Senate approves business tax to boost school budgets
SALEM — A massive proposal to inject more money into Oregon's struggling public school system is headed to the governor's desk, where it is expected to be signed into law.
The Oregon Senate approved House Bill 3427 on an 18-11 vote Monday, May 13, delivering Democrats a signature victory — but only after the party, which holds supermajorities in both the House and Senate, gave up significant concessions to ensure they could have a vote at all.
As a condition of allowing a vote, Republicans issued a list of demands, including legislation they wanted Democrats to abandon.
On Monday, Democratic leaders agreed to jettison Senate Bill 978, a gun control bill widely opposed by Republicans, and House Bill 3063, which would end non-medical exemptions from vaccination for schoolchildren. The latter bill had just passed the House last week.
Outnumbered Republicans, unhappy about one of the largest tax increases in state history passing through the Legislature at "warp speed," endeavored to throw the brakes on HB 3427, also known as the Student Success Act.
Two weeks ago, House Republicans began requiring the text of all bills to be read in full before a floor vote — a process that took close to three hours for the 45-page Student Success bill. But while that May 1 session took up most of the day, the bill's passage was never in serious doubt, and it was approved 37-21.
Last week, Senate Republicans skipped out on seven floor sessions in which a vote on HB 3427 was scheduled. While Democrats have enough votes to pass a tax bill without Republican support, at least 20 senators must be present for the Senate to hold a vote. That forced a frustrated Senate President Peter Courtney, D-Salem, to repeatedly adjourn without a quorum and ultimately kick the vote to this week. "This is the only tool we have," Senate Minority Leader Herman Baertschiger Jr., R-Grants Pass, declared before his caucus' walkout. "We know, we know, elections have consequences — we got it. But this is bad."
Ultimately, Democrats chose to hold firm on the Student Success bill in exchange for the gun control and vaccine bills. "This is not a pretty process sometimes, but we have a gorgeous result today," Senate Majority Leader Ginny Burdick, D-Portland, said after Monday's vote.
The right balance
Raising taxes on business to pay for better public education was a top priority for Democratic leaders heading into this year's legislative session. Oregon already spends about half of its discretionary budget on education. But education advocates, including a state commission formed to figure out what Oregon needs to have a "quality education model," say it's not enough.
The $2 billion per biennium coming from HB 3427 would effectively close the gap between the current service level and the quality education model, although it won't increase the state school fund.
The bill makes nearly half a million dollars per year available in state grants for school districts. Each district would have to present a plan for how it wants to use the grant money, and it would be obligated to report back to the state on what effect that additional spending has.
"Our districts said, 'We need to have more money, and we don't want you to tell us exactly how to spend every penny,'" said Sen. Arnie Roblan, D-Coos Bay, who carried the bill on the Senate floor.
Smaller portions of the funding package go toward state programs — including full funding for Ballot Measure 98, which voters approved in 2016 to expand career and technical education in high schools — and early learning, such as preschools.
All 18 Democrats voted for the bill Monday. Eleven Republicans opposed it. Sen. Jackie Winters, R-Salem, was excused from the vote due to illness.
Sen. Betsy Johnson, D-Scappoose, said her vote in support of the bill is conditional upon the Legislature adopting major reforms to the state's public pension system this year. She warned that if HB 3427 is petitioned onto the ballot and she is not satisfied with efforts to reform PERS, she will campaign against the measure.
Republicans argued the tax will hurt businesses and criticized the lack of PERS reform so far. "It's not because I don't care, because I do," said Sen. Tim Knopp, R-Bend. "I just don't think we have struck the right balance on this particular bill."
The bill taxes businesses on their gross receipts in Oregon exceeding $1 million per year. Businesses would have to pay slightly more than half a percent, although they could deduct 35% of their labor or production input costs.
HB 3427 heads to Gov. Kate Brown's desk for her signature.
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