Legislative Days Report
Legislators convened June 1 for a three-day stretch of informational hearings. Legislative Days, as they’re known, take place between legislative sessions and feature updates on the status of past legislation and recommendations for future legislation. House and Senate committees conducted more than three dozen hearings, including several, noted below, that are particularly relevant to Oregon’s employers.
The Emergency Board (or “E-Board”) also met last week. The E-Board serves as the Legislature’s funding committee when not in regular session. On Friday, the E-Board approved about 70 spending requests. While many of these involved the approval of grant requests to federal agencies, there were also quite a few spending items. New expenditures include $100 million for the Public Defense Service Commission, $42 million for mental health care providers, $30 million for long-term care providers, $19 million for the tribal student grant program and $5 million for affordable housing grants in the Portland area.
Tax and Fiscal Policy
CAT Revenue: Both the Senate and House revenue committees met during Legislative Days with similar informational agendas. Legislators received a review of the corporate activity tax (CAT), including 2020 returns and an early look at 2021 returns, which included technical fixes OBI worked for during the 2021 legislative session. Notably, the CAT generated $1.35 billion during the 2019-21 biennium on the strength of one year of collections (2020). So far in 2022, $775 million has been generated for the Fund for Student Success. CAT revenues are expected to average $1 billion per year.
Tax Credits: The revenue committees also discussed the state’s process for reviewing tax credits. Most of Oregon’s tax credit and incentive instruments sunset every six years. The schedule is staggered so that about one third of all tax credits sunset every two years. The Legislature created this system to ensure the periodic consideration of the full benefits and costs of tax-code expenditures. Several significant tax credits have sunset in recent years, including the state’s $1 million research and develop credit. In 2026, meanwhile, credits worth approximately $110 million are scheduled to sunset, which represents about 50% of the “cost” of all existing credits subject to sunset requirements. The credits that sunset in 2026 are mostly “income maintenance” type credits, including the earned income tax credit. Other types of credits include medical, business development, arts, agriculture, housing and political contribution credits.
Employment and Labor
Unemployment Insurance: The Employment Department presented to the Senate Labor & Business and House Business & Labor committees. The department discussed the changes it has made to staffing and processes related to unemployment insurance claims. The Unemployment Division was not prepared for the volume of claims received due to COVID-related job losses. As a result, Oregonians awaiting benefits experienced significant delays. Employment Department Acting Director David Gerstenfeld also explained that a reduction in federal funds is affecting the department’s administrative budget. To absorb the shortfall, the department will keep vacant positions unfilled and cut other costs.
The department also updated legislators on a project to modernize the technology used by its own staff and the public. Portions of the project are slated to go live by Sept. 6, 2022, with full implementation by March 2024. System enhancements will make it much easier for employers to submit tax payments and file other documentation online.
Paid Leave Oregon: The Paid Leave Oregon (PLO) division provided an update on the implementation status of the Paid Family and Medical Leave Insurance (PFMLI) program. The division also presented a chart comparing PFMLI, the Oregon Family Leave Act (OFLA), the federal Family and Medical Leave Act (FMLA) and Oregon sick time. Unfortunately, the chart had several errors. Of note, the team expects all PLO rulemaking to be concluded by September. Several legislators expressed concern about proposed PLO rules that undermine protections for small businesses.
Heat and Smoke Rules: The Department of Consumer and Business Services provided various updates to the House Business & Labor Committee. Director Andrew Stolfi provided a general overview of the agency and highlighted its oversight of the Insurance Division, including its work with homeowners hurt by wildfires. He also provided an update on Oregon OSHA’s new rules related to employee exposure to heat and wildfire smoke. This presentation generated several questions, as legislators worried that many businesses are not aware that the rules are coming and that OSHA still had not produced many materials to help employers. Stolfi said materials had been published already, but a notice about their existence did not go out until June 2. The heat rules go into effect June 15, and the smoke rules go into effect July 1.
Recycling: The Department of Environmental Quality provided an update on the Recycling Modernization Act, which was passed during the 2021 legislative session. Once implemented, the law will make several changes to the recycling system, beginning with a requirement that all manufacturers join a Producer Responsibility Organization. Manufacturers will then pay a greater portion of the cost of maintaining and improving the recycling system through fees assessed by DEQ and the Producer Responsibility Organization. The law goes fully into effect July 1, 2025. DEQ also presented to the Truth in Labeling Task Force report, which recommends that all product packaging be clearly labelled to indicate recyclability.
Insurance Marketplace: The Oregon Health Authority delivered a presentation to the Senate Health Care Committee about options for a state-based health insurance marketplace that would increase flexibility and reduce costs for the state and individuals. The state currently uses the federal platform. When asked by legislators how a new attempt to establish a state marketplace would avoid the fate of the Cover Oregon debacle, Health Authority staff discussed the lessons learned by other states. Eleven states have developed their own platforms since the Cover Oregon failure, the OHA said, and all are spending less than they would if they used the federal platform. The discussion is relevant now because Oregon must have its own marketplace to pursue a public health insurance option.
Risk Report: The Secretary of State’s Office discussed its recently released K-12 Education Systematic Risk Report with the House and Senate Education committees, which met jointly. The report, about which The Oregonian wrote May 24, raises questions about the proper balance of state oversight and local budget control. It identifies several risks, most related to school oversight and accountability.