We are now two weeks into the 5-week 2018 session.
In our view, the pace of the session appears to be slowing down this week with fewer committee hearings and generally less activity. The insanity of the first two weeks is giving way to the hard realities of trying to push through legislation after only two weeks of work.
All told, about 180 of the 230 policy bills that were introduced are still alive … a stunning number with only three weeks to go. But many of these bills are alive in name only.
Here are the major developments of Week 2:
1. Both ‘Cap and Trade’ bills – HB 4001 and SB 1507 – were kept alive. Both were sent to their respective Rules Committees. We believe this is a bad development. At the very least, we expected the House bill to be kept alive and that the Senate bill would be killed. We are highly suspicious of this turn of events and were highly suspicious of some of the speeches last week that seemed to signal that ‘Cap and Trade’ may yet have some life in this 2018 session. Not good.
2. In a bit of good news, the Senate sent SB 1528 back to committee after a huge outcry from small businesses across the state. As we reported last week, we were surprised that the Senate Finance & Revenue Committee acted so swiftly in Week 1 to effectively repeal Oregon’s ‘small business tax cut.’ Senate Bill 1528 limited the tax cut to only the first $250,000 of pass through income (down from the current level of $5 million). Democrats passed SB 1528 on a 3-2 party line vote in committee, but Democratic senators were leery of being accused of raising small business taxes in an election year. The bill was sent back to committee for a ‘do over.’
3. A ‘Cleaner Air Oregon’ compromise bill – SB 1541 – looks to be gaining momentum. Food Northwest has approved the current version of the compromise bill which codifies more reasonable risk levels than the current version of the Cleaner Air Oregon rule. In exchange for these more reasonable benchmarks, industry will agree to pay for administration of the program. This is an issue to watch very carefully as it continues to undergo more negotiation and political scrutiny. It may end up being the key outcome of the entire session.
4. The state’s revenue forecast again indicated a positive economic outlook, though there was some uncertainty as evidenced by the reduction of 9,000 jobs since the December forecast. Revenue is tracking a bit higher than the December 2017 forecast. Projected 2017-19 net General Fund resources are up $69.8 million and projected 2017-19 Lottery resources are up $29.3 million – a combined projected net increase of 99.1 million. Business groups will use these projections to argue for a complete connection to the federal tax cut legislation.
5. Pay attention to HJR 203 … the political equivalent of a ‘sneaker wave.’ This legislation makes access to affordable health care a constitutional right enshrined in the Oregon Constitution. The budget and tax ramifications are enormous. The legal ambiguity is stunning. And yet the legislation passed the House on a party-line 35-25 vote. If the Senate approves the measure, it will appear on the November 2018 general election ballot.
There are only just a few key issues that will have our attention in Week 3:
1. We are anticipating further amendments to the ‘Cap and Trade’ bills. We continue to believe that legislative leaders, particularly in the Senate, will look for opportunities to back-track on previous commitments to keep ‘Cap and Trade’ at bay in 2018. We believe there could be a fresh set of discussion on ‘Cap and Trade,’ particularly in the Senate Rules Committee. Again, the Senate version is SB 1507 and the House version is HB 4001.
2. The revenue forecast (up $99 million) should have taken the wind out of the sails for the effort to disconnect from the federal 20% pass-through income deduction and further scale back the Oregon ‘small business tax cut.’ But ultimately, it won’t. We believe there will be an ongoing effort to scale back tax benefits to small business. This is likely the second most impactful issue for local business in the 2018 session.
3. We anticipate further discussion on ‘Cleaner Air Oregon’ legislation – SB 1541. If this issue continues down a stable track with strong regulatory sideboards and reasonable risk levels set in statute, it could be the most important issue for local business coming out of the 2018 session.
Other issues of note:
Environmental Regulation. Diesel engine and commercial truck idling regulations are also being discussed with HB 4003. The bill requires DEQ to adopt new emissions standards for medium and heavy duty on-road diesel engines as well as off-road diesel engines. This bill was kept alive.
Employment Regulation. For OSCC members that store customer information, there is a significant push for data breach regulation in the wake of the Equifax data breach. The legislation in question – SB 1551 – appears to be going in a direction that business can generally support. Although it levies additional regulations on businesses that store consumer data, it has taken considerable input from the business community and does not contain any private rights of action.
Affordable Workforce Housing. House Bill 4007 is still the bill to watch here. It proposes to raise document recording fees to put more money into first time homebuyer incentives and incentives for affordable and workforce housing projects. The sticking point is whether to raise the fee to $60 or $75. There appears to be a potential bipartisan consensus around raising the fee from $20 to $60, but at this point the House leadership seems intent on pushing the fee to $75, for which there are no Republican votes. This bill is probably the only real hope to advance any affordable housing progress this session and is currently the subject of a game of political chicken. As indicated on the OSCC government affairs call, OSCC will potentially weigh in support of the legislation if the $60 fee is agreed to.
Fiscal Reform. The Governor’s primary PERS push is going to be a bill which creates PERS ‘side accounts’ to help school districts be able to pre-pay their PERS liabilities. The bill is Senate Bill 1566. It is unknown at this point exactly where all the funding will come from to fund the side accounts in a meaningful way. Overall, it is a very modest proposal that could help ease the PERS crunch on school budgets on the margins. We still expect SB 1566 to advance with bipartisan support in the Senate.