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Secretary of State Shemia Fagan Resigns

In most weeks, a walkout by Senate Republicans would be the state’s biggest political story. Not so last week, however, thanks to Secretary of State Shemia Fagan’s Tuesday announcement that she’d resign on Monday, May 8.

What happened? Here’s a Cliff’s Notes version:

On March 29, Willamette Week published the results of a monthslong investigation of La Mota, Oregon’s second largest cannabis-dispensary chain. Notable findings include state Department of Revenue liens for unpaid cannabis taxes dating back to 2016 and IRS liens for unpaid employment and personal income taxes. Moreover, the company and other entities controlled by owners Rosa Cazares and Aaron Mitchell have faced 30 lawsuits in Oregon since 2017 alleging more than $1.7 million in unpaid bills from vendors and others.

Despite such problems, Willamette Week reported, Cazares and Mitchell are prolific political donors and contributed at least $45,000 to Fagan alone in recent years.

On April 27, Willamette Week reported that Fagan, even as she served as secretary of state, had been working as a paid consultant to an affiliate of La Mota. In her public role, Fagan oversaw her office’s Audits Division, which released an audit of the Oregon Liquor and Cannabis Commission’s regulation of the cannabis industry on April 28. Fagan’s office said she recused herself from the OLCC audit on Feb. 15, five days before the beginning of her consulting contract.

On April 28, Willamette week reported that the audits division overseen by Fagan had sent its final draft of the OLCC audit to the agency on Feb. 8, meaning that it was substantially complete before Fagan recused herself. Records also show that Fagan had instructed audits staffers on multiple occasions in 2021 to reach out to Cazares in preparing the audit.

In response to this reporting, top legislative Republicans on April 28 called for Fagan’s resignation, and Gov. Kotek told Willamette Week that she’d requested investigations by the Oregon Government Ethics Commission and Oregon Department of Justice.

On May 1, Fagan released her consulting contract, which shows that her cannabis work paid far more than her job as secretary of state. The contract also says little about what Fagan was expected to do for the money. Fagan on May 1 said she would terminate the contract.

Calls for Fagan’s resignation spread, including by The Oregonian. And on May 2, Fagan announced her resignation.

What happens now? Gov. Kotek will name a replacement, and voters will choose a successor in November 2024. Oregon Public Broadcasting takes a look at potential interim candidates.

In addition to overseeing the office’s Audits Division, the secretary of state serves as Oregon’s chief elections officer and runs the Corporation Division, which registers businesses.


Republican Walkout Stalls Business in Senate

Activity in the state Senate ground to a near halt May 2, when most Republicans walked out, denying majority Democrats the 20-member quorum needed to conduct business. The walkout continued through this morning.

The walkout, The Oregonian reports, coincides with partisan friction over legislation involving firearm regulations, abortion and gender-related health care. Republican leaders have characterized the action as a protest against the passage of bills that fail to meet legal requirements for readability. The 1979 readability law in question, the Oregon Capitol Chronicle reports, requires every bill summary to be written at the equivalent of a middle-school reading level.

The walkout is the first since the November passage of a ballot measure designed to keep legislators at their desks. Measure 113, which passed by a two-to-one margin, bars lawmakers with 10 or more unexcused absences during a session from holding a legislative seat in the following term. That requirement most assuredly will be challenged in the courts as soon as it bars the first legislator from filing for office. That challenge could indeed happen this upcoming election cycle if the walkout persists.

Walkouts have long been a tactic used by parties in the minority to stall legislative action in Oregon. According to a list compiled by KGW, Republican legislators have staged seven previous walkouts, beginning with a protest over tax legislation in 2007. Before that, Democrats staged three walkouts, the most recent in response to a 2001 redistricting plan.


Don’t Forget to Vote in the May 16 Election

Oregon voters should have received their ballots for the May 16 election by now, though those mailed in Multnomah County were sent later than planned thanks to an error that required them to be reprinted.

May elections in odd-numbered years often receive little attention. Yet, important races for local measures and elected positions, including school board members, are often on these ballots.

While voting is important everywhere, taxpayers in Multnomah County have a particularly good reason to turn out. It’s Measure 26-238, a proposed capital gains tax of 0.75% that would raise money to provide legal representation for tenants facing eviction. This tax would be paid by people regardless of income, would provide benefits regardless of need, and even would apply to the sale of primary homes, affecting people who may have little to no retirement savings other than their house. Moreover, it would pay for services already funded through a Metro homeless services tax. And, as Willamette Week has reported, its administrative costs would consume about half of the revenue it generated and the adjustable rate could be increased by a simple majority vote of the Multnomah County Commission whenever they decided more money was needed.

OBI has provided a voters’ pamphlet argument opposing the measure. Meanwhile, as OBI-backed research has shown, a succession of local and regional taxes has given Portland residents the country’s second highest marginal personal income tax rate.


Legislative and Rulemaking Updates

Legislative Deadline: May 5 marked another important legislative deadline in that bills needed to be scheduled for a second chamber committee vote to remain alive. As with prior deadlines, this does not apply to Revenue, Rules, Joint Ways and Means, or other joint committees. Also, a bill is never dead. Concepts can be kept alive through amendments or priority bills. Nothing is dead until session ends. Nevertheless, the deadline further reduced the overall number of bills, which helps everyone focus a bit more.

Bonus Pay Bill: On May 9, the Senate Committee on Labor and Business will finally hear a bill that would make it easier for Oregon’s employers to retain workers. HB 3205, which would exempt retention bonuses from Oregon’s equal pay act, is the product of much discussion and compromise that would help employers compete for workers with businesses in other states. This is an OBI bill and originally included hiring bonuses as well. Those were amended out in the House after much discussion. The bill saw no opposition on the House floor, but its fate is not certain in the Senate.

Toxics Bill: HB 3043 would expand Oregon’s Toxic-Free Kids Act by including an ill-defined “classes of chemicals” approach. It was heard by the Senate Committee on Energy and Environment May 3 following passage in the House. The Senate is likely to amend it to make the “classes of chemicals” language more workable. That change would make the bill better, as did a House amendment relating to the original, unworkable expansion of “mouthable” items in the base bill. However, the definition still too vague, and OBI remains opposed.

Tax Policy: It was relatively quiet on the tax side of things last week. Thanks to the many people who testified in support of SB 5 on May 5, the R&D tax credit bill we’ve written about before. The key message we needed to deliver was that a credit must be broadly applicable, even beyond the semiconductor effort. Our most recent testimony is here. This week will be busier for tax items. Our bill to give the Oregon Tax Court exclusive jurisdiction over local income tax legal issues, HB 2576, is scheduled for a May 10 work session in the Senate Finance and Revenue Committee. We expect it to advance. In the House Committee on Revenue, HB 2199 and HB 3457 are scheduled for votes May 11. HB 2199 is the important enterprise zone sunset extension bill. We support this bill and are watching it closely for possible amendments attempting to reduce the “cost” of enterprise zones. The Oregon Education Association, the state teachers’ union, has been pushing a plan to carve out the property tax exemption for schools beginning five years after an initial zone exemption has been granted, which would effectively reduce the total exemption by 40%. Paring back the enterprise zone program likely would reduce the tool’s efficacy. HB 3457 would adjust the Strategic Investment Program (SIP) minimum project level upward for inflation. The -2 amendments would further restrict the program by limiting a county’s ability to enter into or negotiate a SIP, creating additional approval hurdles, and significantly increasing program fees. If problematic amendments are adopted on either bill, we will work with stakeholders to ensure a hearty House floor debate, then turn our attention to the Senate.

Electricity Cost: HB 3055 is scheduled for a May 11 vote in the Senate Committee on Energy and Environment. The bill would require electric utilities to buy more renewable energy from non-utility producers. This type of power has historically been significantly more expensive for utilities to acquire and will increase costs for ratepayers. PGE, Pacific Power, the Citizens Utility Board and OBI have testified in opposition to the bill, but it appears the committee remains intent on moving it.

Commuting Rules: OBI filed comments on the Employee Commute Options (ECO) draft rule floated by DEQ at the last rulemaking advisory committee meeting. Given the egregious approach DEQ is taking, we are implementing a broader strategy to oppose the proposal, including a coalition letter and legislator engagement. Rules are being updated for the existing ECO program, which was adopted in the late ‘90s in response to high ozone levels in the Portland Air Quality Management Area (Clackamas, Multnomah and Washington counties). Current rules require that employers with more than 100 employees at a worksite in that geographic region must reduce drive-alone commuting by 10% below a baseline. The draft rules propose a 20% reduction in employee commuting in that region. The rules would also expand the program to include all cities statewide with a population greater than 50,000 (there are seven such cities right now) with a proposed 15% reduction in employee commuting for employers new to the program. While these numbers may not seem onerous, the program will be challenging and costly for employers to implement, particularly for employers with a primarily in-person workforce or those not in close proximity to safe public transit options.

I-5 Bridge Funding: On May 4, the Joint Committee on Transportation held a second public hearing on HB 2098, which would provide funding for the Interstate 5 bridge replacement project. OBI has testified in support of the -2 amendment at both an informational session and at the first public hearing. A work session is scheduled on the bill May 16. A recap of current proposals:

  • The -2 would fund the bridge with $1 billion in general obligation bonding, reaffirm the importance of the Rose Quarter interchange project, conduct a cost allocation study focused on freight users and stress open competition for procurement and contracting.
  • The -3 would require project labor agreements, which could easily increase project costs by $1 billion. It would strip the Rose Quarter affirmation and cost allocation study and require that work on seven interchanges be scrapped if the cost of the bridge exceeded $6.3 billion.
  • The -4 would remove the open competition language from the -2 (opening up the bridge replacement to project labor agreements) but is otherwise effectively identical to the -2.

Alcohol Delivery: HB 3308, which would establish a broadly supported third-party delivery and training system for alcoholic beverages, was heard by the House Committee on Rules May 4. OBI testified in support of this bill, which would strike a good balance in opening up new delivery options for Oregon’s retailers.


Notable News

Tolling Pause: Gov. Kotek has pushed back highway tolling by at least one year, to 2026, The Oregonian reports. The prospect of tolling on I-205 has proven controversial in Clackamas County, prompting opposition by a trio of legislators representing the area. The three, Democratic Reps. Annessa Hartman, Courtney Neron and Jules Walters, announced the governor’s action in a May 1 press release that also noted the creation of a Special Subcommittee on Transportation Planning to monitor tolling efforts.

Daimler EV: OBI member Daimler Truck will begin production of a medium-duty electric truck in Portland this fall, the Portland Business Journal reports. The eM2 is a box truck that will be used for pickup and delivery service. Daimler began building and delivering its heavy-duty Freightliner eCascadia truck late last year.

Zero-Emission Zone: The city of Portland in April announced that it would establish a zero-emission loading zone downtown in which deliveries will be made by tricycle, KGW reports. The 16-block area covers an area west of the Hawthorne Bridge and is dominated by city, county and federal offices. The city plans to partner with B-line Sustainable Urban Delivery, which will deliver material dropped off at its central eastside warehouse.

Portland Utility Assessment: Portland is considering a monthly assessment on residents and businesses to fund its transportation budget, The Oregonian reports. Parking revenue has declined since the start of the recession, and a dip in the city’s population has reduced its portion of the state highway fund. The assessment, a transportation utility fee, would bring in about $35 million per year. About $15 million would come from businesses, and the amount paid by each would be determined by size and physical location.


CompSAFE Webinar: Heat and Smoke Rules, One Year In

Oregon’s workplace heat-exposure rules went into effect on June 15, 2022. Companion rules governing exposure to wildfire smoke went into effect weeks later.

Join experts from Oregon Occupational Safety and Health on Thursday, May 18 to learn how the first year under the rules went and hear about potential adjustments. The online webinar will provide a brief refresher on rule requirements, a look back at 2022 and a look ahead to 2023. State experts also will field questions from webinar participants.

The webinar is made possible by OBI’s CompSAFE program, which allows qualifying members to save on workers’ compensation insurance through OBI’s partnership with SAIF, Oregon’s not-for-profit workers’ compensation insurance provider.

The webinar will run from 10-11 a.m. and is open only to OBI members and to invited guests.

OBI members can register here.