Oregon’s top budget writer endorses $500M in cuts, $500M in new taxes

Source: The Oregonian – March 18, 2017 // By Anna Marum

The Oregon Legislature’s senior budget writer said Friday he would like to see the state’s $1.6 billion funding gap filled equally with taxes on hospitals, cuts to services and other new taxes.

The plan sketched by Sen. Richard Devlin, D-Tualatin, if enacted, would almost certainly require Oregon corporations and households to pay more than a half-billion in new taxes over the coming two years.

It would also prevent some of the more draconian cuts to programs and services that Devlin himself laid out in a budget presentation in February.
Devlin, who co-chairs the Joint Ways & Means Committee, laid out his new vision in a meeting with The Oregonian/OregonLive Editorial Board.

He’s hoping the two-year state budget passed by the legislature this year will create a solid foundation for at least the next four years. This would give lawmakers time to seek a more permanent solution to the state’s funding woes, he said.

“I don’t want to just get us out of the door and be right back to the same position,” he said.

Spending cuts
His pronouncement came two months after Devlin and his fellow co-chair, Rep. Nancy Nathanson, D-Eugene, unveiled their cut-filled budget proposal that assumed no new taxes or revenues for the upcoming two-year cycle.

While Devlin said the cuts outlined in the proposal are unacceptable, some spending cuts are necessary, he said.

He suggested the state could find money by cutting public workers’ pay, renegotiating vendor payments and re-assessing staffing levels.

When it comes to reforming the public pension system, lawmakers’ hands are largely tied by a 2015 Oregon Supreme Court decision. But Devlin said he sees an opportunity to lower costs by implementing a system similar to a 401K for future benefits.

Hospital taxes
In some ways, Medicaid funding poses a larger problem for state budget-writers than escalating pension costs, because of the uncertainty injected by Republicans’ proposed replacement for the Affordable Care Act.

The state is struggling to find the $350 million it needs to cover 10 percent of the costs to insure the additional Oregonians covered under the act. But if the Republicans’ proposal is approved as written, the state would be on the hook for an additional $2.6 billion by 2023, a state analysis showed.

For now, top lawmakers including House Speaker Tina Kotek, D-Portland, are focused on the current shortfall and hope to fill it by raising taxes on hospitals. These provider taxes enable the state to recoup federal dollars for Medicaid.

But the deep cuts to Medicaid proposed in the Republicans’ health care bill could throw a wrench in those plans.

“This is probably one of our greatest dilemmas,” Devlin said. “Because we’re trying to figure out how to make the system work, but we do not know if it will exist.”

New revenue
Provided that the Legislature is committed to cutting costs – especially public pension costs – Devlin said he expects to get some support from the business community for a new tax.

As chair of the Senate Revenue Committee, Sen. Mark Hass, D-Beaverton, is working with fellow lawmakers to craft an alternative way to tax businesses.

Hass has said they’re looking hard at gross receipts taxes in other states, including in Ohio and Washington. These taxes have broad bases, meaning many companies – not just the most profitable – are subject to them, but they’re taxed at low rates of less than half a percent.
Devlin said he’s hoping to see the revenue package come together by mid-April, though much of the finer points of the budget will have to wait for the release of the state’s revenue forecast in May.

“It’s probably going to be a lower revenue package than some members would like to have,” he said. “There are probably going to be some other people who don’t want to have any revenue package. … People on both sides of the aisle will have to accept things they don’t like.”