Gov. Brown to Oregon lawmakers: Start passing budgets

SALEM — Gov. Kate Brown says talk of calling a special session before year-end is still too early, but time is running out for Oregon lawmakers to break their deadlock and balance the 2017-19 budget as constitutionally required by July 10.

During her first unscripted sit-down of the year with the state capitol press Thursday, Brown laid out her top three priorities she says must get done before the 2017 legislative session ends in four weeks: a $500 million-plus hospital and health insurer tax to help keep the state's Medicaid program running, an $8.2 billion long-term transportation infrastructure package as well as spending cutbacks with long-term savings in the hundreds of millions.

As for Democrats' push to raise nearly $900 million or so through a business tax overhaul, Brown says the votes — a three-fifths supermajority requirement that's been hamstrung by a lack of Republican support — aren't there.

"What is most important is that the conversation is happening," Brown said. "It's four weeks. It's time to start passing budgets."

Division over the business tax plan is largely responsible for the stalled progress of the upcoming budget, which faces a $1.4 billion funding gap that's theoretically already solved with all tax and spending-cut proposals on the table.

Republicans are digging in their heels on the business tax plan, saying it's too similar to Measure 97 that voters rejected in November. The GOP minority isn't outright opposed to tax increases but argues Democrats aren't as serious as they say about reigning in government spending, particularly pension and health care costs, which is growing faster than tax revenues that are at all-time highs.

"Much like previous iterations, the latest plan brought forward by Democratic leadership is heavy on new taxes and light on structural spending reform," said Republican Rep. Cliff Bentz, who co-chairs the Tax Reform Committee, referring to the plan's newest version rolled out this week by House Speaker Tina Kotek and Sen. Mark Hass.

Kotek defended her latest plan, which would raise the corporate income tax rate next year then shift to a tiered levy on business-to-business transactions in 2019.

"I've had positive private conversations with Republicans and business leaders for months. In fact, Sen. Hass and I arrived at this compromise in part because of their input," Kotek said. "I'm still hopeful that despite the rhetoric, some of my Republican colleagues will come forward and help us seize this opportunity."

Pat McCormick, spokesman for the Brighter Oregon business coalition, said Kotek's plan is still flawed and in public testimony last week his group "identified $500 million in business tax increases to be coupled with legislation that would slow the growth of spending."

Senate Democrats unveiled two cost-containment bills this week that, when fully implemented over several years rather than immediately, could save up to $1.1 billion system-wide, including the state's general fund that's behind the upcoming budget shortfall. But one of those, Senate Bill 1068, a pension reform proposal, is conditional on passing a business tax.

Brown says she looks forward to signing Senate Bill 1067, the other bill that'd save money through changes to public employee health care, eliminating vacant positions open for longer than six months and nixing automatic inflation increases to service and supply costs.

"I think you're going to hear from legislators on both sides of the aisle that it's a little too hot or a little too cold," she said. "But this frankly is the framework that the bipartisan work group committee put together, and that tells me that it's just about right."

Democrats say there's only so much they can do to curb costs without digging into vital services and jobs. They say the state's current tax system, however, needs more stability and a bigger share of revenue from businesses, and today's booming local economy is an opportune time.

"I am not interested in kicking this can down the road," Brown said.

She says the latest revenue plan could, for instance, funnel roughly $300 million into the $8.2 billion proposed K-12 education budget, which the Senate approved Thursday, and another $300 million to fully fund Measure 98, the voter-approved mandates for career-technical education.

But with that revenue plan still in limbo, labor unions are trying to gain leverage through other means. Most notably SEIU Local 503, the state's largest public employee labor group, which threatened this week to derail the transportation package if lawmakers don't pass the business tax. The transportation package has been more than a year in the making, has bipartisan support and is separate from the budget discussions.

"I am opposed to this type of strategy," said Brown of labor unions' tactics. "It's like cutting off your nose to spite your face."

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