PUBLIC HEARING 3656, WORK SESSION

HB 2182, HB 2837,

 BILL INTRODUCTION HB 3743

 

TAPE 233, 234, 235, 236, 237, AB

 

HOUSE REVENUE COMMITTEE

JULY 30, 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 Max Williams                                               

 

Members Excused:                      Representative Elaine Hopson

 

Witnesses Present:                        Senator Vicki Walker, District 7

                                                Floyd Lanter, Division of Finance and Corporate Securities,

                                                            Department of Consumer and Business Services, (DCBS)

                                                Bruce Piper, ADAPT,

`                                                           Alcohol and Drug Abuse Directors Association of Oregon

                                                Rick Trealeaven, Best Care Treatment Services, Central Oregon

                                                            Mental Health Director Jefferson County

                                                            Association of Oregon Community Mental Health Programs

                                                Ann Uhler, Women’s Commission on Alcohol and Drug Issues

                                                            in the state of Oregon

                                                Karl Ockert, BridgePort Brewing Company

                                                Paula Troyer, BridgePort Brewing Company

                                                Jim Parker, Oregon Brewer’s Guild

                                                Jamie Floyd, Steelhead Brewing and Café

                                                            Oregon Brewer’s Guild

                                                Gordon Fultz, Organization of Oregon Counties

                                                Gina Firman, Association of Community Mental Health Programs

                                                Ellen Lowe, former President League of Oregon Cities

                                                Angela Kimball, National Alliance for the Mentally Ill of Oregon

                                                Steve Harris

                                                Mary Ann Schwab

                                                Roger Martin, The Investment Company Institute

                                                Peter Threlkel, Corporation Division, Secretary of State’s Office (SOS)

                                                Jim Carlson, Oregon Health Care Association

                                                Brett Salmon, Oregon Health Care Association

 

Staff Present:                            Paul Warner, Legislative Revenue Officer

                                                Mazen Malik, Legislative Revenue Office

                                                Lizbeth Martin-Mahar, Legislative Revenue Office

                                                Kathy Tooley, Committee Assistant

 

TAPE 223, SIDE A

 

004

Chair Shetterly

Calls meeting to order at  8:35 a.m.

 

OPENED PUBLIC HEARING HB 3656

 

010

Mazen Malik

Provided “Staff Measure Summary HB 3656”, (Exhibit 1).  Described proposed fee increases in:  “Exhibit B1: Senate Bill 826, Securities Program Proposed Fee Increase Analysis”, (Exhibit 2); business registry transactions, “Exhibit A: Business Registry”, (Exhibit 3); “Revenue Impact HB 3656”, (Exhibit 4); fee increases in: “Exhibit B2: Senate Bill 826 Securities Program Proposed Fee Increase Analysis”, (Exhibit 5).

 

100

Sen. Vicki Walker

Asked Committee to include an amendment originally in SB 826 that did not make it into HB 3656 which sets the implementation date for the securities fees increase for December 1. Discussed impetus for bill.  Discussed low securities fees in comparison with the rest of the country. Discussed possible testimony of Roger Martin in opposition to the bill before the Senate Business and Labor Committee. Compared stockbroker registration fee of $15 to that of a court reporter at $50 year. Spoke with Securities Industry Association regarding fee increase; said Association would remain neutral on the bill. Discussed testimony of Peter Tool of Financial Planning Association of Oregon and Southwest Washington received in Senate Business and Labor Committee on SB 826 who she said reluctantly supported the bill as paying their fair share of the financial burden for the state to provide proper regulation. 

 

193

Sen. Walker

Said Martin previously argued against looking at other states to determine what Oregon does. Said it was important that Oregon be at a median point in its fees and that the DCBS should have authority to increase fees through the public hearings process.

 

212

Sen. Walker

Said one of Martin’s arguments was that suggested fee increases were sometimes 300% of the current fee. Said most of the increases were from $15 to $50 and not that significant.

 

219

 

 

 

225

Sen. Walker

 

 

 

Sen. Walker

Said one of Martin’s arguments was that historically fees tied to licensing are related to the cost of regulating the licensed profession.  Described legal fees incurred when the department tries court cases.

 

Said Martin objected to charges for notice filing fees.  Said the state is entitled to collect fee for privilege of doing business in Oregon.

 

240

Floyd Lanter

Spoke in support of HB 3656, specifically Sections 1-5, 8 and 9; recommended conceptual amendment. Paraphrased written testimony, (Exhibit 6).

 

381

Rep. Scott

What basis did you use for calculating fee increases other than midpoint?

 

383

Lanter

Information available on websites from self-regulatory organizations, the National Association of Securities Dealers and the Investment Advisors Representative Board was used to reach a midpoint.

 

393

Rep. Scott

Other fee increases under consideration use the COLA basis for increases, were any of those calculations used to see where the fee would fall?

 

399

Lanter

Not aware of using any COLA testing, suspect fees would be impact would be higher since it has been so long since these fees have been adjusted.

 

401

Rep. Scott

Have these funds been transferred to from your department to the general fund in the past?

 

404

Lanter

Answered affirmatively. In 2002, $2 million was transferred and there will be about the same this year.

 

409

 

Question and discussion regarding the ending balance for 2001-03 in Lanter’s department.

 

414

Rep. Scott

Do you also calculate what funds you need to have for operating?

 

416

Lanter

Answered affirmatively, the DCBS has a funds balance policy that it is required to follow.  The securities section is required to maintain a minimum of two quarters of fund balance and it transfers funds on a quarterly basis to the general fund.

 

429

Rep. Scott

You propose the date for collection of fees be changed to December 1, 2003.  What are the collection dates throughout the department; are they annual or do they spread throughout the entire year?

 

433

Lanter

License and other fees for investment advisors are handled electronically nationally in December; registrations occur throughout the year.

 

436

Rep. Scott

If transferred money through last quarters and there is sufficient cash flow, other than the theory that says Oregon should be at the median rate, why would fees need to be increased?

 

440

Lanter

Making available an additional source of revenue to the general fund, operating expenses currently are covered with existing fee structure.

 

447

Sen. Walker

Oregon raises more than needed for the general fund, as was done with tobacco, it is not unreasonable as there are other costs involved for DCBS.

 

 

TAPE 233, SIDE A

 

038

Chair Shetterly

It’s the general fund impact of this bill which requires the three-fifths majority, if it was just a fee bill that would not be necessary.

 

043

Sen. Walker

Wanted to dedicate one-half of 1% or $250,000 to the DCBS to promote financial education to combat financial illiteracy. Cited trend in credit card reform is to increase difficulty of filing bankruptcy.

 

066

Rep. Barnhart

People well educated in their own finances, can understand the relationship between programs and taxes in state budgets as well.

 

068

Chair Shetterly

Recessed public hearing on HB 3656.

 

 

 

 

OPENED WORK SESSION ON HB 2837

 

150

Bruce Piper

Gave committee quiz, (Exhibit 7). Spoke in support of HB 2837. Discussed Oregon’s alcohol tax ranking nationally and social impacts from elimination of health care positions and treatment reduction. Countered claims of large percentage increase in tax due to decades without an increase.  Described requiring people who consume too much to pay for the necessary treatment as a policy choice. Business taxes are a necessity passed on to the consumer; described increased tax as a user fee that will help pay for the damage caused by consumption.

 

220

Rick Treleaven

Spoke in support of HB 2837. Paraphrased written testimony, “The Economics of the Beer Tax”, (Exhibit 8).

 

319

Ann Uhler

Spoke in support of HB 2837. Paraphrased written testimony (Exhibit 9).  Described accountability clause.

 

 

TAPE 233, SIDE B

 

086

Rep. Barnhart

Regarding public/private partnership and malpractice insurance, asked for description of the risks involved in the operation of this kind of business.

 

090

Piper

Difficult for private sector to partner with government because of funding levels.  Described risks and capitated contracts which provide a finite amount money. Personally watched 9 providers come and go out of business in Coos County, concerned when Coos County requested ADAPT services. The trade association sees itself as the primary solution for Oregon human services provided in the private sector.  Described risks, directors and officers’ insurance, professional liability and malpractice insurance.

 

130

Uhler

Discussed risks of treating people with medical and mental health complications.  In the women’s program, there are additional costs with children in residence. Malpractice and regular business insurance increased due to risks.

 

124

Rep. Verger

Described worsening problem of drugs in Coos County. Provided quiz for Piper. Said money is not the answer. Felt accountability clause in HB 2837 is an extremely important part of the money track in the war against drugs and in drug treatment.

 

150

Sen. Morrisette

Spoke in support of HB 2837, provided “Proposed Beer Tax Distribution with Small Brewer Exemption”, (Exhibit 10).  Provided history of beer tax, its supporters, and current bills designed to increase the tax.  Reiterated earlier testimony in support of HB 2837, said it was extremely important to go to the source of many of society’s problems.

 

196

Karl Ockert

Described growth of BridgePort Brewing and beer industry.  Described family wage and service positions, support for Oregon agriculture, glass, paper and tanks/equipment industry and union jobs.  Described $300,000 state and federal taxes already paid; opposed increase in beer tax as it singles out and harms the beer industry and is an extra cost of doing business which will decrease sales and inhibit growth.

 

237

Paula Troyer

Spoke in opposition to HB 2837.  Described heritage, quality and community commitment brought by industry, and the risk to community programs by a tax increase, (Exhibit 11).

 

265

Rep. Farr

Declared potential conflict of interest, had BridgePort Blue Heron beer earlier in the week.

 

267

Rep. Williams

Current proposal has a small brewer’s exemption which would not affect BridgePort Brewing Company based on level of production.

 

276

Karl Ockert

BridgePort wants to grow, sees tax as a growth penalty. Said if the tax is increased the distributor would institute a price increase on its whole portfolio, the price on the shelf will go up impacting sales.

 

296

Jim Parker

Spoke in opposition to HB 2837, paraphrased written testimony, (Exhibit 12).

 

 

TAPE 234, SIDE B

 

150

Rep. Berger

The exemption piece is designed to help the craft beer industry, but may have legal problems and the industry says they are going to pay for the tax anyway, why are we looking at this exemption?

 

154

Parker

There is no way to protect us because of the Commerce Clause and the Hawaii case.  Said Committee cannot have the intent of protecting local industry; based on those two tests the exemption would fail.  The Guild has decided not to support an exemption because if the distributors are being hit, they won’t raise the tax on the just the large distributors, they will raise it across the board in order to hit price points.

 

177

Chair Shetterly

Clarified the intent, although talking casually in committee about local brewers because that is who is in front of it, the exemption is based on volume not location. Does the industry need a new distribution system?

 

183

Parker

No response for the record.

 

188

Rep. Berger

The excise tax rates by state shows Oregon’s rank, you would rather see a retail than an excise tax, Oregon does not have a retail tax and a lot of these states cited in the handout do (Exhibit 12).

 

197

Rep. Barnhart

The federal government charges differential tax based on production?

 

199

Parker

Answered affirmatively.

 

200

Rep. Barnhart

Why do they do that?

 

201

Parker

They created the small brewer differential to encourage the growth of craft brewing nationwide.

 

206

Rep. Hass

Both sides of this issue have argued for a restructuring of the tax codes; until that is done every time there is an economic bump in the road it will come up again.  There’s a pretty strong consensus for a different kind of tax system from the ground up.

 

215

Parker

Refuted earlier testimony that this is a user fee. It is not a consumption tax, and selling it as one is dishonest.

 

279

Rep. Barnhart

Asked if Parker would support a direct consumption tax on a glass of beer in the tavern, or bottle of beer in the grocery store?

 

225

Parker

His personal feeling is that if the tax was applied at the consumption level evenly, not drastically increased, that there would not be a lot of opposition.  It would truly be what everyone wants; and that is to see that problem drinkers pay the bulk of the tax.

 

233

Chair Shetterly

The sales tax solves your distribution problem too.

 

238

Jamie Floyd

Discussed brewer contributions to communities, challenge from additional tax would mean a loss of jobs.  Would support the search for revenue that doesn’t outlaw one specific industry.

 

330

Rep. Barnhart

Would you describe what your barrelage is per year and what percentage is sold retail vs. wholesale?

 

332

Floyd

1355 barrels a year, 1 10-barrel batch of beer per day.  On site vs. distributorship flexes depending on the events asked to attend; sells 60-70% on site.

 

 

TAPE 235, SIDE A

 

039

Rep. Barnhart

Are these figures comparable to other brew pubs or are there likely to be significant differences?

 

042

Floyd

Each brewery is complex and has a different business plan, difficult to assess how they are run, varies some have outside distribution, some do not have outside distribution, and some have an site brew pub.

 

057

Chair Shetterly

Recessed work session on HB 2837 at 10:30.

 

 

TAPE 236, SIDE A

 

016

Chair Shetterly

Resumed hearing on HB 2837 at 1:43 p.m.

 

018

Gordon Fultz

Spoke in support of “HB 2804 and Beer and Wine tax proposals – HB 2837”, (Exhibit 13).  Paraphrased written testimony. Described Press Packet “Advocates Observe Beer Tax Rate ‘Birthday’ at Capitol, (Exhibit 14).

 

137

Gina Firman

Spoke in support of HB 2837. Discussed loss of 1800 family wage jobs, serving 50,000 people.  Have operated from February 1 with zero crisis dollars, some counties no longer have crisis services.  Discussed need for philosophical look at what is done with needy Oregonians with mental health issues. Discussed specific cuts.  Considered HB 2837 to provide a part of the solution.

 

163

Chair Shetterly

Recess hearing on HB 2837.

 

 

BILL INTRODUCTION LC 3743

 

165

 

 

 

169

 

Chair Shetterly

 

 

 

Chair Shetterly

Describes LC 3743, (Exhibit 15), as the implementing bill to HJR 18 and authorizes the issuance of COPs for pension bond, pension liability refinancing if the general obligation bond in HJR 18 is not approved.

 

MOTION:  MOVES INTRODUCTION OF LC 3743 AS A COMMITTEE BILL.

 

Clarifies the bill is entered as a Committee Bill, but does not indicate support or opposition b the members of the Committee.

 

170

Chair Shetterly

ORDER:  HEARING NO OBJECTION, THE CHAIR SO ORDERS. (ALL MEMBERS PRESENT EXCEPT REPS. FARR, HOPSON, SCOTT, EXCUSED).

 

REOPENED HEARING ON HB 2837

 

173

Chair Shetterly

Reopened hearing on HB 2837

 

210

Ellen Lowe

Spoke as to historical intent for fund allocation for cities and counties as a logical provider for urban services.  Later cities and counties were to be part of receiving funds due to the use and abuse of alcohol.  Surprised still looking at the same amounts in general revenue sharing.

 

275

Angela Kimball

Spoke in support of HB 2837.  Paraphrased written testimony (Exhibit 16).  Discussed “Diminished Care, Diminishing Returns”, (Exhibit 17).

 

320

Rep. Verger

Said testimony regarding the national television advertising expenditures, might not connect with Oregon breweries.

 

328

Kimball

It refers nationally, including Oregon breweries.

 

329

Rep. Verger

They probably participate, but couldn’t afford anything like that kind of advertising.  Believes industry claims of economic hardship are not intended to be disingenuous.  Regardless of having a beer tax or not, need to address people who have this kind of need in Oregon.

 

TAPE 237, SIDE A

 

029

Steve Harris

Relayed personal experience of drug and alcohol abuse, now a successful drug/alcohol counselor.  Discussed affects of budget cuts on people without representation.  Described concerns for people he’s seen die from drug and alcohol use and the little it would cost per bottle to have an impact.  Described the value and successes he and others have in receiving treatment.  Urged the Committee pass the additional tax in order that others may receive treatment and services the money would provide.

 

070

Rep. Verger

Is there anything in your success that made the difference?  Was it the length of time, 90 days vs. 30 days of treatment for instance?

 

185

Harris

Believes if a person is properly assessed as needing inpatient treatment, the longer the treatment the better in order to learn new ways of life. Other’s need education. Said 7-day treatment does nothing.

 

201

Mary Ann Schwab

Spoke in support of a beer tax; paraphrased written testimony (Exhibit 18); provided Multnomah County Commissioner Letter to Rep. Dingfelder and Sen. Morrisette, (Exhibit 19); provided “The True Costs of Alcohol in Oregon”, (Exhibit 20), provided American Medical Association letter to Karen Minnis, (Exhibit 21).

 

165

Chair Shetterly

Closed hearing on HB 2837

 

REOPENED PUBLIC HEARING ON HB 3656

 

172

Roger Martin

The motivation for HB 3656 is the $22 million the tax would raise. Said the point he objected is not one refuted by Sen. Walker’s earlier remarks.  Section 2 of the bill itself covers new securities which Oregon should charge fees for.  Section 4 of the bill, Page 5, Lines 8 and 9 regarding license fees, covers federally licensed investment advisors for whom the State of Oregon does not have jurisdiction.  Oregon covers those investment advisors that do less than $225 million a year. The Investment Company Institute is made up of 7000 investment companies known as mutual funds. The federal government allows the states to charge a filing fee of $350 for every mutual fund.  Said HB 3656 would approve the largest consumer increase in mutual fund fees that will have adverse affects on small mutual funds resulting in selected filings in Oregon by smaller funds.  Urged Committee to consider a sunset clause.

 

287

Chair Shetterly

Is the sunset directed to a particular section or sections?

 

289

Martin

Suggested Section 1 which deals with mutual funds.

 

295

Peter Threlkeld

The Secretary of State has no formal position on the bill.  Described results of recent online survey (Exhibit 22).

 

328

Chair Shetterly

ABN fee currently $20 going to $50?

 

330

Threlkeld

Answered affirmatively, $50 for 2-year period.

 

 

TAPE 236, SIDE B

 

022

Threlkeld

In Section 7 (3), (5), discussed concerns of SOS office in setting up a new accounting procedure requiring a separate budget system, said it would be an additional expense and burden.

 

032

Chair Shetterly

Sees the separate account as being set up by the Treasurer, do you feel SOS would be setting up a separate account?  Is that your operating account or an operating account under the control of the Treasurer?

 

036

Threlkeld

That would be at the Treasury, believes a fee is charged for that, but would have to account for salaries and other expenses that need to be balanced on a monthly basis and would put existing programs at risk.

 

070

Threlkeld

A flat fee works well and raising it to $50 would be easy to implement.  Asked the Committee to consider changing language that allows operation out of a single budget.

 

074

Threlkeld

Another concern exists in Sections 8, 9, 10, where the language regarding timing in the bill is problematic. Asked the Committee to consider changing the implementation date to be based on the anniversary date.

 

093

Threlkeld

Mentioned feedback from the smaller non-profits, that the $20 annual fee can be a burden.

 

107

Rep. Verger

There are advantages to the state of having a registry on non-profits, the state needs to know who is doing business, even if it is community good.  If they are not going to be legitimate they may not want to do business in Oregon.

 

118

Chair Shetterly

Closed public hearing on HB 3656.

 

130

 

Recessed at approximately 2:30.

 

Reconvened at approximately 2:35.

 

 

OPENED WORK SESSION ON HB 2812

 

144

Lizbeth Martin-Mahar

Described -14 amendments as similar to -6 (Exhibit 23); provided Revenue Impact HB 2182-14 (Exhibit 24); described -15 amendments, (Exhibit 25); Revenue Impact HB 2182-15 (Exhibit 26).

 

256

Jim Carlson

Discussed components of -14 amendments, (Exhibit 27), and -15 amendments, (Exhibit 28). Outlined changes in amendments which represent technical legal issues to address concerns of DHS attorneys and outside legal counsel.  Have reached agreement on all the technical legal issues.  A policy issue still outstanding concerns itself with locking the formula, payment system or delivery of dollars into the statute which is the key provision for OHCA’s support of the bill. Described the major change in the Programs All Inclusive Care of the Elderly. Responded to staff comments about less federal matching money.  Provided Statesman Journal article “Magnolia Manor closes its doors, (Exhibit 29).

 

292

Rep. Verger

Are questions regarding methodology in the bill itself or the amendments?

 

296

Brett Salmon

Described a key issue for OHCA, in Section 13, (4) of the amendment, uneasy with legislation going forward, not knowing that the dollars are going to go back into the program. Discussed the “relationship %”.

 

405

Chair Shetterly

Looked at members of DHS in the audience and received affirmation of signoff on the bill on legal and technical issues.  The outstanding issue becomes a choice of putting reimbursement methodology in the bill or not.

 

320

Chair Shetterly

Asked the Committee if there was any objection the -14 or -15 in the bill?

 

322

Rep. Barnhart

This bill isn’t ready to move?

 

324

Chair Shetterly

No.

 

325

Chair Shetterly

MOTION:  MOVED ADOPTION OF THE –14 AMENDMENT INTO HB 2182.

 

ORDER:  HEARING NO OBJECTION, THE CHAIR SO ORDERS. (ALL MEMBERS PRESENT EXCEPT REPS. FARR, HOPSON, AND SCOTT, EXCUSED).

 

326

Chair Shetterly

MOTION:  MOVED ADOPTION OF THE –15 AMENDMENT INTO HB 2182.

 

ORDER:  HEARING NO OBJECTION, THE CHAIR SO ORDERS. (ALL MEMBERS PRESENT EXCEPT REPS. FARR, HOPSON, AND SCOTT, EXCUSED).

 

328

Chair Shetterly

Closed the Work Session on HB 2182.

 

330

Chair Shetterly

Meeting adjourned at 3:00 p.m.

 

 

 

Tape Log Submitted by,

 

 

 

Kathy Tooley, Committee Assistant

 

Exhibit Summary:

1.       Malik, “Staff Measure Summary HB 3656”, 1 page

2.       Malik, “Exhibit B1:  Senate Bill 826, Securities Program Proposed Fee Increase Analysis”, 2 pages

3.       Malik, “Exhibit A: Business Registry”, 1 page

4.       Malik, “Revenue Impact HB 3656”, 1 page

5.       Malik, “Exhibit B2:  Senate Bill 826, Securities Program Proposed Fee Increase Analysis”, 2 pages

6.       Lanter, “Testimony HB 3656”, 6 pages

7.       Piper, “Revenue Committee Quiz”, 1 page

8.       Treleaven, “The Economics of the Beer Tax”, 3 pages

9.       Uhler, “Testimony HB 2837”, 1 page

10.   Sen. Morrisette, “Proposed Beer Tax Distribution with Small Brewer Exemption”, 2 pages

11.   Troyer, “Testimony HB 2837”, 1 page

12.   Parker, “Testimony HB 2837”, 8 pages

13.   Fultz, “Support of HB 2804 and Beer and Wine Tax Proposals”, 21 pages

14.   Fultz, “Advocates Observe Beer Tax Rate ‘Birthday’ at Capitol”, 50 pages

15.   Chair Shetterly, “LC 3743”, 16 pages

16.   Kimball, “Support of -1 Amendments to HB 2837”, 2 pages

17.   Kimball, “Diminished Care, Diminishing Returns”, 4 pages

18.   Schwab, “Testimony HB 2837”, 2 pages

19.   Schwab, “Multnomah County Board of Commissioners letter to Rep. Dingfelder and Sen. Morrisette”, 1 page

20.   Schwab, “The True Costs of Alcohol”, 4 pages

21.   Schwab, “American Medical Association letter to Karen Minnis”, 6 pages

22.   Threlkel, “Testimony for House Bill 3656”, 6 pages

23.   Martin-Mahar, “HB 2182-14 Amendment”, 10 pages

24.   Martin-Mahar, “Revenue Impact HB 2182-14”, 2 pages

25.   Martin-Mahar, “HB 2182-15 Amendment”, 4 pages

26.   Martin-Mahar, “Revenue Impact HB 2182-15”, 1 page

27.   Carlson, “Major Components of -14 Amendment HB 2182”, 3 pages

28.   Carlson, “Major Components of -15 Amendment HB 2182”, 1 page

29.   Carlson, “Statesman-Journal article, “Magnolia Manor closes its doors”, 2 pages

30.   Yates, “State Beer Excise Tax Rates as of January 1, 2003”, 1 page

31.   Burright, Wolfe, written testimony, “HB 2837-1 Beer tax increase – County Health Fund”, 1 page

32.   Cooper, written testimony, “Memo dated July 30, 2003 - House Bill 2182, dash-6 amendments”, 2 pages

33.   Cooper, written testimony, “Memo dated July 29, 2003 - House Bill 2182, dash-6 amendments”, 2 pages

34.   Lanter, written testimony, “HB 3656 – Data requested”, 4 pages