PUBLIC HEARING HJR 18, HB 2663, HB 2664

PUBLIC HEARING AND WORK SESSION

HB 2152

 

TAPE 87,88, A-B

 

HOUSE REVENUE COMMITTEE

MARCH 19, 2003   8:30 AM   STATE CAPITOL BUILDING

 

Members Present:                        Representative Lane Shetterly, Chair

                                                Representative Joanne Verger, Vice Chair

                                                Representative Phil Barnhart

                                                Representative Vicki Berger

                                                Representative Pat Farr

                                                Representative Mark Hass

                                                Representative Elaine Hopson

                                                Representative Max Williams                                               

 

Members Excused:                      Representative Wayne Scott, Vice Chair

 

Witness Present:                        Randall Edwards, State Treasurer of Oregon

                                                Representative Westland, District 53

                                                Sen. Peter Courtney, District 11

                                                Cynthia Burris, Attorney General’s Office

                                                Ozzie Rose, Confederation of Oregon School Administrators

                                                Steven Lowder, Superintendent of Tigard-Tualatin School District

                                                Deborah Sommer, Superintendent of Canby School District

                                                David Williams, Oregon School Employees Association

                                                Laurie Wimmer Whelan, Oregon Education Association

                                                John Marshall, Oregon School Boards Association

                                                Michael Parker, Oregon College Savings Plan

                                                David Williams, Oregon Revenue Coalition

 

Staff Present:                            Paul Warner, Legislative Revenue Officer

                                                Steve Meyer, Legislative Revenue Office

                                                Dick Yates, Legislative Revenue Office

                                                Kathy Tooley, Committee Assistant

 

TAPE 87, SIDE A

004

Chair Shetterly

Calls meeting to order at 9:30 a.m.

 

OPENED PUBLIC HEARING ON HJR 18, HB 2663

 

014

Steve Meyer

Provided overview of HJR 18 (Exhibit 1) and HB 2663, (Exhibit 2).

 

023

Randall Edwards

Testified in favor of HJR 18 (Exhibits 3, 4). Described school financing system as broken.  This bill is important for investment in the local capital infrastructure.  Local school districts can use the state’s credit rating to lower costs of issuing bonds.  These bills are essential for long term health of public schools. Described how the bond would work, adds match, legislative proposal, amendment to the constitution.

 

138

Rep. Ben Westland

Spoke in favor of HJR 18 and HB 2663.  Described as important legislation, $2.4 billion needed for school maintenance and renewal documented in a Secretary of State’s Audit Division opinion (Exhibit 5).  This bill provides environment for learning.

 

151

Sen. Peter Courtney

Spoke in favor of HJR 18 and HB 2663.  Discussed bonding, earthquake, and election history.  This bill will be in the May 2004 ballot and believes the public will support it.

 

248

Rep. Verger

Why do we need to be the benevolent grandfather and save people from their mistakes, mismanagement or lack of vision? Is sympathetic to capital projects for schools, problem is with fairness. Neighboring cities which did not obligate themselves will be able to get monies if it can get voter support. Cited need for teachers in the classrooms rather than capital projects.

 

274

Rep. Westland

This would help future bond measures, all districts can benefit from this legislation.

 

310

Sen. Courtney

Discussed education philosophy.  Believes in common school fund and the responsibility for educating all kids throughout the state.  Support is for the kids, whether parents support bond measure or not.

 

360

Rep. Verger

Do you include capital projects in that philosophy?

 

363

Sen. Courtney

Answered affirmatively.

 

370

Rep. Verger

Discussed two Marshfield High School graduates who contributed over a million dollars to the district for fitness center as a way of saying thanks.

 

380

Edwards

Described requirements of the bill.  Bill sets framework, bond authority, implementing law, and long term planning.

 

420

Chair Shetterly

Recess public hearing on HJR 18 and HB 2663.

 

 

OPENED WORK SESSION ON HB 2152

 

443

Chair Shetterly

Recapped sense of the Committee regarding HB 2152.

 

448

Rep. Verger

MOTION:  MOVED APPROVAL OF -1 AMENDMENT (Exhibit 6) INTO HB 2152.

 

452

Yates

Discussed model effects of extending $.10 tax, estimated impacts of the bill, new rate and revenues, revenue impact, tracking for cigarette revenues (Exhibit 7-8).

 

 

TAPE 88, SIDE A

 

068

Rep. Barnhart

Prefer the bill as it stands and intends to vote against the amendment.

 

070

Chair Shetterly

ORDER:  HEARING NO OTHER OBJECTION, THE -1 AMENDMENT IS ADOPTED.  Members Present: Berger, Farr, Hass, Hopson, Scott, Verger, Williams, Chair Shetterly.  VOTING NO:  Rep. Barnhart.

 

072

 

 

074

Rep. Verger

MOTION:  MOVED HB 2152 AS AMENDED TO THE HOUSE FLOOR WITH A DO PASS RECOMMENDATION

 

ROLL CALL:  MOTION PASSED 9-0-0

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

 

Rep. Verger will carry the bill.

 

082

Chair Shetterly

Closed work session on HB 2152.

 

 

REOPENED PUBLIC HEARING ON HJR 18 AND HB 2663

 

088

Rep. Hass

Provided history, this component was removed in conference committee last year, any reason to be more optimistic this time around?

 

093

Rep. Westland

I’m more optimistic.

 

096

Chair Shetterly

It could have been a matter of capacity last time.  This may stand a better chance moving by itself than attached to the other referrals for constitutional amendment.

 

101

Rep. Farr

Oregon has a responsibility for the school children for the entire state and is firmly behind the bill.

 

111

Rep. Westland

Redmond has failed its last four bonds, yet Bend rarely does, this bill helps level the playing field.  Schools can take advantage of state’s credit rating.

 

133

Chair Shetterly

It’s a matter of timing, some communities will have just passed bonds to support their infrastructure; once this passes the next round will be communities who just pay part and get the full benefit.  Is this drafted in such a way that a community could vote to refund its bond measure and take advantage of state money?

 

152

Edwards

I don’t believe this is written that way.

 

155

Verger

The rating drop doesn’t mean anything unless community goes out for bonds?  How does lower bond rating affect this bill?

 

161

Edwards

It doesn’t affect this bill. It is an indication of the financial health of the state.   This is a tool to meet long term capital needs for the state as is done for road improvements.  This has an economic development component to it by improving schools capital, means jobs and vitality for schools.  This is a $9 billion capital investment which puts it at the top of capital investment in Oregon, should not be neglecting capital improvements.

 

189

Rep. Barnhart

-1 amendment, section 6, this may have the affect of amending capital definition costs for the purpose of ballot measure 50. Does it include the purchase of furniture to furnish a new building?

 

201

Edwards

There is a discussion about how broad this is written.

 

218

Rep. Barnhart

I would like a broader definition; schools have difficulty buying things to start up that are excluded from definition of capital in Measure 50.

 

223

Chair Shetterly

Probably a question for counsel.  What does it mean “this article supersedes any conflicting provision of the constitution”?  The definition of capital within Measures 5 and 50 is limited to article 11, does not need to be superseded for this definition to apply. What needs to be superseded?  Is it an amendment or revision?

 

240

Edwards

Will get back to you on that.  For the record, the state superintendent is also supportive of this package and submitted a letter of support (Exhibit 9).

 

249

 

 

260

Chair Shetterly

 

 

Chair Shetterly

With strong support this session and getting questions answered, this bill can move forward.

 

Looking at May 2004 primary election.

 

264

 

269

Edwards

 

Chair Shetterly

Could debate if that’s the right timing as well.

 

Discussed definition of capital cost, bringing definition into concurrence.

 

282

Edwards

This creates a separate fund with the department managing both accounts to meet the state’s capital needs.

 

292

Rep. Westland

To Rep. Verger’s concerns, referencing districts that manage well and take care of capital costs, this bill in no way punishes those districts. It gives good stewards and those that don’t equal access to bonds.

 

317

Chair Shetterly

Described cities that have capital needs, but tax base is too limited to fund, cited fairness issue.

 

349

Cynthia Burris

Capital costs definition in HJR 18 is broader and was intentional. It applies only to this measure does not amend Measure 5 and 50 definitions. Allows local districts to have bond measure, including projects outside of limits in up to 30% grant.

 

372

Rep. Barnhart

Would a school be able to buy furniture, books for the library?

 

380

Burris

Could be interpreted broadly, but not certain.

 

390

Chair Shetterly

This should be discussed with bond counsel.

 

394

Rep. Barnhart

This measure should put care into definitions to cover the real costs of a new building.

 

400

Chair Shetterly

The language “supersedes any conflicting provision of the constitution”, why is it needed and does it create a revision?

 

395

Burris

I don’t believe it creates a revision.  The language is in there to be extra cautious.  Described examples of language the article is modeled on.  It does not create a revision to constitution; to have a revision you have to amend more than one section of the constitution.  This creates a new section allowing authority for general obligation bonds and is written the way every state general obligation bond program has been set up.

 

461

Ozzie Rose

Members of the Confederation of Oregon School Administrators support the two measures. State should play a role in rebuilding and maintaining infrastructure in K-12 system.  Cited maintenance deferred in times of distress.  Two main points: equity has been ignored on the capital side; broadens definition of capital to include new technology to improve infrastructure.

 

TAPE 87, SIDE B

 

067

Steve Lowder

Spoke in favor of both measures, cited infrastructure needs.  Previous bond $86 million approved, but needs are greater.  Discussed issue of equity for wealthy and poor districts.  Encouraged committee to keep definition of equipment broad.

 

114

Deborah Sommer

Spoke in favor of the bills, discussed realities of passing bonds at locally and length of time it takes.  Canby scaled down a bond request in order to get voter support over 6 years. Bond dollars were insufficient due to rising costs. Public expects the bond to take care of facility needs for next 25 years.

 

141

Rep. Verger

How do you see this bill playing out in high growth vs. declining enrollment areas?  How will the fairness issue be addressed?

 

160

Rose

All districts will qualify in the same manner and the state will match 30%.

 

178

Rep. Verger

Won’t the bonding be somewhat limited, there would only be so many schools eligible?  Are high growth schools more eligible?

 

183

Rose

Will high growth schools eat up funding?  That’s an issue for future legislatures in how much is made available.  Assume the legislature will have to establish a pattern of increasing the bonding capacity.

 

193

Chair Shetterly

Clarifies match is not exceeding 30%, will depend on what’s available.

 

200

Rose

Vote is scheduled for 2004 primary. Bonds will have to be sold; the first time schools will be able to use the bond will be for the 2006-07 school year.

 

220

David Williams

Spoke in support of HJR 18 and HB 2663, as a tool for school districts to help with capital costs, (Exhibit 10).

 

245

Laurie Wimmer

Whelan

 

Spoke in support of HJR 18, concerned about local match, would like source to be more flexible than local bonding to allow local district flexibility in terms of funding.

 

270

Chair Shetterly

Is that limitation in the joint resolution or in the bill?

 

272

Steve Meyer

It’s in HB 2663?

 

274

Chair Shetterly

That’s statutory and can be fixed.

 

276

Rep. Verger

Regarding OEA position, Oregon has operational needs and wants more teachers, higher standards. There are only so many things can ask the voters for, are you concerned that operations will suffer as a result?

 

290

Whelan

It’s a struggle every district has with respect to bonding and local option.   OEA supports having as many creative options to try to fulfill operational and capital needs of schools.

 

310

John Marshall

Spoke in support of the bills based on need to create the structure that will allow for funding. Need to build the foundation to give treasurer authority to build on in the future.  The challenge will be to find revenue stream to pay debt service after establishment of fund.

 

361

Rep. Barnhart

In Section 3, says 50% has to come from local general obligation bonds, a maximum 30% from this bond, 20% can from somewhere else.  Does require voter approval for local general obligation bonds, not specifying the amount.  The trigger is local voter approval.

 

380

Chair Shetterly

Interested in finding out about definition of capital costs in HJR 18, on HB 2663 direction of administration of criteria.

 

404

Rep. Hopson

HJR 18 definition capital costs should be done in conjunction with definition for operating costs.

 

414

Rep. Verger

Will we know revenue source before going into work session?

 

417

Chair Shetterly

There will be a $1 appropriation in this session to establish the fund, take action of next leg session to authorize issuance of bonds; debt service will be out of general fund.

 

 

TAPE 88, SIDE B

 

002

Edwards

The key point is to set up a framework to address long-term need. This is a critical part of school funding to make sure the buildings are meeting the objectives.

 

027

Chair Shetterly

Meyer confirmed the appropriation is still in the bill, the amendment takes out the limitation.  It will take an amendment to take out the appropriation.

 

032

Edwards

Intent was to take it out.

 

038

Chair Shetterly

Closed public hearing on HJR 18 and HB 2663.

 

OPEN PUBLIC HEARING ON HB 2664

 

 

 

048

Lizbeth Martin-Mahar

Provided background and description, discussed -1 amendment, (Exhibit 11-12).

 

072

 

 

 

105

 

 

Edwards

 

 

 

Edwards

 

 

Spoke in favor of HB 2664, (Exhibit 13) updated Committee on Oregon college savings plan. People have invested $100 million, plan is viewed as an opportunity for the long term.

 

Described college savings plan, risk is on investor. Described features, tax benefits from federal and state; lifetime plan that can be passed on to next generation.

 

191

Rep. Barnhart

Does this bill bring Oregon into conformity with federal law?

 

182

Edwards

Changes are for how the program is administered in Oregon; name change now 529 plan; more a network with other vendors.  Most of the changes are housekeeping for Oregonians to invest into program.  Have to invest by end of calendar year, trying to extend up to the tax date, as an IRA.

 

245

Rep. Barnhart

These changes would allow states to take advantage of flexibility under 529 that it doesn’t now?

 

250

Edwards

That’s a fair statement, mostly programmatic changes that are being made after seeing the market place, giving investor more flexibility.

 

Questions and discussion regarding frontloading.

 

279

Chair Shetterly

Are there a surprising number of contributors that don’t take the subtraction?

 

282

Michael Parker

Answered affirmatively. Discussed people who have not taken the deduction.

 

294

Edwards

Have sent letters reminding people to take the deduction.  Have to explore why people aren’t taking it.

 

Questions and discussion regarding deductions.

 

314

Parker

Discussed -1 amendment, loophole in non-qualified withdrawal, separate account for operation of plan.

 

Questions and discussion regarding non-qualified withdrawals.

 

377

David Williams

Clarify impetus for submitting testimony, (Exhibit 13) concerned with bottom line for this session needs to be revenue offsetting and revenue neutral.

 

 

 

 

412

Chair Shetterly

Meeting adjourned at 10:23 a.m.

 

 

 

 

 

Tape Log Submitted by,

 

 

 

Kathy Tooley, Committee Assistant Reviewed by Kim Taylor James

 

Exhibit Summary:

1.       Meyer, “Revenue Impact HJR 18-1, HJR 18 -1 Amendment”, 2 pages

2.       Meyer, “Revenue Impact HB 2663-1”, 1 page

3.       Edwards, “Investing in our Future:  School Capital Matching Program HJR 18 and HB 2663”, 1 page

4.       Edwards, “Investing in our Future:  School Capital Matching Program, Answers to Frequently Asked Questions about HJR 18”, 2 pages

5.       Westland, “Correspondence from Oregon Audits Division”, 3 pages

6.       Verger, “-1 Amendment to HB 2152”, 1 page

7.       Yates, “Staff Measure Summary HB 2152”, 1 page

8.       Yates, “Monthly Output from Model”, 3 pages

9.       Edwards, “Testimony of Susan Castillo”, 1 page

10.   Williams, “Testimony HJR 18 and HB 2663”, 1 page

11.   Martin-Mahar, “Revenue, Fiscal Impact HB 2664-1”, 2 pages

12.   Martin-Mahar, “-1 Amendment HB 2664”, 1 page

13.   Edwards, “Testimony HB 2664”, 2 pages

14.   Written Testimony Oregon Revenue Coalition, 3 pages