Tina Kotek

Political Poker Game Underway on Taxes, PERS and Cap and Trade

Willamette Week’s Nigel Jaquiss reports there is a high-stakes political poker game underway in Salem and Senator Betsy Johnson, who represents the 18th vote for a Senate supermajority, holds the most important cards. [Photo Credit: Willamette Week]

Willamette Week’s Nigel Jaquiss reports there is a high-stakes political poker game underway in Salem and Senator Betsy Johnson, who represents the 18th vote for a Senate supermajority, holds the most important cards. [Photo Credit: Willamette Week]

A billion-dollar boost for education, a new tax on large businesses and a cap-and-trade scheme may all boil down to how one Oregon senator votes, according to Willamette Week’s Nigel Jaquiss.

“Senator Betsy Johnson (D-Scappoose) holds almost all the cards” in a big-stakes political poker game that could determine the fate of the three highest-profile legislative measures in the 2019 Oregon legislative session, Jaquiss writes this week.

A keen-eyed, long-time legislative observer, Jaquiss says Johnson’s position as the critical 18th Democratic vote in the Senate gives her a lot of leverage. A three-fifths supermajority is required to pass tax-raising measures. Johnson also is one of two Senate co-chairs of the Joint Ways and Means Committee, which okays state spending authority. 

Senator Betsy Johnson, D-Scappoose, may be the key vote that determines the 2019 legislative future for the Student Success Act, PERS funding reforms and cap and trade.

Senator Betsy Johnson, D-Scappoose, may be the key vote that determines the 2019 legislative future for the Student Success Act, PERS funding reforms and cap and trade.

In Jaquiss’ telling, Johnson, whom he describes as a “business-friendly Democrat,” is reluctant to bolster education funding with a commercial activities tax without “significant PERS cost cuts.” This roughly parallels the view of Senate Republicans who staged a walkout this week, denying the Senate a quorum to take floor votes, including the vote on education funding bill. The 12 Senate Republicans feel left out of the final compromise on the tax measure, which has already passed the House, and want to slow it down to allow more time to negotiate an agreement on PERS.

Jaquiss says Johnson also isn’t keen on the Clean Energy Jobs bill that sets up a cap-and-trade system, apparently agreeing with opponents that it will result in higher costs for Oregon consumers. It’s little surprise – and probably not a coincidence – that the state’s leading business advocacy group, Oregon Business & Industry, just gave Johnson its first Jobs Champion Award.

As the crucial Senate floor vote for the Student Success package, Johnson could use her leverage on a PERS deal or to scuttle cap and trade, but probably not both, Jaquiss claims. Her decision may be informed by which option has the strongest political legs. 

In his article, Jaquiss says the other power player in this legislative poker game is House Speaker Tina Kotek, D-Portland. She has a comfortable supermajority in the House (the Student Success Act passed by a 37-23 vote) – and gubernatorial aspirations. Wading into a contentious fight over PERS isn’t on the priority list, but she may not be able to avoid it. Kotek may have to do what it takes to smooth the way for Johnson’s vote on education funding. 

The idea floating around Capitol hallways to deal with the large and growing PERS unfunded liability is to require teachers and possibly all public employees to begin contributing to their own retirement funds. Governor Brown, who is term-limited and under pressure to address PERS funding, could accept that, Jaquiss says, but it would be a tougher draw for Kotek who enjoys high level of trust from Oregon unions. 

Keeping with the poker motif, Jaquiss says Senate Republicans see a delay on the education funding bill as a way to call the bluff of Democrats, forcing backstairs conversations into the open and either gain PERS concessions or a death blow to cap and trade.

Senate Republicans can’t hide out forever, so a deal or no-deal should emerge soon. The Student Success Act is a safe bet to pass. Everything else is 50-50.

 

Glimmer of Hope Surfaces on I-5 Bridge Project Restart

A glimmer of hope has appeared that Washington and Oregon may take the first steps to resume work on replacing I-5 Columbia River Bridge by restarting bi-state project office.

A glimmer of hope has appeared that Washington and Oregon may take the first steps to resume work on replacing I-5 Columbia River Bridge by restarting bi-state project office.

Someday, the I-5 Columbia River Bridge will be replaced. And Washington State hopes that someday is sooner rather than later.

The Washington Legislature generated some fresh enthusiasm when it included $450 million in a proposed transportation investment package to cover the state’s projected share of the cost to replace the bridge. Plus, Washington Governor Jay Inslee included $17.5 million to re-open a project office in his proposed 2019-2020 transportation budget.

The Southwest Washington legislative delegation has tried to stoke the appropriations fires and managed to make the bridge replacement that state’s number one priority in the propose transportation investment package that passed out of the Washington Senate Transportation Committee. However, with a portion of funding for such a packaged tied to creating a carbon fee in Washington, building the necessary support to pass it this year looks more like embers than sparks.

Washington looks poised to retain at least $8.5 million for a project office. While less than early-session expectations, opening a project office would begin laying the groundwork for replacing the bridge. Washington’s Department of Transportation, along with its Oregon counterpart, local cities and community partners, would start re-evaluating permits and design, develop a fresh budget and re-engage with stakeholders on both sides of the river.

Light rail, the bogeyman that helped sink a bi-state deal several years ago, remains a lightning rod. In his budget proposal, Inslee included a light rail provision, even though regional advocates encouraged calling for “mass transit“ to allow for further evaluation. Any mention of light rail has disappeared.

Meanwhile, Oregon, the putative partner in a bridge replacement deal, has been more or less quiet. There have been back-channel conversations between Olympia and Salem, but no real commitments. Majority Democrats in Salem are consumed with a cap-and-trade proposal and quest to raise $2 billion in new revenue for public education. A major transportation funding package is not anywhere near the adult table.

Oregon House Speaker Tina Kotek remains the most ardent advocate for replacing the bridge, which is part of her North Portland legislative district. She probably has support in the office of Oregon Governor Kate Brown and a good chunk of lawmakers. But without a strong, definitive move by Washington officials there is little reason to start beating the drums in Salem. That definitive move appears to be on the horizon.

 

Brown, Democrats Ride Strong Wave of Voter Turnout

Oregon Governor Kate Brown overcame a trail of administrative miscues and an aggressive campaign by challenger Knute Buehler to win re-election to a full four-year term. High voter turnout also swept out three Republican House incumbents and gave Democrats supermajorities in both the House and Senate. [Photo Credit: Steve Dykes, AP]

Oregon Governor Kate Brown overcame a trail of administrative miscues and an aggressive campaign by challenger Knute Buehler to win re-election to a full four-year term. High voter turnout also swept out three Republican House incumbents and gave Democrats supermajorities in both the House and Senate. [Photo Credit: Steve Dykes, AP]

Governor Kate Brown turned back a spirited challenge from Republican Knute Buehler and Democrats earned super-majorities in both the Oregon House and Senate by unseating three sitting House GOP members.

Oregonians rejected ballot measures to end the state’s sanctuary status, ban public funding for abortions and block taxation on groceries. Voters approved a measure to allow local governments to use public money with private developers to build affordable housing. In Washington, voters defeated a carbon tax proposal.

In key local races, Kathryn Harrington won as Washington County Chair and Jo Ann Hardesty glided to victory on the Portland City Commission, becoming the first African-American woman to sit on the commission. Oregon City Mayor Dan Holladay won re-election. A majority of local ballot measures passed. A full list of election results can be found here

The Brown-Buehler contest set campaign spending records in Oregon and may be the spark for campaign finance reform in the 2019 legislative session. Despite running an effective campaign, Buehler’s loss further dented the notion that a moderate Republican could defeat a Democrat in a race for governor in Oregon.

There may not have been a blue wave throughout the nation, but strong turnout by Democratic voters contributed to the defeats of incumbent GOP Reps. Julie Parrish (West Linn), Rich Vial (Sherwood) and Jeff Helfrich (Hood River). House Democrats increased their margin of control to 38-22, up from their 35-25 margin in the previous session. It takes 36 votes to reach a House supermajority required to pass revenue-raising measures.

Democrats managed to flip one seat in the Senate where Jeff Golden prevailed in a seat held last session by GOP Senator Alan DeBoer who didn’t seek re-election. That one seat was enough to give Democrats a Senate supermajority of 18-12.

No changes are anticipated in Democratic leadership. Senate President Peter Courtney easily won re-election to a sixth term and has led the Senate since the 2003 session. Speaker Tina Kotek was elected to the Oregon House in 2006 and became Speaker in the 2013 legislative session.

Brown’s seemingly comfortable 5-point lead over Buehler didn’t necessarily reflect the bruising intensity of the gubernatorial campaign and the closeness of the contest, which drew national attention because the race was unexpectedly tight. The race also attracted gobs of out-of-state money as Brown and Buehler combined to spend a record $30 million.

In her post-election comments, Brown said her priorities in the next legislative session will be campaign finance reform, affordable housing and boosting Oregon’s low high school graduation rate, something Buehler poked at during the campaign. During her campaign, Brown announced a plan to incorporate federal clean air and clean water protections into Oregon law.

Other issues that will demand attention in the upcoming session include how to keep paying for Oregon’s Medicaid program, bolstering community mental health resources and improving child welfare programs.

There will be continuing pressure to address the unfunded liability of the Oregon Public Employees Retirement System and realign the state’s corporate tax system. It is unlikely remnants of the culture wars – immigration, abortion, transgender rights – will rear their heads in the legislature during the next two years.

A well-coordinated campaign apparatus consisting of labor, environment and progressive groups contributed to Brown’s re-election and the defeat of several ballot measures. Congresswoman Nancy Pelosi, expected to return as Speaker of the US House, credited a similar coordinated effort with the discipline and financing to regain control of the House and win governorships across the country, including in Trump country. 

Washington Initiative 1631, dubbed the Green New Deal, lost after large industrial corporations poured $31 million into a campaign to defeat it. If passed, I-1631 would have imposed a new carbon fee to fund conservation projects, renewable energy farms and struggling communities. The measure was endorsed by Governor Jay Inslee who called it “well-balanced, thoughtful policy.”

 

 

Vancouver Acts to Relaunch Effort to Replace I-5 Bridge

Untimely bridge lifts delay and irritate motorists and freight haulers crossing the Columbia River on I-5. The City of Vancouver has stepped forward with a resolution seeking to restart a conversation to replace the bridge.

Untimely bridge lifts delay and irritate motorists and freight haulers crossing the Columbia River on I-5. The City of Vancouver has stepped forward with a resolution seeking to restart a conversation to replace the bridge.

Traffic and backups on I-5 haven’t abated and untimely Columbia River bridge lifts continue to slow and frustrate commuters, shippers and motorists just trying to get through. An effort to resume discussions of a new bridge is beginning to take shape.

The Vancouver City Council voted unanimously this week in support of replacing the I-5 Columbia River bridge. The Council resolution also asked Governor Jay Inslee to “provide adequate funding” for the Washington Department of Transportation to relaunch the process that came to a sudden stop in 2015 after Washington lawmakers refused to commit their share of costs and Oregon officials pulled the plug.

Other Southwest Washington municipalities may follow suit, with the goal of creating momentum that brings – or drags – Oregon policymakers back to the table.

That may be more complicated as Oregon transportation officials are finishing up recommendations to toll some or all of I-5 and I-205. The purpose of the tolling is to reduce congestion. Revenue raised from tolls would go to Oregon roadway investments, not a new I-5 Columbia River bridge.

Washington Congresswoman Jaime Herrera Beutler has threatened to block Oregon Interstate highway tolls because of what she views as their disproportionate impact on her constituents.

If bridge talks do restart, the extension of light rail to Vancouver may remain a sticking point. Attitudes north of the river may have changed, but a transit component may be a precondition for Oregon officials to re-engage.

The Vancouver resolution addresses this challenge by seeking a bridge replacement that includes “high capacity transit with a dedicated guideway.” This language would allow for either light rail or bus rapid transit on a new bridge, and presumably would provide some breathing room for future debate on both options. Bus rapid transit has been embraced as a more affordable alternative in some areas in Clark County outside of Vancouver.

The timing of renewed discussion also presents challenges. Oregon lawmakers passed a major transportation and transit measure in the 2017 legislative session. It contained no provisions relating to a replacement I-5 Columbia River bridge,  but did create a panel to review mega projects in the state moving forward. Based on past experience, another major transportation funding proposal would be difficult unless party leaders put their full weight behind a new bridge project. Veteran legislative leaders such as Senate President Peter Courtney and House Speaker Tina Kotek may see this as an opening on a legacy project.

One of the failings of the Columbia River Crossing effort was its single focus on a new bridge and related highway improvements. In reality, Portland-area and Southwest Washington residents and businesses have broader transportation interests in common as population growth and business expansion continues on both sides of the river.

Vancouver officials have signaled a willingness to pursue some kind of bi-state partnership to identify common ground, regional transportation objectives and a strategy to find a bridge solution.

Collaboration has occurred at the ODOT-WSDOT level and there have been coalitions in both states supporting a new bridge, but elected officials haven’t driven the strategy or policy decisions.

 

Oregonians May Get Another Turn at Term Limits

Oregon experimented with legislative term limits more than two decades ago and the outcomes weren’t what was promised. Once lawmakers were elected, they immediately started angling for their next job, often overlooking serious policy choices staring them in the face.

Oregon experimented with legislative term limits more than two decades ago and the outcomes weren’t what was promised. Once lawmakers were elected, they immediately started angling for their next job, often overlooking serious policy choices staring them in the face.

Oregonians may get another chance to vote for legislative term limits. It would be a good opportunity to buy the idea once and for all.

Unsuccessful GOP gubernatorial candidate Bud Pierce is sponsoring an initiative to re-impose legislative term limits and apply them retroactively to sitting lawmakers. His measure, if it makes it to the 2018 general election ballot and is approved by voters, would disqualify Senate President Peter Courtney and House Speaker Tina Kotek, even though both will be running for re-election on the same ballot.

Term limits are not theoretical in Oregon. Voters approved them overwhelmingly for state and federal lawmakers in 1992. Ballot Measure 3 was partially voided in 1995 by the Oregon Supreme Court to exclude congressional representatives. The entire measure was tossed out in 2002, but not before the fruits of term limits could be assessed. To say the least, the fruit was over-ripe.

Instead of the intended new blood in the legislature, several former lawmakers decided to return to office. That was the good news compared to what happened to the newcomers. They hadn’t settled into their Capitol offices before beginning to plot their next electoral opportunity.

With just three terms in the Oregon House, lawmakers had to make their mark quickly and aim at their next political dart board. A body once distinguished by bipartisan collaboration switched almost overnight to caucus politics by both parties and a political merry-go-round by individual lawmakers of office-shopping.

Perhaps ironically, caucus leaders assumed greater power and imposed stricter party fealty. The concept of new blood morphed into political bloodletting, political opportunism and kicking the can down the road. Why make tough decisions when you would be gone in three or fewer sessions?

Oregon survived the experiment with term limits, but arguably didn’t benefit from it. Now it may have a chance to restore the concept.

For the moment, Attorney General Ellen Rosenblum must rewrite the measure’s ballot title – the most-read part of any ballot measure – to refer to its retroactive provisions. Then Pierce and his allies must collect 88,184 valid Oregon voter signatures by next July to place the measure on the November 2018 general election ballot. Because the idea of “throw out everybody” has a certain visceral appeal, chances are good the measure will make it to the ballot.

Previous Oregon term limits were voided largely on procedural grounds. It is still an open question whether term limits are constitutionally valid. Oregonians – and Americans – have accepted the two-term limit for governors and presidents.

Whether constitutional or not, the question Oregon voters should ask is whether term limits actually do what they promise to do. Empirical evidence in Oregon suggests they didn’t. They had the inimical impact of creating a shifting cast of political characters who began running for a new office moments after being elected to a legislative seat.

The concept of new blood ignores the demonstrable benefits of legislative continuity, not to mention legislative experience. It would be hard for anyone but cynics to deny the enduring contributions of long-serving lawmakers such as Senator Peter Courtney, a Democrat, and Rep. Eldon Johnson, a Republican, to mention only a few. Senate GOP Leader Ted Ferrioli has served for five terms and newly elected Senate GOP leader Jackie Winters has served in the Oregon legislature since 1998. 

Ironically, most lawmakers serve for less than 10 years and move on with their lives. Insiders know it takes at least two to three terms in the legislature to learn the ropes, let alone influence policy.

Hailing term limits is a lot like shopping for a brain surgeon who just graduated from med school. They may be cheaper and less experienced, but they aren’t who you want cutting into your skull to dig out brain tumors.

There will be a lot of heavy breathing if the term limit measure reaches the ballot. Voters would be well advised to seek out the voices of people who lived daily with term limits and can tell you how they worked out in real life.

 

 

State, Federal Health Care Debates Remain in Flux

Oregon legislative leaders Tina Kotek and Peter Courtney want voters to know the fiscal risks of rejecting a tax package to sustain funding for the Oregon Health Plan, as federal lawmakers begin hearings on ways to stabilize coverage and premiums for the individual health insurance market under the Affordable Care Act.

Oregon legislative leaders Tina Kotek and Peter Courtney want voters to know the fiscal risks of rejecting a tax package to sustain funding for the Oregon Health Plan, as federal lawmakers begin hearings on ways to stabilize coverage and premiums for the individual health insurance market under the Affordable Care Act.

On the same day Oregon lawmakers prepared for a January vote on funding to maintain the Oregon Health Plan, a US Senate committee held the first hearing on how to stabilize the individual insurance markets under the Affordable Care Act. Both reflect the unsettled and unsettling condition of key parts of America’s health care system.

Legislators worked Tuesday on a ballot title for a referral sought by GOP Rep. Julie Parrish that could result in voter rejection of a tax package to sustain current spending levels for the Oregon Health Plan, the state’s Medicaid program.  If the tax package is voted down, state officials could face a budget hole of between $300-$500 million to plug during the short 2018 legislative session that starts next February.

An opinion from Legislative Counsel added more potential confusion to the issue that voters could be asked to decide in a January special election. The opinion says the way the referral is written would only eliminate the additional 0.7 percent assessment on hospitals from October 6, 2017 until January 1, 2018. The referral wouldn’t have any effect on the previously approved hospital assessment.

The draft ballot title clearly attempts to raise the specter of the impact of rejecting the tax package on low-income families, children and insurance premiums.

PROVIDES FUNDS CURRENTLY BUDGETED TO PAY FOR HEALTH CARE FOR LOW-INCOME INDIVIDUALS AND FAMILIES AND TO STABILIZE HEALTH INSURANCE PREMIUMS, USING TEMPORARY ASSESSMENTS ON INSURANCE COMPANIES, SOME HOSPITALS, AND OTHER PROVIDERS OF HEALTH CARE COVERAGE.

On Capitol Hill, GOP Senator Lamar Alexander kicked off the first hearing of any kind this year on the Affordable Care Act by declaring, "To get a result, Democrats will have to agree to something – more flexibility for states – that some are reluctant to support. And Republicans will have to agree to something – additional funding through the Affordable Care Act – that some are reluctant to support." Alexander said his priority is on lowering health insurance premiums.

On the day of the hearing, Washington Senator Patty Murray said in an op-ed in The Washington Post that Democrats are willing to work on a bipartisan approach to stabilizing insurance markets. In the op-ed, Murray raised the issue of creating a “public option” to ensure competition to hold down premiums in the individual health insurance market. Capitol Hill observers said that is an unlikely outcome in what already is viewed as a chancy legislative venture in the wake of the Senate’s failed attempts to repeal and replace Obamacare. Conservative groups have already launched a digital ad campaign slamming Alexander’s effort.

A more likely provision may be some kind of reinsurance program to broaden the base to pay for high-cost individuals, which tend to spike overall premium rates.

Alexander expressed hope his committee can produce compromise legislation by the end of September, which is a critical deadline for insurance companies that have to submit plans and prices for individual health insurance markets around the country. Skeptics doubt whether Alexander’s target date is realistic, especially in light of other looming congressional debates to raise the debt limit, approve a disaster relief funding package and approve some kind of FY 2018 appropriation.

For now, the Trump administration is continuing, with reluctance, to make subsidy payments to medical providers as called for by the Affordable Care Act. Insurers have warned that cutting off those subsidies, which essentially compensate for high-cost care for a few individuals, could lead to as much as a 20 percent increase in premiums, effectively forcing some people to drop their policies.

There also isn’t any clear indication how much or perhaps in what form Congress will authorize for Medicaid reimbursement to states in FY 2018. The Obamacare repeal and replacement bill that narrowly cleared the House earlier this year would have slashed $800 billion from federal Medicaid reimbursements over the next 10 years.

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.

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.

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

 

The Ghost of Willis Hawley, Good Intentions and Trade Tariffs

Donald Trump said he would tear up trade deals and negotiate new ones that put America first. He might revisit what happened when an Oregon congressman had the same good intention, but not so great an outcome.

Donald Trump said he would tear up trade deals and negotiate new ones that put America first. He might revisit what happened when an Oregon congressman had the same good intention, but not so great an outcome.

House Speaker Tina Kotek will have a featured place at this week’s Democratic National Convention. Former Oregon Congressman Willis Hawley played a key role at the Republican National Convention.

Kotek, a Democrat, can be expected to talk about inclusion, a higher minimum wage, family leave and free college education. Hawley, a Republican, provided the RNC with an example of what can happen when America erects trade walls.

Of course, Hawley wasn’t actually in Cleveland for the convention. He represented Oregon in Congress from 1907 to 1933 and died in 1941. But his ghost was there.

Former Oregon Congressman Willis Hawley lost his bid for re-election in 1932 after the bill he passed quadrupling U.S. trade tariffs deepened the Great Depression.

Former Oregon Congressman Willis Hawley lost his bid for re-election in 1932 after the bill he passed quadrupling U.S. trade tariffs deepened the Great Depression.

Hawley’s legacy is the Smoot-Hawley Tariff Act, which was passed in 1930 and triggered a trade war that most economists credit for deepening the Great Depression and Henry Ford called “economic stupidity." 

Senator Reed Smoot was a Republican senator from Utah and chaired the Senate Finance Committee. Hawley, who had been president of Willamette University where he taught history and economics, was chairman of the House Ways and Means Committee. The first signs of a global depression had emerged in 1929 as countries trying to rebound from the devastation of World War I lacked currency reserves and gold, so relied heavily on trade to pay their bills. Farmers and workers felt threatened.

The United States had passed a tariff bill in 1922. The League of Nations attempted as late as 1928 to persuade nations to end tariffs, to no avail. Smoot and Hawley pressed their tariff bill in the name of protecting U.S. farmers and workers from unfair foreign trade.

President Herbert Hoover agreed with higher tariffs on farm commodities, but wanted lower tariffs for manufactured goods. Hoover called the Smoot-Hawley Tariff Act, which raised tariffs on farm and manufactured goods, “vicious, extortionate and obnoxious.” But he declined to veto it, despite desperate pleas from 1,028 economists who signed a petition and many industrial leaders.

Oregon House Speaker Tina Kotek will speak at the Democratic National Convention about how to move a liberal agenda at the state level.

Oregon House Speaker Tina Kotek will speak at the Democratic National Convention about how to move a liberal agenda at the state level.

The first country to retaliate was America’s most loyal trading partner at the time, Canada, which directed more of its commercial attention to Great Britain. European nations looked to each other to bolster trading relationships as tariffs on more than 3,200 U.S. products quadrupled.

The result: U.S imports dropped 66 percent and exports declined 61 percent. Unemployment rose from 8 percent when the tariffs were imposed to 16 percent by 1931.

By 1932, the Depression was in full swing. Workers were thrown out of jobs. Farmers struggled and many lost their farms. Meanwhile, Smoot and Hawley were defeated in their re-election bids.

This chart shows the strong relationship to Gross Domestic Product and international trade. When trade drops, so does GDP, forcing job reductions, business closures and consumer belt-tightening.

This chart shows the strong relationship to Gross Domestic Product and international trade. When trade drops, so does GDP, forcing job reductions, business closures and consumer belt-tightening.

Generally speaking, people think of globalization rising in the late 20th century. The Smoot-Hawley Tariff Act is evidence that globalization was a significant economic factor much earlier.

Trump and Democrat Bernie Sanders didn’t exactly call for trade walls in their presidential primary campaigns, but they argued that existing multi-national trade deals are bad for American workers. Sanders focused his attention on not allowing the Trans-Pacific Partnership go into effect. Trump went further and said he would tear up previous trade deals such as the North American Free Trade Act (NAFTA) and renegotiate them, putting American interests first. While possibly unintended, those actions could trigger the eruption of a trade war, adding to the people and regions of the country suffering most from economic dislocation.

Oregon and other West Coast states have benefitted economically from international trade. The Port of Portland is known as an “export” port, with much of its outgoing cargo in the form of bulk agricultural commodities. Oregon manufacturing has declined, but not disappeared because of productivity advances by basic industries and diversification into high tech manufacturing. Consequently, Oregon’s political landscape is more favorable to international trade and trade deals, such as the TPP.

No one from the Oregon delegation to the RNC was likely to hold up a sign saying “Willis Hawley was our hero.” Maybe no one in the delegation ever heard of Willis Hawley. It’s likely Trump doesn’t know who Hawley is.

Too bad, though, because Hawley was a politician who thought he was helping everyday Oregonians and Americans, but wound up compounding their already bad situation so much that he lost his job and slipped into historical obscurity. He might have been a useful delegate at the convention to remind his colleagues that good intentions don’t always equate to great outcomes.

Gary Conkling is president and co-founder of CFM Strategic Communications, and he leads the firm's PR practice, specializing in crisis communications. He is a former journalist, who later worked on Capitol Hill and represented a major Oregon company. But most importantly, he’s a die-hard Ducks fan. You can reach Gary at garyc@cfmpdx.com and you can follow him on Twitter at @GaryConkling.

Session Anger Sparks Courtney Recall Drive

[Photo Credit: The Oregonian] Despite brokering the bipartisan deal that allowed the rancorous 2016 Oregon legislative session to end smoothly and early, Senate President Peter Courtney faces a recall drive led by a Woodburn Republican who says the longest serving Senate president in state history is “out of touch.”

[Photo Credit: The Oregonian] Despite brokering the bipartisan deal that allowed the rancorous 2016 Oregon legislative session to end smoothly and early, Senate President Peter Courtney faces a recall drive led by a Woodburn Republican who says the longest serving Senate president in state history is “out of touch.”

Senator Peter Courtney, the longest serving Oregon Senate president, is facing a recall attempt for the third time in a long political career that stretches back to 1980. The drive, which started collecting signatures over the weekend, may represent spillover hard feelings from the 2016 legislative session.

Courtney's critics are perturbed about successful Democratic legislation in the short 2016 session to phase out coal power and raise the minimum wage. They also are upset that Courtney didn’t push through the resolution to ask voters to approve setting aside 2 percent of Oregon Lottery proceeds to help veterans.

The coal-to-clean bill, which was hammered out as a compromise between electric utilities and environmentalists to avoid a more aggressive ballot measure this fall, created political tension during the short session. House and Senate Republicans demanded that bills be read aloud in their entirety, which slowed down session progress and jeopardized passage of several major bills, including the coal-to-clean legislation.

Some of the venom of the short session landed on Courtney, who played a lead role in convincing Oregonians to amend the state Constitution and permit annual sessions. Skeptics said it was unlikely lawmakers would stick to minor housekeeping legislation and budget tweaks in the 35-day, even-year session. The 2016 session was packed with high-profile bills, including multiple minimum wage bills, several marijuana industry measures and significant energy and environmental legislation.

Matt Geiger, a Woodburn business leader who ran unsuccessfully for a House seat in 2014, is spearheading the Courtney recall. Geiger was planning to make another run for the House, this time as an Independent, but dropped his plans to pursue the recall.

Geiger said the higher minimum wage will harm the agricultural and small business sectors. The utility-environmental compromise on coal, Geiger said, would drive up electricity rates without real environmental benefits in Oregon. He also questioned a bill introduced by Courtney that would allow mass transit districts to impose a payroll tax. That bill never made it out of committee during the 2016 session, largely because Courtney let it sit in deference to the bill’s critics. 

“It’s time we remove from office someone who is clearly out of touch with the needs of his community and who only seems to care about which special interest is writing him a check,” Geiger said in a press release.

However, Dick Hughes, editorial page editor for the Statesman Journal, wondered aloud in a weekend column why Courtney is being targeted. The recall pecks at the coal-to-clean bill that passed, but it fails to mention the California-styled cap-and-trade energy bill that Courtney blocked, to the frustration of many Democrats.

“Peter Courtney is an odd target,” Hughes wrote. “I’m befuddled. The liberalist liberal among legislative leadership is House Speaker Tina Kotek, not Courtney.” It was Courtney who brokered the deal between Republicans and Democrats that allowed the rancorous session to end smoothly and early.

Courtney became Senate president in the 2003 session when there were 15 Democrats and 15 Republicans. He was the only Senate Democrat who Republicans trusted enough to hand him the gavel. He has held the post since then.

Courtney won re-election in 2014 and hasn’t given any firm indications of whether he will run again in 2018 when he will turn 75. The two previous recall efforts against him failed to gather enough signatures. In Oregon, the last 10 recall petitions have failed to receive enough valid signatures. The last successful recall election occurred eight years ago with the ouster of a Wheeler County district attorney. 

A Session of Accomplishment and Failure

The 2015 Legislative session ended last night, and it included a mixture of wins and losses.

The 2015 Legislative session ended last night, and it included a mixture of wins and losses.

Legislative sessions are remembered for what they accomplished – or what they didn't. The 2015 session might be remembered for both.

The Democratically controlled House and Senate pushed through bills that automatically register to vote anyone with a driver's license, require criminal checks for private gun sales, expand access to contraception for women, require paid sick leave and retain a low carbon fuel standard for motor vehicles.

There was broad consensus on a 4-year extension of the hospital tax as part of a package to sustain Medicaid funding and an early vote on a K-12 budget that gives local school districts time to plan around the actual amount of money they will receive. Legislation passed to regulate police body cameras and forbid racial profiling by law enforcement officers.

Legislators avoided an uglier battle by finding a compromise on gain-share revenues – the amount of state tax revenues returned to communities that enter into large property tax abatement-for-jobs deals with major employers such as Intel. Just before adjournment, legislators approved a $1 billion bonding measure that includes $300 million for school construction.

On the flip side, the 2015 legislative session failed to pass a transportation funding package, which Republicans refused to support unless some or all of the low carbon fuels measure was repealed. There were frantic negotiations around some compromise, but in the end a core of House Democrats refused to budge and the plan died.

Speaker Kotek's attempt to raise the state's minimum wage faltered, as did the effort to require so-called inclusionary zoning for affordable housing units. Senate President Courtney also suffered a high profile defeat when House Democrats failed to go along with $300 million in bonding for seismic retrofitting and restoration of the Oregon Capitol, Courtney’s pet project these past several years.

Lawmakers didn't try to undo the personal income tax kicker, which will send back around $500 million to Oregon taxpayers next year. They also did very little to deal with rapidly rising pharmaceutical costs that threaten to overrun cost savings elsewhere in the health care system.

The 2015 session started fast as Democrats punched through their key agenda items and as Governor Kitzhaber's ethics scandal deepened, leading him to resign in February. Secretary of State Kate Brown, herself a former lawmaker, stepped in and provided a seamless transition and leadership on most legislative issues. Brown put her personal signature on several ethics bills that passed.

The entire session took place under the cloud of how and when to implement Measure 91, the voter-approved initiative to legalize recreational marijuana. Lawmakers allowed the legalization to take effect July 1, even though state-approved dispensaries won't open until later. They settled on how and by whom marijuana can be taxed, but stalled on issues such as the sale of edibles made from marijuana.

Lawmakers return to Salem next February for a short 35-day session. A number of state officials and legislators will have decided by then whether to run for other or higher office in the 2016 general election. House Majority Leader Val Hoyle already has stepped down to start her campaign for secretary of state. Brown is expected to run for the remaining two years of Kitzhaber's gubernatorial term. Democratic Rep. Tobias Read of Beaverton wasted little time in announcing his bid to run for state treasurer. Treasurer Ted Wheeler, who is barred from seeking re-election, has been mentioned as a potential candidate for another statewide office or mayor of Portland. Kotek's name also has been mentioned as a mayoral challenger in Portland. 

The Good and the Ugly Session

End-of-session reports by lawmakers to their constituents often leave a lot to be desired — and to the imagination. However, reports by House Speaker Tina Kotek, D-Portland, and freshman Rep. John Davis, R-Wilsonville, offered lucid, contrasting views on how the short 2014 session went.

One of the biggest contrasting viewpoints was on the session itself.

"We now have annual legislative sessions because Oregonians shouldn't have to wait a year and a half to have urgent issues addressed," Kotek wrote in her newsletter.

In a piece appearing in the Wilsonville Spokesman and sent to his constituents, Davis said, "In 2010, when Oregon voters supported Measure 71 to amend our Constitution to add annual sessions, we were told these short, even-year meetings would focus on budget stability and transparency.... This year, unfortunately, Oregonians experienced 32 days of politics and one day of budget review."

"The complexity of the state budget," Kotek said, "requires annual updates to respond to changing revenue forecasts or emerging priorities." She said budget writers were able to increase the state's reserve funds while boosting assistance for seniors, low-income families and the mentally ill.

Kitzhaber, Courtney Legacies Grow

The successful five-bill, three-day Oregon special legislative session will enhance John Kitzhaber's legacy as governor. It also signals a constructive working relationship between House Speaker Tina Kotek and GOP Leader Mike McLane. And the session provided campaign platforms for Reps. Dennis Richardson and Jules Bailey.

Almost lost in the shuffle was Senator Peter Courtney's win in establishing a dedicated funding source for expanded community mental health programs, which was his top priority before the start of the 2013 regular legislative session.

News coverage of the conclusion of the special session Wednesday showed a beaming Kitzhaber. For good reason. He took the tatters of a budget deal left on the cutting room floor in the waning hours of the regular session and wove them into a complicated deal that will result in more money going to K-12 schools and higher education. 

Kitzhaber's unwavering confidence he could find common ground among skeptical House Democrats and legislative Republicans stands in sharp contrast to his defeatist views expressed at the end of his second term of governor. His third term has been an unbroken string of negotiating successes that prove Oregon can be governed after all. And he gets much of the credit.

The Oregonian's Friday edition challenged Kitzhaber now to turn his attention and political capital to comprehensive tax reform, a goal that has eluded him as well as many of his predecessors. Hopefully, The Oregonian will forgive Kitzhaber if he takes the weekend off before starting his new quest.

The Kotek-McLane tandem held together well and under extreme political pressure. To make the multiple-bill compromise work, all five bills had to pass for any to survive. Kotek and McLane knew it would take different cross-sections of lawmakers from both party caucuses to pass the most controversial measures dealing with taxation, PERS cuts and a local pre-emption on genetically modified crops.

Only 22 out of 90 lawmakers voted for all five measures. Kotek and McLane were two of them. More important, they showed they could deliver key votes when it counted. The tax measure, a combination of increases and cuts, began in the House and came up three votes short. Kotek delayed declaring the final vote until she mustered three votes — all from her Democratic caucus.

Kitzhaber Emphasizes Education Investment

Saying Oregon cannot settle for an "uneven, unequal and hesitant recovery," Governor Kitzhaber, wearing his trademark jeans, called for investment in education from pre-school through college by easing "serious fiscal constraints" that keep money from classrooms.

Entering his 11th year as governor, Kitzhaber's State of the State address centered on "difficult choices" that include "reducing the cost of health care and corrections, reducing the cost drivers that are diverting resources from the classroom and undertaking serious review of Oregon tax expenditures."

The former emergency room physician said a new "high-quality, low-cost" care model developed by Coordinated Care Organizations could restrain Medicaid inflation to 3.4 percent in the second year of the coming biennium, saving the state's general fund $100 million. Kitzhaber said shifting public employees, including K-12 teachers, to a similar private health care model could result in a game-changing $5 billion savings over the next decade. 

Stemming the state's rising prison inmate population, the governor said, can avoid spending $30,000 per year per prisoner, compared to the $10,000 per year the state spends on K-12 students.

Kitzhaber repeated his call for changes in the Public Employees Retirement System, which he said is the cause of half of the projected  $1,000 per student increase in the K-12 budget.

Explaining his proposed changes, Kitzhaber said, "This is not about the value of our teachers. It is also not about a major overhaul of the retirement system that continues to be one of the best funded in the nation. It is simply about trying to have a conversation that allows us to strike a balance between the cost of our retirement system and our ability to put dollars in the classroom today to ensure that our students are successful tomorrow."

7 Things to Watch for in the 2013 Legislature

Oregon lawmakers are trekking to Salem for the start of the 2013 legislative session next week, which will feature heavy-duty issues such as education funding, higher education restructuring, health care transformation, prison sentencing, PERS reform, gun control and funding for a new I-5 bridge over the Columbia River.

Here are seven things to look for as the new session unfolds:

1. Leadership – New versus old 

The three key leaders in the House — Speaker-Elect Tina Kotek, Majority Leader Val Hoyle and Minority Leader Mike McLane — are all new to their posts. They worked together during the historic 2011-2012 power-sharing sessions, but how they relate to each other in this new environment with Democrats in control will be worth watching — and may very well determine whether some big issues will move or stall.

Across the building, Senator Peter Courtney will be sworn in for a historic 6th term as Senate President. Joined by Majority Leader Diane Rosenbaum and Minority Leader Ted Ferrioli, this team has worked together and knows how to negotiate in the tight corners of narrow Democratic control. 

2. Pace of the Session 

The budget has always set the pace of legislative sessions in Oregon. With one of the most experienced Joint Ways and Means co-chair teams in decades, the budget-writing committee possesses the know-how to make early decisions and move the session along quickly.

Governor Rolls Out "Education Budget"

Governor Kitzhaber unveiled a budget proposal today that he called "first and foremost an education budget."  He said his budget "creates space for front-end investments in education and early learning by cutting back-end spending on health care and corrections." 

His 2013-15 budget, which was previewed by The Oregonian and Salem Statesman Journal today, puts controversial changes to the Public Employees Retirement System (PERS) squarely in the center of an effort to carve out more money for schools. And that could bump into political resistance from the newly Democratically controlled House.

Despite that, the atmosphere in the state Capitol was markedly different than in Washington, DC, where partisan wrangling continues over how to avoid plunging over the so-called fiscal cliff. While there is no looming fiscal cliff here, the governor's budget will only serve as the framework for the 2013 legislature to hash out a final budget with Democrats at the controls in both the House and Senate.

Senator Richard Devlin, D-Tualatin, already named to be Senate co-chair of the Joint Ways and Means Committee, was charitable toward the governor, as quoted in the Salem Statesman-Journal.  "I appreciate the governor's candor about the specific challenges we face in funding education and the Oregon Health Plan in the next biennium," Devlin said.  "With his recommended budget, Governor Kitzhaber has provided a good starting point for the budget negotiations ahead of us."

New House Republican Leader Mike McLane, R-Powell Butte, praised Kitzhaber for addressing PERS, but questioned the rosiness of revenue projections and the lack of any fund reserves to cushion the budget in case the economy falters in the next two years.

The governor's plan for more money for K-12 schools rests on the premise that the legislature will accept his recommendations to reform PERS in two ways:

• By limiting cost-of-living increases to the first $24,000 in retirement income; and

• By closing a benefit loophole for out-of-state retirees. 

Stuck in Low Gear

Oregon's stagnant economic recovery is likely to shift the legislative focus to reforming the Public Employees Retirement System to relieve pressure on the state and local budgets.The latest quarterly revenue forecast drew a sigh of relief from lawmakers who won't face the prospect of immediate spending cuts. But the accompanying economic forecast confirmed what people feel — Oregon's economic recovery is stuck in low gear.

If nothing else, the forecast served as the opening act of the 2013 legislative session.

New House Republican Leader Mike McLane seized the moment to underscore that 160,000 Oregonians are out of work and may have slim prospects if the state economy continues to limp toward recovery. "Without stronger private-sector job growth," he said, "the next legislature will have difficulty funding education and other services at the levels Democrats promised to voters in the recent election."

"As 2012 winds down," said State Economist Mike McMullen, "Oregon's economic expansion persists, but remains stuck in low gear. Growth continues to come in fits and starts — a strong quarter or two followed by a weak quarter or two, with the underlying trend remaining slow and steady." 

The Results of Election Results

As Monday morning quarterbacks dissect Tuesday's election results, political operatives are busy figuring out what can happen as a result.

By virtue of Democrats reclaiming the Oregon House with a projected 34-26 margin, one party now controls both houses of the legislature, the governorship and other statewide offices. Questions abound on whether that is good or bad for various issues.

For example, will Democratic control throttle any effort to stem rising Public Employee Retirement System changes, which are squeezing K-12 schools, state agencies and local government? Public-employee-union financial and grassroots support played a major role in giving Democrats a majority in the House and may frown on any major changes.

Or, will the advent of Rep. Tina Kotek, D-Portland, as Speaker of the House help the sagging fortunes of the Columbia River Crossing project, which she strongly supports? Clark County voters dealt the latest blow by rejecting a funding measure for the extension of light rail north of the Columbia River.

And, will the legislature feel empowered to tackle thorny issues such as liquor privatization, marijuana legalization and same-sex marriage to forestall proposed initiative drives in 2014? Washington action on all three subjects could serve as motivation, as well as pressure on Kotek, who is poised to become the first lesbian Speaker of the House in the nation.

Add to that stew the frothy ingredients already on the table, including a set of expiring health care taxes, K-12 reform proposals, early childhood learning recommendations, postsecondary institutional aspirations and prison sentencing options. Not to mention a simmering concern — and debate — about how to stimulate job creation, which ranks highest on most voter priorities.

It does seem obvious that tax reform, the subject of a work group named by Governor Kitzhaber, will be an unlikely topic in the 2013 session. There isn't enough agreement in the work group, let alone among voters, and there may not be enough time to tackle the topic in an already congested 6-month legislative session.

The Battle for the Gavel

As legislative candidates hit the hustings, some are plotting who will hold key leadership positions when the Oregon legislature convenes in 2013.The general election is a month away, but the plot is already thickening over who will be in control in the Oregon legislature after all the votes are counted. What's happening out of public sight is a combination of inside baseball and roller derby.

If Democrats regain control of the Oregon House, there appears little doubt Portland Rep. Tina Kotek will ascend to become House Speaker. Rep. Arnie Roblan, D-Coos Bay, who served as co-speaker in the 2011 and 2012 sessions, is running for an open Senate seat.

The bigger question is who takes over for Kotek as Democratic leader. Rep. Val Hoyle, D-Eugene, is the only declared candidate, but rumors have circulated that Rep. Tobias Read, D-Beaverton, is considering a bid for the post, which is complicated by his departure from Nike and search for a new job.