PUBLIC HEARING HB 2764, HB 2152

 

TAPE 79, 80, A

 

HOUSE REVENUE COMMITTEE

MARCH 13, 2003   8:30 AM   STATE CAPITOL BUILDING

 

Members Present:                        Representative Lane Shetterly, Chair

                                                Representative Wayne Scott, Vice Chair

                                                Representative Phil Barnhart

                                                Representative Vicki Berger

                                                Representative Pat Farr

                                                Representative Mark Hass

                                                Representative Elaine Hopson

                                                Representative Max Williams                                               

 

Members Excused:                      Representative Joanne Verger, Vice Chair

 

Witness Present:                        Lynn Read, Department of Human Services, Medical Assistance Program

                                                Courtni Dresser, American Cancer Society,

                                                   American Lung Association,

                                                   American Heart Association

                                                Mark Nelson, R.J. Reynolds Tobacco

                                                Dick Kosesan, Brown and Williamson Tobacco

                                                Lee Hazelwood, Senior Advocate

                                                Maura Roche, Tobacco Free Coalition of Oregon

                                                Bruce Bishop, Oregon Association of Hospitals and Health Systems

                                                Scott Gallant, Oregon Medical Association

 

Staff Present:                            Paul Warner, Legislative Revenue Officer

                                                Lizbeth Martin-Mahar, Legislative Revenue Office

                                                Dick Yates, Legislative Revenue Office

                                                Kathy Tooley, Committee Assistant

 

TAPE 79, SIDE A

 

004

Chair Shetterly

Calls meeting to order at 8:40 a.m.

 

PUBLIC HEARING HB 2152

 

013

Dick Yates

Provided description of HB 2152, (Exhibit 1), the bill extends the sunset on the temporary cigarette tax which provides funds for the Oregon Health Plan, explained the -1 amendment (Exhibit 2) removes the sunset and makes the tax permanent.

 

024

Chair Shetterly

These funds are in the Governor’s recommended budget, correct?

 

025

Yates

Answered affirmatively.

 

030

Lynn Read

Spoke in favor of HB 2152, (Exhibit 3), without passage of the bill it would sunset, January 1, 2004.  Discussed programs the 10 cent tax funds, and programs that would be eliminated if the tax were to sunset reducing revenues by $30.7 million.  Federal funding mandates some of these programs and Oregon would have to negotiate with the federal government to reconfigure the Oregon Health Plan.

 

084

Courtni Dresser

Spoke in support of HB 2152, (Exhibit 4), cites need for stable funding and eliminate the need to request extensions biennially.

 

100

Mark Nelson

Provided history and spoke in opposition to HB 2152.  The original intent of 10 cent tax was to be bridge financing and would sunset.  Looking at preliminary numbers to see if the 10 cent tax and the 60 cent tax passed in September 2002, is bringing in revenues projected.

 

135

Richard Kosesan

Provided history and spoke in opposition to HB 2152. State taxes have reached a point of diminishing returns. Encouraged committee to examine the statistics for receipts vs. tax revenues.

 

181

Nelson

Preliminary numbers point to major problem in Oregon in compliance with gray and black markets, internet sales, and cross border sales, caused by tax rates which differ dramatically from neighboring states, especially Nevada and Idaho.

 

191

Chair Shetterly

Have you looked at these numbers?

 

191

Yates

December is the only month for which statistics have been received.

 

206

Lee Hazelwood

Gave history on 10 cent tax, spoke in favor of removing the sunset clause.

 

252

Maura Roche

In favor of ending the sunset, said taxes are in alignment with Washington and California.  Describes a study which estimates that in order for cigarette taxes to reimburse the state for the amount of tobacco-related services provided, a tax on each pack of cigarettes would need to be $5.

 

302

Bruce Bishop

Spoke in favor of HB 2152, urged the committee to approve without -1, amendments, eliminating the sunset, making the tax permanent.

 

322

Scott Gallon

Spoke in support of the tax, and favored elimination of the sunset.

 

350

Chair Shetterly

The surtax will probably continue into the next biennium, the question is will it continue with or without a sunset.  Asked Yates about three different statistics regarding 10 cent tax, Governor’s 30.7 million, Legislative Fiscal $24.16 million, Legislative Revenue $22.0 million, does this represent a challenge in predicting tobacco tax revenue.

 

375

Yates

That is the case for Legislative Fiscal and Revenues discrepancy.

 

356

Lynn Read

Fiscal analysis for Governor’s budget derived from Department of Revenue December 2002 Tobacco Tax Revenue Forecast, estimated for 2003-2005, 2005-2007 biennia.  The 10 cent tax was calculated from that volume.

 

390

Yates

Problem in past is the lag involved in how many months of additional revenue would be received.  It appears tax starts on January 1, but the revenues don’t come in until the following month.

 

407

Chair Shetterly

Closed Public Hearing HB 2152

 

OPENED PUBLIC HEARING ON HB 2764

 

425

Martin-Mahar

Provided history and description of HB 2764, deletes sunset of December 31, 2001, allows for amendment of 2002 tax return, alters limitation on credit, has a minimal revenue impact.

 

485

Chair Shetterly

Closed public hearing on HB 2764.

 

 

INFORMATIONAL MEETING

 

495

Chair Shetterly

Discussed Randall Edward’s, State Treasurer’s appearance before the Committee, March 12, 2003, regarding the impact of the current economic recession on state budgets and revenue.

 

037

Paul Warner

Discussed comparison of Oregon-Washington revenue stability (Exhibit 6).  The key difference is sales tax vs. income tax driven economy.

 

085

Rep. Hass

This supports the comment that a sales tax is not as volatile as an income tax.

 

093

Chair Shetterly

Washington doesn’t have a large sales tax; it has a narrow base, doesn’t it?

 

094

Warner

Discussed Washington’s business purchases tax, which is a key factor in the stability of a sales tax.  Washington does not tax food; many southern states tax food and that provides stability.  The percentage of business purchases that are taxed makes up 20% of Washington’s base.

 

105

Chair Shetterly

Asked for comparison to California?

 

110

Warner

California is highly dependent on income tax with a higher rate than Oregon; and has a sales tax.  California is more dependent on capital gains than Oregon; it has been an important part of compensation in California.

 

123

Chair Shetterly

What is the impact of energy problems on California’s economy?

 

125

Warner

Energy problems are still a significant factor in long term stability for California.  Discussed California’s economic history in the 1990s. Southern California is rebounding and Northern California is similar to the Northwest.

 

138

Rep. Scott

Good information with a couple of different interpretations.  When the state is not in a recession, obvious growth does not occur and it is more stable; second, it is dependent on what taxes are allowed to be charged on; third, California is a good example, because it has income tax, and have diversified their economy allowing them to coming out of a recession much quicker.  Does not feel sales tax is the only approach.

 

166

Chair Shetterly

If Oregon had been putting money aside during growth spurts, the impact of the recession would have been mitigated.

 

174

Rep. Barnhart

If Oregon had kept money from kicker in reserve, it would be in better shape now.  As a result of Measure 5, the state budget has been under stress.  As a result of the property tax reduction, the equalization of school funding did not succeed in establishing a level of school funding necessary for the long term.

 

196

Rep. Williams

Discussed Moody and Fitch’s statements regarding Oregon’s ratings downgrade.  Those reports add to discussion of the need for long term thinking regarding the overall structure of Oregon’s economy.

 

234

Chair Shetterly

Meeting adjourned at 9:20 a.m.

 

 

 

 

 

Tape Log Submitted by,

 

 

 

Kathy Tooley, Committee Assistant Reviewed by Kim Taylor James

 

Exhibit Summary:

1.       Yates, “Staff Measure Summary, Fiscal and Revenue Impacts, referral letter on HB 2152”, 4 pages

2.       Yates, “HB 2152-1 Amendment”, 1 page

3.       Read, “Testimony HB 2152”, 2 pages

4.       Dresser, “Testimony HB 2152, 2 pages

5.       Martin-Mahar, “Staff Measure Summary, Fiscal, Revenue Impact, Sunset HB 2764”, 4 pages

6.       Warner, “Washington vs. Oregon Revenue Stability”, 2 pages

7.       Oregon Revenue Coalition “Written Testimony HB 2764” 2 pages