PUBLIC HEARING HB 2721, HB 2506, HB 2950

 

TAPE 85 AB, 86 A

 

HOUSE REVENUE COMMITTEE

MARCH 18, 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 Derrick Kitts, District 30

                                                Angela Dilkes, Smart Coalition

                                                Harvey Mathews, Associated Oregon Industries

                                                Joe Schweinhart, AOI

                                                Brian Reader, Department of Education

                                                Paul Phillips, Smartgrowth Coalition

                                                    Pac/West Communications

                                                Al Logan, Nike

                                                Jonathan Williams, Intel

                                                Jim Craven, Oregon Council of American Electronics Association

 

Staff Present:                            Paul Warner, Legislative Revenue Officer

                                                Lizbeth Martin-Mahar, Legislative Revenue Office

                                                Kathy Tooley, Committee Assistant

 

TAPE 85, SIDE A

 

004

Chair Shetterly

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

 

OPENED PUBLIC HEARING HB 2721

 

022

Lizbeth Martin-Mahar

Provided background and description HB 2721; discussed revenue impact, (Exhibits 1, 2).

 

040

Chair Shetterly

Directed the Committee to review the staff measure summary for a list of counties eligible for the tax credit.

 

043

Martin-Mahar

There are two different criteria, unemployment, and distressed area.

 

045

Rep. Derrick Kitts

Spoke in support of HB 2721, described as economic stimulus, providing incentive to invest in Oregon.

 

063

Angela Dilkes

Spoke in support of HB 2721, Smart Coalition members would consider speeding up equipment upgrades or expansion if this bill was approved.

 

075

Rep. Verger

If you only look at unemployment, can you defend this position; a county may have high unemployment, but little infrastructure or industrial land?

 

090

Dilkes

When looking at distressed areas, what factors in more than unemployment rate, is to get investment in areas outside where it might normally happen.

 

103

Chair Shetterly

Closed Public Hearing HB 2721

 

 

OPENED PUBLIC HEARING HB 2506

 

106

 

 

125

Martin-Mahar

 

 

Martin-Mahar

Gave background and description of HB 2506, (Exhibit 3), provided revenue impact.

 

Provided summary for the Committee, “Differences between Federal and Oregon State Law Research and Development Credit”, (Exhibit 4).

 

170

Harvey Matthews

Supported HB 2506, discussed growth benefits of research and development spending (RD) and competitive nature.  This bill would provide the potential to entice other companies to Oregon, in combination with investment in schools, capital gains reduction, and investments in engineering and business capital.

 

220

Joe Schweinhart

Spoke in favor of HB 2506.  Oregon has two advantages which may change this session:  low Worker’s Compensation and Pollution Control Tax Credits.

 

231

Rep. Berger

How do you resolve conflict with business investment and education? How does Oregon get there if it keeps giving tax breaks and doesn’t have revenue to build education base to attract RD business?

 

267

Mathews

Hewlett Packard, Intel, use and sponsor educational events, the impact of these companies on educational system, with their donations, is equal to and better than what is invested in RD tax credit.  If Oregon has strong university system, must have business to keep students here or lose them.

 

289

Schweinhart

RD will bring in high paying jobs and increase tax revenue.  This is a jobless recovery, need to have stimulus to increase jobs and revenue.

 

300

Rep. Berger

Is Intel a member of AOI?

 

301

Schweinhart

Answered affirmatively.

 

303

Rep. Hass

I very much support this bill, have question regarding changing limitations on field of basic and qualified research to the federal rules, why do that?

 

308

Schweinhart

Expanding federally will include more people and provide further stimulus.

 

321

Patrick Green

Spoke in opposition to HB 2506, (Exhibit 5), concerned about price tag.  If it is the right thing to do, should consider eliminating what is not working and not producing high paying jobs.  Concerned about 20 year carry forward. Where is current investment and what evidence is there that it would bring more high paying jobs?  What is Oregon’s business plan before opening tax credits to RD, may want to focus on 1-2 industries?

 

409

Rep. Verger

Agree Oregon needs jobs, but must be thoughtful in how we move forward.

 

397

Rep. Hass

Oregon can distinguish itself as a place for RD, may be able to use this expenditure by eliminating another, or by disconnecting from the federal tax code.

 

422

Chair Shetterly

Are we looking at particular industries that are not covered right now?  And who is not covered?

 

447

Joe Schweinhart

AOI did not go out and try to identify particular industries, could see who is taking advantage of federal tax credits.  Would like to promote diversity through this credit.

 

 

TAPE 86, SIDE A

 

020

Rep. Scott

HB 2506 allows for diversification, and for companies to come in give us potential diversification.  New revenue sources would allow Oregon to fund education and other issues if disconnected from federal reductions.

 

038

Schweinhart

Although specific business is unknown, do know stimulus for the economy is needed. This bill will promote growth.

 

040

Brian Reader

Department of Education is not taking position on this bill.  HB 2506 trades off resources that could alleviate potential additional revenue; in the long run this bill makes sense, in the short run would not agree.

 

087

Rep. Verger

Education is not in competition it is too important.  Must prioritize education, where are the suggestions, criteria to solve funding problems for schools.  Don’t see ideas coming from the education community?

 

106

Reader

Quality Education Commission and its model is well regarded and has specific recommendations to improve quality of schools.  The Commission has not gone after recommendations for stable funding; it is not seen as their charge.  Their charge is the development of a high quality education system.

 

119

Rep. Verger

Quality Education Model is fine, but need to have a partner; can’t avoid funding and just discuss performance and standards.

 

129

Rep. Scott

Quality Education is important, but HB 2506 creates opportunity for long-term funding.  Education community should come forward with ideas to stably fund schools.

 

147

Reader

SJR 18 originated with education community.

 

156

Chair Shetterly

The Committee needs to educate itself, look at price tags and the stimulus and revenue affects over time. The Committee will have to wedge priorities into a sustainable budget for 2003-2005.

 

206

Chair Shetterly

Closed Public Hearing on HB 2506.

 

 

OPENED PUBLIC HEARING ON HB 2950

 

208

Chair Shetterly

Opened Public Hearing on HB 2950.

 

211

Martin-Mahar

Provided background and description of HB 2950 (Exhibit 6), eliminates sunset date, discussed revenue impact.

 

218

 

 

 

 

 

 

262

 

290

Paul Phillips

 

 

 

 

 

 

Phillips

 

Phillips

 

 

Spoke in favor of HB 2950 (Exhibit 7).  This measure goes beyond the RD credit; it ties to federal tax definitions. 

 

·         Since it is a tax credit, it does not automatically reconnect to federal definitions.

·         Trying to phase in an increase in the cap and remove the sunset.

 

Discussed benefits of RD, cited Coopers&Lybrand study, (Tab 7, Exhibit 8).

 

Discussed issue of diversity, (Tab 8, Exhibit 8).  Cited historical uses of economic stimulus.

 

312

Al Logan

Spoke in favor of HB 2950.  The bill supports increased employment and retention of jobs in RD for Oregon; and will be an incentive of companies to come to the state. Every dollar spent in RD is an income dollar in someone’s pocket and taxable.  If Oregon ties to the federal definition, it does not have to use resources to audit companies, the federal government will audit.

 

374

Jonathan Williams

Discussed Intel’s current and future RD plans, and competitive nature of RD spending. Intel struggling over how and where to spend RD dollars.  Cited California and Arizona as having more aggressive RD incentives and do not have caps on their RD.  Discussed quick multiplier effects and benefits of RD.  Intel has made its name by investing through downturns and positioning for recovery.

 

034

Rep. Hass

When strategists look at Texas and California, how would they look at Oregon differently if it removed cap and use 15-18%.

 

046

J. Williams

Oregon would be the most attractive state to do RD.

 

050

Phillips

Cites California Study, which shows Oregon positioned aggressively, (Tab 9, Exhibit 8).

 

057

Rep. Hass

Of the tax breaks and expenditures, Oregon can pay for this bill by disconnecting, and closing loopholes.

 

075

Jim Craven

Emphasized key element of tax incentives, only get credit if amount of RD is increased over a base year, not an entitlement program. The competitiveness cost advantage issue is important.

 

144

Chair

Do you have a perspective on removal of the cap?

 

145

Craven

Several avenues to approach, cap issue, percentage issue, will have comments on those issues.

 

153

Rep. Williams

Question for those who testify, pro or con, looking for suggestions as to how to fund, operate, and maintain a stable system of services within the state.

 

175

Craven

State will need a mixture of cost controls and revenue issuance as in business.

 

192

Chair Shetterly

Discussed Atiyeh stimulus, also noted the temporary income tax increase during his tenure. Noted even a stimulus affect incurs an initial revenue cost.  See long term stimulus, but have to deal with short term budgetary impacts.

 

212

Phillips

Fault of Oregon is planning for immediate and next five years, did create strategic investment program, unitary tax changes, partial corporate apportionment.  There will make Oregon competitive on national basis, but initially costs money.  Balance Oregon’s economy on national economy the hits are softer.  Oregon has been too individualistic, which has had a more difficult impact, quicker and is harder to turn around.  Issue is balance for the entire state of Oregon.

 

244

Chair Shetterly

This session Oregon must be positioned to be able to take advantage of inevitable recovery to the greatest extent possible. This includes stimulus bills with short term costs; challenge for the Committee accommodating costs within a budget.  May need to prioritize and offset reductions with existing tax expenditures.

 

 

 

278

Chair Shetterly

Meeting adjourned at 9:50 a.m.

 

 

 

 

 

Tape Log Submitted by,

 

 

 

Kathy Tooley, Committee Assistant Reviewed by Kim Taylor James

 

Exhibit Summary:

1.       Martin-Mahar, “Staff Measure Summary HB 2721”, 1 page

2.       Martin-Mahar, “Revenue Impact HB 2721”, 1 page

3.       Martin-Mahar, “Staff Measure Summary, Revenue, Fiscal Impacts HB 2506”, 3 pages

4.       Martin-Mahar, “Differences Between Federal and Oregon State Law, Research and Development Credit”, 1 page

5.       Green, “ORC Testimony HB 2506”, 3 pages

6.       Martin-Mahar, “Staff Measure Summary, Revenue Impact HB 2950”, 2 pages

7.       Phillips, “HB 2950:  Research and Development Tax Credit Expansion”, 9 pages

8.       Phillips, “Smart Growth Coalition HB 2951”, 91 pages