LC 2055, 3267

INFORMATIONAL MEETING-RESERVE FUND

PUBLIC HEARING HJR 2

PUBLIC HEARING HB 2345

 

TAPES 58 A-B, 59 A

 

HOUSE REVENUE COMMITTEE

FEBRUARY 28, 2005   1:00 PM   STATE CAPITOL BUILDING

 

Members Present:                      Rep. Tom Butler, Chair

                                                Rep. Vicki Berger, Vice-Chair

                                                Rep. Mark Hass, Vice-Chair

                                                Rep. Brian Boquist

                                                Rep. Larry Galizio

                                                Rep. Betty Komp

                                                Rep. Andy Olson

                                                Rep. Chuck Riley                

 

Members Excused:                     Rep. Sal Esquivel

 

Witnesses Present:                      Rep. John Lim, District 50

 

Staff Present:                          Paul Warner, Legislative Revenue Officer

                                                Kristi Bowman, Committee Assistant

                                               

 

TAPE 58, SIDE A

002

Chair Butler

Calls meeting to order at 1:12 p.m.

 

 

 

OPENS WORK SESSION FOR POSSIBLE BILL INTRODUCTION

 

 

 

010

Paul Warner

Overview of Legislative Concept (LC) 2055 (Exhibit 1). This proposal imposes a fee for issuance of first Oregon certificate of title. Fees would be allocated among the Dept. of Transportation, counties and cities.

 

 

 

020

Chair Butler

Gives background of LC 2055 and LC 3267.

 

 

 

040

Chair Butler

MOTION: MOVES THAT LC 2055 BE INTRODUCED AS A HOUSE REVENUE COMMITTEE BILL ON BEHALF OF THE ASSOCIATION OF OREGON COUNTIES.

 

 

 

043

Chair Butler

ORDER: THERE BEING NO OBJECTION, THE CHAIR SO ORDERS. MOTION PASSES 8-0-1. ANSWERING AYE: BERGER, HASS, BOQUIST, GALIZIO, KOMP, OLSON, RILEY, BUTLER. MEMBER EXCUSED: ESQUIVEL.

 

045

Warner

Overview of LC 3267 (Exhibit 2). Requires a local government that imposes an income tax to use the same tax base that the state uses.

 

 

 

060

Rep. Riley

Asks what this would do for income earned outside the taxing authority.

062

Warner

Responds that residence determines the income base, not where the income is earned. This is similar to the “I” tax currently imposed in Multnomah County in which the county residents are taxed because they reside in Multnomah County.

 

 

 

072

Chair Butler

Gives additional background information of LC 3267.

 

 

 

081

Chair Butler

MOTION: MOVES THAT LC 3267 BE INTRODUCED AS A HOUSE REVENUE COMMITTEE BILL.

 

 

 

083

Chair Butler

ORDER: THERE BEING NO OBJECTION, THE CHAIR SO ORDERS. MOTION PASSES 8-0-1. ANSWERING AYE: BERGER, HASS, BOQUIST, GALIZIO, KOMP, OLSON, RILEY, BUTLER. MEMBER EXCUSED: ESQUIVEL

 

 

 

086

Chair Butler

States that a copy of LC 2357 was distributed to committee members at this meeting. It is a beer tax, and it will be considered as a legislative concept at a future date.

 

 

 

CLOSES WORK SESSION FOR POSSIBLE BILL INTRODUCTION

 

INFORMATIONAL MEETING-RESERVE FUND

 

 

 

125

Chair Butler

General comments about the informational presentation on reserve fund concepts.

 

 

 

140

Warner

Overview of slide presentation: Spending Limit Issues (Exhibit 3).

 

 

 

145

Warner

Slide: Coping with Volatility. Gives background and key issues of spending caps in Oregon.

 

 

 

175

Warner

Slide: State Spending Limits. Discusses the Colorado system and the recent publicity surrounding that state’s Tabor Act. Oregon’s statutory limit is 8% of personal income, not including capital gains.

 

 

 

202

Warner

Slide: Target Growth

 

 

 

233

Warner

Slide: Target Comparison

 

 

 

273

Warner

Slide: Spending Definitions

 

 

 

307

Warner

Slide: General Fund Spending

 

 

 

327

Warner

Slide: Oregon’s Current Spending Limit. The current limit in place since 2001 has not been exceeded.

 

 

 

411

Rep. Galizio

Asks which elements of the Tabor Act in Colorado have created the problematic issues in that state.

 

 

 

 

414

Warner

Responds that the biggest problem is the “ratcheting” effect. In 2000 they went from 2nd in the country in job growth to 49th. They are unable to restore the budget cuts previously imposed.

 

 

 

TAPE 59, SIDE A

024

Chair Butler

Makes informational comments on “ratcheting.”

 

 

 

042

Warner

Additional comments on another issue affecting Colorado’s budget. There is an additional amendment that sets a different target for schools, reducing the flexibility the legislature has in dealing with their budget problems.

 

 

 

056

Warner

Slide: Coping with Volatility. Discusses rainy day funding in other states. Gives historical background of education stability fund in OR. Discusses issues pertaining to rainy day funding.

 

 

 

102

Warner

Slide: Oregon’s Post World War II Downturns

 

 

 

122

Warner

Slide: Oregon Remains a Goods Producing State

 

 

 

129

Warner

Slide: Consequences of Being a Goods Producing State

 

 

 

135

Warner

Slide: National Data

 

 

 

141

Warner

Slide: General Fund Revenue History

 

 

 

151

Warner

Slide: Education Stability Fund. States that there are several proposals in the Senate Revenue Committee that would modify the stability fund.

 

 

 

217

Rep. Berger

Clarifies that the 3/5 vote as a trigger is the voting percentage in each chamber. Asks when the stability fund was enacted.

 

 

 

220

Warner

Responds that the fund was established as Measure 19 in September 2002.

 

 

 

232

Rep. Hass

Asks about proposed rainy day fund issues for OR.

 

 

 

234

Warner

Responds that lottery funds have been a stable source of revenue. Discusses fund size percentage.

 

 

 

266

Rep. Riley

Asks whether it would be reasonable to have another rainy day fund for general purposes.

 

 

 

268

Warner

Responds that a general purpose fund would require a special session to allocate funds. Counterargument is that 60% of the general fund budget is allocated to public education, including higher education and community colleges.

 

 

 

285

Rep. Boquist

Asks about 5% fund size issue.

 

293

Warner

Responds that the fund size relates to the revenue source, which in OR is the lottery earnings. Discusses the education endowment fund and the interest earnings on that fund.

 

 

 

333

Chair Butler

Asks about an emergency declaration by the governor as a trigger.

 

 

 

335

Warner

Responds that a decline in employment, or a 2% decline in general fund forecast, or an emergency declaration can be triggers, but a 3/5 vote must still be used. If the governor declares an emergency, you don’t need the budgetary or economic triggers.

 

 

 

364

Warner

Slide: Reserve Fund Proposal. Discusses the HJR 2 and HB 2345 issues for today’s public hearing.

 

 

 

400

Warner

Slide: House Revenue Committee—Interim Spending Limit Proposal. Discusses how limit was set up. The target (8.1% per biennium, fixed base) does not have the ratcheting effect that Colorado has.

 

 

 

TAPE 58, SIDE B

060

Warner

Finishes slide presentation

 

 

 

062

Rep. Hass

Asks about putting a spending cap on tax expenditures.

 

 

 

066

Warner

Responds that the argument regarding a spending limit is that the public sector will grow beyond its optimal size if a limit is not imposed. Comments that the public sector can be limited by limiting its revenue.

 

 

 

080

Chair Butler

Asks who has the tax expenditure report information.

 

 

 

082

Warner

Responds that the expenditure report originated with the House Revenue Committee  in 1995. The expenditure report was then turned over to Dept. of Revenue as a result of legislation. The Revenue Office reviews the  data with the Department.

 

 

 

102

Rep. Hass

General discussion with Warner regarding tax expenditures.

 

 

 

113

Rep. Riley

Asks if a spending limit would be more desirable for a legislator in order to create more credits.

 

 

 

121

Warner

Responds that there are forces within the public sector that pushes it beyond its optimal growth, and therefore a constraint is needed. As the limit is approached and a legislator wants a particular program to be funded, tax expenditures would be an alternative and wouldn’t violate the limit.

 

 

 

137

Rep. Galizio

Asks if Warner knows of any consensus about the optimal size of government.

 

 

 

 

139

Warner

Responds that the optimal size is defined as what the people want. Comments about public sectors in European countries.

 

 

 

OPENS PUBLIC HEARING FOR HJR 2 AND HB 2345

 

 

 

163

 

Rep. John Lim

Testifies in support of HJR 2 in order to implement rainy day fund. States that in the past the legislature has not prepared for a downturn in the economy. He supports taking away corporate kicker refunds, not individual kicker refunds. When the rainy day fund reaches $1 B, kicker refunds can then be made to corporations. Supports using rainy day fund for general fund purposes as well as for education. Proposes a vote by the people on this issue.

 

 

 

306

Chair Butler

Asks Rep. Lim to explain what the education stability fund would look like under HJR 2.

 

 

 

328

Rep. Lim

Responds that the stability fund would not be affected as it is funded by a dedicated percentage from the lottery. Discusses the triggers that would allow the legislature to allocate moneys from the reserve fund.

 

 

 

354

Rep. Berger

Clarifies that HJR 2 only affects the corporate kicker.

 

 

 

372

Warner

Discusses the recent history of corporate kickers.

 

 

 

397

Rep. Lim

Comments about the chances of the bill passing if corporate kicker funds in addition to other contributions are put into the reserve fund.

 

 

 

TAPE 59, SIDE B

024

Rep. Boquist

Asks Rep. Lim: 1) asks about an amendment in process to return kicker funds back to corporations;  2) what if the trigger mechanism was $500 M instead of $1B.

 

 

 

033

Rep. Lim

Responds that an amendment is in process. Regarding the trigger mechanism amount, he is flexible on the amount.

 

 

 

CLOSES PUBLIC HEARING FOR HJR AND HB 2345

 

 

 

053

Chair Butler

Adjourns meeting at 2:39 p.m.

 

 

 

 

 

Tape Log Submitted by:

Reviewed by:

 

 

 

Kristi Bowman, Committee Assistant

Kim Taylor James, Committee Coordinator

 

 

Exhibit Summary:

  1. 1.      LC 2055, Legislative Counsel, 5 pp., 2/16/05
  2. 2.      LC 3267, Legislative Counsel, 3 pp., 2/18/05
  3. 3.      Slide Presentation: Spending Limit Issues, Warner, 10 pp., 02/28/05