Oregon Legislative Update 5-21-19

Week 17 – State Legislative Update

Activity on Major Issues

• The $2.8 billion Commercial Activity Tax (HB 3427) was signed into law by Governor Brown. Starting on January 1, 2020, all businesses doing business in Oregon will see:
   
  • A gross receipts tax rate of 0.57% on Oregon sales over $1 million;
  • A 35% deduction from taxable sales for labor OR business inputs, whichever is higher;
  • An exemption for groceries (defined as those that qualify for ‘SNAP’) and transportation fuel.
• Cap-and-Trade (HB 2020). On Friday, HB 2020-A passed its first major milestone. After three hours of debate, the Joint Committee on Carbon Reduction adopted the -94 amendments on a party line vote and sent the bill to the Joint Committee on Ways & Means for further deliberation. Democrats voted down all other amendments that were brought forward, although it was widely acknowledged that rural Oregon would suffer job loss and economic hardship under the bill.
  
  As currently written, if this bill were to pass in its current form, transportation costs will increase. Natural gas costs will increase. Propane costs will increase. Local food processors and manufacturers will face a real competitive disadvantage. Small businesses and households will see increases in transportation and energy costs.
  OSCC still believes there are still opportunities to change this bill in the Ways & Means Committee.  

What happened last week?

• The state revenue forecast added $770 million to state coffers for the upcoming 2019-2021 biennium. Just from the last forecast in March, every metric grew by eye-popping numbers due to a historic influx of revenue over the tax season.
  
  In addition to the influx of $770 million into the upcoming budget cycle, the kicker almost doubled in size.  It’s now projected at $1.4 billion. Net reserve funds are now nearly $3.5 billion.
  
  But the real impact of the historic revenue forecast is that it will tamp down on talk of additional tax revenue for the remainder of the 2019 legislative session.
• The legislature’s attempt at PERS reform was unveiled with Senate Bill 1049. SB 1049 contains the following provisions:
   
  • 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. 

The future of SB 1049 is uncertain. Although it is only a modest cost-saving measure, the unions oppose it in force and it is unlikely that majority Democrats can carry the issue themselves.

• Equal Pay Technical Fixes (SB 123-A). On Tuesday, the Oregon Senate passed SB 123 unanimously. The bill includes several important technical fixes to give employers clarity in implementing Oregon’s Equal Pay Act. Oregon’s law is the most comprehensive in the country, and it has been difficult for many employers – large, small, and seasonal – to implement. We anticipate rulemaking later this year to address several other issues identified by Sen. Kathleen Taylor and Sen. Tim Knopp.

Other key issues coming up this week.

• Prevailing wages in enterprise zones (HB 2408). We are expecting the Senate Workforce Committee to take up HB 2408 this week. In its current form, the bill requires prevailing wages to be paid on private enterprise zone projects of $20 million or more. OSCC is actively opposing and lobbying the legislation.
• Lawsuit Damages (HB 2014). We are expecting the Senate Judiciary Committee to vote on HB 2014 this week. HB 2014 would repeal Oregon’s legal limit of $500,000 on non-economic damages in personal injury and negligence lawsuit claims. OSCC, health care groups, and business organizations are opposing this legislation because it is a significant factor in driving up health care costs and general liability costs for employers.
• Paid Family Leave is still under discussion. The last remaining bill alive looks something like this – Details of this are being worked out now.  More like the Washington state model.  Business has asked for it as long as it more clearly mirrors the Washington model. Current scenario.  – Employer employee split 40/60, 12 weeks for serious medical conditions, birth. Same qualifying factors for OFLA, business under 25 employees, exempt, but employees have to pay in those businesses.  Only those (businesses) who pay into system are available for training grants to cover those employees on leave.  Leave requirements apply to any employee down to 1 employee, even if exempt as under 25 employees.  Employer plans we need to meet or exceed these benefits to get a waiver.  More details as we get them.

There are fewer than 45-days before session adjourns, and NOW is the time to make your voice heard.