Oregon Legislature Delivers Big Results This Week
Historic Bi-partisan Agreement Reduces PERS Liabilities by Billions & Delivers Significant Small Business Tax Relief. Excerpt from October 3, 2013 edition of AOI Leading Issues.
To view the full legislative voting matrix and see how your legislator voted, click here.
Against the backdrop of dysfunctional national politics, the Oregon Legislature came together on a sweeping bipartisan agreement to curb PERS liabilities, add $100 million to K-12 school funding, freeze tuition at Oregon’s universities and community colleges, and deliver the most pro-growth business tax policy Oregon has seen in over a decade by establishing a lower tax rate for S-corporations, LLCs and partnerships.
The package of bills also included the top priority for Oregon’s agricultural community – a preemption of local government regulation of genetically modified crops.
Last week, Governor Kitzhaber and Democrat and Republican legislative leaders negotiated the final package of five bills. The details of these bills – and the vote counts – remained in flux until the final day.
AOI took a strong position in support of the bipartisan agreement. In partnership with our colleagues and partners in the Oregon business community, AOI lobbied hard in support of the five bills.
You can see AOI and the business community’s statement of support here.
The five bills include:
- SB 861, which improves the financial viability of PERS by reducing the system’s $15 billion unfunded actuarial liability (UAL) by $5 billion. SB 861 produces over $800 million in biennial cost savings to schools, local government, and state government and eliminates the “collaring” gimmick which delayed $350 million in PERS payments until the next two-year budget cycle.
- SB 862, which prevents final average salary “spiking” by excluding health insurance payments, prospectively removes legislators from PERS, and limits PERS benefits for public employees convicted of on-the-job felonies.
- SB 863, which requires any Oregon policy regarding genetically modified crops to be implemented statewide and not on a county-by-county basis.
- HB 3601, which reduces the tax rate down to 7% (down from current 9.9%) on the income of small businesses (S-Corps, LLC, LLPs, and partnerships) who employ non-owners and report “active” business income (Schedule E filers). This is projected to be a $239 million tax cut for small business.
HB 3601 also raised the C-corp tax rate on net income above $1 million to 7.6%, reduced the Senior Medical Tax Deduction for high income seniors, eliminated the $183 personal exemption credit for high income taxpayers, and increased cigarette taxes by 13 cents per pack.
All told, the C-Corp tax increase, along with the elimination of the personal exemption credit, raises about $135 million this biennium. The budget savings from reforming the Senior Medical Deduction is $82 million this biennium.
Because the small business tax cut does not take effect until 1/1/2015, this package represents an increase of $189 million into the General Fund this biennium. The small business tax cut cancels out this increase starting in 2015. HB 3601 is a significant net tax cut for Oregon business.
- HB 5101, which appropriates the $189 million to include $100 million in 2013-15 for K-12 education to restore school days and teachers in all districts across the state, $25 million to state University Systems to eliminate tuition increases, and $15 million to Community Colleges which eliminates tuition increases.