Student Success Plan

Student Success Plan, Tax to Pay for It Take Shape

Increased investment in early childhood education is one of the goals of the Student Success Plan that has been rolled out by a joint legislative committee. The rollout also included details on a commercial activities tax that could raise the $2 billion called for in the education plan.

Increased investment in early childhood education is one of the goals of the Student Success Plan that has been rolled out by a joint legislative committee. The rollout also included details on a commercial activities tax that could raise the $2 billion called for in the education plan.

The Joint Committee on School Success rolled out its “Student Success” plan that spells out how $2 billion in new revenue would be invested, where the money would come from and how it won’t be spent.

The leaders of the joint committee, which spent 14 months touring the state and visiting 77 schools, briefed reporters on the major components of their plan. As reported by OPB’s Rob Manning, the spending targets are:

  • $400 million per two-year budget cycle on early childhood priorities, including full funding for Early Childhood Special Education.

  • $600 million per biennium on “statewide investments” such as dropout prevention and supports for students with disabilities.

  • $1 billion per biennium for a “school improvement” fund, described as “non-competitive grants” toward specific goals, such as smaller class sizes, a longer school year and additional health professionals in schools.

The $2 billion they seek would likely come from a commercial activities tax tiered by the size of business earnings. Two options were presented, including one that would allow businesses to deduct labor expenses in exchange for a higher tax rate. Individual income tax rates would be adjusted slightly downward to account for pass-through price increases resulting from the new tax.

Rep. Greg Smith, R-Umatilla, a vice chair of the committee, spoke in favor of the new tax. He speculated other Republicans would join him to boost education funding.

“I think that there are Republicans who want to make strategic investments in education,” Manning quotes Smith as saying. “Once they have the opportunity to see what the revenue package looks like both on the personal income tax side and the commercial activity tax side, I believe there may be votes there.”

Committee leaders politely dismissed the idea that any of the $2 billion would go to higher education, even though Governor Kate Brown has hinted it might. “The goal of this committee’s work has been pre-K to 12 from the start, and that’s because in 1990, when Measure 5 was passed, we had a significant shift in how funding worked,” according to Co-chair Rep. Barbara Smith Warner, D-Portland. 

Committee leaders acknowledged conversations to address the growing unfunded PERS liability, but noted none of the proposed commercial activities tax would go to PERS. 

Many legislative hurdles remain from a briefing to final passage of an ambitious education improvement plan, a new corporate tax and tinkering with personal income tax rates. Those conversations about PERS, which now include former Democratic Governor Ted Kulongoski, cast a long political and fiscal shadow over the plan and new revenue.

Brown has resisted engaging in ways to modify PERS benefits, focusing instead on ways to secure sizable chunks of money to whittle down the unfunded liability, such as the possible sale of SAIF. Kulongoski and former GOP legislator Chris Telfer are the chief sponsors of a pair of initiatives for the 2020 general election ballot that would reduce some public employee retirement benefits and divert some benefits to a 401(k) savings plan.

Tim Nesbitt, a former Oregon AFL-CIO president, says he has received a grant from the Oregon Business Council to form a broad-based coalition in support of the initiatives. Nesbitt said he hopes the prospect of a ballot measure fight will spur action in the 2019 legislative session.

Oregon labor officials have testified the two initiatives would fail to make a dent in the unfunded liability and likely would be declared unconstitutional. They insisted that boosting funding for education shouldn’t be an excuse for cutting benefits for public employees.