What’s Happening (OSCC Political Observations)
House and Senate Republicans ground the session to a crawl last week as both caucuses employed tactics designed to slow the pace of the session. Senate Republicans simply did not come to the capitol and effectively denied the necessary quorum to conduct Senate business.
Senate Republicans continue to negotiate with Senate President Peter Courtney on a slew of bills and a “go home” package. They hope to be able to come to agreement by Monday.
The result was an atypical slow legislative week in what would have otherwise been an intense week of jockeying as major deadlines loom. May 10th was the deadline for all policy bills to be posted for a work session in order to move forward. By May 24th, all bills must have been voted out of their second chamber policy committee in order to survive. Bills in Rules, Revenue, or Ways & Means will remain ‘in play’ through the end of session, although many of those committees will be wrapping up their work by mid-June.
Activity on Major Issues
- The $2 billion Commercial Activity Tax (HB 3427) was most impacted by the work stoppage last week in the Senate. What was slated for an expedited Senate vote last Tuesday is still on hold.
HB 3427 includes the following components:
- Gross receipts tax rate of 0.57% on top line sales over $1 million;
- A 35% subtraction from receipts for labor OR the cost of goods sold (COGS), whichever is higher; and
- An exemption for groceries (defined as those that qualify for ‘SNAP’ sold at retail).
Senate Republicans are trying to force the bill back to committee to lower the tax rate and/or increase the $1 million exemption. It is unclear whether they will be successful.
- PERS Reform finally made an appearance (SB 1049). On Friday afternoon, Speaker Kotek and Senate President Courtney unveiled their plan to tackle PERS costs. Under their plan:
- Tier 1 and Tier 2 members, who are public employees who entered the PERS system before 2004, would have 2.5% of their salaries diverted from their individual retirement accounts into paying off the system’s debt.
- Workers hired 2004 or later (PERS Tier 3 and Tier 4), would face a lower diversion – 0.75% of their salaries.
- Public employees earning less than $30,000 a year would be exempted.
- A reduction in assumed interest rate for retirees who use the “money match” method of calculating their pension benefits.
- Most significantly, legislators seem to have abandoned efforts to raid SAIF to cover PERS liability, which is a good development for Oregon employers.
- Cap-and-Trade (HB 2020) Legislators unveiled the latest version of the carbon pricing bill in the -84 amendments last week. The amendments made a handful of changes, but failed to address some of the bigger affecting the business community such as the huge cost pressures associated natural gas and transportation fuel.
The new version of the bill contains the following:
- Natural gas utilities receive 60% free allowances in 2021 that decline in 2022 in contrast to 100% for investor-owned electric utilities. Similar to California, these allowances are consigned, which limits how the utility can use them. That means many ratepayers-particularly industrial and commercial facilities-will see rate increases beginning in 2021. This was not a win for local business communities.
- Trade-exposed manufacturers and processors are assigned a benchmark of free allowances based on the best available technology. This is an attempt to keep some of the state’s bigger job-providers from moving out-of-state.
- Transportation fuels will bear the brunt of the cost increases in the early years of the cap-and-trade program. A tax refund may be available for off-road fuels used in forestry and agriculture, but it is subject to a study of legal challenges.
- Assistance may be available to low income Oregonians to help cover cost increases for automobile fuels, propane, and home heating oil.
There is still a lot of work to be done, because as written, the -84 amendments will still result in a competitive disadvantage for local Oregon businesses. Our sources tell us that legislators plan to adopt the -84 amendment on Friday this week and pass the bill to Ways & Means. We will keep you updated as the process unfolds or as opportunities to weigh in come up.
- Diesel Regulations (HB 2007) Negotiations have been ongoing on HB 2007, the on-road diesel engine retrofit and replacement bill. The bill is scheduled for a public hearing and work session early next week with an amendment that is expected to:
- Scale down the phase-out and diesel retrofit requirement for on-road diesel engines to the tri-county (Metro) area which includes Clackamas County, Washington County, and Multnomah County.
- By 2029, all heavy duty diesel trucks must have a 2007 or newer engine. Also by 2029, all medium duty diesel trucks must have a 2010 engine or newer. Farm vehicles and motor homes will be exempted.
- Paid Family Leave (HB 2005) Paid family leave has dominated the labor conversation this session. HB 2005 is the last remaining paid family leave bill, and it currently sits in the House Rules Committee. Labor unions have threatened a ballot measure in 2020 if HB 2005 fails to pass. However, a draft policy is currently in the works to forestall a ballot measure, including the below components (modeled loosely on Washington):
- 12-weeks paid family and medical leave annually
- All employees are eligible after they’ve earned $1,000
- State-run insurance program, funded through payroll tax contributions
- Payroll tax of up to 1% (60% employee paid, 40% employer paid)
- Employers with 25 or fewer employees are not required to pay the premium
- Job protection requirements come into effect after 90 days of employment
- Marijuana Accommodation (SB 379) In a bit of good news, SB 379 is officially dead. This bill would have undermined and nullified all employers’ workplace drug-free policies and would have required employers to accommodate off-duty marijuana use. Although the Senate Judiciary Committee passed the bill on a party-line vote, Senate President Courtney refused to let it come to the Senate floor when it was clear that OSCC and other secured enough votes to defeat the bill.