Legislative Report - Week of 3/9

REVENUE

Patricia Garner, Josie Koehne, Peggy Lynch 

The short session is over.  The Governor still has to decide if she’s signing the legislation. And the work is not done.  There was not enough revenue to fund the 2025-27 budget without cuts and new legislation as shared below. The Feb. 4 Revenue Forecast guided the spending for the 2026 legislative session. Carl Ricidonna, Oregon’s State Economist, provided his report, along with Michael Kennedy, Senior Economist.  See pages 17 and 20 for the important numbers.  And the Legislative Revenue Office’s Forecast Summary. 

LWVOR participated with several other volunteer and non-profit organizations in the unofficial Oregon Revenue Coalition that worked together to find ways to preserve Oregon revenue in the light of lost federal income from Congress’s passage of H.R.1 which would cut major sources of funding for Medicaid, SNAP and many other services. (Signed on to letter in January.) We focused on a bill to limit the damage caused by Oregon’s rolling connection to federal income tax law, since legislation to disconnect from the federal law failed in the 2025 long session. This session SB 1507 A passed (Senate (17-13) on Feb. 16 and House (34/21/4/1) on Feb. 25) that disconnected from certain sections of the federal code that the Legislative Revenue Office (LRO) reported would save Oregon $311.6 million in revenue this biennium and $313.9 million in the 2027-29 biennium, while providing increased funding for the Earned Income Tax Credit (EITC) at a cost of $26.2 and $52.7 million per biennium respectively. The League has long supported an increase in the EITC. Summaries of the 44-page bill and its amendments can be found here. LWVOR testimony in support. 

At least one legislator is considering collecting signatures to place portions of the bill on the ballot per this Oregonlive article. Of concern is that the referral process allows petitioners to select parts of the bill.  In this case, they could leave off the increase in the EITC while only asking voters to stop the disconnect—which, in part, is expected to pay for that EITC increase.

HB 5204  is the final bill that balances the budget as required by state law. In the bill,  the legislature made over $128 million in cuts, mostly in agency services and supplies and by not filling vacancies and shifting remaining funds around to fill in some gaps. This was fewer cuts than anticipated at the start of the session.  But they also funded or rebalanced some agency programs and staff.   The  -2 amendment was adopted.  See the 4 Analysis documents for the budget additions and reductions, Budget Notes and final LFO recommendation. Passed the House and Senate Mar. 6.  Oregonlive article  and the Oregon Capital Chronicle addressed the 2025-27 budget rebalance.  The Oregonian did a final budget review. 

SB 1601 was the Program Change bill. The  -3 amendment was adopted and includes rebalance of ODOT’s programs in Section 11-23 and clarifies the 1% of lottery monies for county fair upgrades and repairs. Passed the Senate and House Mar 6.

SB 5701 amends the limits established during the 2025 legislative session for the maximum amount of bonds and other financing agreements that state agencies may issue. The proceeds from the issuance of bonds are included as revenues in agency budgets. The -2 amendment  and the LFO Recommendation includes increases in general obligation and lottery revenue bonds authorized. Bond sales are not anticipated until the spring of 2027.  Passed the Senate and House Mar. 6. 

SB 5702: Establishes and modifies limits on payment of expenses from specified funds by certain state for capital construction. Capital Construction 6-year limitation.  -1 amendment LFO Recommendation Mar. 5 passed Senate.  Mar. 6 passed House. 

SB 5703: Modifies amounts allocated from the Administrative Services Economic Development Fund, Veterans' Services Fund, Criminal Fine Account, Oregon Marijuana Account and Fund for Student Success. Mar. 5 passed Senate. Mar. 6 passed House. 

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.  LFO Recommendation Mar. 6 Passed the House and Senate. 

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.  This omnibus bill, with amendments, would provide an opportunity to explore additional tax policy for consideration in the 2027 session. It is easier to understand the many provisions of SB 1510 by reviewing the summary provided by the Legislative Revenue Office of the bill and its -4 amendments.  Feb. 24:  Passed the Senate (28/1/1).  Passed the House Mar. 4. 

HB 4014:  Establishes the Task Force on Taxation of International Income with the amendments.  -2 amendment replaced the “study” bill.  Staff Measure Summary. Due to this complicated tax policy, parties agreed to use the interim to consider impacts on this federal tax policy on Oregon revenue. Passed the House floor (32/26/2). On to the Senate floor at adjournment. Business interests want to have this conversation behind closed doors rather than an open public Task Force. The bill died but the conversation will continue.   

SB 1511: A bill modifying the estate tax that would have increased the $1 million exemption to the estate tax to $2.5 million failed this session. The tax rates would have been greatly increased for the highest valued estates but fewer estates would pay an estate tax. For the first biennium, the revenue would have been about the same as our current estate tax SB 1511. The revenue staff  provided this analysis on the A -3 amendment that was approved by the Senate) with no expected revenue loss for this biennium, but $35 million by 2029-31. The bill did not pass out of House Revenue by end of session, but may be back in the long session.

Two bills focused on increasing tax incentives for economic development faced intense debate and scrutiny, and one, SB 1586, was withdrawn on March 3 due to much public outcry about tax breaks for data centers and the expansion of the Metro’s Urban Growth Boundary into land zoned as rural agricultural land, in violation of the 2014 Grand Bargain. OPB provided an article on this contentious bill. LWVOR testimony in opposition to the bill and additional testimony opposing the -7 amendment. The bill remained in Senate Finance and Revenue at the end of session, but is likely back in some form in 2027. 

The other economic development bill, HB 4084 A introduced by Governor Kotek, would fast track the permitting process for certain new business development to be completed within 120 days, by means of a specially appointed Joint Permitting Council to oversee the each permitting agency’s permitting process. This section of the bill aligns with a federal program: Permitting Council’s FAST-41 Assistance for States.  

In addition, in the bill as introduced, all local property taxes abatements for Enterprise Zones were to be extended. This bill was also controversial because of these extensions since it would allow data centers which are hotly contested throughout the US, and which are the primary recipients of these tax credits, to not pay local property taxes for many years. After several amendments, three were incorporated into the final bill. LWVOR comments. The final bill included these provisions as summarized by LRO:

• Removes the $40 million General Fund appropriation to OBDD for deposit into the Industrial Site Loan Fund. (However, HB 5204 included $10 million for the Regional Infrastructure Fund, $5 million to support horse racing events at county fairgrounds, $5 million cash and $10 million bonds into the Industrial Site Loan Fund, and $10 million in lottery bond funds. The bonding bill provided targeted investments in sewer and water projects statewide to help with increased housing development demands.)

• Modifies SB 1507 (2026) to limit the tax credit for job creation to certain specified qualified industries. To qualify for the tax credit, a taxpayer must receive an attestation-based certification from Business Oregon, who will develop the tax credit application process, establish job creation determination methodology, and further define the term “qualified industry” through rulemaking.

• Excludes any qualified property of an authorized business in an enterprise zone with an operating data center from entering into a written agreement with the enterprise zone sponsor to 1) extend the period during which the qualified property is exempt from taxation beyond the allowable three years; 2) agree to flexible hiring timelines; and 3) approve alternative performance criteria.

• Prohibits data center properties from authorization as an eligible business firm prior to 90 days after the adjournment of the 2027 legislative session. An amendment was added at the end that puts this one-year moratorium on all new data center development certifications by Business Oregon, starting three months after the close of session. This allows the Governor’s Oregon Data Center Advisory Committee time to consider the various impacts of data center development on Oregon, and to report back to the Legislature with their recommendations. It also limits the existing Standard Enterprise (for urban areas) tax break to three years, but allows all other currently operating data centers, including those in rural areas of the state, to continue to receive tax breaks through the extended time periods as outlined in the bill. Oregonlive provided a great analysis of the impact of data centers.  Oregonlive update on data centers in this legislation.   Oregon data center operators will save nearly a half-billion dollars in local property taxes this year through three different incentive programs. Kotek’s legislation, House Bill 4084, would expand the fastest growing of those three programs. 

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. The -7 amendment adopted that changes the percentage to 50/50 and passed the House floor Feb. 25 (40/12/4/4).  Mar. 5 Passed the Senate (23/6/1).

SJR 201: Kicker Reform: Proposed 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.  OPB covered a story about the bill.  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. The bill did not get a Work Session.

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. The bill had one public hearing on Feb. 16 and died in committee.  The League is hopeful that a version of this bill will return in 2027.

HB 4125: Prescribes methodology for the preparation of revenue estimates used in the budgeting process and as applicable to the surplus revenue refund process—potential kicker reform. Public Hearing Feb. 2.  The bill died in Committee. 

On Feb. 20, the US Supreme Court declared that President Trump does not have authority to impose widespread tariffs under a specific federal statute. Oregon’s Attorney General, Dan Rayfield, led the coalition of states arguing that the President did not have this authority. 

HB 4061 B passed that provides monies to help Oregon businesses hurt by these tariffs.  Budget Report.  The bill passed the House on Mar. 3 and passed the Senate Mar. 6.   

On Thursday Mar. 5, Rayfield and officials from 23 other states filed a lawsuit against the new tariff at the U.S. Court of International Trade, with Oregon again leading the way. 

“Budget aftershocks from the Trump cuts to Medicaid and SNAP will keep hitting Oregon in future years,” said Senator Jama. “Oregon lawmakers must continue working together to make resources stretch and to help families thrive.”

As we await the May 20th Revenue Forecast, we watch for data that may change the forecast. Oregonlive reports that Oregon exports are down.   Then we now have a war with Iran that, so far, has increased gas and diesel prices.  That increases costs to state agencies, local governments, Oregon businesses and individuals.  Iran, Saudi Arabia, Qatar, the United Arab Emirates and Bahrain — supply more than a third of the world’s urea, an important nitrogen fertilizer, and nearly a quarter of another one, ammonia. And they all use the Strait of Hormuz to export their products. So that means less food production and an increase in food prices. 

The February national jobs report was not good (loss of almost 100,000 jobs) and the national unemployment rate rose to 4.4%. (In Oregon, we’re at 5.2%.)  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.   

According to this Oregonlive article, Oregonians are working the fewest hours since 2010.  Oregon workers are spending less time on the job, another indication that the state’s labor market continues to sag.  The average Oregonian worked less than 33 hours a week in December, according to federal data. That’s the lowest number since 2010, when the state was still digging out from the Great Recession — even worse than the sharp decline that accompanied the pandemic.

As we continue to be concerned about the economy, we note a study related to AI: Brookings Institution study on AI job losses and adaptability points out metros most at risk – Portland Business Journal

Roughly 30% of workers displaced by artificial intelligence will struggle to find new jobs, according to a new report from the National Bureau of Economic Research and Brookings Institution. While 70% of highly AI-exposed workers would likely be able to transition to another job, the rest may have trouble adapting “due to limited savings, advanced age, scarce local opportunities, and/or narrow skill sets. ”What’s more, of the displaced workers in low-adaptive jobs, 86% are women.

The League will continue to work with the Oregon Revenue Coalition and others as we address the need for increased revenue to pay for the services Oregonians need. The Ways and Means Co-Chairs warn of increased demand and federal funding cuts for the 2027-29 and 2029-31 biennia.  

It's time to work with state agencies as they develop their 2027-29 budgets.  Here’s some budget guidance that agencies have received:  2027-29 Budget Guidance: Governor's Letter and CFO 2027-29 Budget POP Guidance.  Bottom line:  The Governor has asked state agencies to provide a “neutral” budget.  If they want to add a program or staff, they need to find a program or staff to remove from their budget request.  You can contact the agency you want to engage with as they work to provide proposals to the Governor around June. 

See other sections of the Legislative Report for information about specific agencies or areas of concern.