Special Session: Retrospective



Rep. Michael Dembrow 
NE Portland, Maywood Park & Parkrose

Phone: 503-986-1445

 Email: rep.michaeldembrow@state.or.us 
Website: http://www.repmichaeldembrow.com  

E-Newsletter                           10/4/2013

Dear Friends and Neighbors:

As I begin to write this report with the Special Session having ended about three hours ago.  I’m back home now, having retrieved my dogs from the dog-sitter where they’ve lived for the past few days.  (My wife is with our grandchildren in Gainesville, Florida, where I’ll be heading for a few days after the constituent coffee on Saturday.)  It’s now time to decompress and look back on all that was achieved over these intense, stressful last few days—and to ponder all the work that is yet to be done. 

That’s what happens when you come up with a bipartisan compromise package.  They are never settled things: yes, there are elements in the package to like very much (that do historic things for kids, college students, seniors, and low-income Oregonians), but there are also things in it that will require ongoing surveillance to make sure they don’t do harm and will most likely require changes in the future.  

As part of Democratic leadership in the House, I’ve been involved in discussions around the package that would come to be considered in a special session throughout the summer and fall.  Believe me, the discussions in leadership and in our caucus as a whole have been difficult and contentious.  In the end, the decision was made that for the long-term good of the state, we needed to do what we could to make it the best it could be and move it forward.  I ended up voting yes on the revenue bill (despite reservations that I’ll describe below) and yes on the PERS COLA reductions (having done all I could to mitigate its potential harm), and voting no on the GMO bill.  I’ll discuss my rationale for these votes below.

In this newsletter I’d like to go over the process and give you a behind-the-scenes look at what got us to this point.  I’d also like to explain why I voted as I did on the various bills in the package.  Finally, I’ll talk about the elements of the package in more detail and provide you with links to the bills and other resources to help you better understand them.

I'll warn you that this is a particularly lengthy edition of the newsletter, but I hope you'll take the time to read through it in its entirety and give me your feedback.

But first, tomorrow being the first Saturday of the month, let me make a pitch for our monthly constituent coffee:

Constituent Coffee

Saturday, October 5th at 10am

Hollywood Senior Center (1820 NE 40th Ave)

Leading Up to the Vote – A Rocky Road 

In my previous newsletter I explained the various components of the framework agreement that had been reached by the Democratic and Republican legislative leaders on September 17.  The goal was to draft the five bills, have public hearings, draft amendments based on those hearings, and get the bills through the committee, to the floor, and voted on all in one day, Sept. 30.  Getting all the agreements nailed down ahead of time was very ambitious and ultimately impossible.  It would take having members together in the Capitol to get things worked out, and that would take time.

Though they had reached conceptual agreement, many of the precise details in the bills had yet to be worked out.  And as always happens, once the legal language begins to be drafted, disagreements crop up over the details.  With new information coming out of the hearings, along with pressure from within and without, changes were demanded and further disagreements ensued. 

With four parties to these negotiations—not including the Governor—representing different caucuses with their own different internal dynamics, this was clearly not going to be easy.  An important part of the agreement was that each caucus leadership was expected to generate a number of votes for each bill (aside from the GMO bill, which had the votes to pass from the beginning, and would have passed during the regular session earlier this year had my colleagues and I on the House Rules Committee not blocked it from coming to the floor).  Complicating things was the fact that not all the members were going to be able to be present for the session.

In the end, Speaker Kotek, President Courtney, and the Republican minority leaders were committed to working things out, and amendments were generated to make it easier for members to support the bills.  After many hours of intense work, most of it behind the scenes, the bills were able to be amended in committee and sent to the floor.  Even then, on Wednesday morning, there were a couple of difficult hours on the House floor (more on that below).  But at last, by 5 p.m. all five bills had passed and the final gavels were dropped.  

What had been accomplished?

HB 5101 – Historic Appropriations for Students, Seniors, and the Mentally Ill

House Bill 5101 appropriates approximately $200 million to Oregon’s public schools, community colleges, universities, mental health services, senior programs, and support for low-income families. It passed the House by a vote of 54-1 and the Senate 27-1.

Here’s where the money will go:


$140 million to education:

K-12:  $100 million

Universities:  $25 million

Community Colleges: $15 million


$20 million for community mental health:

Juvenile: $5,800,000

Adult/Crisis Services: $4,200,000

Other: $10 million (exact allocation to be determined over the next few months)


$41 million for senior programs: 

Oregon Project Independence: $10 million

Elderly and Disabled Transit: $5 million

Other: $26 million (exact allocation to be determined over the next few months)


For more detail on all the critical programs to be funded, here is the budget report.

You can see the impact of the increased dollars going to individual school districts here.

As you’ll see, Portland Public Schools will receive an extra $7,850,566.  The district intends to use the additional funding to add 180 teachers and paraprofessionals and restore programs.  Parkrose School District will receive an extra $575,999.  That will allow them to restore 3 school days. (Parkrose is currently down 9 days.)  This money will become available next school year.

The money for universities and community colleges will allow this year’s tuition increases to be  reduced or eliminated entirely for Oregon’s students, in some cases beginning  as early as this Winter term.  Needless to say, this is an important step in our attempt to reduce the burden on students and their families.

The funding for mental health is truly historic, the first time that mental health programs in this state have received a dedicated, stable source of funding.  In combination with the new access to mental health and addictions treatment required under the Affordable Care Act, these community-based programs will make an enormous difference in the lives of many Oregonians and their families.

Finally, the new senior services dollars will also be making a big difference.  Oregon Project Independence, which allows seniors to stay in their homes and receive needed support, will be doubled in size.  Increases to senior and disabled transit will also allow seniors to stay in their homes and live independently.  Over the next few months, the Legislature will work with senior advocates to make sure that the remaining $26 million is allocated to services that seniors need most.  Included among them, I believe, will be the statewide public guardianship/conservatorship program that is so badly needed in this state.  I’ll be submitting legislation very soon to make it a reality.

HB 3601—A Revenue Bill Full of Difficult Compromises 

House Bill 3601 raises $244 million in new revenue, reallocates money from reserves, and cuts taxes for some. It passed the House by a vote of 36-19It passed the Senate 18 -10.  The bill passed both chambers with just the required number of 'aye' votes. (Since the bill raises revenue for the state, a supermajority of each chamber is required.) 

The revenue bill that pays for the investments described in the previous section has many parts to it.  Here is a chart that describes each of the sections of the bill.

I voted for the bill, but it was a difficult vote, as it was for many of my colleagues. In the end, it took us nearly two hours on the floor to secure the required number of votes. (More below.)

The Positives

It means-tests a number of revenue sources and deductions in ways that are fair and appropriate. 

More will be asked of corporations with annual profits exceeding $1 million, with the added revenues going into programs and into state reserves. 

More will be asked of Oregonians with household incomes above $200,000, who will see their $183 personal exemptions capped.

The special senior medical deduction will be similarly capped and will become a subtraction, thereby opening it up to many tens of thousands of low-income Oregonians who take the standard deduction and cannot itemize.  It was extremely important for us to make this change now, as it has become more and more expensive to the state, while focusing most of the benefit on the more affluent.  The savings will be used to fund the sorely needed senior programs described above.

The earned income tax credit will be increased in year 2 of the biennium, something many of us have wanted to do for years.  It will put dollars into the pockets of low-income working Oregonians, dollars that will immediately go into local economies around the state.  (Funds to support this will come out of reserves.)

The cigarette tax is modestly increased. It is increased by 10 cents a pack (going up to 15 cents over the next two biennia), which is unfortunately not enough to be much of an incentive to get people to stop smoking. Also on the down side, in the near term the increase only applies to cigarettes.  (This was unfortunately very important to Republicans.)  On the positive side, it does raise $20 million a biennium for the community mental health programs described above.

The Big Negative

The hardest part for many of us, including me, in this bill is the provision that purports to be a small business tax cut (the “Special Tax Rate for Active Schedule E Income”).  Now, many of us would like to see taxes reduced on truly small businesses—in Oregon small businesses are taxed at a higher rate than corporations.  (Alternatively, many of us would like to see taxes on corporations raised further.)  This bill reduces the rate on partnerships and businesses known as “S Corporations” that have at least one employee.  In principle it is intended to spur employment and encourage business creation.  In fact, most of the benefit will likely go to business owners and partners that don’t need the help.  But it was the linchpin to Senate and House Republican agreement to allow other taxes to be raised.

The further problem with the tax cut is its potential cost.  In this first biennium, its cost is low because it doesn’t go into effect until the last two quarters of the biennium.  As the spreadsheet shows, in later biennia, if not contained it will grow to consume most of the new revenue in the bill.  Amendments were adopted that put some constraints on its growth, but their success is not certain.  It is very worrisome.  And that concern created the greatest challenge for most Democrats.

In the end, ten House Republicans voted for the bill.  We were hoping for more, but the tax increases proved too much for more of them to sign on.  After the initial votes were taken, there were only 33 aye votes.  During the recess period that followed, Speaker Kotek had to persuade three Democrats to change their votes from no to yes.  She eventually did.

What quid pro quo did she offer them in exchange?  Will they be getting new highways in their districts or plum committee assignments or guaranteed passage of their favorite bills.  No, none of that.  Those three legislators are individuals of extremely high moral fibre.  They opposed the bill for the best of reasons—their concerns about the policy and potential impact of the business tax cut.  What brought them to yes was a strong commitment from the Speaker and the Governor that the tax cut would be closely tracked and mitigated further if necessary.  I admire them for what they did.

SB 861 – Asking for More Sacrifice from Public Retirees

Senate Bill 861 – makes additional cuts to the cost-of-living adjustments received by PERS retirees while mitigating impacts on lower-wage workers. It passed the House by a vote of 31 – 24, the Senate 22-7.

The bill reduces the annual cost of living increase to 1.25% on benefits $60,000 and below per year and .15% on benefits above $60,000.  This reduction will reduce the unfunded liability in the PERS system by a third over the next twenty years.  In order to mitigate the effect on low-income workers, those with benefits of $20,000 and below will receive annual checks amounting to a .50% COLA on top of the 1.25%, and those with benefits between $20,000 and $60,000 will receive .25%.  Funds for these payments will come out of the PERS reserve fund and will add up to $65 million over the next six years.  This will help make the reductions more bearable for middle- and low-income retirees.  However—and this is crucial—it will not be subject to the annual roll-up on which the next year’s COLA will be calculated. 

If the reduction continues for the next twenty years, the loss of potential monthly retiree income will be substantial and painful.  The bill directs PERS to do an analysis of the fund in six years to determine the condition of the unfunded liability.  The PERS board could then recommend to the Legislature that the supplemental payments be eliminated, reduced, or increased; or that the COLA be further reduced or restored to 2%.  Obviously, my hope is that the latter will occur.

I voted for this one, which was extremely tough.  Why was it tough?  It’s not because it affects me directly as a future PERS retiree, though it does.  It’s because we had already passed a bill (SB 822) that reduced the COLA back in April, and now we were asking for further sacrifice from public servants who did nothing to deserve this.  So why did I vote for it?

After the close of the regular session, it became increasingly clear to those of us who had to look at the numbers that SB 822—whether or not it is upheld by the Supreme Court when it rules at the end of 2014 or early 2015—would not prevent further serious PERS rate increases for cities, counties, school districts, colleges, and universities, to the tune of many hundreds of millions of dollars.  Yes, the economy is slowly closing the gap in the PERS fund, but even if the economy continues to recover at its current rate, it will be several biennia before the fund becomes once again fully funded.

We received clear warnings from people that I have come to trust that governments, school districts, colleges, and universities would have to once again do cuts in salaries and school days, as well as layoffs if something wasn’t done.   My preference would have been to find enough additional revenue to prevent that, but that would take bipartisan support that is simply not there at this time.  (Remember, it takes a supermajority to raise revenue in the Legislature.)

I was convinced that we needed to do something that would not jeopardize the integrity of the PERS system.  As you know, there have been calls out there to “reform” the system in a way that would essentially make it no longer a pension and would do very serious damage to employees and retirees.  I’ve always felt that this is a short-term problem—one that will resolve itself over the next few biennia—and it requires a short-term solution.  Doing a further COLA reduction—while adding some payments to mitigate the impact on low-income retirees—seemed the best way to do that.

Back in June, when we were first considering further cuts, there was another item on the table, one changing the “money match” method for “inactive” members.  I’ve written in the past about why this was a horrible idea, one that would cost a number of people who are in fact currently working in public service thousands of dollars in benefits each month.  I’ve been pushing to have that provision removed, and I’m happy to say that I did manage to get it off the table.  I also managed to help create improvements in the supplemental payments (many thanks to Rep. Peter Buckley and Sen. Richard Devlin for following through on this). 

Having done so, I felt that I had to support the bill if it came to the floor, and it did.

We were assured by the Governor that if we passed this legislation, further cuts to PERS would be off the table as long as he remains in office (which will either be one year or five years).  I was pleased to see him hold a press conference immediately after the bill passed in which he repeated that promise for the public.  In his words, “The Public Employees Retirement System is off the table for this governor.  We are done. We are going to move on to other things that are important to Oregonians.”  He has also indicated that he will immediately begin work to keep anti-public-employee measures off the ballot and will bring people together for serious tax reform in this state, one that will get us to stable and adequate funding for necessary public services in a fair way.

SB 862 – Removing Unnecessary, Controversial PERS Elements

Senate Bill 862 – reforms certain policies related to the PERS system that nearly everyone agreed are not needed in the system.  The bill passed the House unanimously and passed the Senate 27-2.  Here are its three elements:

Removes Future Legislators from PERS.  There are people who believe that having legislators in the PERS system compromises their ability to act dispassionately on issues related to PERS.  In my experience, I simply do not see that.  But we are making this change to remove the perception of a potential conflict of interest.  Currently, legislators who are not already PERS members through their other employment have the choice of joining PERS or going into the state’s deferred compensation program.  Now they will only have the latter choice.  New legislators who are already in PERS will be able to remain in PERS, so that this does not become a barrier for teachers, firefighters, and other public employees to run for public office. 

Bars Payments in Lieu of Insurance Coverage from Being Calculated as Salary for PERS. In certain rare cases, employees have apparently arranged to have their employer-paid insurance premiums converted into salary during their final three years of employment, which results in a bump to their PERS benefit when they retire.  The bill makes that impossible going forward.

PERS Distributions Subject to Garnishment/Attachment.  Currently, PERS benefits are shielded from court-ordered restitution or fines for a felony.  The bill establishes conditions under which monthly PERS benefits or lump sum payments can be ordered garnisheed or attached by the court. 

SB 863 – Banning Local Ordinances on GMO Products

Senate Bill 863 preempts local bans on agricultural seed except in counties where local ordinances have already qualified for the ballot (i.e., Jackson County).  It passed the House by a vote of 32-22 and the Senate 17-12.

Modeled after a bill that passed the Senate but failed to come to the House floor during the regular session, this version would allow Jackson County to proceed with its planned referendum next May.  It was added to the package as a Republican demand when the terrible “inactive” piece of the PERS bill was removed.  It should never have been part of a special session that focused on PERS and additional revenue for schools and senior services, but it did become part of the framework.  It was a little different from the others, in that, based on what we knew about where legislators were on this issue during the regular session, there were always going to be enough votes on both sides to pass it if it was allowed to come to the floor.  And that’s how it turned out. 

I was a "no" during the regular session when the bill was in the Rules Committee, on which I sit.  I do believe that local voters should be able to regulate against products that they consider harmful.  I remained a "no" when the bill came to the floor on Wednesday.

If there’s a silver lining to this turn of events, it’s that there is a lot more awareness of this issue now.  Legislators received thousands of emails from concerned Oregonians around the state.  As a result of this activism, the Governor has agreed to take some strong steps to find a statewide solution to the problem of unwanted GMOs in our state.  On the day before the vote he sent a letter to the Speaker and the Senate President articulating his plans to seek a statewide plan for GMO labeling and ways to insure that GMO seed does not taint non-GMO crops.  Read it here.

This will obviously require further attention and further work.

Bipartisan Angst, Bipartisan Accomplishment

In the reporting on the special session, we have seen many comparisons made to what’s going on in Congress right now.  Yes, that comparison makes us look especially good because  unfortunately right now Congress is setting a pretty low bar.  

Looking back, what I find really interesting in the votes on the various bills in the package was the way they were NOT completely split along party lines. Disagreements were as much within parties as between parties.  Look at the way the votes came down on the House side:

HB 3601 (the revenue package, 36 aye votes needed):

Aye 26D, 10R

Nay 5D, 14R

Excused 3D, 2R

HB 5101 (the spending package)

Aye 31D, 23R

Nay 1R

Excused 3D, 2R

SB 861 (the PERS COLA bill)

Aye 15D, 16R

Nay 16D, 8R

Excused 3D, 2R

SB 862 (the PERS Policy bill)

Aye 31D, 23R

Nay 1R

Excused 3D, 2R

SB 863 (the GMO bill)

Aye 8D, 24R

Nay 22D

Excused 4D, 2R

(For an interesting further analysis of the vote distribution, check out Kari Chisholm’s piece in Blue Oregon).  Again, it shows just how mixed the votes were, with each member weighing each bill on its own merits while keeping an eye on the total package.

A joint statement by the House Democratic and Republican caucuses captured the spirit of the accomplishment—and the angst:   “This compromise package . . . included something that was difficult for every member of the legislature.  Every legislator had to wrestle with these decisions and determine the best path forward. We are grateful for all the hard work done by our colleagues.”

All the controversial bills were compromises, including elements that some within each party could support and others not, and that accounted for the split votes.  The debates and deliberations behind closed doors, within the individual caucuses, were long, intense, and difficult--I know ours were—but by the time the bills came to the floor and we were prepared to vote, it was a different story.  The quality of the debate was very high, and during the down times there was a great deal of collegiality.  Members from different parties and with positions on different sides of the individual bills hung out together and enjoyed one another’s company.  

There were some interesting coincidences that helped set this positive tone.  Monday, the first and probably the most difficult day of the session, was also Speaker of the House Tina Kotek’s birthday.  Tuesday we celebrated the 75th anniversary of the Capitol building.  And on Wednesday we got to see photos of the newest member of the legislative family, Grace Reed Garrett, born to Rep. Chris Garrett and Lauren Rhoades Garrett, who had been born in the midst of the special session.  Standing together on the floor and applauding her arrival was very, very special.

And a far cry from the gridlock in Washington, D.C.



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