Legislative Report - Week of 2/2

REVENUE

Josie Keohne, Patricia Garner, Peggy Lynch

YOU have an opportunity to testify to the Ways and Means Committee on the budget cuts that were proposed during the November Legislative Days.  The public hearing will be held at the Capitol in Salem from 5-8p on Feb. 3, but there will be a remote link as well. Individual League members are encouraged to participate, but remember that only our League President can speak on behalf of the League.  LWVOR sent an Action Alert to members to share your concerns about these cuts and to attend a rally in Salem on Feb. 5^th from noon-2p. For more information see the For Our Future Oregon website and the Jan. 13^th press release.  KOIN reported on tax issues. As did KPTV.   

State agencies provided the Ways and Means Subcommittees with proposed cuts of up to 5% from their currently-approved budgets during the November Interim Days. Here are the costs to OHA & DHS related to H.R. 1 recently calculated.  Oregonlive provides an  article to explain the need for staff and software:  The Oregon Department of Human Services and the Oregon Health Authority say they need $340 million more in state funding and 475 more workers between now and June 2027 to comply with new demands from Republicans’ far-reaching 2025 tax and budget-cutting bill.

In addition, we are seeing all the cuts by local school districts as shared in this Oregonlive article and funding the Oregon Dept. of Transportation will need to be addressed, currently set at $242 million. In other reports, you can read about some of the cuts or cost replacements needed to provide Oregonians with the services they need.  

We look forward to the Feb. 4^th Revenue Forecast  (8am in Senate Finance and Revenue Committee-- agenda) so the legislature will know the expected revenue for the rest of this biennium so they can rebalance the state budget.  The League has joined with others in a reconstituted Oregon Revenue Coalition, and signed on to this letter. 

Some Oregon counties get a pay bump from this article on Jefferson Public Radio.   

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. 

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.

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.

SB 1507: Reduces taxes imposed under various tax programs, operative conditioned upon imposition of a statewide retail sales tax dedicated to specified purposes. Directs the Department of Revenue to estimate the revenue lost to tax reductions and to direct an equal amount of revenue to various purposes. Public Hearing on Feb. 4. 

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. Aligns sunset dates for earned income tax credit provisions with the underlying sunset date for the credit. Expands the tax credit for certified film production development contributions to allow the use of contributions for the production of commercials. Applies to fiscal years beginning on or after July 1, 2026. Provides an exception from the annual filing requirement for the property tax exemption for property burdened by an affordable housing covenant used for owner-occupied housing. Applies to property tax years beginning on or after July 1, 2027.

SB 1511: Requires the Legislative Revenue Officer to study the estate tax. Directs the Legislative Revenue Officer to submit findings to the interim committees of the Legislative Assembly related to revenue not later than December 1, 2027.

SB 1586: Modifies 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. The League has major concerns about sections of this bill. 

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 as well as 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. NO public hearing has been scheduled at this time. 

HB 4014: Requires the Legislative Revenue Officer to study the state financial system. Public Hearing Feb. 2.

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. 

The budget was balanced when the legislature adjourned last June.  Then in early July Congress passed H.R.1 (see Summary), a collection of tax cuts and program cuts.  Oregon’s income tax system automatically “connects” to the federal income tax system.  Between the two actions, Oregon is expected to see a reduction in revenue.  

We are still suffering from income inequality as shared in this Oregon Center for Public Policy Podcast/You Tube. 

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.   

See other sections of the Legislative Report about the cuts in each area and what’s being considered to address the revenue shortfall.