Movement in Salem

Friends and Neighbors:

Things seem to be moving in Salem at last.  Last week was a big one at the Capitol.  On Thursday we had the release of the revenue forecast—a very positive one—that will be used to build the final 2013-15 budget. The Governor called upon legislators to come to a compromise that would trade further PERS reform for a higher level of funding for education.  Senate Republicans are holding a crucial health care funding bill hostage.  We had two great hearings related to single-payer health care.

And now this week two bills of special importance to me passed the Senate floor and are headed to the Governor’s desk for his signature.

I’ll go into detail on each of these below.

A Positive Revenue Forecast

Oregon’s state economist and his team presented the latest revenue projections and economic forecast to the revenue committees on Thursday.  We get these forecasts once a quarter.  They give us a snapshot of the state of the local and national economy, and they let us know how our tax revenues are lining up with expectations.  This particular forecast is important because it’s the last one before the beginning of the next budget biennium; it’s the one that’s used to build the next biennial budget.

This was easily the best forecast I’ve experienced in my five years in the Legislature, both in terms of the amount of revenue we can expect to receive, but also in terms of the sense of optimism communicated by the economists. 

The bottom line is that higher-than-expected income tax receipts this year show us finishing this biennium (which ends on June 30) with $115 million more than expected.  The forecast for the next budget cycle shows a $147 million increase.  As a result, the state will have an additional $272 million available for the 2013-15 budget.  This should allow us to fund K-12 at the targeted $6.75 billion level, and for the most part fund the rest of the budget at or above the Governor’s recommended budget.  This is great news.

However, it doesn’t yet get us to a “no-cuts” budget for most K-12 school districts, nor does it fund higher education anywhere near the level it was funded just five years ago.  We still have work to do. (See below.)

Also, the overall good news has a not-so-positive side-effect:  Because Oregon’s business climate is improving, the upswing in corporate tax collections triggered a corporate kicker payment.  This is particularly ironic because just last November the voters passed Measure 85, which directs all proceeds from the corporate kicker to education.  However, Measure 85 doesn’t go into effect until next biennium.  So, $20.3 million must be paid out to corporations (many of them out of state) one last time.

We do not appear to be at risk of the individual kicker kicking, though it’s not yet out of the realm of possibility.  If it did, that would be a very serious problem.

I will be pushing to have the $20.3 corporate kicker diverted to help fund higher education.  I believe that this would be in line with the wishes of the voters and clearly in the oft-stated interest of Oregon’s corporations.  To do so will require a 2/3 vote of both chambers of the Legislature.

You can see the State Economist’s Powerpoint presentation here and read the detailed report here. 

Here are some interesting extracts from the report:

The Governor’s Latest Budget Proposal—Should We Seize It?

Given the positive revenue forecast, we could probably go home with a budget that more or less meets state needs over the next biennium.  Again, coming after the huge budget cuts of the last four years, this would be no mean accomplishment.  At the same time, it would leave in place many gaps that were created during the recession, particularly in the area of higher education (community colleges, universities, and need-based financial aid).  Many school districts would still have to lay off teachers, expand class size, and/or shorten the school year.  Obviously, many of us would prefer not to see that happen.  And that includes the Governor.

Governor Kitzhaber has put out a proposal that would find further PERS savings by eliminating the “Money Match” method of calculating benefits for those known as “inactive members”—i.e., those who worked in the public sector for a period of time, established PERS accounts, then left the public system after a period of time without cashing out their account.  Their money in those accounts has continued to grow (or at times decrease) with the rest of PERS investments, even though their former employers were not putting additional money into their accounts.  Under Money Match, when the ex-employee finally chooses to retire and tap into their PERS account, their former employer would be required to match the amount of money in the account at that time.  This obviously drives up the cost of the system, and many would like to see a change there, or at least a test of the constitutionality of the change. (Making this change might well be ruled an unconstitutional violation of the ex-employee’s employment contract.)

Although we wouldn’t save much money in the short-term by ending this practice (many if not most of those in that situation now would probably retire immediately to take advantage of Money Match before the change went into effect), but there could be substantial long-term savings.

House and Senate Democratic leadership has indicated that we could be open to such an attempt if it were done right (e.g., didn’t adversely affect long-term employees laid off against their will as a result of economic downturn), and if it were matched by an additional $200 million in revenue for education (Pre-K, K-12 and Post-Secondary), either through closing tax loopholes or through additional taxes.  So far, House and Senate Republicans have declined the Governor’s offer and refused to come to the table for further negotiations on a compromise.  But, the session isn’t over yet and I remain hopeful.

Getting this additional money would at last allow us to make college more affordable and keep every school in the state cuts-free.  It’s an historic opportunity for Oregon, and I hope that my Republican colleagues will rise to that opportunity.

Republicans Holding Hospital Assessment Hostage

I've got good news to report below on our efforts to bring a single payer system to Oregon.  But first I wanted to update you on continued efforts by the Republicans to hold hostage a critical piece of health care legislation.  House Bill 2216, which passed the House last week on a 54-5 vote, reauthorizes a tax on hospitals and long-term care facilities that raises nearly $2.5 billion in funding for the Oregon Health Plan by leveraging a generous federal funding match.  Passage of this bill is a must-do before we adjourn for the session, but despite strong bipartisan support in the House, Senate Republicans are now openly holding HB 2216 hostage and demanding more cuts to PERS.  I'm hopeful that they'll come to their senses soon and allow this bill to pass.  The consequences of doing otherwise are unthinkable.  I'll keep you posted.

Click to read David Sarasohn's recent piece on this.  You can also read a good post on The Lund Report about the House passage of HB 2216 here.

Moving Forward on Single Payer

Two recent hearings are sending a positive signal for healthcare reform in Oregon.  HB 2922, our single payer bill, had a great hearing in the House Health Care Committee.  It won't be moving forward this session, but a companion bill that moves us closer to single payer is looking good for passage.  HB 3260 will set up a study of different ways to accomplish universal coverage in Oregon, including single payer.  I'm very excited by its prospects.  The Lund Report, as usual has some good coverage that I'd encourage you to read.

Two More for the Win Column

The Senate this week gave final approval to two bills that I chief sponsored.  Both measures will have a positive effect on Oregon’s workforce development. 

The first, HB 2986, provides a way for ex-offenders to break out of a vicious-circle and become productive citizens in our communities after they’ve served their time.  For many ex-offenders, the best route back into society is through a pre-apprenticeship or apprenticeship program.  These programs get them the skills that they need and put them on track to employment. 

But many ex-offenders are blocked from being part of an apprenticeship program because to be enrolled in a pre-apprenticeship or apprenticeship program, they’ve got to have a valid driver’s license.  They have not been able to have their license restored to them because they have outstanding traffic fines that they still need to pay.  They cannot because they have no jobs.  They’ve paid their time, but they can’t pay their fines.

They could do the right thing and pay their fines if they could only complete their programs and get a job in a trade.  But they can’t do that because they don’t have a driver’s license.  Hence the vicious circle.

HB 2986 allows us to break that circle.  Thanks to some great, creative partnership between DMV, Corrections, Judiciary, and BOLI, we’ve worked out a straightforward, no-cost way for the court to reinstate a person’s driving privileges as long as the person is enrolled in a certified pre-apprenticeship program or is registered as a certified apprentice.  This provides a further incentive for the student or apprentice to work hard and be successful in their program.  (If they leave the program, the license suspension will be reinstated.) The individual must begin making payments within six months of completing the program, or else the court will reissue the suspension.

The second bill, HB 3341 deals with another side of our workforce pipeline.  Oregon, alone among all states, has an odd wrinkle that prevents our public colleges and universities from creating new high-demand programs in areas where a for-profit institution might have gotten there first.  Under current law, any for-profit college or university has the ability to block new certificates or degrees from being created at its local community college or university if it is already offering similar programs, even if at much higher cost.  If the new program is deemed to have what is called an adverse impact on the proprietary school’s business.  The reverse of course is not true—for-profits are free to come in and open a new branch or campus wherever they want.  It’s a free market for the for-profits, but not for the community colleges.  It’s a one-way street, and it has had a profound chilling effect on the community colleges’ efforts to be responsive to local needs.

This can have serious results for low-income students, who really need access to low-cost public higher education.  Students who don’t have the community college option for new programs will be forced to pay 3 to 4 times the amount that they would have paid if they could have gotten their education at a public college. 

The effect on young Oregonians, veterans, and dislocated workers can be serious.  Students attending for-profit colleges account for just a fraction of all college students, but they currently account for 47%--nearly half—of all federal student loan defaults.  Nearly 1 in 4 students at a for-profit college will default on their student loan within 3 years of leaving.  Those are not good odds for our students, and it’s taxpayers who end up picking up the tab.

Proprietary colleges in every other state are able to exist and to thrive without the protectionism of adverse impact.  So can Oregon.  Passage of HB 3341 means the end of adverse impact in our state, and that's a very good thing for our students and our public colleges.

Next Constituent Coffee:  Saturday, June 1^st

Mark your calendars and plan to join me for our June constituent coffee next Saturday, June 1st.  Time and location will be emailed out early next week.

Until next time,

Michael