carbon tax

A Challenge and a Legacy Lie Ahead for Legislative Democrats

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

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

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

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

Some of the complicating factors are:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

 

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.”

 

 

Washington to Vote on Carbon Tax

Washington could become the first state in the nation with a carbon tax if voters pass Initiative 732 in November. But state budget analysts warn it could amount to a loss of more than $900 million in tax revenue over a four-year period. 

Washington could become the first state in the nation with a carbon tax if voters pass Initiative 732 in November. But state budget analysts warn it could amount to a loss of more than $900 million in tax revenue over a four-year period. 

Washington state could find itself at the cutting edge of taxing carbon emissions with Initiative 732 heading for the ballot this fall. But opponents and budget analysts fear the bold plan goes a step too far.  

The measure would create a new tax of $25 per metric ton of carbon burned in fossil fuels, including gasoline, natural gas and coal. It also would also shrink Washington’s sales tax rate by one percentage point and virtually eliminate the business and occupation tax for manufacturers.

If the initiative passes, Washington will become the first in the nation to tax carbon emissions as other states look on.

“I-732 encourages cleaner energy solutions by shifting the tax burden onto carbon pollution and away from regressive and burdensome taxes that hurt families and businesses,” says Carbon Washington, the group behind the initiative.

Sounds great. So, what’s the problem? Well, as always in the process of creating new taxes and changing the rates of old ones, you have to look at the broader picture. And the big question surrounding I-732 comes down to its fiscal impact, which thus far has been defined by polar opposite projections from either side of the initiative battle.

Carbon Washington argues the tax would ultimately be revenue-neutral, bringing in an estimated $1.7 billion a year while returning roughly that much to taxpayers by lowering the sales tax. State budget analysts with the Office of Financial Management, on the other hand, estimate the tax change would amount to about $915 million in lost revenue for Washington over a four-year period, a painful gut punch for a state where annual budget shortfalls have become the norm.

Yoram Bauman, the founder of Carbon Washington, fired back at the OFM in February, saying the agency miscalculated the fiscal impact of I-732. Bauman added that OFM analysts are not carbon tax experts.

However, the Department of Revenue and legislative budget analysts also project I-732 would create a net revenue loss for the state.  

Several major state organizations have come out against the initiative, including the state Democratic Party, the Washington State Labor Council and the International Association of Machinists and Aerospace Workers. Ultimately, they argue that it’s the worst time to experiment with a change that could jeopardize so much tax revenue.

“At a time our state is struggling to fund basic services – including public schools, mental health facilities and many other essential services – I-732 would send Washington in the wrong direction and create more damaging austerity choices,” Labor Council President Jeff Johnson said.

Numerous environmental activist groups support I-732, but it's also drawing criticism from some environmentalists. Several factions of Democrats in the legislature and county-level Democratic organizations across the state also are lining up behind the initiative, which supporters tout as an economic stimulus that will do something concrete to address climate change without hurting the middle class.

Lowering the B&O tax for manufacturers would help keep living wage jobs in Washington, proponents argue. The group anticipates reducing the sales tax would save hundreds of dollars a year for the average household in Washington. The initiative would provide up to $1,500 a year in tax rebates for about 400,000 low-income households across the state, Carbon Washington says.

The legislature had a chance this winter to alter the carbon tax proposal and address revenue concerns. But in a short session ruled by more immediate budget woes and questions about adequate education funding, that simply didn’t happen. It also didn’t happen during the special session that ended March 29.

Now, it’s up to the voters to decide what to do. Given Washington voters’ recently muddled history on tax reform measures, it’s anyone’s bet as to how this one will turn out on Election Day. 

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.

Energy for an Energy Plan

Governor Kitzhaber has prevailed in persuading lawmakers to approve high-profile initiatives in education, early childhood learning and health care. Now he wants to tackle energy, which could prove a more elusive and tougher sell.

Earlier this year, Kitzhaber handpicked three dozen industry insiders to recommend innovative policy ideas and create a 10-year energy plan. Teams worked for four months, focusing on: 1) consumption/energy efficiency, 2) supply side/resource mix, 3) siting, 4) transportation, and 5) governance.

The group sent its recommendations to Kitzhaber, which now have been made public. Their major theme is reducing carbon dioxide emissions through energy source conversion, more reliance on renewables, and ditching power generation based on high-carbon fossil fuels. Most Oregonians may not know that more than half of the state’s electricity comes from coal-burning power plants.

One big hurdle in accomplishing carbon reduction is already surmounted as PGE has agreed to close down its Boardman coal-fired plant. But even that decision raises thorny questions as the utility looks for a way to replace a source of reliable energy to serve its base load.

Legislators had a previous taste of energy politics when they considered, but didn't act, in the 2009 session on a cap-and-trade proposal, intended to use market forces to encourage businesses with options to switch to energy sources with lower carbon emissions.

Since then, interest has grown in the merits of a carbon tax, which is a more direct disincentive for using fossil fuels. It also is a tax, which raises political flags.