It is vitally critical that chambers respond to the Action Alert on HB 3427, the $2 billion gross receipts tax on Oregon businesses. We have very little ability to impact this debate unless Chambers show up!

HB 3427 is the wrong approach for Oregon

We’ve reached the mid-point of the 2019 Legislative Session with the clear theme of generating revenue.  You name it, there’s a tax for it.

HB 3427 would generate $2 billion in NEW revenue to fund proposed education priorities. The goal is laudable but the mechanism is not.  A gross receipts tax, as proposed in HB 3427, is one of the most regressive taxing mechanisms.  If this bill passes, local businesses and consumers will be subject to pyramiding of taxes up and down the supply chain and increased costs that are certain to stifle Oregon’s economy.
 Enough is enough!  The total cost of proposed taxes, programs and fees being considered by the 2019 Legislature is $5.67 billion over the next two years.  That is too great a burden on local Oregon businesses.  

 
Tell Oregon legislators that HB 3427 is the wrong approach for Oregon!

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What's Happening (OSCC Political Observations)

From a business perspective, the 2019 session can be distilled into four primary categories:

1. Revenue. As we've noted, there is currently over $5.67 billion in additional revenue proposals that are alive in the legislature. The crown jewel of the revenue proposals is HB 3427, the $2 billion gross receipts tax for K-12 and early education. OSCC is also very concerned about HB 2269, the sneaky $500 million health care tax on employers with 50+ employees. HB 2005, a $1+ billion tax to establish a new paid family leave program, is also alive in the legislature.
    
2. Cap and Trade. OSCC has consistently opposed HB 2020 and is currently working with key legislators on changes to the bill that would offset the increase in costs on electricity and natural gas for local businesses. These efforts could prove successful. But at the same time, there appears to be very little legislative effort underway to reduce the major increases in gas taxes that would result from the bill. An initial 16-cent per gallon gas tax hike is projected from the legislation. HB 2020 also establishes a new bureaucracy, the Carbon Policy Office, which would have broad powers over the economy.
    
3. SAIF raid / PERS reform / Cost containment. The response to the Governor's proposal to take $500 million from SAIF, take $500 million from the 'kicker,' and require active Tier 1 and Tier 2 public employees to contribute 3% of salary to their pension has hit with a thud. Republicans will not support taking the 'kicker,' unions won't support public employee contributions to the pension, and business is vehemently opposed to raiding SAIF.
    
4. Ancillary business issues. OSCC continues to be concerned with the significant number of bills that would hurt business operations (SB 379, marijuana accommodations), hurt economic development (HB 2408, prevailing wages in enterprise zones), hurt existing programs (SB 595, diversion of transient room taxes to fund housing), create additional liabilities (SB 726, workplace harassment liability) and add additional business costs (HB 2014, eliminates $500k cap on non-economic damages in civil lawsuits). 

 

Activity on Major Issues

• The $2 billion Commercial Activity Tax (HB 3427) is now clearly the top priority of legislative leadership.
  
  The Thursday public hearing was a disaster for business as only OSCC and two agricultural groups showed up to testify against the gross receipts tax.
  
  HB 3427 has the following components:
• • A flat $250 tax on all business entities for sales under $1 million;
  • All business entities with sales over $500,000 must register with the state;
  • A gross receipts tax rate of 0.49% on Oregon sales over $1 million;
  • A 25% deduction from taxable sales for labor OR business inputs, whichever is higher;
  • An exemption for receipts from sales to a wholesaler or ag cooperative for any sales outside of Oregon; and
  • An exemption for groceries (defined as those that qualify for 'SNAP').
    
    OSCC testified against the proposal because of its impacts on small and start-up businesses.

• SAIF. There is ongoing negotiation between SAIF and the Governor's office about SAIF's potential contribution to the PERS unfunded liabilities. The Governor's office is looking for a $700 million contribution from SAIF while SAIF believes it can contribute somewhere in the neighborhood of $300 million over the next 7 years without impacting policyholder rates and dividends. OSCC continues to be opposed to a raid on SAIF to pay down PERS liabilities.      

 

What happened last week?

• Prevailing wages in enterprise zones. OSCC was disappointed to see that HB 2408 passed the House floor so easily. The bill required prevailing wages on all private projects in Enterprise Zones in excess of $20 million. Such a policy erodes one of Oregon's last remaining economic development tools. OSCC will fight the bill much harder on the Senate side.

 

Other Key Issues Coming up This Week

The upcoming week is going to be fairly quiet on key issues. There will be no additional hearings on Cap and Trade this week, but there will be consideration of the following:

• HB 2269 health care tax.  OSCC strongly objects to this legislation which will give the Department of Consumer and Business Services (DCBS) a blank check to determine how much each business 'should' be spending on health care for its employees and then tax each business that does not spend as much on health care as DCBS believes it should. The bill will be engineered to raise $500 million per biennium. To make matters worse, Legislative Counsel has determined that because the bill simply allows an agency to construct and levy the tax, it does not require the 3/5th supermajority to pass the legislature.

• HB 3022 workers' compensation compromise. OSCC initially testified against this legislation, which would have upended 30-years of successful workers' compensation reforms and drastically raised workers' comp costs on employers. However, the bill was deftly negotiated by SAIF so as to end up a compromise bill that won't impact employer rates. OSCC continues to monitor to ensure that the terms of the compromise are honored.

Stop the Raid on SAIF

Governor Kate Brown recently proposed raiding SAIF, Oregon’s leading workers’ compensation insurance carrier of nearly $500 million to cover unfunded liabilities within our state’s Public Employee Retirement System (PERS). 
 
Small businesses, school districts, and local governments depend on SAIF’s affordable rates and safety programs to ensure a safe and healthy workplace.  Raiding SAIF’s reserves could damage what’s been a very successful model for Oregon employers and injured workers.  In a recent editorial, The Oregonian newspaper cautioned against the raid stating it, “risks destabilizing an entity that has competently, reliably and efficiently administered workers’ compensation for public and private employers for years.”  We agree!
 
Raiding their reserves increases the likelihood of rate increases and fewer resources for accident prevention and workplace training programs.
 
While PERS faces a $26 billion deficit, there is no tie or correlation between their unfunded liability and the premiums that Oregon employers pay to SAIF.  Should it ever be determined that SAIF does have excess reserves those funds should be returned to policyholders and not grabbed by politicians for unrelated matters. 

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It is our analysis that a $2 billion schools tax will pass.  At this time, it is prudent for OSCC to analyze its options as we have no ability to stop this tax increase.

OSCC's current position is in opposition to HB 3427, the $2 billion gross receipts tax.  Our opposition, while appreciated and meaningful to our members and allies in the legislature, renders us unable to affect any outcomes in a very adverse legislative session.  Our opposition is also only a small impediment to ultimate passage of the tax. 

It may be prudent at this time to signal a willingness to support $2 billion in taxes if certain conditions are met.  It is acknowledged that signaling a willingness to support $2 billion in taxes is both out of character for OSCC and carries some risk.  However, there is also a risk to not adapting to our political surroundings - namely, forgoing any chance to protect small business from the proposed tax, advocating for increased funding for community colleges, and being better leveraged to defeat additional bad bills that will impose major additional costs on our members.

Below is the analysis stemming from yesterday's OSCC Government Affairs call:

Context: OSCC currently opposes HB 3427, the $2 billion gross receipts tax on business. However, it is our analysis that the $2 billion tax for Oregon schools will pass. There’s 18 votes in the Senate and at least 36 in the House. There will be a $2 billion tax that passes the legislature. The overall package is currently being negotiated, but leadership wants to “fast track” the issue. The question is whether OSCC would be willing to support $2 billion for schools if certain conditions are met. __________________________________________________________________________________ OSCC Decision Options: (1) Continue to oppose HB 3427 and $2 billion tax. (2) Indicate support for $2 billion in additional taxes if certain conditions met. __________________________________________________________________________________ ‘Opposition’ upside: Our members expect us to stand with them on issues that affect their ability to be profitable. Maintain ability to join coalition to refer measure to Oregon voters. ‘Opposition’ downside: We are steamrolled with a 0.49% gross receipts tax that hurts small businesses down to $1 million in sales. No ability to kill additional bad legislation. No seat at table. ‘Support’ upside: Seat at table. Can potentially shape the tax to protect small business. Can potentially shape how money is spent. Can potentially kill other threatening bills that would impose additional burdens on our members. ‘Support’ downside: Our ability to shape the tax, the expenditures, and kill other threatening bills may not meet expectations. Our members will have difficulty with supporting a tax increase. We lose leverage to refer the measure to voters. __________________________________________________________________________________ Possible OSCC conditions: 1. No gross receipts 2. Protect small & start up business 3. Cost containment of $1 billion 4. Community colleges must receive priority funding 5. Other damaging bills must die – HB 2020, HB 2269, HB 2408

If you want to make your opinion known, contact Mary Ann Gray, who is East Portland's representative on the OSCC Government Affairs Committee at MaryAnn@westsidesec.com. 

Public Hearing on $2 Billion Gross Receipts Tax TONIGHT

Dear OSCC members and colleagues - We've reached the mid-point of the 2019 Legislative Session with the clear theme of generating revenue.  You name it, there's a tax for it. HB 3427 would generate $2 billion in NEW revenue to fund proposed education priorities. The goal is laudable but the mechanism is not.  A gross receipts tax, as proposed in HB 3427, is one of the most regressive taxing mechanisms.  If this bill passes, local businesses and consumers will be subject to pyramiding of taxes up and down the supply chain and increased costs that are certain to stifle Oregon's economy.   Enough is enough!  The total cost of proposed taxes, programs and fees being considered by the 2019 Legislature is $5.67 billion over the next two years.  That is too great a burden on local Oregon businesses.   https://www.votervoice.net/OSCC/campaigns/65435/respond TAKE ACTION   The first public hearing on the proposed gross receipts tax is scheduled for Tuesday, April 16, at 5:00 PM in Hearing Room F.  Show up or write in, and tell Oregon legislators that HB 3427 is the wrong approach for Oregon!

OSCC has issued an ACTION ALERT for SB 379(Marijuana Accommodation). Please respond today! This issue continues to be extraordinarily timely until we get confirmation that the bill is dead.

https://www.votervoice.net/OSCC/campaigns/62827/respond

Write your Senator now

Dear OSCC members and colleagues -

What's Happening (OSCC Political Observations)

The second half of the 2019 session is now underway.

Legislative leadership has made the timing decision to prioritize the $2 billion business Commercial Activity Tax (HB 2019) and put it at the front of the line. We are expecting quick consideration of HB 2019 with public hearings on the new tax as early as this week.

This means that Cap & Trade (HB 2020) has been postponed until after consideration of the business tax hike. This could push Cap & Trade back by a month or more as it is currently mired in complexity primarily from the transportation sector.

The major focus of the legislature this week will be passing bills during numerous floor sessions so that they can move bills to the second chamber in a timely way. Committee activity will be greatly diminished this week as both the House and Senate will be focused on casting floor votes this week.

 

Activity on Major Issues

The major issue that will be moving forward this week in the Joint Student Success Committee is the$2 billion Commercial Activity Tax (HB 2020), which was finally unveiled last week. Also of note, the Governor unveiled her PERS liability buy-down proposal last week along with a PERS reform proposal that would require Tier 1 and Tier 2 active employees to contribute 3% of pay down the unfunded liability of the state's pension program.

• Commercial Activity Tax. At a high level, the gross receipts tax proposal includes the following components:

• A flat $250 tax if business sales are under $1 million;
• A commercial activity tax (CAT) rate of 0.49% on Oregon sales over $1 million;
• A 25% deduction from taxable sales for labor OR business inputs, whichever is higher;
• An exemption for receipts from sales to a wholesaler or ag cooperative for any sales outside of Oregon; and
• An exemption for groceries (defined as those that qualify for 'SNAP'). 

This proposal is likely to change over the next week, and OSCC will keep chambers apprised of any changes to the tax reform package. In the meantime, the business community continues to oppose a commercial activity tax.

 

• PERS Raids and Reform. On Friday afternoon, Governor Brown unveiled her plan to halt the rise of PERS costs for Oregon's schools by sweeping $486 million in reserves held by SAIF Corp, the state-owned worker's compensation insurer. She also proposed taking $400 to $500 million in kicker payments to pay down K-12 PERS liability, but that move would take a 2/3 vote by each chamber of the legislature. OSCC is closely tracking these efforts, and business groups are mobilizing against the threat of sweeping SAIF reserves.

 

The one piece of PERS reform proposed by the Governor is to institute pension contributions from public employees. The governor's plan calls for active Tier 1 and 2 members of PERS - those hired before August 2003 and still working - to contribute 3 percent of their pay to an account that would help pay for their pension benefits. Employees' first $20,000 in salary would be exempt from the contribution. Those hired after that date would contribute 1.5 percent of their pay after exempting the first $20,000 in salary.

Those changes could bring in about $100 million per biennium.

              

What happened last week?

Paid Family & Medical Leave. (HB 3031; HB 2005) After the April 9 deadline, only one paid family and medical leave vehicle remains, HB 2005.  HB 2005 gives the Employment Department the authority to levy up to a 1% payroll tax on employers and a 1% income tax on employees to implement a 26-week per year paid family leave program. The bill would apply to all employers with at least one employee and raise $1.5 billion in new taxes every biennium.

 

Bounty Hunter Law. (SB 750) OSCC joined other business organizations in opposition to SB 750, which would allow employees and third party organizations to act as private attorneys general to supplement enforcement actions by public agencies. This would create a wave of costly litigation against Oregon employers.

 

Pay Equity Technical Fixes. (SB 123) Following BOLI rulemaking in November 2018, OSCC brought forward necessary technical fixes to assist local businesses in complying with the Oregon Equal Pay Act.  SB 123 is the vehicle for these fixes.  Unfortunately, the negotiated product ran into problems when labor logged opposition on Monday evening.  The bill moved to the Senate Rules Committee where conversations will continue.

 

Sexual Harassment in the Workplace. (SB 726) SB 726, the workforce harassment and discrimination bill, moved out of the Senate Workforce Committee with the -5 amendment.  The -5 amendment removed the individual liability and "should have known" standard for third parties, which was a positive change for Oregon employers.  After the bill passed, the Committee Chair indicated that a work group would be formed to continue to explore individual liability.  

 

Pregnancy

• Pregnancy Accommodations. (HB 2341)  After negotiations, HB 2341 was amended to apply new pregnancy accommodation requirements to employers with 6+ employees and allow any employers to file an undue hardship exemption with BOLI. 
• Expressing Milk in the Workplace. (HB 2593) Last week, advocates came together to draft - 3 amendments to HB 2593, which allows employers with 10 or fewer employees to file an undue hardship exemption with BOLI if providing unlimited nursing breaks causes significant difficulty or expense.

OSCC appreciates the work of Rep. Shelly Boshart Davis (R-Albany) and Rep. Karin Power (D- Milwaukie) to find middle ground to provide reasonable pregnancy protections in the workplace.

Workers Compensation. (HB 3022) Last week, business interests and the trial lawyers reached a compromise on HB 3022.  As a reminder as originally drafted, HB 3022 would undo the Mahonia Hall Reforms that make Oregon's Worker's Compensation program one of the best in the country.  Conversations will continue on an amendment in the House Rules Committee.

 

Other Key Issues Coming up This Week.

 

Marijuana Accommodation. (SB 379) OSCC is still pushing hard to DEFEAT SB 379.  SB 379 would undermine and nullify all employers' workplace drug-free policies and would require employers to accommodate off-duty marijuana use. OSCC is very concerned about the ability of employers to implement and enforce workplace drug-free policies.  SB 379 is passed out of Committee on a party line vote but has not been scheduled for a floor vote yet. We suspect we may have defeated this legislation but we do not have official confirmation.

We know there is widespread anticipation and concern regarding the new $2 billion business tax being promoted by legislative leadership. Last evening, the detailed plan was finally made public. https://olis.leg.state.or.us/liz/2019R1/Downloads/ProposedAmendment/15752   At a high level, it is a 0.49% gross receipts tax with a 25% deduction for either business inputs or labor costs, whichever is greater. The tax applies to all business entities with gross sales in excess of $1 million. Although this is a new 25-page tax bill that undoubtedly has many complexities, our understanding is that legislative leadership intends for the process to move quickly. There may be limited opportunity for input or to amend the bill. In another area of concern, we also believe that the Governor/Governor's office will be presenting her PERS pension reform package today at the noon hearing for Ways & Means Capital Construction subcommittee. We have reason to believe that a raid on SAIF resources and reserves will be a part of that discussion, but the particulars are not clear. We also anticipate their will be other fund "sweeps" to help buy down escalating PERS rates, particularly for schools.

Dear OSCC members and colleagues - Cap-and-trade has far-reaching consequences for Oregon. Beyond raising prices for everyday items like gasoline and food, HB 2020 would hurt Oregon's economy by putting thousands of jobs at risk for in the manufacturing sector. Supporters of the bill have even acknowledged the impact the proposed bill would have on manufacturing. And because of the importance of the manufacturing sector to Oregon's economy, other sectors will also be weakened as a result. Cap-and-trade, as envisioned in House Bill 2020, would sacrifice many Oregon manufacturing jobs. Even those who seek to offset jobs losses in one manner or another underestimate the tidal wave of economic damage that would flow from a poorly designed carbon-reduction program. As currently written, HB 2020 would lead key industries to reduce their Oregon presence, remove major employers from rural communities and increase costs for the manufacturers that remain. Read the full article here. OSCC continues to ask for your assistance to shine a light on the negative impacts of cap-and-trade. Individual chambers can start by joining the Partnership for Oregon Communities. The Partnership will coordinate grassroots voices with concerns about the rising costs of fuel and energy. Email jessicac@oregonchamber.org to join the coalition. OSCC will continue to follow up as we learn of opportunities for public testimony and engagement with the legislature.  OSCC has issued an ACTION ALERT for HB 2020 (Cap & Trade) for all legislators. PLEASE RESPOND ASAP WITH YOUR MESSAGE.

Dear OSCC members and colleagues - What's Happening (OSCC Political Observations) By Tuesday, April 9th, all bills need to be voted out of their original committee in order to survive. This is the turning point of the session. Priorities get whittled down and the playing field becomes clearer as extraneous legislation falls by the wayside. We will know much more on Wednesday morning as committees will work into the evening up until the very last moments on Tuesday evening. Activity on Major Issues We want to reiterate the four major tax hikes being pushed by legislative leaders. As of now, all four proposals are serious and viable. Please get familiar with and distribute this infographic. It is the story of the 2019 Oregon legislature. Health Care Tax (HB 2269). This unbelievable proposal would give the Oregon Department of Consumer and Business Services (DCBS) the authority to determine what every large employer (defined as 50+ employees who work an average of 8/hrs per week!) should be spending on health care for employees and authorizes the agency to levy a tax on every employer that does not meet the agency's minimum health care spending requirements. Agency leaders testified that the bill is designed to raise $500 million per biennium in new taxes. OSCC strongly opposes to this bill and joined other business associations in written testimony. We were not even allowed to testify in person! The bill now resides in the House Revenue Committee. Paid Family Leave (HB 2005). Legislative leaders have now introduced this bill as the newest and most refined effort to pass a paid family and medical leave system. Bottom line: the bill gives the Employment Department the authority to levy up to a 1% payroll tax on employers and a 1% income tax on employees to implement a 26-week per year paid family leave program. The bill would apply to all employers with at least one employee. The bill raises about $1.5 billion in new taxes every biennium to fund this new state-run bureaucracy and insurance program. Cap & Trade (HB 2020). The newest re-write of HB 2020, the 'Cap & Trade' bill, did nothing to alleviate cost concerns for manufacturers or everyday Oregonians. The new version of the bill would immediately add 16 cents per gallon in fuel costs and an immediate 30% increase in natural gas costs for residential, commercial and industrial customers. Large manufacturers will see similar and immediate cost increases for electricity. All told, we are analyzing this bill as a $1.1 billion increase in costs for Oregonians each biennium. The vast majority of direct costs will be borne by manufacturers. HB 2020 will result in an immediate 30% increase in natural gas costs and a 16-cent per gallon gas price hike. Business Tax Increase. It's becoming clearer that Democratic leadership will lean toward selecting a Commercial Activity Tax, which is a pure gross receipts tax, as the basis for implementing a new business tax to add more than $2 billion in revenue each biennium into the state's K-12 system. At this point, it does not appear that PERS reform or any other government cost savings will accompany this tax proposal. A growing coalition of business organizations, including OSCC, are now going on record as opposing a new gross receipts tax.  You can see OSCC's response to the tax package here. What is the total biennial cost to the all the tax increases that are now on the table? $5.67 billion.  Other Key Issues Coming up This Week. Marijuana Accommodation (SB 379). OSCC is still pushing hard to DEFEAT SB 379. SB 379 would undermine and nullify all employers' workplace drug-free policies and would require employers to accommodate off-duty marijuana use. OSCC is very concerned about the ability of employers to implement and enforce workplace drug-free policies. SB 379 is scheduled for a committee vote early this week. We are trying to keep it bottled up in committee. Please respond to the OSCC ACTION ALERT on SB 379. We need to mount our defense on this issue in the Oregon Senate NOW!! The bill is scheduled for committee vote late this week. BOLI Budget (SB 5516). OSCC joined other groups from business and labor in supporting a renewed focus on technical assistance at BOLI. Commissioner Val Hoyle's budget request would make small business technical assistance a core focus, add an eastside technical assistance and apprenticeship specialist, and update BOLI's hard-to-navigate website. OSCC was pleased to be able to support Labor Commissioner Hoyle. Harassment in the Workplace (SB 726). On Thursday, the Senate Committee on Workforce had a work session on SB 726, which would create sweeping changes to Oregon's harassment and discrimination statutes. The committee reviewed the -4 amendment, which removes the section that would hold those with executive authority personally liable if they merely "should have known" about harassment and failed to prevent it from occurring. While this is a positive change, there are still more amendments to be made, and OSCC anticipates a -5 amendment will be considered during Tuesday's work session on the bill. OSCC considers the removal of personal liability for owners and officers to be a major win.  Write your senator here -https://www.votervoice.net/OSCC/campaigns/62827/respond ACTION ALERT OSCC has issued an ACTION ALERT for SB 379 (Marijuana Accommodation). Please respond today! This issue is extraordinarily timely this week.

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