Like it or not, Grand Bargain is now Oregon law

by Sen. Doug Whitsett (R- Klamath Falls)

The three day special legislative session called by Governor John Kitzhaber concluded Wednesday with the passage of five bills. I voted in favor of four of those bills including:

· SB 891 further reduced the cost of taxpayer funding for the Oregon Public Employee Retirement System (PERS) and reduced the System’s long term unfunded liability. The measure was another small step in the right direction. It did not create nearly enough savings but, in combination with a bill enacted into law during the earlier regular Legislative session, it does address about one third of the PERS structural funding shortfall.

· SB 862 prohibits newly elected or appointed legislators from becoming new PERS members, curtailed some of the ability to use medical insurance premiums to “spike” PERS benefits, and made PERS benefits accessible to pay certain criminal judgments. The bill does not go nearly far enough but it does make small steps in the right direction.

· SB 863  establishes that only the state legislature has the authority to enact laws regulating the cultivation of genetically modified crops and livestock. This new law is often misquoted and misunderstood. It does not address whether it is appropriate to grow genetically modified crops and livestock. Its only purpose is to appropriately limit the regulatory authority to the legislature; thereby, preventing the creation of a mosaic of unenforceable and conflicting regulations from being enacted that would cripple Oregon agricultural production.

· HB 5150 appropriated the $190 million in newly created revenue to K-12 schools ($100 million), to Community Colleges ($15 million), to Universities ($25 million) and about $50 million for a variety of senior, mental health, and disability programs.

I voted in opposition to HB 3601 for a variety of reasons that are highlighted in my floor speech that follows:

“It has been said that this “must be a good bill”, because it has something for everyone to dislike.

1.) For those who believe we should practice fiscal responsibility: The bill takes nearly $80 million from the Rainy day fund to spend on current expenses over the next 42 months. Is it good policy to use money from our savings account to pay for current and ongoing costs?

2.) For those who believe we should live within our means: The bill increases taxes by nearly $190 million during the current two year budget period. Most of those tax collections are retroactive to the first of January. This year, we already have nearly $2 billion more to spend in General Fund and Lottery revenue than ever before in history. We have chosen to spend virtually all of that increase on other programs. Obviously, even a 13% increase in revenue cannot satisfy our insatiable spending appetite.

The $190 million in new tax revenue created by this bill only amounts to 1.16 percent of the nearly $17 billion that we have already spent. Wouldn’t it be more prudent to reprioritize a little more than one percent of our spending rather than to enact even more taxes?

3.) For those who believe in limiting government growth: The bill increase taxes by about $320 million over the next 10 years. The growth in spending for this biennium will now be more than 14.5%, with the addition of the $190 million in new tax revenue in this bill. As you know, the appropriation bill, to be considered later, spends all of that increase and more.

4.) For those who believe Oregonians are already over-taxed:This bill increases taxes by $190 million in this budget cycle alone and is retroactive to Jan. 1st. According to Legislative Revenue numbers it increases taxes by about $320 million over ten years, an average of about $32 million per year.

5.) For those who believe taxation should be equitable:

a.) This bill does not reduce taxes; rather, it shifts the tax burden.
b.) Over ten years, the bill takes about $1.55 billion more from certain taxpayers, gives about $1.25 billion more to other taxpayers, and keeps the balance for the state government to spend.
c.) It takes about $220 million from middle-class C-Corps, such as doctors, dentists, attorneys, accountants, engineers and architects that are organized as professional corporations.
d.) It takes about $400 in personal deductions from middle class families. This feature is not indexed to inflation, so each year more families will lose that deduction.
e.) It takes more than $800 in medical deductions from seniors. The senior citizens that are losing this deduction are not all wealthy people. The tax increase begins with a 22% loss of the medical deduction, with an Adjusted Gross income of only $25,000, a monthly income of only about $2,000! That tax increase expands to a 44% loss of the medical deduction, for those with an Adjusted Gross Income of $50,000, a monthly income of only about $4,000.

The bill also phases in changes in the age eligibility from 62 to 66 years of age and requires that for those filing a joint return both must have achieved that age before any deduction can be taken. Make no mistake! This bill is designed to eliminate Oregon’s senior medical deduction regardless of the amount of their income.

6.) The bill does provide more than a billion in tax reductions for middle-class pass-through businesses. However, those tax reductions DO NOT begin until Jan 1, 2015!

Those tax reductions will NOT apply to sole proprietors who do not have non-shareholder employees. These are Oregon’s self-employed entrepreneurs. The Legislative Revenue Office estimates that this class of taxpayers contributes as much as 15% of all income tax revenue.

The entire class of taxpayers is left out of the tax break. HOW EQUITABLE IS THAT?

This bill has something for everyone to dislike …. because it really is a very dislikable bill.”

This set of five bills made up the grand political bargain that has been negotiated for most of the past eight months. The leadership of both political parties has been tenacious in moving the bills toward resolution. Like it or not, they are now Oregon law.