SENATE SPECIAL SESSION COMMITTEE ON BUDGET SOLUTIONS

 

 

September 4, 2002   Hearing Room 357

9:00 a.m.      Tapes 1 - 2

 

MEMBERS PRESENT:            Sen. Lenn Hannon, Chair

Sen. Ken Messerle, Vice-Chair

                                                Sen. Steve Harper

                                                Sen. Peter Courtney

Sen. Joan Dukes

 

STAFF PRESENT:                  Gina Rumbaugh, Legislative Fiscal Office Manager

                                                Jennifer Simmons, Administrative Support

 

MEASURE/ISSUES HEARD:            Informational Meeting

                                                Ken Rocco, Legislative Fiscal Office

                                                Paul Warner, Legislative Revenue Office

 

These minutes are in compliance with Senate and House Rules.  Only text enclosed in quotation marks reports a speaker’s exact words.  For complete contents, please refer to the tapes.

 

TAPE/#

Speaker

Comments

Tape 1,A

INFORMATIONAL MEETING

001

Chair Hannon

Calls the meeting to order at 9:05 a.m.  Presents the committee rules.

003

Chair Hannon

MOTION:  Moves to ADOPT the proposed Committee Rules dated 09/04/02.

004

 

VOTE:  5-0

 

Chair Hannon

Hearing no objection, declares the motion CARRIED.

032

Paul Warner

Legislative Revenue Office.  Presents written material (EXHIBIT A).  Speaks about the revenue forecast.

068

Chair Hannon

Asks if economic indicators were showing a revenue shortfall prior to September 11, 2001.

072

Warner

Answers that the forecast in August 2001 showed a shortfall of about $250 million.  Says that the biggest drop has been in the loss of capital gains revenue.

086

Chair Hannon

Asks if the economy is still down without the capital gains loss.

091

Warner

Answers that the recession started in the first quarter of 2001.

108

Chair Hannon

Asks why budget recommendations were not made during the 2001 session if the economic indicators were showing reductions in revenue.

115

Warner

Answers that at the time the forecast did not point to such a large decline in revenue.

135

Sen. Messerle

Asks when the loss in capital gains might be expected to recover.

141

Warner

Answers there may be a bounce back in the next two to three years.

162

Sen. Courtney

Asks if there is a problem with the economic forecast system.

189

Warner

Points out changes in the economic system, agrees that the forecasting system needs work.

229

Sen. Yih

Asks if there are any models that states use to predict revenue shortfalls.

237

Warner

Responds that Oregon’s forecast system is modeled after the national system.  Says that the systems in most states are similar.  Points out that federal revenue has also decreased.  Continues with presentation.

359

Sen. Yih

Asks what PIT is.

361

Warner

Answers that PIT is an acronym for Personal Income Tax.  Continues with presentation.

379

Sen. Dukes

Asks what is happening with the S corporations that run through the PIT.

381

Warner

Answers that they do not have a good short term look at that because it all comes through as income tax.

399

Sen. Courtney

Speaks about his difficulty understanding the revenue system.  Asks if business as a whole is down 47 percent.

TAPE 2,A

006

Warner

Clarifies that those filing as corporations are down 47 percent.

013

Sen. Courtney

Asks for clarification of an S corporation.

015

Warner

Responds that an S corporation is a small business that files a personal income tax.

016

Sen. Courtney

Says that he has always thought of Oregon as a small business state.

017

Warner

Responds that small business is very important in Oregon. 

030

Sen. Harper

Asks if we separate the S corporations from any other category.

032

Warner

Responds that it is done when the returns come in.

054

Sen. Hannon

Asks if these numbers are really reflective of what is being done on the investment side.

067

Warner

Answers that the numbers have been adjusted for the September forecast.

075

Sen. Dukes

Clarifies that this is through June 30, 2003.  Asks how comfortable Warner is with these numbers.

087

Warner

Answers that he is comfortable with the numbers being consistent with economic projection.  Says that if the economy is weaker than expected the numbers are probably too high.

107

Sen. Messerle

Asks if we are looking at the worst case scenario.

113

Warner

Responds that this is a middle of the road estimate.  Continues with presentation.

144

Chair Hannon

Asks if the $487 million budget gap includes $50 million from the proposed cigarette tax.

149

Warner

Answers that $482 million is the projected deficit. 

202

Sen. Harper

Asks if the House cigarette bond proposal is new cigarette tax money.

205

Warner

Answers that it only applies to cigarette revenue raised from rate increases after September 1, 2002.

210

Sen. Courtney

Asks what would happen if the cigarette tax increase fails and the bonding passes.

212

Warner

Answers that the Oregon Department of Treasury would have the authority to issue bonds but would have no revenue to back them up.

219

Sen. Courtney

Asks for clarification on the true number of the budget deficit.

223

Warner

Answers that it is currently $482 million.

243

Sen. Yih

Asks what the annual interest cost is for the cigarette revenue bonds.

246

Warner

Answers that on a five-year bond the annual cost of interest is about $15 million.

274

Warner

Continues with presentation.

295

Sen. Dukes

Asks if there is any reason to believe that this is constitutional.

296

Warner

Answers that in Legislative Counsel’s opinion it is constitutional.

313

Sen. Dukes

Expresses concern with taking money from the Common School Fund.

379

Sen. Harper

Asks about selling state lands or timber for revenue.

386

Warner

Says that they have not looked at the numbers on those issues.

387

Rocco

Responds that it has been looked at in the past.  Says that they are unaware of the value of the lands.  Says that timber sales would not be a good short-term solution.

419

Sen. Dukes

Points out that the state would receive very little money from those types of solutions.

TAPE 1, B

005

Chair Hannon

Says that he would like to have the committee excused from the floor session because he would like to finish all bills on the agenda.

021

Rocco

Presents written material (EXHIBIT B).

067

Sen. Harper

Asks if the $482 million is interchangeable or if it is a straight percentage.

069

Rocco

Answers that it is the same percentage for all appropriations lines.

104

Sen. Messerle

Asks about reducing state workers to four day work weeks.

110

Rocco

Responds that under labor negotiations you can not furlough some workers due to contracts.  States that this would also not be very effective.

125

Sen. Messerle

Asks if the state is allowed to reopen contracts.

126

Rocco

Answers that the Executive Branch has the authority to do that. 

145

Chair Hannon

Explains the intent of the committee.  Invites Senator Yih to testify before the committee.

170

Sen. Yih

Reads written testimony (EXHIBIT C).  Proposes a three step budget balancing guide.

272

Chair Hannon

Thanks Senator Yih for her testimony.  Welcomes Representative Donna Nelson to testify before the committee.

300

Rep. Nelson

Testifies that the state needs to decide on core services and cut the rest to resolve this problem.

366

Chair Hannon

Recesses at 10:22 a.m. to return at the call of the chair.

 

                        Reviewed By,

 

 

 

                        Marjorie Taylor,

                        Administrator

 

EXHIBIT SUMMARY

 

A – written material, Paul Warner, Legislative Revenue Office, 2 pp.   

B – written material, Ken Rocco, Legislative Fiscal Office, 9 pp.                                       

C – written testimony, Senator Mae Yih, 2 pp.