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Quarterly Forecast Boosts Revenue Projections by $559 Million

The Office of Economic Analysis released the state’s quarterly economic outlook and revenue forecast on Feb. 7. In their presentation to the joint House and Senate revenue committees, the state’s economists described stable and generally favorable conditions for Oregon’s economy and revenue outlook.

Economic and population outlook

The economic outlook is stable. State economists pointed to increasing sentiment among economists that the Federal Reserve can achieve a “soft landing.” Inflation is close to the Fed’s target level, but it may take some time for the Fed to begin lowering interest rates due to continued strength in the economy, including personal and corporate income growth, a strong job market and improving consumer sentiment. For Oregon, a more serious potential obstacle to strong economic growth is the state’s stagnating population. The forecast projects population growth of only 0.6% per year over next 10 years. In the forecast released in December 2023, economists projected 0.7% per year. Deaths are currently exceeding births in Oregon, which leaves in-migration as the only source of population growth.

Economists noted repeatedly that improvements in efficiency are needed to bridge any potential gaps in economic output caused by slowing population growth. They pointed specifically to the need for investments in equipment, machinery and processes that improve efficiency and production. Supporting such investment is a significant reason why OBI promotes pro-growth, pro-investment tax and regulatory policies.

Revenue forecast

The March report increased expected tax revenue for the 2023-35 biennium, which is considered fairly flat by forecasting standards. However, the forecast also includes unspent revenue from the last (2021-23) biennium. In total, state economists anticipate a revenue increase of $559 million since the December 2023 forecast. This significant jump pushes total expected 2023-25 biennium general fund and lottery revenue to $35.5 billion, exceeding the close of session forecast used to set state spending by $1.2 billion. This increase should give legislators the money they say they need to accomplish several priorities during the current session, including the governor’s housing package and efforts to address crime, behavioral health and drug addiction. The increase also should take any conversation about tax increases off the table while supporting the case for remaining connected fully to the federal tax code. Continued connection is particularly important given likely passage of bipartisan tax reforms in Congress, which would help companies throughout the country.

Reserves

In addition to any ending fund balance (funds forecasted but unspent in the legislatively approved budget), the state has two reserve accounts, the Oregon Rainy Day Fund (RDF) and the Education Stability Fund (ESF). The March forecast indicates these funds, combined, contain $2.2 billion, and that ending balance reserves total $1.7 billion, for total effective reserves of $3.9 billion. This is more than 10% of the general fund budget and puts the state in a solid position, historically speaking, if and when faced with the next recession.

Overall, it’s a good report. Read the entire document here, and view a slide presentation here.

Legislative Updates

The 2024 legislative session kicked off last Monday, Feb. 5. This odd-year session is constitutionally limited to 35 days, so it will run no later than March 10. So far, more than 280 bills have been introduced (OBI is actively tracking 167 of those). There are some big issues in the mix, such as the governor’s housing production initiative as well as reform efforts related to Measure 110 and drug decriminalization. The OBI team did a tremendous job preparing for the session, so there were very few surprises. In addition, some problematic bills were never even introduced thanks to good work before session. As always, there are a lot of ideas that are exceedingly complex — probably too much so for the spirt of a short session (budget rebalances and emergency policies issues). Given that the session is short, internal timelines to advance bills come quickly. The pace last week was intense, and the OBI team was busy testifying, negotiating, educating and, importantly, collaborating with our members on next steps.

Federal Tax Connection: A longstanding OBI principle is continuous connection to the federal tax code, something the Legislature usually does without fanfare every year. Connection simplifies tax compliance and eases administrative burdens whereas disconnection creates increased compliance complexity and costs. This should be a no-brainer. However, OBI is flagging it because several legislators are contemplating a partial disconnect from federal code. Their motivation is the bipartisan tax bill making its way through Congress, HR 7024, co-sponsored by Sen. Ron Wyden, D-Ore. Without getting into the weeds, HR 7024 is very good for American businesses. It accelerates deduction and depreciation treatment for certain expenses and assets used in multiple industry sectors. Disconnecting doesn’t change an Oregon business’s ability to use these provisions for federal tax purposes, but it would put Oregon at (yet another) severe competitive disadvantage, diminishing the state’s ability to attract and retain investments in research sectors such as bioscience, manufacturing and technology. It would add cost and complexity to Oregon reporting and filings. And it would mitigate the value of 2023’s semiconductor package. OBI is working hard to stop momentum toward a disconnect.

Paid Leave Oregon: After a lot of negotiating and work on amendments, OBI testified in support of SB 1515 (with the -3 amendment) at the bill’s hearing on Feb. 7 in the Senate Labor and Business Committee. The bill passed the committee unanimously and is headed to the full Senate for a vote. While the bill does not contain everything employers need resolved to eliminate the burden of competing leave laws, this is a very good step forward. What does it do? First, it removes most of the leave from OFLA that is now covered in the new paid leave program (Paid Leave Oregon). Included in what was removed: leave for one’s own serious health condition, leave to care for a family member with a serious health condition, and bonding leave when welcoming a new child. A couple of provisions remain in OFLA: 12 weeks of pregnancy disability leave, and 12 weeks combined sick child leave and bereavement leave (the latter capped at four weeks). Second, the bill contains an important exception to Oregon’s scheduling law by protecting employers from penalties if they change an employee’s schedule with fewer than 14 days’ notice because that employee returns from leave and is entitled to that shift. There are many technical issues that need resolution in rulemaking or further legislation, but this is a step forward. The committee’s chair committed to an interim workgroup process, and relevant state agencies are tasked with reporting on identified areas of improvements in September.

Pay Equity Fix: Today (Feb. 12), the House Committee on Business and Labor will hold a public hearing on HB 4050, one of OBI’s priorities. The bill would give Oregon employers the same flexibility to offer pay incentives to workers as competing employers have in other states. HB 4050 borrows language from other states – like California and New York – that also have strong protections against pay discrimination while allowing for this flexibility. Specifically, HB 4050 would allow Oregon employers to recruit and retain workers through pay incentives, such as bonuses, when a business necessity justifies it. OBI is leading a coalition of nearly 50 public and private employer organizations that need the Legislature to act this session.

Omnibus Tax Bill: Every session, the Legislature moves an omnibus tax bill made up of mostly technical adjustments to tax law. This year is no exception with SB 1526. In addition to technical fixes, the bill includes policy changes OBI strongly supports. Four specific elements are: (i) the extension of the sunset date for the state’s Industrial Site Readiness Program, which is vital (when funded) to helping local governments convert commercially zoned lands into shovel ready lands; (ii) the addition of trusts as entities that can use the state’s elective business activity income tax (BAIT) and offsetting credit to work around state and local tax (SALT) deduction limitations enacted in the 2017 federal Tax Cuts and Jobs Act; (iii) increased flexibility of the BAIT program to allow its use by any member of a pass-through entity partnership, similar to California’s workaround law (current Oregon law requires all partners to agree or else none can use it); and (iv) amendments to the bill clarifying that disclosure of confidential taxpayer information is prohibited at every level of government in. This bill will ultimately pass. OBI expects amendments and a Senate committee vote soon.

Housing Production: OBI testified last week in support of SB 1537, Gov. Kotek’s housing production bill. The bill is not perfect, but it does take positive steps to address Oregon’s severe housing availability and affordability challenges. OBI consistently hears that housing remains a significant workforce issue (both with recruitment and retention), particularly when it comes to insufficient housing supply and of middle-market workforce housing. This workforce issue hinders individual employers and employees, but also the state’s overall competitiveness. Among other provisions, SB 1537 makes moderate changes to the land use system by giving one-time options for cities to bring land into the urban growth boundary. While we need a more permanent modernization of Oregon’s 50-year-old land use system and a larger exploration of permitting issues and incentives for middle-market housing production, SB 1537 is a positive step to relieve current pressures.

Right to Repair: There have been serious efforts to pass R2R legislation during the last few sessions. Past efforts, which OBI opposed, would have required original equipment manufacturers to provide parts and repair information to independent repair providers upon request. SB 1596 is this session’s effort and the bill is much improved, allowing OBI to be neutral at the bill’s Feb. 8 hearing. Improvements include the removal of private right of action provisions and the addition of significantly strengthened protections for intellectual property and other proprietary information. Importantly, SB 1596 is narrowly limited to a small range of consumer electronics. OBI worked closely with the bill’s chief sponsor on these improvements. OBI expects the bill to pass out of committee this week and expect it to pass both chambers and become law.

Mandate Review Committee: A priority of OBI’s remains establishment of a Health Insurance Mandate Review Advisory Committee (HIMRAC) that would allow stakeholders to review proposed health insurance mandates in a holistic way. Efforts before have failed, but OBI is hopeful that HB 4091 will pass this session (read OBI’s comments in support). The HIMRAC would review proposals through this interim committee and report back to the full Legislature before the session. Currently, proposed mandates are considered on a one-off basis without holistic review of cost, efficacy, impact, etc. on consumers, providers and payers. The bill is scheduled for a vote in the House Committee on Behavioral Health and Health Care today (Feb. 12).

Semiconductor Fund: OBI offered testimony in support of HB 4154, which would establish the Semiconductor Talent Sustaining Fund through the Higher Education Coordinating Commission (HECC). The fund would allocate $5 million for STEM education and work-based learning opportunities, $5 million for community college workforce training and $5 million for advanced degrees and research. The fund also would allocate a one-time investment of $15 million for community colleges and universities to launch investments in infrastructure, faculty and curriculum to support this area of education and research. This was one of the recommendations from the state’s Semiconductor Task Force report that were not implemented last session. A vote is scheduled in the House Committee on Higher Education tomorrow (Feb. 13). Assuming passage, the bill will go to the Join Ways and Means Committee.

Seismic Hazards: Last week, the House Emergency Management, General Government and Veterans Committee held a public hearing on HB 4044, which would study risk from inhaling hazardous airborne chemicals in the event of a major earthquake. Although only a study, there is an intent to regulate informed by two key external factors: a Multnomah County report authored by PSU (more than 1,000 pages) detailing such risks and a fuel tank stability bill (and subsequent rule) passed in 2021. The irony is that EPA already regulates facilities that hold certain amounts of more than 260 chemicals through its Risk Management Program. Though OBI testified in opposition to the bill, it was passed out of committee with amendments likely to further prejudice the study’s outcome. The bill now moves to the Joint Ways and Means Committee, where OBI will continue to oppose it. It would almost certainly lead to regulatory duplication and compliance cost increases.

Clean Energy Procurement: HB 4112 includes clean energy procurement standards for the state, along with a host of other provisions that run the gamut of policy areas, including labor, workforce and business development. The OBI team is working together to prepare testimony for a hearing today (Feb. 12). Notwithstanding any concerns OBI may have with individual provisions, OBI’s overarching concern is that a bill with this many complex provisions, particularly one that stakeholders did not get to see in advance, should not be hastily moved through a short session.

Warehouse Worker Bill: Last session, OBI and a coalition of stakeholders prevented HB 3568 from passing. This so-called Warehouse Worker Protection Act, like similar bills in other states, would have imposed overly broad, unduly burdensome, and duplicative disclosure and workplace safety requirements on Oregon’s entire warehouse and distribution industry. While this session’s version of the bill – HB 4127 – initially repeated many of the objectionable provisions, OBI and others worked with the chief sponsor on amendments to significantly narrow the scope of employers covered; clarify when the disclosure provisions would apply; and eliminate provisions that duplicate existing strict employment laws, such as those relating to meal and rest breaks. OBI testified as neutral.

Liability Proposal Neutralized: OBI also worked to mitigate the likely unintended consequences in SB 1580 as it was introduced, which would have imposed felony criminal liability on employers convicted of workers’ compensation fraud. Of course, OBI doesn’t support leniency for bad actors in any system, but the proposal was too sweeping and would likely have led to the wrongful conviction of employers. The specific issue the bill tries to solve is the submission of false information on payroll reports. These reports are complicated, and mistakes can be made without ill intention. A felony for first-time mistakes was an overreach. After much negotiation and six amendments, OBI convinced the chief sponsor that the best course of action was not to create a completely new crime, but rather to clarify that current law already prohibits employers from knowingly submitting a false payroll report. OBI now supports the bill as a measured protection against abuse of the workers’ comp system.

Greenhouse Gas Goals: SB 1559, setting more aggressive state GHG reduction goals, will receive a hearing in Senate Energy and Environment this week. The new goals mirror those adopted by the Oregon Climate Action Commission of reducing emissions to 95% below 1990 levels by 2050 (with interim goals in 2030 and 2040) and an additional aspiration of achieving net zero emissions as soon as possible and net negative emissions thereafter. OBI opposed an almost identical bill in the 2023 session, engaged heavily in interim conversations on the bill, and will also oppose SB 1559. OBI supports reasonable, workable climate policy. However, additional GHG regulation should be part of a more comprehensive conversation for the 2025 legislative session, not part of a rushed short session.

Child Care Fund: On Feb. 7, the House Committee on Early Childhood and Human Services heard HB 4158, which would establish and provide $5 million to the Home and Small Center Child Care Fund. Small child care facilities frequently report administrative roadblocks in accessing lottery bond funds allocated to the recently established Child Care Infrastructure Fund. This new fund will provide small facilities easier access to grant funding, which is another small step towards improving child care options in Oregon. OBI offered testimony in support of HB 4159, which is scheduled for a committee vote today (Feb. 12).

Notable News

Portland Poll: A majority of Portland area voters remain pessimistic about the region’s quality of life and are concerned about persistent issues such as homelessness, crime and the safety of the city’s downtown core. There is also a growing perception that taxes are too high and economic opportunities too low. Those are among the findings of an annual poll of likely voters commissioned by Portland Metro Chamber (The Oregonian).

Clean Energy Fund: Two Portland commissioners — each running for mayor this year — are looking to divert dollars from the city’s lucrative voter-approved climate tax to prop up precarious public safety initiatives (The Oregonian).

Business Recruitment: Business recruiters and local mayors want the Oregon Legislature to allocate $5 million during the current session to help market the Portland area and improve its image after three years of turmoil and bad press. The money would fund an “Open for Business” marketing campaign, aimed nationally and internationally helmed by the business recruitment agency Greater Portland Inc. (The Oregonian).

Bottle Bill: As lawmakers prepare this month to consider a major expansion of the Bottle Bill, some people question whether it has drifted off course. That’s because of two uncomfortable facts. First, it has morphed from a law that serves its original purpose—environmental protection—to one that legislators claim has another benefit: offering a legal means of income for hard-up Oregonians, so much so that lawmakers now say that to change it would be to injure the state’s poorest citizens. Second, as the price of fentanyl drops, there’s no quicker way to obtain a fix than by rummaging through trash cans and recycling bins for the few cans it takes to buy a single dose (Willamette Week).

Deschutes County Homelessness: Deschutes County earmarked $1.5 million for a managed homeless camp Feb. 7, but what form the site will take, where it will be located and when it will open aren’t yet known (The Bulletin).

OLCC Projections: The Oregon Liquor and Cannabis Commission appears to have vastly overestimated the growth of liquor sales in the current two-year budget cycle and beyond, which could leave local and state governments with budget holes to fill (The Oregonian).

Grants Pass Tax: The Grants Pass City Council is moving forward toward implementing a food and beverage tax and a utility fee to fund public safety. Grants Pass city officials have been trying to find funding for police and fire for years. Now, they want a 3% food and beverage tax to address a large part of the city’s deficit (KOBI).

Mill Closure: Rosboro Co. shuttered its Springfield stud mill Feb. 9, an indefinite closure that will cost 40 workers their jobs while the company repositions its business to reduce its dependence on commodity products subject to big price swings (The Oregonian).

Canola Limits: Oregon farm groups and lawmakers will look to put a decades-long debate to rest this legislative session. Right now, canola farming is limited to 500 acres in a protected district that stretches from Multnomah to Lane County. Last year, a Senate bill, SB789, looked to make the restriction permanent, although it did not pass. This session, legislators will decide whether to allow more canola farming within the Willamette Valley beyond the current restrictions (Oregon Public Broadcasting).

PGE Renewables: Portland General Electric is officially in the market for a huge batch of new energy resources intended to reduce its climate emissions and allow it to meet demand that the utility expects to grow. The request for proposals that PGE posted Feb. 2 comes amid uncertainty about how it will get to the first milepost in the state’s ambitious decarbonization law, and how much the effort will cost (Portland Business Journal).

PERS Bill: Oregon district attorneys, designated state employees who work in dangerous environments and police officers and firefighters could receive increased public employee retirement benefits under a bill advancing in the Legislature. A House committee on Feb. 8 unanimously approved House Bill 4045, which would increase public pension benefits for frontline workers from 911 operators to police officers to state psychiatric hospital workers. The bill’s total cost to state and local employers, which could be substantial, was not disclosed (The Oregonian).

Hops Funding: The Hillsboro Hops took another step toward building a new stadium after Washington County approved $8 million toward funding the facility. The Washington County Board of Commissioners approved the funding for construction of the new city-owned ballpark, the team announced Feb. 6. The funding is allocated through the county’s transient lodging tax (The Oregonian).

OBI Accepting Visionary Award Nominations

Is there a person or organization you’d like to nominate for OBI’s highest honor, the Oregon Visionary Award? If so, please let us know.

The Oregon Visionary Award recognizes people, employers and organizations that strengthen Oregon’s economy and contribute significantly to shared prosperity by developing solutions to significant problems. Winners are honored at OBI’s annual Vision Oregon Event, which will take place this year on Oct. 23 at the Portland Art Museum.

The 2023 recipients of the Oregon Visionary Award are Families First Childcare Center and the Oregon Manufacturing Innovation Center (OMIC R&D). Go here to learn more about these organizations. Even better, watch the videos shared at the 2023 Vision Oregon Event. You can find the Families First Childcare Center video here and the OMIC R&D video here.

Please send nominations for the 2024 award to obi@oregonbusinessindustry.com, and be sure to explain how nominees have contributed to shared prosperity by developing solutions to significant problems.

NAM CEO Blasts Adoption of ‘Untenable’ Air Quality Rule

On Feb. 7, the Environmental Protection Agency released a final rule lowering national ambient air quality standard for fine particulate matter (PM 2.5) to nine micrograms per cubic meter.

In a statement, National Association of Manufacturers President and CEO Jay Timmons predicted that the new rule would make “an already gridlocked permitting system further gridlocked.”

Calling the standard “untenable,” Timmons predicted that the nation’s manufacturers will be “hard pressed to make long-term investment plans domestically as our global competitors have set more reasonable goals.”

OBI is NAM’s state affiliate in Oregon. To read NAM’s statement and learn more about the new rule, go here.

Oregon Business Academy Seeks Volunteers

The Oregon Business Academy is looking for volunteers from businesses to help with this summer’s Business Week, a seven-day summer program for rising 10th through 12th graders held at Oregon State University.

Business Week brings together leaders from a variety of industries to help educate and inspire Oregon’s future workforce. Volunteers can serve in various roles, including as company advisers, judges and mock interviewers. Go here to learn more about volunteer opportunities.

Business Week teaches the fundamentals of building and running a company. Teams of participating students create and run companies, compete against other student companies, explore career fields and meet some of Oregon’s top executives. They also get a taste of college life by living on campus.

Business Week is offering two options, June 23-29 and July 28-Aug. 3. Enrollment for participating students is $1,495, but scholarship support is available for qualifying students. Registration will end March 31.

Learn more about Business Week here.

OBI is a proud supporter of the Oregon Business Academy. Check out our 2023 profile here.

Welcome, New OBI Members

Welcome to the employers below, who joined OBI in December:

  • AF Nursery LLC
  • Armstrong Industrial LLC
  • Cascade Insurance Center LLC
  • Excel Orthodontics Inc.
  • Gardner & Gardner, Attorneys, PC
  • Hubbell Communications LLC
  • JT’s West Coast Gutter LLC
  • MAC Consulting LLC
  • McKenzie Cascade Heavy Excavation
  • Mills Mint Farm
  • Snow Farms
  • Swanson Group
  • Timber Products Company

Check Out OBI’s Member Benefits

OBI offers members a range of programs that can save money or help small businesses offer benefits normally available only to much larger companies. Benefit programs include:

  • HealthChoice: Helps businesses with fewer than 100 employees offer comprehensive health-care benefits through our partnership with Regence BlueCross BlueShield of Oregon.
  • CompSAFE: Helps eligible companies enjoy workers’ compensation discounts through SAIF Corporation.
  • Fuel Program: Helps members save fuel costs through our partnership with Ed Staub & Sons.
  • ODP Business Solutions: Helps OBI members save money on office furniture, supplies and other services.
  • LegalPLUS: OBI members receive 15 minutes of free legal consulting per month from Innova Legal Advisors.

Go here to learn about all of OBI’s member benefits.