to defend it if there is a referral. 

The referral may hinge on the PERS reform legislation, which has just been introduced and may be on a fast track. That legislation would stretch out the unfunded liability, providing some relief in the short term for public employers, but actually increase the liability. The most contentious part of the legislation is requiring public employees to contribute to their own PERS accounts, which could be a hard pill for some legislative Democrats to swallow.

The tax measure represented at least a two-session campaign by Senator Mark Hass to find a way to raise money for public schools while modernizing the state’s corporate tax system. The final version focuses the tax on an estimated 40,000 out of 460,000 businesses operating in Oregon, according to the Legislative Revenue Office. Hass credited Nike tax experts for providing critical assistance to fine-tune the tax proposal. A key compromise was to sequester the projected $1 billion per year in new revenue from going to PERS payments.

 

 

Hass: Boost Student Success and Curb Tax Volatility

Oregon’s economic forecast continues to look rosy, but also a little “bizarre,” according to State Senator Mark Hass, D-Beaverton, because the strong economy contrasts with struggling schools and Oregon’s unique personal income tax kicker law.

Oregon’s economic forecast continues to look rosy, but also a little “bizarre,” according to State Senator Mark Hass, D-Beaverton, because the strong economy contrasts with struggling schools and Oregon’s unique personal income tax kicker law.

Legislative newsletters and press releases can be informational, but not always newsy. The one dispatched today by Senator Mark Hass combines informational and newsy.

Senator Mark Hass, whom the Portland Business Journal referred to as Oregon’s Mr. Fix-It, hopes the work of the Joint Committee on Student Success, a rosy economic forecast and the prospect of returning a half billion dollars to state taxpayers could prompt action on Oregon’s volatile tax system.

Senator Mark Hass, whom the Portland Business Journal referred to as Oregon’s Mr. Fix-It, hopes the work of the Joint Committee on Student Success, a rosy economic forecast and the prospect of returning a half billion dollars to state taxpayers could prompt action on Oregon’s volatile tax system.

The occasion for the communication from Hass, a Beaverton Democrat who chairs the Senate Finance and Revenue Committee, was the release of the latest quarterly Oregon economic forecast.

“I want to update you with my impression of the remarkable economic forecast released today,” Hass wrote. “Most indicators – including jobs, income and gross domestic product (GDP) – are all improving. This suggests Oregon’s booming economy will continue into the foreseeable future.”

A booming economy also means higher-than-projected state tax revenues – quite a bit higher. Hass says state coffers will have $911 million more revenue than was projected in the state’s two-year budget approved during the 2017 Oregon legislative session.

“Because revenues grew faster than what economists estimated, the state will send back $555.3 million to taxpayers due to Oregon's unique ‘Kicker’ law,” Hass said. “So, we have this bizarre confluence of a strong economy, struggling schools and sending back a half billion dollars to taxpayers.”

Hass has tried unsuccessfully to convince his legislative colleagues on both sides of the political aisle to look seriously at ideas to reduce the volatility of Oregon’s income-tax-dominant taxation system and modernize state taxation of corporations. Here’s how he explains the dilemma:

“Oregon's volatile tax code is too reliant on the income tax. In good times when unemployment is low, the state brings in too much revenue and we send it back to the taxpayers. In bad times when people are struggling, Oregon has a train wreck. While today's forecast paints a rosy picture, it is important to remember the big jump in projected revenue is emblematic of Oregon's boom-and-bust revenue cycle.”

This may not be new “news,” but it isn’t information that makes its way into a lot of political discussions these days. When it does, it is usually in the context of calling for more revenue or blaming the Public Employees Retirement System for Oregon’s unsustainable spending.

Hass threads the needle differently. He says fixing Oregon’s “bizarre confluence” of a strong economy, struggling schools and a personal income tax kicker should occur during economic good times, not economic bad times. Warning signs abound, he says. Oregon’s economy is still growing, but the pace of its growth is slowing. The housing affordability crisis is taking its toll on many Oregonians. Personal income taxes make up 80 percent of the state’s General Fund, while corporate taxes contribute 6 percent.

Hass hasn’t given up on some type of tax reform, but is concentrating his efforts leading up to the 2019 legislative session on traveling around Oregon as part of the Joint Committee on Student Success, talking to students and education and business leaders.

“My hope,” Hass wrote, “is that through the work of the Student Success Committee and this economic forecast, we end up mixing new educational policies with structural tax reform for stable, well-funded schools, community colleges and universities.”

PERS Costs To Deal a Heavy Blow to Oregonians

Senate Minority Leader Ted Ferrioli, R-John Day, left, says he and a handful of other lawmakers have proposals in mind to address the climbing cost of unfunded liabilities in Oregon's public employee pension system.  (Denis C. Theriault/The Oreognian/OregonLive)

Senate Minority Leader Ted Ferrioli, R-John Day, left, says he and a handful of other lawmakers have proposals in mind to address the climbing cost of unfunded liabilities in Oregon's public employee pension system. (Denis C. Theriault/The Oreognian/OregonLive)

Oregon’s public worker pension system is in the news again, and this time it’s going to cost us all quite a bit more money.

Lost amid the national hullaballoo over the presidential campaign, we learned that the cost of Oregon’s Public Employee Retirement System (PERS) will climb an extra $885 million in the next biennium. That increase will elevate Oregon’s sum of unfunded liabilities to $22 billion for the next year, leaving lawmakers in an overwhelming bind: Find new revenue to fill the gap or start scaling back public services.

Unfunded PERS liabilities rose to $18 billion last year, and projections from four months ago placed the figure closer to $21 billion. They’ve increased again, largely from a combination of declining pension investment returns, a 2015 Oregon Supreme Court decision restricting pension benefit reductions and the simple fact that pensioners are living longer.

The full gravity of the update began to sink in last Friday when actuaries released new financial projections to the PERS Board.

The situation begs all kinds of big questions: Why isn’t this dilemma a central topic in statewide campaigns this election season? And will political leaders once again try to find PERS reforms in the next session or have they just given up in light of Oregon Supreme Court rulings? 

The biggest problem, though, is that state leaders don’t seem to know how to stop this giant snowball from bounding down the mountain. A spokesman for Governor Kate Brown told The Oregonian editorial board that despite casting a wide net for reforms, state leaders so far have found no solutions that would survive a court challenge. Furthermore, Oregonians cannot afford another year of failed PERS reform attempts, the spokesman said.

“There's no end in sight,” The Oregonian editorial board wrote Tuesday in response to the news. “Contributions by employers – they are required to cover the difference between PERS investment earnings and benefit promises – are expected to go up by 4 percent of payroll in 2017, 2019 and 2021. That puts the employer contribution to the system at $4.5 billion for the 2021-23 biennium, more than twice what it is now, reported Ted Sickinger of The Oregonian/OregonLive.”

With the latest projections, school districts are taking the biggest hit, facing an anticipated $335 million increase in PERS costs. Meanwhile, public agencies will have to carve out $260 million of their own funding to cover the shortfall in PERS payments. Ultimately, the pain will trickle down more directly to taxpayers.

“Oregonians, along with the children they send to school, rightfully expect tax and employer dollars to bear fruit, not burden, and throwing money into an expanding fire is useless,” The Oregonian editorial board wrote. “Unless lawmakers prepare to act in the next legislative session, PERS threatens to undermine the capacity of the state to meet its basic obligations. Fewer school teachers, larger class sizes and the diminution of other critical government services loom.”

Potential revenue for the shortage is quietly tied up with the IP 28/Measure 97 effort to generate a cash influx for Oregon. But of course, the fate of those measures remains up in the air.

Senate Minority Leader Ted Ferrioli, R-John Day, said he and a handful of lawmakers have a list of reform proposals in mind, but Democratic leaders need to be prepared to make difficult cuts. 

“If you want PERS to remain solid, and we do, then you have to trim expectations,” Ferrioli told the editorial board. “We're not messing with anybody's retirement. We need to be prospective about this, look ahead. We can use the court's decision as a template. All it will take is a modicum of interest from the House speaker, the Senate president and the governor."

Unfortunately, no matter where you stand on the issue, the one thing everyone can agree on is that the problem seems to have reached a point where it can no longer go ignored.

Justin Runquist is CFM’s communications counsel. He is a former reporter for The Oregonian, The Columbian and The Spokesman-Review. Away from the office, he’s a baseball fanatic with foolhardy hopes that the Mariners will go to the World Series someday. You can reach Justin at justinr@cfmpdx.com and you can follow him on Twitter at @_JustinRunquist

 

Tax Reform, Affordable Housing Top Readers’ 2016 Policy Priority List

Affordable housing is top of mind for many Oregonians heading into 2016. In September, Mayor Charlie Hales declared Portland had fallen into a housing crisis. The announcement helped set the stage for difficult state-level discussions about how to solve the problem. 

Affordable housing is top of mind for many Oregonians heading into 2016. In September, Mayor Charlie Hales declared Portland had fallen into a housing crisis. The announcement helped set the stage for difficult state-level discussions about how to solve the problem. 

We asked about top 2016 policy priorities, and you answered. The two most mentioned policy priorities were tax reform and affordable housing. A transportation funding plan and changes to the Public Employee Retirement System (PERS) also drew mentions.

As expected, when we asked about leadership, most comments zeroed in on Governor Kate Brown and her role in making needed changes, even as she faces election this November to complete the last two year’s of John Kitzhaber’s term.

Here are some highlights from what you told us.

Tax Reform

Jan Lee, a former state representative from Clackamas County and lobbyist, said it’s again time to explore a sales tax in Oregon. “We need a sales tax with some compensating features to reduce income or property tax a bit so that we have a system that fares better in all economic climes,” Lee says. 

While Oregon’s employment figures have shown strong growth over the past year, incomes have largely remained stagnant. But Lee believes changing the state’s tax system while raising the minimum wage could be enough to spur creation of higher paying jobs across the income spectrum.  

“The legislature can raise the minimum wage; if not one of this fall's ballot measures can achieve that result,” she says. “Maybe instead of some of the other tax credits now made available, there could be more tax breaks that businesses can earn by providing higher paying blue collar and white collar jobs to drive our economy and meet families' needs.”

“As always, close coordination with the Governor's office and open communication between the two party caucuses sets up a better opportunity for leadership to bring people together,” Lee explains. “Consensus is not expected, but achieving a little higher majority on important issues makes the system more workable.”

Tom Wilson, vice president of Campbell & Company, said it’s time to put the clean fuels bill approved during the 2015 Oregon legislative session and a proposed 10-cent per gallon gas tax back on the table. That’s just the start of a series of changes Wilson envisions for Oregon’s tax system, which he says will require top-down leadership.

“Governor Brown needs to lead the charge on this by reminding all the Multnomah County Democrats and Tina (Kotek) that there is actually another part of Oregon that needs to be served,” Wilson says. “Start to fix PERs by requiring members to contribute to their retirement like the rest so do. Do not allow the unions to jam through another tax on corporations.”

Affordable Housing

Four months ago, Mayor Charlie Hales declared a housing crisis in Portland, and news stories continue to surface about Oregonians struggling to keep up with skyrocketing rents and day-to-day housing costs. So, it’s no surprise that affordable housing is top of mind.  

Chris Vetter of  the Vetter Group and Don Mazziotti,  the former head of the Portland Development Commission and now a Portland-based management consultant, listed housing as their primary concern for Oregon in 2016.

“We need more affordable apartments and opportunities for urban professionals,” Vetter says.

Mazziotti says Oregon lawmakers should focus on easing the financial burden on homeowners and renters across the state.  

Jim Standring, president of Tigard-based Westland Industries, took another angle, suggesting lawmakers approach the affordable housing crisis with an eye toward improving Oregon’s land-use laws. 

“Oregon's land use system is totally broken and needs significant change,” Standring says. “Concerns about affordability and homeownership will continue to suffer without these changes.”

We hope you will keep talking to us about the priorities you want addresses in Oregon. We’re listening. 

Justin Runquist is CFM’s communications counsel. He is a former reporter for The Oregonian, The Columbian and The Spokesman-Review. Away from the office, he’s a baseball fanatic with foolhardy hopes that the Mariners will go to the World Series someday. You can reach Justin at justinr@cfmpdx.com and follow him on Twitter at @_JustinRunquist

In Each Other We Trust

Even though Oregon lawmakers are laboring to approve a grand bargain budget deal, legislative leaders such as House GOP Leader Mike McLane and House Speaker Tina Kotek are seeking common ground based on mutual trust, a sharp contrast to gridlock in the nation's capital that has shut down part of the federal government.With the federal government on furlough and Congress in dysfunction, the Oregon legislature is trying to enact a grand bargain in what some hoped would be a one-day special session. That one day came and went without any action, but legislative leaders were meeting to hold together a deal they reached last week.

What's happening in Salem is a sharp contrast to what's not happening in Washington, DC.

As erratic as Oregon’s political process can be from time to time, we are, by comparison, an exemplar of the political process done right. One of the key reasons for Oregon’s success is the ability of Oregon’s leaders to avoid sharing all of their thoughts with the press.

Political Pot Continues to Boil

The September 15 deadline is creeping up for Governor Kitzhaber to decide whether to move forward with a legislative special session to consider further cuts to public employee pensions, business tax cuts and an Oregon-led approach to building a replacement I-5 Columbia River bridge.

The path to all three is littered with political obstacles. One thing is clear, however. If there is a special session, it will be by September 30, the date that Oregon's offer expires to share the state costs on the bridge with Washington.

The Kitzhaber camp isn't saying whether he has lined up the votes for the grand bargain or bridge funding. The pieces may not fall into place – or fall apart – until Treasurer Ted Wheeler releases his financial analysis of the risks involved in Oregon leading the way on replacing the Columbia River bridge. When the Oregon-in-the-lead strategy was unveiled last month, Wheeler questioned whether there was enough time for an analysis before a special session would be called. Now he has until September 15.

Bridge financing is not a new subject for Wheeler, the former Multnomah County chair who pieced together the bucks to replace the aging Sellwood Bridge, which is now under construction. But the timing of the Columbia River bridge financial analysis couldn't have occurred at a stickier time for Wheeler, who might be the odds-on favorite to succeed Kitzhaber as governor if he decides not to seek re-election.

As it turns out, Kitzhaber is fundraising, presumably for his yet-to-be-announced 2014 gubernatorial re-election campaign. The three-term governor also showed his political flag at a Labor Day union function, declaring firm opposition to an initiative that would ban mandatory payments by public employees to public unions. The Oregonian speculated his comments – which caused Oregon AFL-CIO President Tom Chamberlain to quip: 'Damn, Governor, you sounded like the president of the AFL-CIO" – were aimed at politically defusing political opposition caused by his continued support for deeper cuts in public employee pensions.

Finding Budget Happiness

When Governor Kitzhaber returns from his Bhutan sojourn to find the secrets to happiness, he will discover unhappiness engulfs his homeland.

A Democratic plan to raise taxes on wealthy Oregonians and corporations evaporated on the House floor for that pesky constitutional problem of too few votes. Two days later, labor-backed Our Oregon responded by filing six proposed ballot measures to hike corporate taxes from as little as $185 million to as much as $1 billion per year. All that has business groups howling about a reprise of the divisive Measure 66 and 67 tax battles.

The purpose behind raising revenue is to prevent more K-12 school cuts. Nervous about the legislature's ability to boost spending on schools, droves of parents in the beleaguered Beaverton School District took to knocking on doors to drum up votes for a special levy.

The governor stepped back to let rookie House Speaker Tina Kotek, D-Portland, have a go at the $275 million bill, which never even came to a vote. Now it may be time for Kitzhaber to invite legislative leaders to Mahonia Hall to find common ground.

Senate Republican Leader Ted Ferrioli, R-John Day, told reporters the failed House tax vote last week created an opportunity to find solutions in the political center. In his first two years of this term, Kitzhaber was adept at finding bipartisan support for major initiatives, in part because he spent time meeting with both Democrats and Republicans. That same skill set will be called on this session.

In reality, the 2013 Oregon legislative session has not been overly partisan. Going into the session, observers said it would be necessary for Democrats to recruit Republicans to support budget and revenue packages — as well as wise to sustain the bipartisan esprit that developed as a result of the unique power-sharing agreement in the 2011 and 2012 sessions.