WORK SESSION: HJR 19

TAPE 1 A

CONFERENCE COMMITTEE ON HJR 19

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JULY 4, 2001 – 3:00 P.M. - HEARING ROOM A - STATE CAPITOL BUILDING

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Members Present: Representative Lane Shetterly, Chair

Representative Janet Carlson

Representative Mark Hass

Senator Roger Beyer

Senator Steve Harper (absent 3:16 p.m. to 3:30 p.m.)

Senator Mae Yih

Staff: Paul Warner, Legislative Revenue Officer

Richard Yates, Legislative Revenue Office

Carol Phillips, Committee Assistant

Invited Testimony: Kate Richardson, Chief of State, State Treasury

John Lattimer, Audit Division Director, Secretary of State

TAPE 1, SIDE A

005

Chair Witt

Meeting called to order at 3:16 p.m.

OPENED WORK SESSION ON HJR-19

007	Richard Yates	In review, stated that HJR-19 deals with sending to voters in the next May primary election a constitutional amendment that would allow general obligation (G.O.) bonds to be issued up to one-half percent of the statewide value of taxable property. The purpose would be limited to funding the Oregon Opportunity Act at Oregon Health & Science University (OHSU) with $200 million.
015	Chair Shetterly	Added that in previous discussions, HJR 46 contained general fund matching for K-12 capital construction bonds. To that end, the (-A3) amendments have been created.
019	Carlson	MOTION: MOVES THE (-A3) AMENDMENTS TO HJR-19 BE ADOPTED.
024	Kate Richardson	Testified in support of the (-A3) amendments and stated that they represent HJR 46, which was passed in the House but did not emerge from the Senate Revenue Committee. The K-12 general obligation bonding authority was removed in the Rules Committee. The (-A3) amendments simply reinstate that K-12 bonding authority and would place the question before voters. There is no implementing language in the (-A3)s. (Exhibit 5.)
059	John Lattimer	Testified in support of the (-A3) amendments. An audit report was recently issued by the Secretary of State’s office that indicated major concern from the Department of Education about the state of school facilities around Oregon. There are many problems within school districts in funding construction of new buildings as well as basic maintenance of existing structures. For example, if a boiler needs replacing but there are no funds set aside for that, the school takes money from their operating funds to replace the boiler.
077	Lattimer	Added that many states face court challenges over inequality of school facilities. Courts are saying under basic constitutional provisions for equal education many states are not fulfilling that obligation because they are not funding all school facilities equally. This issue has not been brought to a court in Oregon yet, but it could be a possible problem in the future.
088	Rep. Carlson	Asked for explanation of how the matching aspect of the program would operate.
095	Richardson	Responded it is anticipated that because local bond measures would have already been passed in order to activate the matching aspect, a school district would estimate the cost of a particular project. If matching funds are available, then it reduces the amount they need to ask from local voters. Further questions and answers followed.
111	Lattimer	Added that there is a wide disparity among different school districts in their ability to have local voters approve bond issues for capital improvements to schools. School buildings in one district were actually condemned because bond issues were rejected two or three times, and failing water and electrical systems could not be replaced or repaired.
128	Richardson	Explained that the (-A3) amendments would address both the maintenance and refurbishing needs of older schools and the building of new schools in fast-growing districts. Further questions and answers followed.
156	Sen. Yih	Asked for clarification regarding how matching funds for capital costs would be obtained.
160	Richardson	Responded that the specifics would be addressed in implementing legislation, which is not part of HJR-19 or this legislative session. A work group decided to simply pose the question to voters first, then deal with specific implementation in a future legislative session should the voters approve the concept. The Board of Education would probably administer the program, and applications for matching funds would be submitted to it for approval and distribution.
206	Sen. Yih	Stated she was surprised to see maintenance and repair of public schools listed in the (-A3) amendments as one of the provisions. Pointed out maintenance should come under good building management, and schools should set aside a reserve for repair and maintenance rather than go out for bond measures to cover those costs.
216	Lattimer	Responded that schools do have maintenance funds in their budgets, but because schools do not always have enough money for their operating costs, they utilize maintenance funds. Thus, when they require maintenance or repair funds that have already been spent, they have to go to the public. Currently bond funds at the local level cannot be used for maintenance but only for capital expenditures, so they have to build a new building.
236	Sen. Yih	Reiterated that good preventive maintenance would avoid facing large maintenance projects. Under proper management large projects (like replacing a boiler) should be taken care of as preventive maintenance. With good management many large expenses could be avoided.
245	Chair Shetterly	Agreed with Sen. Yih, but added sometimes bad circumstances or bad luck play into the situation.
255	Richardson	Pointed out that the maintenance and repair issue is just one small part of the (-A3) amendments. It is not anticipated that this bonding would generally be used for maintenance or deferred maintenance costs. Some of the other problems that districts face are much more extensive than just a boiler or a roof. They face broad renovations needed to update with technology and structural (seismic) concerns.
271	Rep. Hass	Stated Sen. Yih brought up a good point about management. Asked for a comparison of revenue bonds vs. general obligation bonds and how their use would translate into cost savings.
279	Richardson	Answered that general obligation bonds are much cheaper than revenue bonds and offer the best interest rate available to the state. Using the $200 million OHSU funding as an example, general obligation bonds would save $70 million in interest, compared with revenue bonds.
313	Chair Shetterly	VOTE: ROLL CALL VOTE: MOTION FAILS: 3 – 3 – 0 SENATORS VOTING NO: R. BEYER, HARPER, YIH REPRESENTATIVES VOTING AYE: CARLSON, HASS, SHETTERLY
323	Sen. Harper	Offered a vote explanation. Stated the main objection is approving the concept this year to be implemented next biennium, but not funding the resolution directly. The idea has merit, but it should be funded up front.
343	Chair Shetterly	MOTION: MOVES THE HOUSE CONCUR IN THE SENATE AMEND-MENTS DATED JUNE 22, 2001 AND THE RESOLUTION BE READOPTED.
349	Chair Shetterly	VOTE: ROLL CALL VOTE: MOTION PASSES: 5 – 1 – 0 SENATORS VOTING AYE: R. BEYER, HARPER, YIH REPRESENTATIVES VOTING AYE: CARLSON, SHETTERLY REPRESENTATIVE VOTING NO: HASS Rep. Shetterly will carry the resolution on the House Floor.
359	Rep. Carlson	Offered a vote explanation. Stated she is very much in favor of the OHSU program, but is disappointed the K-12 (-A3) amendments aspect could not be included.
368	Rep. Shetterly	Agreed and appreciated the comments of Sen. Harper. Under-stands that sometimes it takes two or three legislative sessions for an idea to make it through the legislative process.
376	Rep. Hass	Reiterated that high-growth school districts in Washington and Deschutes counties are in need of financial aid. They can do only so much with the funding they have. It seems like the legislature is ignoring those pleas for help and thought HJR-19 might be the tool to answer their call.
387	Sen. R. Beyer	Agreed with Sen. Harper’s comments. Would like to see his Open Enrollment for Schools Bill coupled with something like HJR-19. Then parents would have the opportunity to send their children to any school in the state that they choose. Would like to see these two ideas that would both help education move together.
403	Rep. Shetterly	Adjourned meeting at 3:43 p.m.

Submitted by, Reviewed by,

Carol Phillips Kim Taylor James

Committee Assistant Revenue Office Manager

Exhibit Summary:

1. HJR-19, Yates, Fiscal Impact Statement, 1 pp.

2. HJR-19-A, Yates, Staff Measure Summary, 1 pp.

3. HJR-19, Yates, Staff Measure Summary, 1 pp.

4. HJR-19, Yates, Fiscal Impact Statement, 1 pp.

5. HJR-19, Richardson, Written testimony undated, 4 pp.

6. HJR-19, Lattimer, Written testimony dated February 19, 2001, 3 pp.

7. HJR-19-A, Legislative Revenue Office Staff, (-A3) amendments (CH/ps) 7/2/01, 2 pp.