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Friends and Neighbors,
June
has come, and we begin our last four or five weeks of the 2015 Legislative
session—we hope! The Legislature is
mandated by the state Constitution to finish its work by July 11. Many of us have our fingers crossed that we
can finish a little ahead of that deadline, but at this point it’s hard to say
that this will be possible. On the
positive side, we received a revenue forecast that overall is good enough to
avoid huge budget battles in these closing weeks—though there will still be many
tough decisions to be made: a huge number
of policy bills stuck in Ways and Means awaiting final budget priority
decisions. Some of the bills that have
been clogging up the works—notably, the paid sick leave bill—are starting to
break loose and head down the road to passage.
Among
the high-profile bills that have been in the works for a long time, we’ve seen
final passage of the bill requiring further background-checks for gun sales, a
bill that kept us in a stalemate during the 2014 session. But the jury is still out on two very
high-profile issues: marijuana, and the transportation package that will
provide much-needed repairs to our roads and bridges. The former is caught up in controversies
around the ability of local governments to ban the sale of marijuana in their
jurisdictions despite the passage of M91 last November. The latter is caught up in efforts by some to
gut the Clean Fuels bill that we passed in the beginning of the session,
efforts that are based on wild claims that the Clean Fuels programs will lead
to a huge increase in the cost of gas—despite all evidence to the contrary in
the places where it has been in effect.
Lots of behind-the-scenes action is underway on both the marijuana front
and the transportation front.
This
week marks another of those session deadlines that are crucial markers for the
fate of policy bills. Any bill that has
not been voted out of committee by the end of this week is dead for this
session. We in the Senate will be voting
on the last of the bills coming over from successful passage in the House. The great majority of these bills coming from
the House were non-controversial fixes or improvements, but some of them were
controversial in the House and they remain controversial in the Senate (and
vice versa). They have required major
amendments to get to the point where they can make it to the floor of the
second chamber, and some of them will never make it out of committee this
session.
I’m
happy to report that at this point all of my priority bills are still on track
and will still be alive after this week.
I’ll let you know about a couple of them in this newsletter.
In
this newsletter I also want to tell you about next weekend’s constituent coffee
and our upcoming annual bike town hall.
I want to give you a report on the May revenue forecast and what it
portends for the remainder of the session.
As
always, please let me know if you have any questions about any of the
information in this newsletter, need help with navigating the legislative
website, or have some advice to offer as we begin to navigate the crazy,
difficult final days of the session.
There
are two constituent coffees coming up this month!
This Saturday the 6th at 9:00am,
we’ll be at the Hollywood Senior Center (1820 NE 40th Ave.). Hope to see you there!
Next
weekend, on Saturday the 13th, Rep. Keny-Guyer and I will be hosting
at Portland Mercado (7238 SE Foster Rd.) together, at 4:30pm. I encourage you to join us, especially if you
haven’t had a chance to check out the Mercado yet. Their website is http://www.portlandmercado.com/.
The
SD 23 bike town hall is something Barbara, Alissa and I do once a year, and one
of my favorite things as a bike enthusiast. This is the 7th edition
of the ride, and this year we’ll be riding around the Lents neighborhood,
touring lots of different things: from the Portland Mercado, to a community
orchard, to the Belmont (now known as the Lents) goats! Lots of fun things to
see, and we promise to stop for bathroom breaks and snacks along the way. The
ride is just under 6 miles and we’ll be starting at the Portland Mercado at
12:30pm on Sunday, June 28th.
As
I’ve mentioned in earlier newsletters, much of my time this session has been
devoted to shepherding SB454, the Sick Leave for All Oregonians Act, through
the legislative process. It has been
incredibly difficult, in part because of “the sky is falling” skepticism from business
interests and in part because of legitimate concerns about potential harm if we
don’t get it right. So it has been very
important to get the policy right, while lining up the votes for passage. It has taken us 39 different drafts (!!!),
but I believe we are finally there. On
Tuesday, the Human Services Subcommittee of Joint Ways and Means passed the
bill to the full Ways and Means Committee, which will meet tomorrow. If all goes as expected, we could see it pass
both chambers early this month.
SB
454 has the potential to do great things for Oregonians all over the
state. There were powerful attempts to
reduce the number of businesses that it would cover. There were attempts to keep agricultural
workers from being part of it (despite the incredibly arduous and vital work
that they do). There were attempts to
connect it to bills that would prevent local governments from taking positive
action on behalf of working families.
There were attempts to put things into it that would cause legislators
to vote against it. Fortunately, we’ve
been able to fight back those efforts, and what is emerging is a plan that
offers strong protections for workers and their families, while remaining as
simple and easy for businesses to implement as possible. It will be serve as a model for the nation as
a whole.
Click here for an overview of the new state sick leave program that SB 454 will
create.
The
House Health Care Committee passed SB 705—the bill requiring asbestos testing
for houses facing demolition—out to the House floor last Friday. The bill was amended at the request of
several committee members who were concerned that very new houses, which are
unlikely to contain asbestos, would also need to be tested. The amendment charges the Environmental
Quality Commission with writing rules that would clarify which houses, and
which materials in those houses, would need to be tested. This struck me as a very reasonable request
and I was happy to have it included in the bill.
The
bill passed the Senate on a 22-8 vote, and I expect similar strong support in
the House next week. Once the session
ends, we’ll start working on similar legislation regarding testing homes slated
for demolition for lead paint.
Oregon’s
state economist and his team presented the latest revenue projections and
economic forecast to the revenue committees a couple of weeks ago. 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 particularly important because it’s the first one to
come right after the April tax filing deadline, but even more so because it’s the
last one before the beginning of the next budget biennium. It’s the one that we will use to build the
final state budget for 2015-17.
The
report that we received this time was very positive, by far the most positive
of any I’ve seen in my 6 years in the Legislature. The economy in Oregon is steadily improving,
and we’re starting to see the big growth outside of the Portland metro
region. Employment is up, and salaries
are starting to rise. Those at the upper
end have benefited from the rising stock market and are reaping significant
capital gains. However, those at the
bottom of the economic ladder are not seeing the benefit of that. On the contrary, they are having an
increasingly difficult time remaining self-sufficient even while working
multiple jobs.
The
upshot of the improved employment and capital gains is higher-than-projected
state revenues in the current biennium, and in increase in what we can expect in
2015-17. The rise in the current
biennium is now projected to cause the kicker to kick (see the next section of
the newsletter for more on the kicker), and the revenue for the next biennium
is now projected to be $463 million higher than we thought it would be when the
Governor’s proposed budget was drafted.
This
increase is great news for K-12 education.
It will allow us to fulfill our promise back in April when we passed a
modest K-12 budget and said that 40% of any new money in the May forecast would
go to K-12. It will also allow us to
fill some budget holes, freeing us from having to make some difficult cuts in
the Human Services and Public Safety budgets.
It will allow us to put some money into savings. And it will allow us to put around $150
million into important funding areas, such as career/technical education and
community colleges, which will be critical to bringing people out of
poverty. I’ll try to keep you up to date
on the exact priority decisions over the next few weeks.
Additional
Information:
Office
of Economic Analysis forecast documents
Office
of Economic Analysis summary blog post
Here
are some selected details from the report:
- Oregon’s
economic recovery is stronger than the national recovery, and continues to be
stable and growing in the short term.
- Wage
and job growth is stronger than in most states, and this pace is expected to
continue for another two years before slowing as the strongest phase of the
economic recovery passes.
- Oregon’s
unemployment rate has fallen to 5.4 percent after hovering closer to 7 percent
for much of 2014 and the labor force has surged as more Oregonians are employed
or actively seeking employment. Oregon has added 7,400 more jobs since the
March 2015 forecast. However, significant job polarization continues, as
jobs are increasingly concentrated at high and low-wage ends of the spectrum,
and middle wage jobs are shrinking as a share of all jobs.
- We
are seeing steady growth in the Portland metro region. Outside of Portland, the percentage increases
are much stronger, particularly in the Valley and in Bend—which were harder hit
during the recession. Our frontier
counties are nearly all recovering, but at a much slower rate.
- A
$477.5 million personal income kicker is projected for 2015, largely due to
very strong projected April 2015 tax filings from investment income and 2013
Special Session revenue increases ($185 million over the kicker threshold).
The revenue lost to the projected personal income tax kicker is felt mostly in
the 2015-17 biennium.
- Calculations
to determine if a kicker is triggered do not occur until July 2015.
- A
$61.3 million corporate kicker is projected to direct $61.3 million to K-12
funding (Thanks to Measure 85, 2012).
- About
$106 million of the increase will be dedicated to K-12 education under HB 5017,
passed in April.
- Risks to economic and revenue growth: In
addition to uncertain national fiscal policy and growth, and the strength of
the housing market recovery, drought and wildfire risks threaten rural economic
growth and state revenue growth. The robust pace of recovery growth reflected
in today’s forecast is only expected over the next two years, after which
growth expectations are significantly reduced.
- Lottery
revenues are rising at a surprising rate, mostly the result of a new generation
of video lottery machines. The projected
$4.2 million increase this biennium and $43.1 million next biennium is mostly the
result of increased video lottery sales, which has accounted for about 85
percent of the all lottery earnings in the last three years.
- One
risk to the forecast is the uncertain impact of our current drought. We’re on track to have another bad fire
season, which will require us to dip into reserves. While we’re hoping to
increase our investments in important water storage projects this session, the
fruits of those investments won’t be seen for many years. In the meantime, we could also see negative
effects on agriculture.
Senate
and House leadership are committed to building up our reserves to record levels
to prepare for the expenses that we know we’ll have in 2017-19 due to the PERS
decision and increasing Medicare costs.
Fortunately, the Rainy Day Fund is projected to receive $159.2 million
at the end of the 2013-15 biennium. The Education Stability Fund is
expected to receive about $171.9 million from lottery sales, for an ending
balance of $179.3 million at the end of the biennium. This will definitely help us with our effort.
The
revenue forecast presentation was disrupted at one point by a number of Oregon
college and university students who called on legislators to vote to withhold
this year’s kicker payments and devote some of them to combating the soaring
costs of tuition and the burden of student debt. Because yes, it is now clear that both the
personal and the corporate kickers will kick this year.
The
forecast projects a personal income kicker of nearly half a billion dollars
($477.5 million to be exact) at the end of the 2013-15 biennium, largely due to
very strong projected April 2015 tax filings from investment income and 2013
Special Session revenue increases.
The
2011 Legislature changed the return mechanism for the personal income tax
kicker from a refund back to a credit, so taxpayers will receive their kicker
through a credit on their 2015 income tax return rather than through a mailed
refund check. Refund amounts are based on a taxpayer’s tax liability
before tax credits. The chart below
shows an estimate of the size of kicker refund credits.
The reporting on the kicker has mentioned the “average” household kicker amount as close to $300. As you’ll see from the chart, the more significant median amount is only $144. The average is skewed upwards by some VERY wealthy individuals. What the chart is telling us is that most Oregonians will be receiving a credit of less than $150.
For me, this is a shame, because the $477.5 million in kicker payments will prevent us from putting additional dollars into colleges and universities, as well as other educational and human service programs that will benefit lower-income Oregonians far more than a $150 one-time credit will. It also prevents us from setting aside money in reserves that we know we’re going to need in the next biennium when the bill for the recent Supreme Court decision on PERS (a likely $850 million) comes due. But to hold back the kicker requires a 2/3 vote of both chambers of the Legislature, and the politics on that are unfortunately impossible.
For more details on how the kicker works, see LRO’s 2015 Public Finance Basic Facts.
Until next time,
 Senator Michael Dembrow
District 23
email: Sen.MichaelDembrow@state.or.us
web: www.senatordembrow.com
phone: 503-986-1723
mail: 900 Court St NE, S-407, Salem, OR, 97301
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