What’s Happening (OSCC Political Observations)
Much of the Legislature’s focus over the last week was centered around Mike Nearman and whether to expel him from the Legislature over letting protesters into the Capitol in December 2020. On Monday, House Speaker Tina Kotek introduced a measure that would formally expel him from the House of Representatives. By Thursday evening, the House voted 59-1 (with Mike Nearman casting the no vote) to do just that. His seat was immediately declared vacant and must be filled via appointment within the next 30 days. There is nothing that precludes Nearman from seeking to re-gain his seat.
Against the backdrop of Nearman’s expulsion, lawmakers continue to make steady progress toward adjournment. The Joint Committee on Ways and Means met Friday to advance a hefty mix of nearly 50 budget and policy bills. At this point, it appears that all major budget decisions have been made as agency budgets are nearing completion, ARPA funding decisions have been made, and “Christmas Tree” general fund and lottery bonding decisions are solidified.
Given all this, a June 18th adjournment, at least in the Senate, remains a strong possibility. The House, too, is increasingly likely to adjourn early, though likely a few days behind the Senate. House Speaker Tina Kotek told Representatives they should tentatively plan to work through this weekend. In the meantime, final deals are being made on some of the more controversial “go home” policy bills such as the 100% Clean Electricity Mandate (HB 2021).
Update on Legislation Impacting Local Business Communities
Paid Family Leave Delayed Implementation (HB 3398)
OSCC is expecting passage of legislation to delay implementation of Oregon’s Paid Family Leave law. Under the law passed in 2019, the department is supposed to begin collecting the tax to fund the program beginning in January 2022, with employees receiving benefits in 2023. Under HB 3398, the new tax would be delayed for one year – until January 2023 – with benefits being paid out later that fall.
PPP Loan Forgiveness Tax (SB 137 -2)
The Senate Finance and Revenue Committee considered a gut-and-stuff amendment to SB 137 that would result in increased taxes on PPP loans forgiven by the federal government. Under the amendment, the taxes would kick in on forgiven loans above $100,000. The Legislative Revenue Office estimates this tax would cost Oregon businesses between $450-$600 million. The Senate abandoned this effort when OSCC and our members strongly pushed back.
Pass-Through Entity Tax Increase (SB 139)
Senate Finance and Revenue Committee Chair Ginny Burdick (D-Portland) continued her work last week on a proposal to roll back the reduced tax rates for pass-through entities. Sen. Burdick’s current proposal would eliminate the reduced tax rate for pass-through entities with more than $5 million in annual net income. Qualifying businesses with less than $5 million in net income would also be subject to an owner-employee ratio test or a three year average limitation on distributions of income as a percentage of ordinary business income.
The proposal continues to face pushback from Oregon’s business community, though Sen. Burdick appears intent on attempting to move her proposal before adjournment. OSCC opposes the bill as it attempts to raise taxes on businesses when state government is swimming in more money than anytime in history.
Small Business Development Centers (HB 5023)
Small Business Development Centers received about a 25% increase in funding for the upcoming 2021-23 budget.
Current funding levels of $4.6 million were proposed to be cut by 50% under the Governor’s Recommended Budget. However, the legislature will not only restore those proposed cuts, it will add another $1 million to fund SBDC’s at a $5.6 million level.
Unemployment Insurance Tax Fix (HB 3389)
HB 3389 will finally pass. OSCC testified in favor and lobbied for this important bill to allow employers to defer payment (without penalties or interest) until June 30, 2022, of up to one-third of tax owed in 2021 if their tax rate increased by at least 0.5 percentage points between 2020 and 2021. The bill also provides a formula for employers to have a percentage of their tax bill forgiven depending on the rate of increase they experienced.
But perhaps most importantly, the bill attempts to hold employers most impacted by the pandemic harmless from future increases by excluding layoffs that took place during the 2020 pandemic when calculating an employer’s experience rating going forward.
The bill should save employers $2.4 billion in unemployment tax costs over the next decade.
OSCC remains skeptical of HB 2021 as it effectively aims to eliminate natural gas a generating resource for electricity in Oregon by 2040 and make Oregon’s electricity grid reliant on hydro, solar and wind power. Our concern for the bill is ultimately the reliability issues we’ve witnessed in California with rolling brownouts and blackouts due to lack of available electricity supply in peak times.
HB 2021 was assigned a Ways and Means Subcommittee late on Friday, signaling lawmakers will give the bill a final push before the end of session. We believe proponents of the bill are continuing to meet behind closed doors to develop last second amendments that they hope will lead to its passage. We believe these amendments will be aimed at encouraging more renewable projects to be built in Oregon.
Consideration of HB 2021 is complicated by two related bills also awaiting further action in the Joint Committee on Ways and Means: HB 3221 and SB 784. HB 3221 establishes the Oregon Renewable Options Program within the Public Utility Commission, allowing local governments to opt in to utility programs that offer more renewable electricity. SB 784 grants utility companies the authority to charge customers for costs associated with “resiliency” projects, such as those that respond to climate change.
Conversations over which of these three bills will or will not move forward are ongoing. We believe lawmakers will prioritize HB 2021 and leave the other two bills for another session.