- Associated Press - Thursday, May 4, 2017

SALEM, Ore. (AP) - Three Democratic lawmakers, including House Speaker Tina Kotek, unveiled an unexpected proposal Thursday for Oregon’s looming $1.6 billion budget shortfall that draws ideas from another plan but includes multi-billion-dollar earmarks for education and long-awaited estimates for spending cuts.

Both proposals before the newly-created Joint Tax Reform Committee could raise up to $3 billion in extra funds for the next 2017-19 biennium through an overhaul of Oregon’s corporate income tax system similar to Measure 97, which voters struck down in November.

How the two might be combined and included in the final budget package with spending cuts and reduced personal income taxes will become clearer after May 16 when state economists release the next quarterly revenue forecast - a much-anticipated report that’ll help lawmakers know how much money they’ll have to work with for the next budget cycle.

If Republicans, however, maintain their opposition during the final two-month stretch of the 2017 session, voters could wind up having the final say on the business tax proposal that, so far, is a more tepid version of the $6 billion-tax boost from big business they rejected through Measure 97 last year.

The Legislature has two routes for passing tax hike proposals: signing into law by the governor after a three-fifths vote by both chambers, or approval by voters after a simple majority vote in the chambers. Without Republican support, Democrats are eyeing the latter option, potentially prompting a special election this fall.

Kotek along with state Reps. Nancy Nathanson and Phil Barnhart, who helped craft Thursday’s proposal, are hoping this latest plan might still be comprehensive enough to pass muster with conservatives, businesses and, if need be, voters.

“This is all about whether or not we believe the No. 1 priority for the Legislature is to provide for essential services for public education, health care, senior services, public safety and to balance (the) budget,” Kotek said during testimony before the Tax Reform Committee. “We are adults, we all make choices, my choice is to march up the hill and try to do this.”

The two proposals call for a gross receipts tax - or a tax on revenue from business-to-business transactions - on a broader set of businesses and at a lower tax rate than Measure 97. Unlike the first proposal spearheaded by Democratic Sen. Mark Hass, Kotek’s proposal would earmark roughly $2 billion, or two-thirds of the estimated new revenue, for K-12 and higher education. The mechanics as to how those funds would be set aside for those purposes is unclear.

It also factors in $650 million-worth of spending cuts through curbing employee pension and health care costs, among other things; it’d additionally preserve the $357 million that voters earmarked in November for high school vocational training, youth outdoor recreation programs and veteran services through Measures 98, 99 and 96, respectively.

Kotek says the numbers assume a still-tentative new tax on health care providers has, theoretically, been approved. New funds from that tax hike would stave off Medicaid expansion cuts and other health cutbacks, although Thursday’s passage of the Affordable Care Act overhaul in the U.S. House could further complicate Oregon’s options.

Still, Republicans like House Minority Leader Mike McLane say “it’s a wolf in sheep’s clothing … and once again Democrats claim, ‘it’s for the kids,’ even as they continue to drag their feet on what would truly secure lower class sizes and more school days.”

Labor unions applauded the latest effort while the private sector appeared split, garnering accolades from Main Street Alliance of Oregon’s coalition of 3,500 small businesses, many of whom would largely avoid the new tax; groups like Priority Oregon representing many larger corporations that’d be subject to the tax, blasted lawmakers for holding hearings that “excluded input from the public, consumers, and Oregon businesses.”

Senate President Peter Courtney, Oregon’s longest-serving lawmaker and a moderate Democrat, says they’ve shown they’re “serious about cutting costs” and it’s time for businesses to do the same on raising revenue.

“I can’t tell you at this stage if this will be the plan … We’ve got work to do. The clock is ticking,” Courtney said.

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