Do you remember a couple of years ago, the last time the Legislature was seriously considering a major new tax on Oregon businesses? At the time, business leaders were sending encouraging signs that they’d be open to taxation proposals — as long as legislators also reformed the state’s underfunded public pension system.
Long story short: The deal fell apart, as legislators were reluctant to tackle major overhauls to the Public Employees Retirement System. A coalition funded largely by public employee unions moved ahead on its own and placed a business-tax measure on the ballot; that proposal, Measure 97, was swatted down by voters.
So here we are in 2019, and in some ways, the picture hasn’t changed that much: A legislative subcommittee is pondering various business-tax options, and some business leaders have made encouraging words, although there isn’t a full-fledged proposal yet. Gov. Kate Brown has asked legislators to come up with a business-tax plan that will raise $2 billion per two-year cycle, with the idea that most of that money would go to K-12 schools, but she hasn’t offered any details, leaving that task to the Legislature. And all parties are trying to keep the taxation issue separate from any discussions about PERS reform.
But that’s an impossible task: Like an unwanted but persistent dinner guest, the rising cost of PERS premiums always finds a place at the table.
An analysis last week by the Oregon Business Council (the subject of a story by The Oregonian) explains some of the reasons why.
Here’s the basic conclusion of the analysis: If the governor and the Legislature don’t shield schools from the impacts of rising PERS premiums, those premiums will eat up a quarter of any additional money during the next two-year budget cycle — and that percentage will grow substantially in the future.
Legislators could elect to earmark all of the money raised by any new business tax for schools, in the hope that the state’s economic expansion boosts the amount of revenue the tax would raise. If that happens (a big if), the amount of revenue would increase along with PERS premiums, and schools still would end up with extra dough. But even under this scenario, PERS premiums would take up half of the new money by 2023. But legislators might like this idea, under the “half a loaf” philosophy. (This scenario offers no help for other governmental entities groaning under the PERS liability.)
Another option for legislators is to find some way to shield schools from rising PERS premiums. One idea calls for setting up a so-called side account that school districts could draw from to help cover rising PERS costs. But it’s not clear how this would be funded, especially since the price tag is estimated at somewhere around $3 billion in addition to any money raised by a new tax. Brown has proposed dipping into the $1.9 billion surplus at the state’s workers compensation agency, SAIF Corp., but that will generate substantial opposition. Another idea, to earmark the $724 million “kicker” rebate Oregon taxpayers are expecting next year to help pay for the fund, may be even less popular. Brown also has suggested she might be open to increasing the amount public employees would be required to pay toward their retirement, although such a move could alienate the public unions who have been among her staunchest supporters.
Other than that, though, the governor isn’t offering any specifics about her preferences, other to say that it’s a false premise that Oregon can’t generate additional money for both K-12 schools and PERS relief.
And that statement is partially true: It’s not necessarily a false choice, assuming you have enough money for both. But it is a false premise to assume that you can cover the needs of K-12 education and other state priorities without taking PERS into account. Like it or not, it’s at the table to stay. (mm)