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Legislative Report for March 10, 2017


There is a missing sense of urgency in the capitol in light of the challenge facing Oregon’s structural budget shortfall. In the first six weeks of session, legislative committees have met only ten times on Fridays. In comparison, committees held 34 hearings in the same span of time during the 2015 legislative session.


The absence of activity in the building is strange given the heightened awareness of the state budget. All bills, including those with minimal costs, are at risk for greater scrutiny because of the shortfall. If there is any concern a bill would increase costs for state government, it will be sent to the budget-writing committee for additional review, only increasing the opportunities for a bill to die. In some cases, that is a good thing.


Agencies have assumed a more powerful role in the legislative process as a result of the budget situation. Traditionally, the governor and legislative leadership were largely the only barriers to a bill moving forward. This year, however, agencies have a newfound ability to kill any proposal simply by suggesting the bill cannot be implemented without increasing resources.


Lawmakers are continuing to search for solutions to the structural deficit in the state pension system. Recently, a bipartisan group of legislators had been considering a change to the way the state pays into the retirement accounts for current employees. Currently, the state directs six percent of an employee’s pay to their individual retirement accounts—similar to a 401(k)—as part of their benefit. A proposal on the table would have redirected the money—approximately $1.2 billion—to the general pension fund to offset costs for the increasing liabilities to the system. However, legal opinions from both sides of the table concluded the state could not redirect the money without dedicating an equal amount to employees because of the contracts signed with the state. Therefore, the opportunities for reforming the pension system have been stalled as lawmakers look for alternatives. The reality is that options for reforming the current obligations are increasingly limited, and the only solution for addressing the current liability may be for the state to pay its debts.


The pursuit for additional revenue has grown increasingly more creative in the past several weeks. On Tuesday, a committee in the Oregon House heard testimony on a proposal that would pare back the tax deduction on home mortgage interest. The proposal would create a cap for the popular tax break at $15,000 and eliminate the break altogether for income earners over $100,000 ($200,000 for married filers). The proposal would also eliminate the tax credit for second and vacation homes and is intended to target high-income earners. Valued at more than $1 billion per budget cycle, reductions to the tax break could produce real savings for the state. Lawmakers will likely run into serious opposition from everyday Oregonians regarding this proposal, however, as many second homes are purchased as rental properties for retirement investments.


Rumors about budget solutions are at an all-time-high in the legislature. There is a new rumor on a new tax or a vital service being eliminated every day. Regardless of the rumors, the caucuses are gearing up for a robust discussion on a Measure 97-lite proposal. The Legislative Revenue Office has been running a circuit amongst the four caucuses presenting on the options the legislature has to consider for adopting a gross receipts tax. These discussions are usually exclusive to the revenue committee unless there is an expectation for a robust discussion.


In preparation for a dynamic revenue debate, Gov. Brown has announced the hiring a former legislator and chair of the budget-writing committee, Rep. Peter Buckley (D-Ashland), to aid her office in navigating the budget shortfall. The announcement has received mixed reactions from those in the building due to the representative’s polarizing policy positions during his tenure in the legislature (Rep. Buckley was a loud proponent of Measure 97). Late into the week, however, Legislative Counsel released an opinion suggesting that a 2007 ethics law sponsored by then Sen. Kate Brown, which created a revolving door policy for state officials, precludes Rep. Buckley from any activities attempting to influence his former colleagues.


We are only six weeks into our legislative session and the drama is only getting started. The first formal deadline of session is Tuesday, April 18, when bills must be passed by their chamber of origin. The chamber of origin deadline is typically the most dreaded day for a legislator or a lobbyist with a bill still in its first committee. This year, the deadline will take a whole new meaning because it should mark a shift in focus from policy discussions to the trenches of the budget battle.


Provisional license for rural physicians (circumventing residency requirements)


On Thursday, the Senate Committee on Health Care heard a bill that would allow graduated MD students to surpass residency requirements in exchange for a provisional license, where they would be supervised by a physician and must practice in rural Oregon.


This bill came about because one woman was unable to match with a residency after she graduated from OHSU. She testified in support of the bill, citing a lack of residency opportunities and a statewide physician shortage, especially in rural areas.


David Walls, Executive Director of the Osteopathic Physicians and Surgeons of Oregon (OPSO), testified in opposition, citing the importance of residencies and mentioning several underlying issues with the bill. For instance, as written, the bill would allow for osteopathic physicians to act as supervising physicians, but would not allow graduating DO students to hold provisional licenses themselves. Additionally, this bill is unclear in other ways, and proponents failed to work with the medical board. Walls stated that there are other, better ways to address residency and provider shortages in the state.


Hospital tax exemptions


This week, the House Revenue Committee held two public hearings on several bills that address the tax-exempt statuses for hospitals and the definition of a community benefit.


The tax exemptions created for hospitals are again front and center in the legislature this year. These issues have gained prominence as the amount of uncompensated care in Oregon hospitals has rapidly decreased, a result of a record-breaking insured rate and the successful implementation of Medicaid expansion. Hospitals are claiming significantly less uncompensated care than before the Affordable Care Act, and lawmakers are continuing to consider changing the requirements for a hospital to earn their tax-exempt status.


The House Revenue Committee held a hearing this week on several bills that would increase the requirements on hospitals in order for them to gain their exemption. Sen. Laurie Monnes Anderson (D-Gresham) and Rep. Mitch Greenlick (D-Portland), the health care committee chairs, opened the hearing by stating their frustrations with the current system that allows hospitals to claim community benefit without providing measurable benefits to the community.


The Revenue Committee is considering two bills that would address the tax exemptions. HB 2115 would require hospitals and health systems to spend at least five percent of their gross receipts (net revenues) on community benefit and eliminate their ability to include the losses related to Medicare and Medicaid in the accounting of their community benefit for their income tax-exempt status. HB 2047 would require hospitals and health systems to have 40 percent of their patient portfolio be free care or reduced-cost care and recipients of medical assistance in order to claim their property tax exemption.


The committee did not hold a work session on either bill and likely will not anytime soon as leadership continues its efforts to negotiate a health care financing package that will undoubtedly require the hospitals to forgo some of their enhanced payments they receive through the hospital tax.


Cigarette tax day in House Revenue


The House Committee on Revenue held a public hearing on six cigarette tax bills. Some of the bills allocate a portion of revenue raised to Medicaid, others allocate money towards addiction services, and of course, a portion of the money is allocated to the general fund to help alleviate our current budget hole.


Proponents of these bills argued that the benefits are twofold. In addition to increased revenue for the state, a higher cost of cigarettes may disincentive people from beginning smoking and may incentivize current smokers to quit.


Opponents of the bills argued that an increased “sin tax” is not a stable way to remedy Oregon’s budget crisis, especially if the end goal is to decrease smoking overall. Other opponents included passionate vapers, who consistently argue that vaping is a healthy alternative to traditional cigarettes.


After hearing two hours of public testimony on all six bills, the Chair closed the hearing without taking any further action. However, we fully expect to see some version of a cigarette tax increase later this session.


Drug take-back programs


The House Health Care Committee held a joint public hearing on HB 2386 and HB 2645. These bills are part of the larger opioid discussion that is occurring this session. They would implement a statewide requirement for take-back kiosks funded by pharmaceutical manufacturers.


Several proponents testified in support of the bill, citing the opioid crisis, the dangers of pills falling into the wrong hands and pollution issues that result from pills being flushed into the sewage system. Proponents included local governments, law enforcement, water resources managers, health officers and community advocates.


Opponents of the bill argued that a sweeping approach is not realistic and will be costly for business. Additionally, not all pharmacies are set up in a way that is conducive to a drug take-back program.


We are expecting to see amendments to these bills and will keep you updated on their progress.

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