Revenue
Legislative Report - Week of 2/16
Revenue Team
Coordinator: Peggy Lynch
REVENUE
Patricia Garner, Josie Koehne, Peggy Lynch
The latest word is we are $650 million in the hole related to revenue needs vs. expenses. But this number doesn’t reflect all the legislation being considered this session. One positive action taken this last week is the Senate Committee On Finance and Revenue’s passage (along party lines 3-2) of SB 1507 A that “disconnects” a few sections of the federal tax code from our state tax system. We understand that the bill was the result of both chambers’ Revenue Chairs and others as they sought to balance the needs for tax reform with the need to help fill the revenue hole brought on by the federal H.R.1. The Legislative Revenue Office provided this chart to help explain the revenue impact. Here is the Staff Measure Summary, the Fiscal Impact Statement and the Revenue Impact Statement. The measure provides for an increase in the Earned Income Tax Credit that the League has long supported. If this bill passes, it will reduce that revenue hole by about $300 million. Our partners at the Oregon Center for Public Policy (OCPP) have provided a video that might help explain this complicated tax policy. The Oregonian provides another explanation of the committee’s work. The League provided testimony in support of the amended bill.
There was a Minority Report filed (Staff Report) and that report’s Revenue and Fiscal Impact Statements are available in the bill’s meeting materials. SB 1507 A is now headed to the Senate floor for a vote. If it passes, it will then be sent to the House for consideration.
Another bill we are watching is SB 1510: Updates the terminology used to describe certain income earned by multinational corporations to reflect a change in the term used in federal law a bill. The bill, with amendments, would provide an opportunity to explore additional tax policy for consideration in the 2027 session. Public Hearing Feb. 11. Work Session Feb. 16. Although the League was disappointed that this policy was not included in SB 1507 A, we can support a continued conversation around corporate tax policy.
We are also watching for potential changes in the estate tax, SB 1511. A -3 amendment is posted for a Feb. 18 Work Session. The staff has provided this analysis that indicates no expected revenue loss for this biennium but $35 million by 2029-31. Public Hearing Feb. 11. OCPP provides an analysis of this tax. Work Session Feb. 18 -3 amendment is posted.
SB 1586: the tax credit allowed for semiconductor research. Creates and amends certain programs offering tax breaks related to advanced manufacturing, enterprise zones and regionally significant industrial sites. Directs certain state agencies to establish deadlines within which the agency intends to process applications for permits and make the deadlines available to the public. Directs certain state agencies to publish a catalog of permits issued by the agency within 60 days after the effective date of the Act. Adds rural reserves in Washington County to Metro to be used for high technology and advanced manufacturing purposes. See more on this omnibus bill in the Land Use section of the Natural Resources Report. Oregonlive provided this comprehensive assessment of the bill. This Oregonlive article indicates that the bill’s chief sponsor is listening to concerns: “The enterprise zone part is being removed from the bill.” But there’s still a chance that the tax breaks will expand this session. Gov. Tina Kotek has similar language in an economic development bill she is promoting. Public Hearing Feb. 16. The League will provide testimony in opposition to this bill.
As we watch the U.S. and Oregon’s economy, we note the Oregon Capital Chronicle Jobs Report article, of special concern as Oregon is an income tax state.
The Full Ways and Means Committee met Feb. 6th and introduced 6 budget bills for the session. Here are the bill numbers. Expect amendments by the end of session:
SB 1601: Amends an incorrect internal reference in a law relating judicial compensation. Program Change.
SB 5701: Modifies previously approved lottery bonding provisions. (Includes monies for the Port of Coos Bay) Bond Authority. Public Hearing Feb. 13 where the Housing Alliance requested funds for preserving existing housing that will no longer be regulated as “affordable”.
SB 5702: Establishes and modifies limits on payment of expenses from specified funds by certain state agencies for capital construction. Capital Construction 6-year limitation. Public Hearing Feb. 13 where the committee heard 3.5 hours of 2-minute requests from across the state—from infrastructure to housing to resilience hubs to a variety of economic development projects. Legislators were allowed only two requests each but even that meant up to 180 requests!
SB 5703: Establishes biennial appropriations and expenditure limitations for ______ for the biennium ending June 30, 2027. Placeholder for agency allocation changes.
HB 5203: Approves certain new or increased fees adopted by state agencies. The bill includes the Dept. of State Lands Wetlands processing fees set forth during rulemaking for which the League engaged. Fee Ratification.
HB 5201: Establishes biennial appropriations and expenditure limitations for ______ for the biennium ending June 30, 2027. Placeholder.
HB 5202: Establishes biennial appropriations and expenditure limitations for ______ for the biennium ending June 30, 2027. Placeholder.
HB 5204: Modifies certain biennial appropriations made from the General Fund to specified state agencies and the Emergency Board. Establishes and modifies limitations on expenditures for certain biennial expenses for specified state agencies. The items populated in this bill as introduced reflect tentative decisions made by Ways and Means during the January Legislative Days. Omnibus Budget.
Here is the material from the Oregon State Debt Policy Advisory Commission. Tentatively the General Obligation bond capacity for the 2026 session is $513 million and $86 million lottery bond capacity.
Revenue Committees and Ways and Means don’t need to follow the session deadlines. They work until close to the end of session.
Other bills we may be following:
SB 1562: Allows city and county services for which net local transient lodging tax revenue may be used to be provided either directly by the city or county or indirectly by a special district. Changes the division of allowable uses of net local transient lodging tax revenue from at least 70 percent for tourism related expenses and no more than 30 percent for city or county services, to at least 40 percent and no more than 60 percent, respectively. Allows units of local government with restricted grandfathered local transient lodging tax regimes to take advantage of the new provisions of the Act. Establishes biennial reporting by local governments of amounts and uses of local transient lodging tax revenue.
HB 4148: Allows city and county services for which net local transient lodging tax revenue may be used to be provided either directly by the city or county or indirectly by a special district. Changes the division of allowable uses of net local transient lodging tax revenue from at least 70 percent for tourism related expenses and no more than 30 percent for city or county services, to at least 40 percent and no more than 60 percent, respectively. Allows units of local government with restricted grandfathered local transient lodging tax regimes to take advantage of the new provisions of the Act. Establishes biennial reporting by local governments of amounts and uses of local transient lodging tax revenue. The LOCAL Act, adjusts the post-2003 lodging tax distribution so that local governments may adjust the percentages, with up to 60% used for critical local services and infrastructure, such as first responders, and at least 40% dedicated to tourism promotion and facilities. The LOCAL Act is a bipartisan collaborative bill that updates outdated restrictions so communities can better balance supporting tourism with maintaining residents' quality of life. Public hearing Feb. 9.
HB 4125: Prescribes methodology for the preparation of revenue estimates used in the budgeting process and as applicable to the surplus revenue refund process. Applies to estimates prepared on or after January 1, 2027. Requires the Department of Revenue to estimate the difference in surplus revenue calculations using stated methodologies, and transfer an amount equal to the difference for use for various purposes. Establishes the One-Time Emergencies and Finance Fund. Public hearing Feb. 2.
HB 4136: Disallows, for purposes of personal income taxation, a mortgage interest deduction for a residence other than the taxpayer’s principal residence, unless the taxpayer sells the residence or actively markets the residence for sale. Establishes the Oregon Homeownership Opportunity Account. Transfers an amount equal to the estimated increase in revenue attributable to restrictions on the deduction of mortgage interest to the account, for the purpose of making down payment assistance payments. Applies to tax years beginning on or after January 1, 2026. Public Hearing Feb. 16.
SJR 201: Kicker Reform: Proposes an amendment to the Oregon Constitution to require a portion of surplus revenue that would otherwise be returned to personal income taxpayers to be used for funding public kindergarten through grade 12 education, community colleges and wildfire prevention and suppression, if surplus revenue exceeds a certain threshold. Refers the proposed amendment to the people for their approval or rejection at the next regular general election. OPB covered a story about the bill. Public Hearing Feb. 18. The League has long supported kicker reform but we also note that, with our new state economist, another kicker is not expected in the near term.
HB 4014: Requires the Legislative Revenue Officer to study the state financial system. Public Hearing Feb. 2. Another Public Hearing Feb. 11. -1 amendment
HB 4125: Prescribes methodology for the preparation of revenue estimates used in the budgeting process and as applicable to the surplus revenue refund process. Public Hearing Feb. 2.
See other sections of the Legislative Report about the cuts in each area and what’s being considered to address the revenue shortfall.