PUBLIC HEARING

HB 3460

TAPES 140-141 A-B, 142 A

002

Chair Butler

Calls meeting to order at 1:09 p.m.

OPENS PUBLIC HEARING FOR HOUSE BILL 3460

004

Chair Butler

General comments about the work of an informal work group that studied the issues surrounding HB 3460. Rep. Hass and Rep. Berger are members of the work group.

031

Rep. Hass

Comments that stabilization vs. adequacy was an issue in the work group. The bill doesn’t add new money, but it “reconfigures the pots.” Adds that if the legislature can reconfigure the pots and stabilize education, then that is a good first step toward something better.

043

Rep. Berger

Comments on work group issues. Three needs were initially discussed: stability, predictability and adequacy. Doing things the

same way and expecting different results won’t happen. The bill is a step in the right direction for stability and predictability.

070

Chair Butler

General comments regarding the contributions of various work group members. Expresses hope that consensus can be reached about issues of stability and predictability and that the committee can have a direct discussion about adequacy.

096

Paul Warner

Gives overview of HB 3460 (Exhibit 1) which is a dedicated approach to school funding. Discusses the basic approach of HB 3460 and issues raised by the work group. Discusses the mechanics of the funding and potential amendments.

320

Warner

Discusses handout: California General Fund Revenues (Exhibit 2). Comments on short-term and long-term elasticity rates of various components of the total revenues in California. The higher the elasticity rate, the more volatile the revenue source is.

375

Chair Butler

Asks about property tax revenues in Oregon pertaining to Measure 50 in relation to short-term and long-term elasticity rates.

380

Warner

Responds that Oregon rates are generally stable, but due to Measure 50, property taxes would not keep up with inflation and growth in nominal income.

400

Chair Butler

Discussion with Warner about property tax issues pertaining to school funding.

TAPE 141, SIDE A

010

Chair Butler

Expresses concern about inflation issues and the volatility of personal income tax.

027

Warner

Comments that over time a dedicated revenue source such as the personal income tax will generate significant revenue growth.  Comments that a strong reserve fund is needed to offset the short-term elasticity impact on personal income tax.

040

Chair Butler

Comments that Rep. Flores, Rep. Roblan, and Rep. Farr are members of the work group and are also members of the House Subcommittee on Education.

045

Rep. Linda Flores

Discusses work group issues and gives an overview of HB 3460. The bill is a framework that would provide funding stability. There are options that could be crafted into the bill that would include stability, adequacy, and predictability. Expresses hope that this bill will be part of the solution [of school funding].

087

Rep. Arnie Roblan

Expresses concern about the adequacy of school funding. This plan would have a much greater chance of success if it was started in

better economic times. The initial starting point needs to be economically stable.

155

Rep. Roblan

Discusses the historical perspectives of the state tax base and school funding. Comments on the loss of local control over being able to raise their local tax base because of statewide ballot measures that have been enacted.

204

Rep. Debi Farr

Discusses stability and adequacy issues. Comments that if the state could send more money to the School Fund, less to the Successful Schools Fund and still put a percentage of the overage into the Education Stability Fund to create a rainy day fund, it would be an extremely important step.

246

Chair Butler

Comments that Chuck Bennett, Kent Hunsaker, and John Marshall are members of the work group.

250

Chuck Bennett

Comments that COSA has been supportive of HB 3460 since it was introduced. Whatever budget number is agreed upon is never adequate for education. This bill takes “head-on” the issues of stability and predictability and does offer the opportunity to grow. Comments on work group issues: the starting point, the growth rate, the percentage of personal income tax available, and the division of the budget for operating funds, the Successful School Funds, and a rainy day fund. HB 3460 enabled a full discussion to take place instead of a bidding war that began in January.

320

John Marshall

Comments that the work group was productive. The bill proposes a framework to address fundamental issues of school funding.

358

Kent Hunsaker

Expresses concern that the proposed budget amount of $5.2 M for schools will not be adequate. Discusses loss of programs, textbooks, and support staff. HB 3460 does provide stability but “at what cost.”  

TAPE 140, SIDE B

010

Chair Butler

Asks Hunsaker about the proposed percentage number of 50% of personal income tax revenue to be dedicated to the State School Fund.

012

Hunsaker

Responds that previous percentages have been @ 55%. Using the 50% number would be proposing a declining amount of state revenues toward schools, resulting in less money going to schools.

025

Chair Butler

Asks Marshall to provide written information to the committee on the $5.318 M amount proposed in the OSBA School Forecast Model.

039

Warner

Responds that the $5.318 M amount is a product of the School Forecast Committee that was created by an executive order of the Governor at the end of 1999. Regarding projections to simulate the effect of HB 3460, Warner discusses the handout: HB 3460—Trend Projection (Exhibit 3). Discusses the projected growth of personal

income over the next two biennia. Discusses projected revenue from lottery allotments.

100

Chair Butler

Discussion with Warner regarding the 2007-09 projected revenue figures on handout.

131

Chair Butler

Discussion with Warner about the Measure 19 allocation of excess funds to the School Capital Matching Fund sub-account.

160

Rep. Komp

Asks Warner about the calculation used for the $22 M amount in 2007-09 for the Successful Schools Fund.

162

Warner

Explains the calculation methodology for the $22 M amount.

175

Rep. Komp

Comments on federal funds that are dedicated to the Successful Schools Fund. Asks if those funds were considered in calculating the Oregon Successful Schools Fund.

190

Warner

Refers to section 4, subsection B of the bill that addresses the federal No Child Left Behind Act. Federal funding is another variable to consider.

208

Rep. Galizio

Asks Warner what effect the capital gains tax cut would have on HB 3460.

211

Warner

Responds that there would be two long-term effects: it would reduce the personal income tax revenue; it would reduce the elasticity/volatility of income tax. Continues with cyclical projection discussion.

270

Rep. Hass

Regarding the recession scenario, asks if instead of putting money into the Stability Fund, could money be used to rebuild during economic “dips” as the state is in now.

280

Warner

Responds that a 3/5 vote is required to withdraw money out of an existing account.

296

Chair Butler

Asks about the “ratcheting effect” on the 8% excess process.

306

Warner

The bill refers to the Stability Fund (Section 1, sub. 3) and the legislature would be able to pull in stability money.

336

Chair Butler

Comments on the issue of continued student growth and population increases.

345

Warner

Responds that enrollment growth has flattened out, averaging ½ of 1%. There is a relationship between raw student enrollment and the weighted student enrollment.

380

Andi Jordan

Testifies in opposition to HB 3460 and reads from written testimony (Exhibit 4).

426

Otto Schell

Testifies in opposition to HB 3460. Comments that adequacy is the biggest issue, and if the funding formula in HB 3460 is less than what is allocated currently, the PTA cannot support the bill.

TAPE 141, SIDE B

030

Chair Butler

Asks Jordan about two statements in her testimony regarding the reliance on income tax for school funding and the removal of lottery funding for K-12.

033

Jordan

Responds that lottery funds need to stay in the School Funding Formula. Adds that restoration of art, physical education, and second language programs are important to PTA members, and they would be willing to pay for them as shown by parent donations of money and time.

057

Rep. Boquist

Asks Jordan to define adequacy. Asks if she would define it as a dollar number or a percentage number.

063

Jordan

Responds that it would be a percentage of the Quality Education Model.

080

Laurie Wimmer Whelan

Testifies in opposition to HB 3460 and reads from written testimony (Exhibit 5). Expresses concerns about adequacy and accountability. HB 3460 retreats from those issues.

188

Brian Reeder

Testifies in opposition to HB 3460 because the initial proposal of 50% of income tax is a reduction from where we are today. Agrees with Hunsaker’s testimony on that issue. The adequacy question is tied in fundamentally to Oregon’s tax structure. Comments on Oregon’s comparable state ranking for tax burden on its citizens.

250

Chair Butler

Discussion with Reeder regarding Oregon’s tax-burden status compared to other states.

344

Rep. Hass

Comments on pending legislation for a tax reform plan that is revenue-neutral.

362

Gwyneth Van Frank

Testifies that adequacy is fundamental and hopes that the committee can redesign the bill to address that issue. Comments on changes to school districts since Measure 5. Statistics say businesses do not come to Oregon for corporate tax breaks but for the quality of life. Tax breaks need to be tied to performance outcomes such as job creation or public improvement projects around corporate facilities. Tax reform should be discussed, but only as it relates to corporations.

TAPE 142, SIDE A

030

Chair Butler

Asks Warner to discuss potential amendments.

040

Warner

Discusses potential amendments outlined on handout (Exhibit 1). 

068

Chair Butler

Adjourns meeting at 3:04 p.m.

Tape Log Submitted by:

Reviewed by:

Kristi Bowman, Committee Assistant

Kim Taylor James, Committee Coordinator