Legislative Preview: A Shifting Balance

BY APRIL STREETER

Democratic gains pave the way for a revival of environment and labor bills as revenue reform languishes.

Democratic gains pave the way for a revival of environment and labor bills as revenue reform languishes. 

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BY APRIL STREETER | ILLUSTRATIONS BY CHRIS NOBLE

In the upcoming 160-day session of the Oregon legislature, there is no single “signature” issue like the Columbia River Crossing to garner major attention. Yet numerous smaller initiatives and the long-term specter of tax and revenue reform have the power to rile — and even divide — the business community.

State government always revolves around revenue and budget, and the slightly better economic times Oregon is experiencing now make “budget challenges a little easier to deal with,” says Dan Jarman, partner at CFM Strategic Communications, a lobbying group in Portland. “On the other hand,” Jarman continues, “the business community may be asked next session to swallow hard for paid sick leave or a minimum wage increase to $15, among other things. That may be challenging.”

With the midterm general elections and Democrats’ gain of two seats in the Oregon Senate, priorities are already shifting. The passage of measure 91 legalizing recreational marijuana gives lawmakers work to do grappling with implementation issues. How the Oregon Supreme Court will rule on legality of the PERS reforms of the last legislative session will also have budgetary significance.

Yet it is that slight two-seat change in the control margin in the Oregon Senate that may have the biggest effect going forward. Reelected Gov. John Kitzhaber enjoyed Democratic majorities in both the House and the Senate last session, and with the boost of two seats, he may now have just the votes needed for environmental initiatives like the Clean Fuels Program, which must be extended during the 2015 session or face death before ever being implemented.

This Democratic swing is, of course, in direct contrast to the national legislature, where the Republicans gained control of the Senate, likely generating an even more gridlocked lawmaking environment.

Working through the emotions toward resolution

U.S. Sen. Jeff Merkley, who handily won reelection against Republican opponent Monica Wehby, recently commented that Oregon’s legislature “works 10 times better” than the highly polarized national version.

That’s been due to a spirit of nonpartisan compromise that has managed to prevail in Oregon in the near past, says Nik Blosser, president of Celilo Group Media and a former chair of the Oregon Business Association.

“Our legislature is far more functional than Washington, D.C.’s  —  we just don’t have the same kinds of pressures,” Blosser says. The get-it-done spirit Blosser describes was instrumental in rejiggering the state’s PERS pension system in the last legislative session. PERS reform has already been deemed by many to have positive impacts on state education through freed-up funds for new-teacher hiring, but the Supreme Court could overturn it before the 2015 session.

Whether this relatively well-functioning milieu (Oregon is considered the 19th most partisan legislature nationwide) can persist in 2015 is hoped for but not certain. Relationships between the business community and labor unions may become strained in the next session, as CFM’s Jarman indicated, as labor unions push a little harder on minimum wage, statewide paid sick-leave provisions and even a savings or pension program for non-state workers.

Joe Baessler of the Oregon branch of the American Federation of State, County and Municipal Employees (AFSCME) says he is looking for “smart compromise” rather than any kind of a “throwdown.”

“That would definitely be a path that leads to a breakdown of relations, and that’s not what I want. Sessions can get really emotional, but I think we want to keep it congenial and keep it compromise driven,” Baessler says.

In terms of paid sick leave (Eugene and Portland already have provisions for city workers), the Oregon Business Association is “open and willing to sit down at the table and see if there’s a statewide solution that works,” as OBA president Ryan Decker put it. However, the state’s other business group, the more conservative-leaning Associated Oregon Industries (AOI) has come out firmly against the idea, as has the Oregon division of the National Federation of Independent Business (NFIB).

{pullquote}Sessions can get really emotional, but I think we want to keep it congenial and keep it compromise driven. — Joe Baessler{/pullquote}

“Small business hasn’t bounced back economically to the same degree and can’t tolerate these extra costs,” says NFIB director Jan Meekcoms. “Looking at 2015, to us the added healthcare costs, added labor costs, an added gas tax [if the Clean Fuels Program moves forward] are all adding up to one of the most small-business-unfriendly sessions in recent memory.”

Clean Fuels Program to be a point of contention

That Clean Fuels Program is a key area where the business community divides. The program sunsets in 2015 and has only had a first reporting phase implemented; the second phase mandates a 10% reduction in carbon emissions from fuel use over 10 years. The standard  is supported by large companies like Waste Management, as well as smaller companies like Cornelius-based Summit Natural Energy, which is making ethanol from apple cores and rotten brownie mix. Angela Crowley-Koch, legislative director for the Oregon Environmental Council, says proponents of the bill count on OBA’s support, and notes a clean-fuels “cluster” could be spurred here if the fuel standard moves forward. NFIB and AOI are adamantly opposed to the measure.

Doug Moore, executive director of the Oregon League of Conservation Voters, considers the chances for implementation of the fuels program, with the Senate shift, to be “excellent.” But Moore says he is inclined to throw cold water on the idea of quick passage of a carbon tax. A report on carbon pricing due late December from the Northwest Economic Research Center will be discussed, but no bill is yet in draft.

“Nothing is impossible, and no doubt there will be discussions on it,” Moore says. “My feeling is the legislature is not going to want to do something like a carbon tax in a piecemeal fashion.” Moore stressed that getting control of climate change (and pricing carbon in some way) is very much on OLCV’s slate of priorities. But looking ahead, he believes, “with so many issues facing our state — school funding, for example — a carbon tax has got to be seen in light of that longer-term discussion of revenue funding that needs to take place.”

0115 legislativepreview02 620pxOEC is also hoping to revive a toxics disclosure and substitution bill on children’s products in the next session. HB 3162, the Chemicals of Concern for Children’s Health bill, didn’t go through in 2013, but “public support for the issue in Oregon is huge, and bipartisan support was good, so we are trying again,” Crowley-Koch says.

Working to maintain the food industry's forward momentum

One topic that can cross the partisan aisle as well as the state’s urban-rural divide in the next session is food industry innovation. Even while most segments of the Oregon economy floundered during the recession years, food manufacturing in the state grew, and even outpaced national growth of the sector. That’s why OBA is working on an appropriations request for the 2015 session to build a more substantive food innovation center in the state, and to boost the ability of processors to develop and lab test innovative products locally. D.J. Vogt, OBA’s vice president of government affairs, put the price tag on this type of facility at “north of $50 million,” and it is the kind of initiative, he says, that would feed this well-developing industry while expanding opportunities in the rural reaches of the state.

Education is another area where there is across-the-aisles good will but hard economic choices. In 2015 the Pay It Forward pilot program, which creates an alternative way for college students to pay a percentage of earnings when in future jobs, will be presented to the legislature. The possible price tag — $119 million in revenue losses to the state over 50 years — gives some pause. Jarman calls this type of new program part of “expensive funding liabilities,” while OBA’s Vogt said its education “pillar” for the 2015 legislative season will be K-3 reading programs, especially since the last session involved a lot of focus on higher education and university governance in the state. Gov. Kitzhaber’s proposed 2015-17 budget, released in early December, calls for a 9% increase in education spending, with a priority on early childhood: the plan allots $6.9 million to public schools, up 4% from its current level of $6.65 million, with another $407 million earmarked for early learning programs..

A last specter looming for the next legislative session with power to either galvanize or grate on the state’s business community is tax reform. Kitzhaber, reelected to an unprecedented fourth term, may spend some political capital to press the legislature to come up with its own ballot measure (for 2016) revising corporate tax rates, or possibly reconsidering the tax-reduction rate for small businesses passed with HB 3601 in 2013. That’s anathema, says NFIB’s Meekcoms. “Small businesses are where jobs are created in Oregon,” she says. “And we’re just starting to see the trickle-down in economic improvements. We’re a smallbusiness state and this is a small-business issue, but we haven’t really been included by Kitzhaber at the tax-reform talking table.”

How far Kitzhaber will want to go on this and other environmental-business issues such as carbon pricing remains to be seen. Shaken from the disclosures regarding his fiancée, Cylvia Hayes, the press-harangued governor may be battle weary. For those wondering what the 2015 legislature will mean for business in Oregon, it looks like a mixed bag. Signs point to higher environmental priorities and perhaps the emergence of both a stronger food innovation sector and  a revitalized biofuels sector, but at possibly increased costs to businesses from higher minimum wages and sick leave policies. As for the lack of an overriding issue like the Columbia River Crossing: In 2015 the elephant in the legislative room is the absence of a coherent and sustainable state funding infrastructure.

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