PUBLIC HEARING:

SB 1083, HB 3232, HB 2542-A, HB 3481-B

TAPES 152, 153, 154, 155, 156 A-B; 157 A

005

Chair Deckert

Calls meeting to order at 8:45 a.m. Opens public hearing on HB 2542-A, the reconnect bill with amendments.

PUBLIC HEARING, HB 2542-A

010

Lizbeth Martin-Mahar

Directs members’ attention to HB 2542-A13 amendment (EXHIBIT 1). Gives overview and revenue impact of HB 2542-A13 amendment (EXHIBITS 2, 3). Disconnects Oregon tax law from two provisions contained in the 2004 American Jobs Creation Act. Two components from House Revenue Committee minority report are added back.

090

Sen. George

Asks for a comparison of the total cost to Oregon business in regard to being reconnected vs. being disconnected and suspended rolling connection.

095

Martin-Mahar

Responds with explanation of additional revenues.

110

Chair Deckert

Notes, in HB 3232, the R & D tax credit and agricultural minimum wage credit are factored in for balance.

116

Sen. Metsger

Asks for the location of the disconnect section of the amendment.

120

Martin-Mahar

Discusses page 5, sections 29 and 30.

134

Vice Chair C. Starr

Summarizes, this will be a tax increase on Oregon businesses in order to balance revenues and tax credits.

138

Martin-Mahar

Responds, that is correct in a sense.

143

Chair Deckert

Idea was to buy room for R & D and agricultural tax credits while staying in balance. This is one route to put resources on the table. The committee can select not to do these credits and to stay with the reconnect bill.

151

Sen. Metsger

Supports the farm worker tax credit since farmers need the most help.

203

Jim Craven

Testifies in favor of HB 2542-A, but in opposition to HB 2542-A13 amendment. The American Electronics Association is a long-standing supporter of Oregon remaining connected to the federal tax code. Oregon is twice as dependent on manufacturing as any other state.

237

Craven

Asks legislative counsel for an opinion on the relating clause of this bill. This is not a generic tax bill, it is about federal reconnect. Summarizes: “We are going down a dangerous road in using the federal reconnect bill as a generic tax bill.”

265

Chair Deckert

Is not sure Oregon should blindly connect to all federal law changes. Asks Craven to comment.

286

Craven

Does not agree with blindly reconnecting, but contends the repeal of ETI and partial substitution of QPAI would help Oregon companies. Would prefer connecting to federal code. Asks the committee to pass this bill as passed by the House.

339

Linc Cannon

Testifies in support of HB 2542-A (see written testimony submitted April 28, exhibit 4). Concurs with Craven’s testimony. OFIC supports full reconnection.

367

Joe Schweinhart

Reads written testimony in support of HB 2542-A without the proposed amendment (EXHIBIT 4). It includes e-mails and press releases of companies in support of the bill.

423

Sen. George

Is stressed that 70 jobs are leaving Multnomah County and this bill is a tax increase. Contends companies would prefer going to a state that is connected to federal law.

443

Schweinhart

Agrees.

021

Chair Deckert

Is heartened to see that three studies by think tanks have ranked Oregon as having the lowest corporate tax in the nation.

030

Schweinhart

Responds to study results. Oregon is behind neighboring states in venture capital and investments, partly because of capital gains tax and corporate income tax. The studies are not inaccurate; it just depends on how you look at them.

056

Sen. Prozanski

Asks for more information on Schweinhart’s comments that Oregon’s tax system discourages businesses.

060

Schweinhart

Clarifies, he was talking about income taxes as a whole.

064

Sen. Prozanski

Asks what the solution is.

066

Schweinhart

Does not have one, but Oregon’s tax system is a consideration for some companies.

089

Sen. Prozanski

Follow-up questions and discussion.

109

Sen. Metsger

Comments that an airplane manufacturing firm in Bend has jobs available and is having trouble filling them.

134

Chair Deckert

Asks for the latest census statistics on relative tax burden.

144

Paul Warner

Oregon ranks 46^th in percentage of income; per capita Oregon ranks 39th. Will check on requested data.

159

Chair Deckert

Asks Legislative Counsel to comment on whether EITC fits into HB 2542-A.

169

Dexter Johnson

Concludes, it fits within the title of the bill.

196

Tim Nesbitt

Compliments the committee “for making a silk purse out of a sow’s ear” with this bill. Changes in the tax code will be fairer to working families. Refutes Craven’s testimony that this bill raises taxes on Oregon manufacturers. This package is a wise choice. We must focus on the real causes of the jobs crisis – unfair foreign trade agreements.

263

Laurie Wimmer Whelan

Thanks the committee for the HB 2542-A13 amendment. Oregon’s manufacturing sector will still be able to take the federal QPAI tax deduction. That’s a fair compromise. OEA contends that tax policy should be a matter of Oregonians’ will and should not go on autopilot to follow Washington D.C.

292

Arthur Towers

SEIU Local 503 supports changes to this legislation, particularly the targeted nature of the EITC. This benefits working families who are struggling. Supports HB 2542-A13 amendment. Asks committee to be as targeted as possible on each of these tax credits.

339

Bob Castagna

Oregon Catholic Conference supports the refundable EITC. Catholic social teaching poses questions on how a decision will help the poor. Urges lawmakers to adopt this option for the working poor.

373

Ellen Lowe

Oregon Food Bank/Oregon Law Center support a refundable EITC. The refund money will be put back into the economy because people will use it for necessities. This is one of the best ways to stimulate Oregon’s economy. Also suggests connecting to the Working Family Tax Relief Act.

440

Sen. George

Isn’t it true that Oregon taxes the poor at a higher rate than other states?

453

Castagna

Agrees, Oregon has one of the lowest thresholds for taxing in the country. Federal EITC is the most important federal program to help lift people out of poverty.

034

Lowe

Expresses hope that lawmakers can make the tax system more fair during the interim.

038

Castagna

Oregon faith communities have recommended that the Oregon EITC be refundable in order to help alleviate poverty.

049

David Bean

Testifies in support of HB 2542-A on behalf of disabled Oregonians who cannot work. Many are homeless and mentally ill.

062

Martin-Mahar

Clarifies, the bill makes the Oregon EITC refundable beginning in the 2005-07 biennium. There will be a fiscal impact, but a net positive income.

067

Warner

Explains SB 1083, which is directed at the agricultural sector. The tax credit is for 50% of wages that are attributable to increases in minimum wage. It can be carried forward up to 5 years.

118

Warner

Discusses work sheet (EXHIBIT 10).

139

Warner

Discusses SB 1083-2 amendment (EXHIBIT 11), which broadens the pool of qualified workers to 44,000 and boosts the revenue impact. Proponents of the bill do not want this change, and Sen. Kurt Schrader has requested another amendment to address this issue.

155

Don Schellenberg

Submits written testimony in favor of SB 1083 (EXHIBIT 12). Calls members’ attention to the hard copy of a slide presentation (EXHIBIT 13), page 2. Expresses concern that the labor-intensive crops are most in jeopardy because of high labor and transportation costs. Another draft of the bill will be forthcoming, and the Oregon Farm Bureau will support the amended version.

209

Scott Ashcom

Testifies in support of SB 1083 (EXHIBIT 14). Reads from an attached study on the impacts of minimum wage indexing on production agriculture and food processing industries. Most agricultural jobs being lost are on the Oregon/Idaho border because Idaho’s minimum wage is lower.

257

John McCulley

Urges support for SB 1083 on behalf of Tree Fruit Growers.

280

Nesbitt

AFL-CIO opposes using taxpayer funds to subsidize employers to comply with laws. One solution is a higher minimum wage in all 50 states. Agriculture is dealing with consequences of bad trade deals such as NAFTA. Urges committee to provide help to agriculture, but target the assistance to employers who need it most.

333

Ramon Ramirez

Testifies in opposition to SB 1083. Doubts that this proposal will do justice to farm workers, who are America’s lowest paid workers. Discusses discrepancies in minimum wages in the various states. Wants proof that farm workers would benefit from this bill by creating jobs. Pruners are already exempt from minimum wage. Majority of farm workers do not qualify for unemployment benefits.

020

Ramirez

Gives example of nursery industry. It has grown and is thriving and yet would qualify for a tax credit under this bill.

030

Sen. Metsger

Counters, they are not minimum wage jobs and he does not believe they would qualify.

054

Nesbitt

Responds, the structural problem with limiting this credit is that there is an incentive and a disincentive.

063

Ramirez

Agrees. There is a huge influx of people to sustain the horticulture industry, and most of those jobs are at minimum wage.

080

Joe Schaeffer

Opposes this bill on behalf of SEIU (EXHIBIT 15). It is too broad and does not target the people who need help. It includes the nursery, livestock and equestrian industries. Also, something that hasn’t been addressed is that large businesses can buy these tax credits at a profit and it won’t protect family farms. It’s targeted at agri-business.

137

Chair Deckert

Closes public hearing for SB 1083. The committee stands in recess until after floor session.

146

Chair Deckert

Reopens committee at 11:40 a.m. Opens public hearing on HB 3232.

155

Martin-Mahar

Explains the HB 3232-1 amendment including revenue impact (EXHIBITS 16, 17 and 18). Compares changes to original bill.

182

Martin-Mahar

Explains the HB 3232-2 amendment including revenue impact (EXHIBITS 19, 20 and 21).

208

Chair Deckert

Explains why he had these two amendments drafted. Asks if anyone would like to testify on HB 3232. Hearing none, closes public hearing on HB 3232.

228

Martin-Mahar

Gives overview of the contents of the B-engrossed biofuels bill versus the contents of the amendments (B14, B15, B16, B17 and B10). See summary sheet for a breakdown (EXHIBIT 24).

·         Property Tax Exemption for Biofuel Production Facilities: HB 3481-B14, B16 and B17 amendments are the same as the B-engrossed bill. The original bill has been deleted.

·         Additions and Sunset Extension to the Pollution Control Tax Credit

299

Martin-Mahar

·         Increases in the Percentage of Certified Cost and Sunset Extension for the Pollution Control Tax Credit

·         New Tax Credit for Producers of Biofuel Raw Materials

360

Martin-Mahar

·         Clean Emission School Buses

·         Biofuel Research and Development Tax Credit

446

Martin-Mahar

·         Gasoline Additive Restrictions

010

Martin-Mahar

·         State Government Use of Biodiesel

·         Excise Tax Reduction for Motor Vehicles Using Biodiesel

·         Excise Tax Reduction for Certain Farm Vehicles Using Biodiesel

·         Administrative Rules

·         Captions

041

Martin-Mahar

Page 3 lists the new sections of the HB 3481-B14, B16 and B17 amendments.

·         Renewable Fuels Standards

·         Solar Technologies

099

Martin-Mahar

·         Community Renewable Energy Project Fund

·         State Energy Facilities

·         Diesel Emission Control Devices

·         Sustainability Board

135

Sen. George

Expresses concern over the potential cost of these changes.

139

Martin-Mahar

Begins review of revenue impact statement for HB 3481B-B14 amendment (EXHIBIT 32).Gives total general fund revenue figures. Discusses other funds, lottery bond proceeds, highway fund revenue and local property tax revenue.

218

Sen. George and Acting Chair C. Starr

Ask questions about meeting Oregon production standards.

232

Martin-Mahar

Responds yes, specific standards must be met in Oregon.

277

Matt Blevins

Testifies in favor of HB 3481-B (EXHIBIT 36). Oregon Environmental Council sees this bill as a solution to a number of problems including economic development and solving the energy problem. Gives history of this legislation. See exhibit 36, page 2 for a list of biofuel incentive bills.

332

Sen. George

Asks if the drafters the bill support the amendments.

336

Blevins

Yes they do. Expresses support for HB 3481-B16 and HB 3481-B17 amendments (EXHIBITS 28 and 29). OEC’s goal is to move the bill back to its original intent.

376

Sen. Prozanski

Reports that none of the committee members have the HB 3481-B16 amendment.

422

Blevins

Continues discussion on HB 3481-B16 and B17 amendments.

434

Sen. George

Asks about the mileage per gallon and cost to a vehicle that uses these fuels. Follow-up questions.

442

Blevins

Responds, ethanol averages about $1 cheaper; biodiesel costs about 20 cents more per gallon.

020

Rep. Jeff Kropf

Encourages committee to move forward on this bill so it can be heard in a conference committee. This process is about compromise. It’s critical to create the foundation for biofuels in Oregon now. Has not seen the amendments yet.

049

Sen. George

If the industry disappeared, the standards would be left in place. Asks Rep. Kropf for a response.

056

Rep. Kropf

Responds, it is unlikely that a company would move here, invest in the industry and then leave.

062

Sen. Metsger

Comments, this bill has been loaded with too many elements. This issue is very important. Asks Rep. Kropf for his reaction to getting back to the original 7 bills.

082

Rep. Kropf

Agrees, clean legislation is better, but that’s not reality. Would have preferred 7 separate bills, but he will embrace this opportunity with the hope for further negotiations.

101

Rep. Jackie Dingfelder

Testifies in support of HB 3481-B (EXHIBIT 37). Agrees that she would prefer the original package, which was balanced and bipartisan. This bill was amended in the House. Asks for some of the deleted elements to be restored.

139

Sen. George

How much of these amendments (HB 3481-B16 and HB 3481-B17) are in the minority report?

151

Dingfelder

None. The minority report removed pollution control tax credit. It did not restore all the elements in the original package.

168

Rep. Gordon Anderson

“This bill is headed to an icy, cold death on the House side” even though the sponsors have tried to re-balance it. We need to be looking to the long-range benefit – hundreds of millions of dollars in business and revenues to Oregon. There are major differences in opinion, but they can be reconciled. Encourages the committee to pass this bill out to a conference committee.

192

Chair C. Starr

Asks if the bill from the House contained compromises.

197

Rep. Anderson

It has seen some major compromises and will see more. Asks environmentalists what compromises they would like to include.

220

Rep. Paul Holvey

Directs members’ attention to HB 3481-B17 amendment, section 56, dealing with solar technologies, page 49. This is the related HB 3001, which passed out of the House Business Committee unanimously. The HB 3481-B10 amendment (EXHIBIT 30) contains the language of HB 3001. Asks committee to consider both pieces.

279

Chair Deckert

Asks Rep. Anderson whether he would agree with moving back toward the original bill.

294

Rep. Anderson

Would agree with parts of it.

301

Blevins

Begins comparisons of the HB 3481-B16 and HB 3481-B17 amendments. Suggests setting aside the HB 3481-B14 amendment (EXHIBIT 26) since it is contained in B16. The primary difference between the B16 and B17 amendment is the addition of bills that were outside the original scope of the biofuels package.

343

Blevins

Explains, the HB 3481-B17 amendment is a full gut and stuff which completely rewrites the bill. Reviews the amendment by section:

Page 1: Biofuel, Ethanol and Verified Fuel Additive Facilities

Page 5: Pollution Control Facilities

Page 16: Producers of Biofuel Raw Materials

380

Blevins

Page 24: Renewable Fuel Standards

391

Chair Deckert

Asks how a state could mandate production of a certain blend. That would put constraints on the market. Follow-up remarks.

401

Blevins

Refers to a fact sheet contained in exhibit 36.

440

Blevins

Page 29: Gasoline Additive Restrictions

Page 30: Energy Facility Siting Requirements

032

Blevins

Page 41: State Government Use of Biodiesel

Page 42: Fuel Tax Incentives

048

Blevins

Page 49: Solar Technologies. This is where the HB 3481-B16 amendment would end.

074

Chair Deckert

Meeting stands in recess until 1:40 p.m.

002

Chair Deckert

Reconvenes meeting at 1:40 p.m.

004

Mike Grainey

Gives general remarks and then discusses differences between HB 3481-B16 and HB 3481-B17 amendments. The Dept. of Energy prefers the B17 amendment.

Page 49: Solar Technologies

Page 50: Community Renewable Energy Projects

040

Grainey

Page 53: State Energy Facilities; and Page 55: Sustainability Board

059

Vice Chair C. Starr

Comments, geothermal energy development is missing.

061

Grainey

Responds, geothermal projects would be eligible for community renewable energy projects. DOE supports development.

069

John Ledger

Believes this bill will go to a conference committee where problems can be ironed out. This was not a consensus bill, and AOI was not consulted on it. There is a group working on it that is concerned about the pollution control tax credit program. It is found in almost every state and is important as an enticement to business. Oregon’s rules are too stringent.

149

Brian Doherty

Western States Petroleum Assn. was not consulted in the drafting of the original bill package. Reads written testimony on eight reasons why mandates are not necessary (EXHIBIT 38).

179

Doherty

HB 3481-B came to this committee on a 46-to-12 bipartisan vote. There’s a lot in it for people to like. Addresses three points:

·         HB 3481-B14 amendment, section 31, page 29, gasoline added restrictions. Methanol is banned but ethanol is permitted.

·         Clean emission school buses. Opposes tying pump fees to school bus retrofits.

277

Sen. George

Asks questions concerning biodiesel costs.

319

Doherty

·         Mandates are not necessary. Prefers tax incentives. A mandate goes not guarantee a company will buy its fuel from an Oregon farmer. Gives examples of other states’ mandates for ethanol.

425

Sen. George

Does not see mandates guaranteeing that anybody will sell or produce the (needed materials) here. Also there is nothing in these bills that allows for additional water to grow the corn.

446

Doherty

Agrees. Gives example of a business plan to bring in corn from Iowa.

035

Chair Deckert

Asks how an agreement was made in the House to prefer a federal mandate.

043

Doherty

Responds, the industry reached an agreement in the House energy bill for the $5 billion mandate in exchange for a relief from liability.

055

Rep. Anderson

Explains why methanol was taken out of the mix as a transportation fuel. The HB 3481-B16 amendment adds it back in, along with ethanol.

080

Blevins

Clarifies, in the B16 and B17 amendments methanol was taken off the list of banned products. Under the current bill it is banned.

102

Sen. George

Why not change the law after a new form of methanol is created?

104

Blevins

OEC does not feel strongly about this, but is dealing with the bill that is going forward.

118

Bob Russell

Oregon Trucking Assn. strongly opposes any mandates. Explains why. Industry will dramatically clean up diesel emissions beginning next year. OTA also supports national standards, which will level the playing field nationwide. Also, diesel engine companies will not honor insurance claims for damage caused by biodiesel fuels.

184

Sen. George

Expresses concern about jumping ahead of the technology. Old engines won’t get the same mileage and the engines won’t last as long. Someone will have to recover these costs. Follow-up discussion.

195

Russell

Agrees, fuel mileage will be dramatically dropped. Neither the majority nor the minority report in the House Revenue included mandates.

240

Doherty

The federal energy bill mandate is a “renewable fuels mandate.” There’s no particular biodiesel number that has to be met. There are about 70,000 gallons of biodiesel being produced daily in the U.S. It’s a young industry and doesn’t need a mandate, it just needs incentives to be competitive.

248

Chair Deckert

Asks what the penalty would be for not meeting a mandate.

253

Doherty

Responds, does not know what the penalties would be. HB 3481-B without amendments has no mandates.

282

Sen. George

The industry is so close to environmentally friendly fuel, it’s a bad idea to disrupt that progress now. Will not vote for a mandate.

320

Doherty

That is a good point, in that biodiesel testing is in its infant stage. We can get there but we need to get there in the right steps.

369

Olivia Clark

TriMet is bringing forth the HB 3481-B15 amendment (EXHIBIT 27) which deals with retrofitting buses. TriMet’s amendment is modeled after the trucking industry’s clean diesel initiative. The proposal would allow TriMet a pass-through option for the Pollution Control Tax Credit (PCTC). See written testimony (EXHIBIT 39).

434

Chair Deckert

Asks why TriMet needs more tax incentives to assist in retrofitting, since it’s doing it already.

442

Clark

Responds that TriMet has experienced budget issues due to cost increases.

028

Chuck Craig

Directs members’ attention to written testimony (EXHIBIT 40). Supports concept of the bill, but expresses concern with putting a $5 surcharge on motor fuel pump fees to support a school bus emissions program. Oregon’s pump fees are already the highest in the nation. Amendments would make it necessary to raise fees. Sees no way the Legislature would pass a fee increase. Asks committee to consider taking the pump fee out of the bill.

090

Chair Deckert

Questions how an increase in the pump fee would decrease Dept. of Agriculture’s ability to pass fee increases in the future. Follow-up comments.

095

Craig

Responds, it would prevent the industry from gaining acceptance for raising a fee to support the motor fuel quality program in the future.

123

Sen. George

Comments, the fee is not related to the service being presented.

141

Craig

There are two other sources of funding for the school bus program.

171

Martin-Mahar

Clarifies, there would be a fiscal impact for clean emissions for school buses, but none in the B-engrossed bill.

182

Andrea Foque

LOC is concerned with the 1% solar mandate. LOC is working with Rep. Holvey and others on this language. Gives background. Refers to HB 3481-B10 amendment (from Rep. Holvey). LOC is comfortable with compromises in the B14 and B17 amendments.

278

Chair Deckert

Does not think asking communities for reports sounds like a good idea.

297

Foque

Communities don’t like them either, but would prefer reports to mandates.

301

Mike McArthur

The AOC supports Fogue’s comments. Solar energy is rapidly being incorporated in public buildings. Does not know why a 1% mandate is necessary.

314

Jeff Bissonnette

Fair & Clean Energy Coalition appreciates efforts of LOC to find a compromise. Supports the HB 3481-B10 amendment. Oregon has heavy competition from California and needs to be competitive. HB 3001 represents a small statement, and if Oregon is not ready to make that statement it may not be ready to maintain its leadership role in solar energy.

373

Sen. George

Has your organization failed to notify cities and counties that solar is a good alternative?

380

Bissonnette

Responds no, but people are not taking it seriously.

424

Sen. George

Objects to a mandate. Local jurisdictions should be able to decide. Solar technology is a local decision. Technology will continue to move ahead, but we can’t bankrupt local jurisdictions. 1% is a lot of money when you’re running a tight budget.

443

Foque

LOC opposes the roll-over concept in the HB 3481-B10 amendment.

045

McArthur

Comments in favor of Community Renewable Energy Projects, page 50 of the HB 3481-B14 and 3481-B17 amendments, section 58. This used to be SB 834 which passed out of the Environment and Land Use Committee. This would create a $1 million fund and would cost only $156,000.

099

Blevins

Clarifies points raised by prior testimonies regarding retrofits for school buses and warranties for engines that use biodiesel fuel. Refutes the claim that changing to biodiesel reverses environmental impact progress. There is clearly a movement toward the biofuels industry. The bigger question is, how will Oregon take the lead?

177

Sen. George

Asks Blevins to go on record supporting additional water to produce these products (corn). Expresses concern for a bidding war for straw.

180

Blevins

Responds, Oregon can use products like straw that are already being produced. Will not go on record at this point to support additional water use.

226

Craig

Responds to Blevins’ comments about the cost-sharing requirement for school bus retrofitting. Reads from EPA grants: “All applicants must contribute a minimum of 5% of the total project cost. The cost share may be provided in the form of cash or an in-kind contribution.”

243

Chair Deckert

Does not see the link between Dept. of Ag. And EPA grants for school buses. Closes public hearing. Adjourns meeting at 3:25 p.m.