What’s Happening (OSCC Political Observations)
From a business perspective, the 2019 session can be distilled into four primary categories:
- Revenue. As we’ve noted, there is currently over $5.67 billion in additional revenue proposals that are alive in the legislature. The crown jewel of the revenue proposals is HB 3427, the $2 billion gross receipts tax for K-12 and early education. OSCC is also very concerned about HB 2269, the sneaky $500 million health care tax on employers with 50+ employees. HB 2005, a $1+ billion tax to establish a new paid family leave program, is also alive in the legislature.
- Cap and Trade. OSCC has consistently opposed HB 2020 and is currently working with key legislators on changes to the bill that would offset the increase in costs on electricity and natural gas for local businesses. These efforts could prove successful. But at the same time, there appears to be very little legislative effort underway to reduce the major increases in gas taxes that would result from the bill. An initial 16-cent per gallon gas tax hike is projected from the legislation. HB 2020 also establishes a new bureaucracy, the Carbon Policy Office, which would have broad powers over the economy.
- SAIF raid / PERS reform / Cost containment. The response to the Governor’s proposal to take $500 million from SAIF, take $500 million from the ‘kicker,’ and require active Tier 1 and Tier 2 public employees to contribute 3% of salary to their pension has hit with a thud. Republicans will not support taking the ‘kicker,’ unions won’t support public employee contributions to the pension, and business is vehemently opposed to raiding SAIF.
- Ancillary business issues. OSCC continues to be concerned with the significant number of bills that would hurt business operations (SB 379, marijuana accommodations), hurt economic development (HB 2408, prevailing wages in enterprise zones), hurt existing programs (SB 595, diversion of transient room taxes to fund housing), create additional liabilities (SB 726, workplace harassment liability) and add additional business costs (HB 2014, eliminates $500k cap on non-economic damages in civil lawsuits).
Activity on Major Issues
- The $2 billion Commercial Activity Tax (HB 3427) is now clearly the top priority of legislative leadership.
The Thursday public hearing was a disaster for business as only OSCC and two agricultural groups showed up to testify against the gross receipts tax.
HB 3427 has the following components:
- A flat $250 tax on all business entities for sales under $1 million;
- All business entities with sales over $500,000 must register with the state;
- A gross receipts tax rate of 0.49% on Oregon sales over $1 million;
- A 25% deduction from taxable sales for labor OR business inputs, whichever is higher;
- An exemption for receipts from sales to a wholesaler or ag cooperative for any sales outside of Oregon; and
- An exemption for groceries (defined as those that qualify for ‘SNAP’).
OSCC testified against the proposal because of its impacts on small and start-up businesses.
- SAIF. There is ongoing negotiation between SAIF and the Governor’s office about SAIF’s potential contribution to the PERS unfunded liabilities. The Governor’s office is looking for a $700 million contribution from SAIF while SAIF believes it can contribute somewhere in the neighborhood of $300 million over the next 7 years without impacting policyholder rates and dividends. OSCC continues to be opposed to a raid on SAIF to pay down PERS liabilities.
What happened last week?
- Prevailing wages in enterprise zones. OSCC was disappointed to see that HB 2408 passed the House floor so easily. The bill required prevailing wages on all private projects in Enterprise Zones in excess of $20 million. Such a policy erodes one of Oregon’s last remaining economic development tools. OSCC will fight the bill much harder on the Senate side.
Other Key Issues Coming up This Week
The upcoming week is going to be fairly quiet on key issues. There will be no additional hearings on Cap and Trade this week, but there will be consideration of the following:
- HB 2269 health care tax. OSCC strongly objects to this legislation which will give the Department of Consumer and Business Services (DCBS) a blank check to determine how much each business ‘should’ be spending on health care for its employees and then tax each business that does not spend as much on health care as DCBS believes it should. The bill will be engineered to raise $500 million per biennium. To make matters worse, Legislative Counsel has determined that because the bill simply allows an agency to construct and levy the tax, it does not require the 3/5th supermajority to pass the legislature.
- HB 3022 workers’ compensation compromise. OSCC initially testified against this legislation, which would have upended 30-years of successful workers’ compensation reforms and drastically raised workers’ comp costs on employers. However, the bill was deftly negotiated by SAIF so as to end up a compromise bill that won’t impact employer rates. OSCC continues to monitor to ensure that the terms of the compromise are honored.