Legislature poised for generational investment in education

Last week was a big week for education in Oregon.

The Joint Committee on Student Success heard amendments Thursday, April 11, with specific language for an approximately $2 billion investment in schools. And Friday, April 12, Gov. Kate Brown unveiled a cost-containment proposal that would include cuts to the Public Employees Retirement System and creation of a new fund to stabilize PERS rates for school districts.

These proposals are not flawless and face significant opposition, but the Legislature is on track to make a generational investment in public education.

The Student Success Committee held a nearly four-hour public meeting on HB 2019, which currently contains the plan to create a fund outside the General Fund to pay for programs to support early learning and preK-12 student achievement.

Witnesses’ testimony during the hearing laid bare the failings of Oregon’s chronically underfunded public school system and demonstrated the ways strategic school programs can change people’s lives. Dozens of students, parents and educators praised the proposal to increase school investments.

Notably, Gov. Kate Brown testified to praise the committee’s work as well as to ask the committee to include money for higher education. Senate President Peter Courtney, however, said the Student Success Act would not be used to fund higher education.

The committee also posted but did not discuss an amendment containing a proposed revenue raising mechanism. The amendment would create a 0.49% “Corporate Activity Tax” on business receipts above $1 million, with a 25% deduction for inputs or labor costs. The committee has aimed to raise roughly a net $1 billion a year after lowering most personal tax rates by a quarter percentage point. This is one of the options the revenue subcommittee had previously discussed.

Brown detailed her cost containment proposal in front of the Joint Committee on Ways and Means Capital Construction Subcommittee. The proposal would create a new fund with the goal of keeping PERS rates for school districts at the 2019-21 rate for the next 10-14 years. To do this, Brown would make three controversial changes to existing law:

• Move into the fund 3% of the current 6% Individual Account Program contribution for Tier 1 and Tier 2 retiree PERS accounts, on a going-forward basis;
• Move some money from reserves at SAIF, Oregon’s nonprofit workers’ compensation insurance company; and,
• Change capital gains taxes on a one-time basis to move some money into the fund and also to avoid having Oregon’s kicker law kick this year.

These changes, along with many smaller changes, such as a temporary increase in surcharges and fees, would seek to raise approximately $800 million for the fund this biennium, with an additional $1.6 billion to follow over the next 15 years.

This week, the Student Success Committee will attempt to keep the momentum going with public hearings. The committee will hold hearings on HB 3427, which will likely replace HB 2019 as the main vehicle for its work because of a legislative language technicality.

These proposals are almost certain to draw the ire of many political stakeholder groups, including business groups. The Legislature and governor are moving at breakneck speed, capitalizing on the mandate from Oregonians to fund schools and address PERS costs. The ambition and drive to get a plan in place and respond to the needs of students looks to generate a transformative investment in schools.

OSBA Executive Director Jim Green summed it up for the committee: “The plan you have before you … will make a difference in students’ lives.”

- Richard Donovan
Legislative Services specialist