Legislators say yes to additional $1 billion a year for education
Student Success Committee leadership Sen. Arnie Roblan, (from left) Rep. Barbara Smith Warner and Sen. Mark Hass conferred in the hallway Monday night before voting on a potentially $1 billion a year investment in Oregon education. (Photo by Jake Arnold, OSBA)
The Legislature took a big step Monday toward making a significant and stable investment in Oregon schools.
The Joint Committee on Student Success sent the Student Success Act to the House on a party-line vote Monday night. House Bill 3427 would dedicate roughly $1 billion a year to early learning and K-12 education from a new business tax.
“This is a huge investment in our students that will be game-changing for every school across the state,” said OSBA Executive Director Jim Green. He said OSBA appreciates the committee’s work to tour the state, listen to schools’ needs and adopt a workable solution.
Democrats likely have the votes in the House to meet the state’s two-thirds supermajority requirement for tax measures. The bill’s future is less clear in the Senate, where Democratic Sen. Betsy Johnson, a possible deciding vote, has often been skeptical of tax measures. The bill’s success could be tied to cost containment efforts, particularly legislation to curb Public Employees Retirement System rate increases.
A surprise move Monday night, however, lessened the chances of a ballot measure challenge. Oregon Business & Industry President Sandra McDonough testified that the state’s leading business association would not oppose the bill. With the business- and union-backed Coalition for the Common Good already offering solid support for the bill, statewide backing for anyone opposing the bill would be limited.
Committee Co-Chair Rep. Barbara Smith Warner said the bill offers the kind of sustainable investment in education not seen since the property-tax limiting Measure 5 in 1990.
“Ultimately, I think we are doing what the voters sent us here to do,” said Smith Warner, D-Portland.
Education advocates have offered enthusiastic support.
“Everyone should take a moment to celebrate the first concrete step toward a major reinvestment in our schools in almost 30 years,” said Morgan Allen, deputy director of policy and advocacy at the Confederation of Oregon School Administrators.
OSBA Board President Tass Morrison, a North Santiam School Board member, agreed.
“It means so much for kids,” she said. “We will be able to increase opportunities for our students that we haven’t been able to do for decades.”
The Legislative Fiscal Office calculated that the bill would generate $1.6 billion for the 2019-21 budget, with funds first available for the 2020-21 school year. The bill would send $623 million to the State School Fund: $423 million to replace funds lost because of the bill’s 0.25 percentage point personal income tax cut and $200 million to help the fund reach current service levels. The remainder would be split among three accounts: 50% for the Student Investment Account ($476 million), 30% for the Statewide Education Initiatives Account ($285 million) and 20% for the Early Learning Account ($190 million).
For 2021-23, the business tax would generate $2.8 billion, with $700 million set aside for personal income tax breaks, according to the Legislative Revenue Office.
The committee went through the bill’s revenue and investment language line by line during lengthy hearings last week, but the commercial activities tax numbers passed Monday changed slightly from previous hearings. Monday’s amendment increased the labor and input deduction to 35% but also increased the tax rate to 0.57% on business receipts over $1 million to maintain the $1 billion a year goal.
Legislative Revenue Officer Chris Allanach testified the tax would affect about 40,000 businesses out of approximately 460,000 doing business in Oregon.
Committee Co-Chair Sen. Arnie Roblan, D-Coos Bay, said the goal was to keep the tax as simple to collect and as low on all businesses as possible.
Committee member Rep. Cheri Helt, R-Bend, raised concerns about the tax rate being the same whether a business had $1 million in sales or $100 million. Helt, a restaurant owner and former school board member, said she could not support the tax because of the potential effect on small businesses.
All money from the tax would go to an education-dedicated fund outside the general fund, walling off the money from other uses as much as legislatively possible.
Sen. Mark Hass, co-chair of the committee’s revenue subcommittee, said last week that the revenue amendment “couldn’t be more different” from the failed 2016 Ballot Measure 97, which proposed a gross receipts tax on C corporations with sales of more than $25 million. The new tax’s rate is significantly lower, it exempts gas and groceries, and 100 percent of the money is dedicated to education, said Hass, D-Beaverton. It also cuts taxes for consumers to offset any price increases, he added.
The language laying out the uses for the money remained mostly unchanged from earlier public hearings, where it was repeatedly praised by parents, students, educators and advocates.
Even Republicans who voted against the bill spoke passionately of the committee’s work and its goals.
Committee Co-Vice Chair Rep. Greg Smith, R-Heppner, has stressed the bill’s accountability measures. Districts will have to account for how they spend the money and will be expected to meet clear markers of improvement. The Oregon Department of Education will deploy Student Success Teams to help districts that fall short, but much of the decision-making would remain with districts.
The bill would set a minimum grant based on enrollment equal to about $60,000, which would apply to about a dozen districts. Roblan said it was important that all districts receive enough to do something significant, such as hiring a part-time staff member or ordering classroom materials.
The new bill language would also offer some money for education service districts, charter schools and educator development. The bill does not include money for higher education, as Gov. Kate Brown and many advocates had sought. House Speaker Tina Kotek and Senate President Peter Courtney have made clear they consider higher education funding a separate subject, possibly for another legislative session.
HB 3427 folds in the language of a half-dozen other bills in its statewide initiatives. It sets up money for school lunches, a statewide youth reengagement system, a statewide school safety and prevention system, statewide equity initiatives, and summer programs. The statewide initiatives account would also fully fund Measure 98.
For Roblan, a former teacher and principal who has been in the Legislature for 15 years, this committee’s work has been deeply personal.
“This is the bill I came here to write and to work on,” Roblan said. “It’s pretty unbelievably emotional for me to say that there is a path forward for our schools.”
- Jake Arnold, OSBA
jarnold@osba.org