WORK SESSION: HB 2449, SB 479, SB 427

 

TAPES 121 A-B, 122 A

 

 

SENATE REVENUE COMMITTEE

MAY 17, 2005† †9:00 AM ††STATE CAPITOL BUILDING

 

Members Present:††††††††††††††††† Senator Ryan Deckert, Chair

††††††††††††††††††††††††††††††††††††††††††††††† Senator Gary George

††††††††††††††††††††††††††††††††††††††††††††††† Senator Rick Metsger

††††††††††††††††††††††††††††††††††††††††††††††† Senator Floyd Prozanski

††††††††††††††††††††††††††††††††††††††††††††††† Senator Charles Starr, Vice Chair

†††††††††††††††††††††††

Witnesses Present:††††††††††††††† Katy Coba, Dept. of Agriculture

††††††††††††††††††††††††††††††††††††††††††††††† Ken Yates, Northwest Food Processors Association

††††††††††††††††††††††††††††††††††††††††††††††† Gil Riddell, Association of Oregon Counties

††††††††††††††††††††††††††††††††††††††††††††††† Michelle Deister, League of Oregon Cities

††††††††††††††††††††††††††††††††††††††††††††††† John Marshall, Oregon School Board Association

††††††††††††††††††††††††††††††††††††††††††††††† Chuck Bennett, Confederation of Oregon School Administrators

 

Staff Present:††††††††††††††††††††††††† Paul Warner, Legislative Revenue Officer

††††††††††††††††††††††††††††††††††††††††††††††† Lizbeth Martin-Mahar, Economist

††††††††††††††††††††††††††††††††††††††††††††††† Mary Ayala, Economist

††††††††††††††††††††††††††††††††††††††††††††††† Steve Meyer, Economist

††††††††††††††††††††††† ††††††††††††††††††††††† Barbara Guardino, Committee Assistant

 

 

TAPE 121, SIDE A

005

Vice Chair C. Starr

Calls meeting to order at 9:05 a.m.

 

WORK SESSION, HB 2449

016

Sen. Metsger

MOTION: MR. CHAIR, I MOVE WE SUSPEND THE RULES FOR THE PURPOSE OF RECONSIDERATION OF HB 2449-A WHICH WAS SENT TO THE SENATE FLOOR WITH A DO PASS RECOMMENDATION.

 

018

Vice Chair C. Starr

SEN. METSGER MOVES THAT WE SUSPEND THE RULES TO RECONSIDER HB 2449-A WHICH WAS SENT TO THE SENATE FLOOR WITH A DO PASS RECOMMENDATION. DISCUSSION.

 

022

Vice Chair C. Starr

ORDER: THERE BEING NO OBJECTION THE CHAIR SO ORDERS. VOTE: 3-0-2. MEMBERS VOTING AYE: GEORGE, METSGER, C. STARR. EXCUSED: PROZANSKI, DECKERT

 

024

Lizbeth Martin-Mahar

Explains the reason the bill has returned to the Senate Revenue Committee is that there were conflicts with another bill that was already passed, HB 2448. That bill permitted the Dept. of Revenue to refund amounts determined to be overpayments on the original tax returns which were filed more than three years after the due date. That bill amended ORS 314.415. This bill deals with apportionment of tax refunds among married couples, based on adjusted gross income of each spouse.

 

043

Sen. Metsger

MOTION: MOVES ADOPTION OF HB 2449-A3 AMENDMENT.

 

045

Vice Chair C. Starr

ORDER: THERE BEING NO OBJECTION THE CHAIR SO ORDERS. VOTE: 4-0-1. MEMBERS VOTING AYE: GEORGE, METSGER, PROZANSKI, C. STARR. EXCUSED: DECKERT

 

047

Sen. Metsger

MOTION: MOVES HB 2449-A AS AMENDED TO THE SENATE FLOOR WITH A DO PASS RECOMMENDATION.

 

049

Vice Chair C. Starr

ORDER: THERE BEING NO OBJECTION THE CHAIR SO ORDERS. VOTE: 4-0-1. MEMBERS VOTING AYE: GEORGE, METSGER, PROZANSKI, C. STARR. EXCUSED: DECKERT

 

WORK SESSION, SB 479

064

Paul Warner

Directs membersí attention SB 479-3 amendment (EXHIBIT 3). This amendment is based on SB 479-2 amendment. The involved parties have just received it, and will comment on it.

 

071

Chair Deckert

Senate President Courtney wants the committee to hold onto the tax credit bills. Chair Deckert would like the committee to settle on which tax credit bill it wants to present for final budget negotiations.

 

079

Mary Ayala

Gives overview of SB 479 (EXHIBIT 4). Provides a 5-year property tax exemption for purchases of new equipment by qualified companies. Qualified companies must engage in the processing of raw or fresh fruit, vegetables, legumes or seafood. SB 479-3 was requested because during prior testimony there was a request for a sunset provision and clarifying language. This amendment narrows the list of industries affected, and adds seafood processing. This increases the impact from $.67 million to $1.23 million (EXHIBIT 5) in the 2005-07 biennium.

 

130

Chair Deckert

Calls on focus panel to update committee on their progress over the last week. (Panel includes Departments of Agriculture and Revenue, along with counties and cities.)

 

135

Katy Coba

Recommends passage of SB 479-3 amendments. They include definitions of food processing for the purpose of this property tax exemption. Focuses on primary processing. Language in the bill defines the panelís intent in terms of primary processing. Focus is to provide incentive for the industry to remain competitive by investing in equipment and technology. Currently processors that would qualify are in existing enterprise zones which already have similar exemptions. The panel is not interested in having companies ďdouble dip.Ē They need to choose one exemption or the other, and that needs to be stated in an amendment.

 

166

Ken Yates

Echoes, this has been a productive collaboration. The intent is to fill the gap for approximately half of the processors, which are not in enterprise zones. Theyíd be given the option of an enterprise zone or this tax exemption. The thrust of this legislation is to address the distressed commodity processors, to provide technology that will increase productivity and provide higher skilled and higher wage jobs. Feels good about the bill, although it could use some additional tweaking.

 

198

Chair Deckert

Asks those involved to put out a joint statement on the process by which they arrived at this bill.

 

215

Gil Riddell

AOC sees this bill as promising. Is pleased that it is precisely targeted and supports the bill for that reason. It may well work. Notes, this is a switch from tax credits to property tax exemptions, which means local revenues are being spent for a statewide problem. AOC takes the five-year sunset date seriously and wants to be sure this money is well spent.

 

246

Yates

Will witness the signing of a similar bill in Olympia, Washington this afternoon. Is encouraged by Washingtonís efforts.

 

264

Vice Chair C. Starr

Appreciates the work thatís been done. Is involved in the agriculture industry and realizes it is struggling. Large numbers of processors have disappeared over the last five years, and taxes disappear with them. Hopes this will improve profitability and opportunity in Oregon.

 

286

Sen. George

Asks whether this bill includes hazelnut processing.

 

289

Coba

Responds yes, nuts are considered fruits.

 

297

Sen. George

Comments, itís important to keep these businesses alive. Itís a tough business with diseases and foreign competition. Applauds Washington state governorís efforts.

 

322

Michelle Deister

League of Oregon Cities opposes converting this tax from a tax credit to a property tax exemption. Acknowledges Dept. of Agriculture, Revenue and food processorsí hard work. Agrees with Riddellís comment that this is a statewide problem.

 

349

Sen. George

Wonders how much revenue Salem and other communities have lost over the last five years due to local plant closures.

 

360

Deister

There are tax consequences to these building closures, but there are plenty of deserving companies that are struggling and need help.

 

365

Chair Deckert

Closes work session on SB 479.

 

WORK SESSION, SB 427

376

Chair Deckert

Notes, there are amendments to look at which have to do with the high cost disability grant in the school equalization formula.

 

380

Sen. Metsger

Sponsored the original bill, which was a transportation bill. It is now a vehicle for another bill.

385

Chair Deckert

Has asked for another amendment to sunset the school formula in three years. Would like to discuss this during the interim. Asks if anyone else is interested in this amendment.

 

415

Meyer

Directs membersí attention to SB 427-1 amendment (EXHIBIT 6). It is not quite the same as he had intended, which was the same as HB 2450-A. The amendments were left off the Senate version. He will take care of this. Sunset must be removed. The high cost disability grant for 2004-05 states that all of the costs above $25,000 for each high cost student are eligible for this grant. At that level the total cost was about $17 million and the maximum amount for the grant was $12 million. So districts got less than the full reimbursement. The House changed that to $30,000, which cut the total down.

 

 

 

TAPE 122, SIDE A

022

Meyer

Directs membersí attention at School Finance Distribution table (EXHIBIT 7). It doesnít match the SB 427-1 amendment. He used the $30,000 figure for the floor in calculations in this table. The House bill also removed the sunset for the small high school supplemental fund, which is $2.5 million per year. Has used the Senateís appropriation figure of $5.325 billion for the state school fund in running the formula numbers.

 

 

 

053

Meyer

Eighty districts receive revenue under the high cost disability grant; 99 districts qualify for the small high school supplemental fund allocation.

 

056

Chair Deckert

Summarizes, there are three questions: high cost disability reimbursement; small high schools; and a general formula conversation.

 

067

Sen. George

Asks how many districts are in the minus category.

 

072

Meyer

Responds, about 110 show a gain and 88 show a loss.

 

078

Sen. Prozanski

Requests more information on the small high school fund. There are small schools in his district (Lane County) that donít qualify and he believes they should.

 

087

Chair Deckert

Would like a review of changes made last session on the high cost disability fund.

 

099

Meyer

Responds, high cost disability students are Individual Education Program (IEP) students. They also qualify for double weight in the formula. The number of IEPs that can be weighted is limited to 11% of students without a waiver.

 

104

Sen. Prozanski

Notes, Cottage Grove area has 19% of students qualifying but they are only being funded at 11%. Can they go through the waiver process?

112

Meyer

Responds, yes. There are districts spending more than the double weight allowed. Typically they are in urban areas where other services are available. Portland area has a higher percent of high-cost students than the state average. The interim group proposed that they be eligible for those high costs as a new grant in the formula. It was set at $25,000. Adds, at the $25,000 floor, the total number of qualified students is 2,000. With the $30,000 floor it is half that number.

 

156

Sen. George

Compares this process with shuffling the deck chairs on the Titanic. The districts are required by law to meet the needs of these students. Who will pickup the difference?

 

159

Meyer

There is nothing in the numbers that change the total amount available to school districts. Itís a matter of how funds are distributed.

 

165

Sen. George

This is shifting the burden onto local districts. Wonders where that leaves the children with special needs.

 

173

Chair Deckert

Is glad this has been sunset so it can be revisited.

 

180

Meyer

Continues discussion, concerning small high schools. There is in the formula a small school correction weight. The school district must have less than 8500 ADMw to qualify. It is for existing high schools only, not for larger districts that split into smaller ones.

 

196

Sen. Prozanski

Asks how Bethel School District in Lane County fits into this small high school fund. Fern Ridge has nothing coming in, and yet would take a $30,000 hit. Will take this information to his school districts and have them comment.

 

226

Meyer

During the 2003 session discussion, there was concern that small high school correction weight still didnít generate enough to serve larger high schools. This was a counter-weight to help larger and smaller districts.

 

242

Chair Deckert

Asks about the wide swing in formula per pupil throughout the state.

250

Meyer

There is a combination of factors including transportation costs, weighting, poverty factor, special needs students.

 

260

Vice Chair C. Starr

The more affluent communities like Sherwood donít have the student weighting that other communities have. These factors put them in a tough position on how to maintain programs with the growth.

 

278

Chair Deckert

This bill will not move today. Is interested in setting up a task force to revisit the whole formula.

 

309

John Marshall

Components of this bill were added by 2003 legislature following an interim study. Describes the high cost disabilities grant as an insurance program. Every school district pays a premium. Eugene, for example, has a student who costs over $100,000/year and has to be placed out of district. It is not uncommon for a small district to receive one of these students. The idea was that every school district would pay a premium, and the deductible was $25,000. But that level of reimbursement is not high enough, so the deductible was increased to $30,000. This provides greater protection for schools. In small rural districts this provides a great deal of assistance. The other change last session was to increase the transportation grant in order to help small rural districts with high transportation costs.

 

375

Marshall

High cost students tend to live in urban areas where medical and other services exist. Itís unusual to see them outside metro areas but itís possible, so thatís why the concept was created.

 

389

Chuck Bennett

COSA supports the SB 427-1 amendment. Responds to Sen. Prozanskiís questions concerning Bethel School District.

 

 

 

415

Vice Chair C. Starr

Asks whether the premium is high enough. Districts with large numbers of special needs students are still being penalized.

 

425

Marshall

Moving from $25,000 to $30,000 is already 100% reimbursement. If you increase the premium, the question is whether to lower the deductible.

 

446

Vice Chair C. Starr

It seems these districts are paying large amounts for the difference in what they receive in the formula and the $30,000 limit. Itís a tough proposition to find a balance.

 

TAPE 121, SIDE B

033

Sen. Prozanski

Follows up on Sen. Starrís comments. Also expresses concern over small rural districts that have timberland but donít get their money until the timber is harvested. They need a different formula to get them by while the timber money is unavailable.

 

065

Chair Deckert

Wants Meyer to look at what would happen if the cap were dropped back to $25,000 and the fund were bumped up to more fully reimburse the high cost districts. Several things within the formula should be looked at during the interim.

 

088

Chair Deckert

Committee will bring this bill back on Thursday with a more perfected amendment. He asks Meyer to run the math on reimbursements.

 

108

Chair Deckert

Closes work session on SB 427. Adjourns meeting at 10:07 a.m.

 

 

 

 

 

 

Tape Log Submitted by,

 

 

 

Barbara Guardino, Committee Assistant††††††††††††††††††††††††††††††††††††††††††††††††††††††

 

Exhibit Summary:

1.      HB 2449-A, Staff Measure Summary, Martin-Mahar, 5/17/05, 1 pp.

2.      HB 2449-A, Amendment HB 2449-A3, Legislative Counsel, 5/6/05, 6 pp.

3.      SB 479, Amendment SB 479-3, Legislative Counsel, 5/17/05, 4 pp.

4.      SB 479, Staff Measure Summary for SB 479-3, Ayala, 5/17/05, 1 pp.

5.      SB 479, Revenue Impact of Proposed Legislation for SB 479-3, Ayala, 5/17/05, 1 pp.

6.      SB 427, Amendment SB 427-1, Legislative Counsel, 5/16/05, 11 pp.

7.      SB 427, School Finance Distribution, Meyer, 5/16/05, 8 pp.

8.      SB 427, Staff Measure Summary, Meyer, 5/16/05, 1 pp.

9.      SB 427, Revenue Impact of Proposed Legislation, Meyer, 5/16/05, 1 pp.