Revenue
Legislative Report - Week of March 2
Revenue Team
Coordinator: Peggy Lynch
REVENUE
Patricia Garner, Josie Koehne, Peggy Lynch
Despite earlier alarms, Oregon programs and services can proceed largely unscathed in wake of Trump tax and budget cuts per this Oregonian article.
We’re in the final innings with few answers around exactly how much revenue we have and what cuts will be needed to balance the 2025-27 budget. It IS the one responsibility of our legislature. We will get our answers by the end of next week—or March 8th at the latest!
One important revenue bill is SB 1507 A that “disconnects” a few sections of the federal tax code from our state tax system and could provide another $311 million of revenue to reduce that $650 million deficit. 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 (EITC) that the League has long supported. 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. The bill passed both chambers.
The Senate passed SB 1507 A 17-13 on Feb. 16. On Feb. 25, SB 1507 A passed the House (34/21/4/1). On for the Governor’s signature. 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. Thank you for all who responded to our Action Alert.
HB 4014: Establishes the Task Force on Taxation of International Income with the amendments. Public Hearings held Feb. 2 and 11. Work Session Feb. 20 -2 amendment replaced the “study” bill. Staff Measure Summary. The bill passed the committee and was sent to Ways and Means General Government Subcommittee. Work Session Feb. 25. Minimal Fiscal Impact. Feb. 27 to Full Ways and Means where it passed and is now headed to the House floor and then to the Senate floor.
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 likely 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. 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. On Feb. 16, the Committee adopted the -4 amendments and passed the bill out of committee unanimously. Feb. 24: Passed the Senate (28/1/1). On to House Revenue with a Public Hearing and Possible Work Session on Mar. 2.
SB 1511: Modification of the estate tax. Public Hearing Feb. 11. A -3 amendment was posted for a Feb. 18 Work Session. The amendment was adopted and the bill passed (3/2). The staff has provided this analysis on the -3s that indicates no expected revenue loss for this biennium but $35 million by 2029-31. OCPP provides an analysis of this tax. The bill was covered extensively in last week’s revenue report. The Senate passed the bill (22/5/3) and it now goes to House Revenue with a Public Hearing and Possible Work Session Mar. 2.
SB 1586: An omnibus bill, part of the bill relates to tax credits allowed for semiconductor research. Creates and amends certain programs offering tax breaks related to advanced manufacturing, enterprise zones and regionally significant industrial sites. 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 provided testimony in opposition to this bill. A -4 amendment was provided by Sen. Sollman and she testified on the bill. Another Public Hearing set for Feb. 18 where many “analysis” documents were posted, including one from the Legislative Revenue Office on R&D Tax Credits. Another Public Hearing Feb. 23. See the meeting materials posted in the Analysis section of the bill’s Overview for more information. OPB provided an article on this contentious bill. -7 amendment was posted Saturday morning (9:27a) from Sen. Sollman. It seems to be a replacement of the bill. LWVOR provided testimony opposing the amendment on Feb. 23. Currently the bill remains in Senate Finance and Revenue with no Work Session scheduled. This bill includes data center development. HB 4084 A also has data centers and Enterprise zones included. Oregonlive provided a great analysis of the impact of data centers.
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. 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. Public hearing Feb. 9. Work Session Feb. 19. -7 amendment adopted that changes the percentage to 50/50 and passed the committee to the House floor where it passed Feb. 25 (40/12/4/4). On to the Senate Finance and Revenue for a Public Hearing and Possible Work Session Mar. 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. 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 in House Revenue 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 in House Revenue 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 in Senate FInance and Revenue Feb. 18. A Work Session has not been scheduled. 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.
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 Full Ways and Means on Feb. 27 that provides monies to help Oregon businesses hurt by these tariffs. Budget Report. The bill now goes to the House and then Senate chambers.
The Full Ways and Means Committee met Feb. 6th and introduced 6 budget bills for the session. Here are the bill numbers. Look for these bills to be posted for hearings or work sessions this week. Expect amendments by the end of session:
SB 1601: Amends an incorrect internal reference in a law relating judicial compensation. Program Change. Assigned to Capital Construction Subcommittee.
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”. Assigned to Capital Construction Subcommittee.
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! Assigned to Capital Construction Subcommittee.
SB 5703: Establishes biennial appropriations and expenditure limitations for ______ for the biennium ending June 30, 2027. Placeholder for agency allocation changes. Assigned to Capital Construction Subcommittee.
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. Assigned to Capital Construction Subcommittee.
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 bill. This bill will be populated with budget adjustments—adds or claw backs in General Fund and Lottery Funds to balance the 2025-27 budget. Assigned to Capital Construction Subcommittee.
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.
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 and Rules Committees and Ways and Means don’t need to follow the session deadlines. They work until close to the end of session. However, except for Capital Construction, the Ways and Means Subcommittees are closed for the session.
As we continue to work on 2025-27 Revenue and Budgets, many of us will be working 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
See other sections of the Legislative Report about the cuts in each area and what’s being considered to address the revenue shortfall.