PUBLIC HEARING HB 2705, HB 2698

WORK SESSION HB 2489

 

TAPE 77, 78, A-B

 

HOUSE REVENUE COMMITTEE

MARCH 12, 2003   8:30 AM   STATE CAPITOL BUILDING

 

Members Present:                        Representative Lane Shetterly, Chair

                                                Representative Wayne Scott, Vice Chair

                                                Representative Joanne Verger, Vice Chair

                                                Representative Phil Barnhart

                                                Representative Vicki Berger

                                                Representative Pat Farr

                                                Representative Mark Hass

                                                Representative Elaine Hopson

                                                Representative Max Williams                                               

 

 

Witness Present:                        Representative John Mabrey, District 59

                                                Randall Edwards, State Treasurer

                                                Gary Weeks, Department of Administrative Services

                                                Tom Potiowsky, Office of Economic Analysis

                                                Charles Stern, Yamhill County Clerk

                                                    Oregon Association of County Clerks Legislative Committee

                                                Dexter Johnson, Legislative Counsel Office

 

Staff Present:                            Paul Warner, Legislative Revenue Officer

                                                Dick Yates, Legislative Revenue Office

                                                Mazen Malik, Legislative Revenue Office

                                                Kathy Tooley, Committee Assistant

 

TAPE 77, SIDE A

004

Chair Shetterly

Calls meeting to order at 8:34 a.m.

 

OPENED PUBLIC HEARING HB 2698

 

018

Dick Yates

Provided background and described HB 2698.

 

029

John Mabrey

Spoke in favor of HB 2698, bill would allow non-PERS retiring local employees to be treated equally to federal employees.

 

080

Chair Shetterly

Recessed public hearing on HB 2698

 

INFORMATIONAL MEETING

 

085

Chair Shetterly

Discussed credit rating downgrades and what it means to short term and long term planning in Oregon.

 

077

 

 

110

 

 

 

 

 

 

 

160

 

 

 

172

 

 

 

 

188

Treasurer Randall

Edwards

 

Edwards

 

 

 

 

 

 

 

Edwards

 

 

 

Edwards

 

 

 

 

Edwards

Discussed recent credit downgrades from two ratings agencies, Moody’s,  (Exhibit 1), Fitch’s, (Exhibit 2), provided Standard and Poor’s (Exhibit 3).

 

Current downgrade based on systemic problems, Oregon’s income tax system termed one-legged stool.  Report cited income tax, and kicker law which prohibited putting money aside to weather downturns. Discussed short term liability; recent negative revenue forecast tipped the scale in favor of downgrade. Rating based on Oregon’s track record relative to other states coming out of recession; one-time monies depleted; questioned Oregon’s ability to meet future obligations. 

 

Other issues highlighted past ratings include: initiative process adds volatility and affects general fund; Measure 5, 4750, unfunded mandate passed 12 years ago in funding schools. 

 

Need to look at short term and long term opportunities to show Oregon can manage itself. Must view Oregon’s finances relative to public school system; credit agencies see rainy day fund as a positive.  Need to expand and grow economic base.

 

Discussed independent nature of Moody’s, Fitch, Standard & Poor’s.

 

212

Rep. Berger

How do you explain to Oregonians how important this is?

 

220

Edwards

This is a hidden tax or fee increase.  Oregon will now pay more for bonds for roads and schools.  The Oregon School Bond Guarantee Act, bond rating was also lowered which had saved local school districts $100 million in interest savings.

 

228

Rep. Williams

Is it an appropriate time to begin conversation about long term tax structure reform in Oregon?

 

240

Edwards

This conversation should have happened a long time ago.  One of the credit agencies senior analysts said it would benefit the state to broaden its revenue source.

 

248

Rep. Barnhart

Is the issue the nature of the tax itself as a type or the volatility, or all of the above?

 

271

 

 

 

288

Edwards

 

 

 

Edwards

Rating agencies won’t advise on policy, they point out vulnerability.  Rating agencies noted other states are equally challenged, but few downgraded due to having more revenue sources. 

 

Discussed uniqueness of Oregon’s Kicker Law and vulnerability it causes.

 

315

 

 

Rep. Shetterly

At issue is exposure of weaknesses in the system that is easy to mask when revenue is coming in. However, during periods of reduced revenue, the structure is not there to sustain government services.  Need to address issue, so the system works in good times and in lean times

 

335

Edwards

Oregon has dropped $2 billion in revenues because of the recession in a short period of time, worse than any other state.  Moody’s point is to have money put aside for rainy day.  Time is now to have a long term discussion.

 

355

Rep. Verger

Multi-tax structure states are also in trouble, state’s problem not just because Oregon has income tax.  Votes approved Measure 5 and Measure 50.  Kicker law is unique but was designed to keep government from growing.  Failure to diversify, overregulation put companies out of business.  Time is of the essence asked for Edwards comment on the crisis.

 

408

Edwards

Has to be an enormous sense of urgency on many fronts.  What are we doing with economic development?  Did diversify the economy by growing technology broader.  Challenge is in changing economic course, Governor is right on improving the climate.  Change takes time; global issues will keep market from booming; fiscally challenge is what to pay for and how.  K-12 situation critical, consequences for passing Measure 5 and 4750 have not truly been understood until today.  Local option is part of the solution, but part of the long term discussion.

 

 

TAPE 78, SIDE A

 

010

Rep. Farr

Oregonians need to be aware that there is a tremendous natural resource that is not being used. Need to use forests wisely using new techniques, and maintain a strong ecology.

 

034

Rep. Scott

Tax reform is an issue that needs to be discussed, but in context.  Should not reform taxes without making adjustments in essential needs.

 

055

Edwards

 

The expenditure side is also one to look at, but will take time.  Tax reform takes time to change the revenue stream, should review in stages of what is possible, time urgency, long term tax base and how to pay for critical services.  Keep coming back to how Oregon’s public school system is funded; with all the other demands on general fund can’t sustain it.

 

074

Rep. Hass

Discussed that a long term plan will take a year and half to get to the voters, discussed research on more successful systems.  Given the urgency, what should be done immediately?

 

081

Rep. Edwards

Broader discussion on tax expenditures, and federal hookup. Rating agencies don’t like to see state rely only on economic recovery to rebound.  Don’t have the ability to find any more money to cut, have to look at revenues to balance.

 

105

Rep. Williams

In favor of addressing immediate needs with long term tax restructuring. Few long term solutions will resolve immediate problems. Will have to look at painful reduction in services. Do not want to get through short term problem without having a long term solution in place.  States with diversified tax system are not suffering at the magnitude Oregon is.

 

148

Chair Shetterly

Summed up Committee’s challenge as complex in reviewing Oregon’s budget, spending, revenue structure and service as stewards of the economy including the revenue derived from natural resources.

 

171

Edwards

Oregon has short term and long term opportunities; the credit rating indicates change is needed.

 

OPENED PUBLIC HEARING ON HB 2705

 

176

 

 

202

 

 

223

 

 

227

 

240

Paul Warner

 

 

Warner

 

 

Warner

 

 

Warner

 

Warner

 

 

 

Described and gave background on HB 2705; does not have a revenue or fiscal impact, (Exhibit 4). 

 

Reviewed forecasting process and recommended structural changes (Exhibit 5).

 

Discussed issue simultaneous distribution of forecasts to legislative and executive leadership.

 

Discussed creation of statutory authority of State Economist.

 

Discussed issues as: 

 

·         Relationship of Revenue Forecast Advisory Group and current Governor’s Council of Economic Advisors, noted as a strongpoint in the current system.

·         Open meetings law, when discussing hard revenue numbers in open forum is not addressed in the bill.

 

255

Gary Weeks

Discussed Governor Kulongoski’s view of HB 2705.  Two priorities regarding forecasting:

 

·         Continue to not politicize process of forecasting.

·         Supported Governor’s Council of Economic Advisors, would like to maintain as core advisors, discussed possible evolution of duties.

 

311

Weeks

Gov. Kulongoski views the board as an appropriate forum for the release of revenue and economic forecasts to all interested parties at the same time, as well as instrumental in recommending candidate to fill the state economist’s position.

 

338

Weeks

Deferred to Tom Potiowsky to give governor’s view of Council Economic Advisors.

 

349

Tom Potiowsky

Described voluntary membership and expertise of the Council of Economic Advisors, and its input in the development of the economic forecast and recent exposure to the revenue forecast.

 

019

Rep. Hass

Don’t oppose creation of the boards, but don’t see improving accuracy and methodology in HB 2705.

 

028

Potiowsky

Have moved to range forecast rather than particular number.  The bill addresses the Revenue Forecast Advisory Committee as a technical group of tax practitioners, some with forecasting experience, that could influence the look of corporate taxes.

 

049

Weeks

Methodology is not a part of this bill, but the Governor is more than willing to discuss strategies regarding methodology.

 

055

Chair Shetterly

This bill does not change the process, but strengthens and institutionalizes the revenue component into the forecasting process.

 

069

Rep. Farr

In favor of statutizing the board, the commission and the position of the economist, but what is the full value for the future?  Do you see this board as having a role in alerting the legislature or decision making bodies to avert future crisis?

 

091

Potiowsky

That would be the role of the Revenue Forecast Board depending on members chosen.

 

105

Rep. Verger

Critical of Section 5, Council consisting of an indeterminant number of members, appointed by the Revenue Forecast Board.  Should be limited, others could be asked testify. Where does Economic Development Department fit into this, do they get the final reports done currently.

 

133

Weeks

Would agree; urge consideration of an amendment, fixing a number with regard to Section 5, and the role the Governor should have in appointing members.

 

167

Potiowsky

Economists are part of DAS committee meeting quarterly, may not be able to divulge a company coming into the state.  May be able to discuss plant siting or departure, this would not otherwise be picked up in the forecast.

 

178

Rep. Verger

The DAS group, is that the extent of Economic Development Department’s participation in the process.

 

199

Potiowsky

It’s the main function, but not the only function.

 

205

Rep. Hopson

There is nothing wrong with getting this into statute, isn’t there a way to merge this together so it doesn’t become redundant.

 

220

Potiowsky

Responded favorably to meshing the functions of the councils.

 

222

Weeks

Advised the Committee that the public aspect of the comments needs to be resolved.

 

246

Rep. Verger

Are we going to address who recommends and the number?

 

249

 

Chair Shetterly

It is noted as an issue to address.

255

Chair Shetterly

Closed Public Hearing on HB 2705.

 

REOPENED PUBLIC HEARING ON HB 2698

 

250

Del Cesar

Gave history and spoke in favor of HB 2698.

 

310

Yates

Provided history and gave background of HB 2698, described scope of the bill (Exhibits 7-11).

 

351

Chair Shetterly

Revenue impact includes more than just 9 people in The Dalles?  It assumes employees of other districts that fall into the same category?

 

370

Yates

Answered affirmatively.

 

388

Cesar

Discussed highlighted letter he received from Dave Ammick of PERS, (Exhibit 12).

 

387

Chair Shetterly

Closed public on HB 2698.

 

 

OPENED WORK SESSION ON HB 2489

 

400

Mazen Malik

Described history and background of HB 2489, (Exhibit 13), and -1 amendment (Exhibit 14.

 

 

TAPE 78, SIDE B

 

009

Charles Stern

Discussed general vs. limited power of attorney.  Not intent of county clerks to allow out of state corporation to avoid obtaining professional, licensed representation.  Intent was to meet the needs of a citizen, who could not take care of their business, have a trusted friend with a general power of attorney to sign the petition and represent the individual before the Board of Property Tax Appeals.  Noted a requirement for notarization was deleted in the amendment, under current law not required.  Intent that if this person had power of attorney, notarized or not notarized, they could meet the business needs of the principal individual.

 

038

Chair Shetterly

You are comfortable with the use of the “general” in referencing power of attorney in the statute?

 

043

Dexter Johnson

Explained ORS generally doesn’t use “general power”, instead limits it at “power”. Discussed with Dave Hendricks and “general” is a well understood common law concept general power vs. special power and Legislative Counsel is comfortable with the use of that term.

 

053

 

055

Rep. Hass

MOTION:  MOVED ADOPTION OF THE –1 AMENDMENT INTO HB 2489.

 

ORDER:  HEARING NO OBJECTION, THE CHAIR SO ORDERS. (ALL MEMBERS PRESENT EXCEPT REP. VERGER, EXCUSED)

 

056

Rep. Hass

MOTION:  MOVED HB 2489, AS AMENDED, TO THE HOUSE FLOOR WITH A DO PASS RECOMMENDATION

 

ROLL CALL:  MOTION PASSED 8-0-1

REPRESENTATIVES VOTING AYE:  Barnhart, Berger, Farr, Hass, Hopson, Scott, Williams, Chair Shetterly.  EXCUSED:  Verger

 

Chair Shetterly  will carry the bill.

 

064

Chair Shetterly

Closed the work session on HB 2489

 

065

Chair Shetterly

Meeting adjourned at 10:00 a.m.

 

Tape Log Submitted by,

 

 

 

Kathy Tooley, Committee Assistant Reviewed by Kim Taylor James

 

Exhibit Summary:

1.       Edwards, “Moody’s Global Credit Research March 10, 2003”, 4 pages

2.       Edwards, “Fitch Ratings:  State of Oregon Department of Administrative Services”, 5 pages

3.       Edwards, “Standard & Poor’s Research Summary:  Oregon Department of Administrative Services, Appropriation”, 2 pages

4.       Warner, “Staff Measure Summary:  HB 2705” 1 page

5.       Warner, “Memo: Review of Revenue Forecasting Process”, 6 pages

6.       Warner, “Description of Economic & Revenue Forecast Council”, 2 pages

7.       Yates, “Staff Measure Summary HB 2698”, 1 page

8.       Yates, “Revenue Impact HB 2698”, 1 page

9.       Yates, “Pension Income Taxed by Oregon”, 1 page

10.   Yates, “Non PERS Employers with Social Security Section 218, 6 pages

11.   Yates, “Pension Income Tax Credit:  Joint Returns”, 2 pages

12.   Cesar, “Testimony HB 2698”, 1 page

13.   Malik, “Staff Measure Summary HB 2489-1”, 1 page

14.   Malik, “HB 2489-1”, 1 page