With the adjournment of the 2017 legislative session last Friday afternoon, this issue provides a summary of the session, including:
This issue provides an update and summary of some of the major budget decisions affecting Oregon’s public universities. Last week when the Governor and House and Senate leaders announced they could not reach an agreement on revenue reform this session, both chambers started moving pell-mell for the exits, with the hope to adjourn well before the July 10 constitutional deadline. The legislature will be working through the weekend and, if necessary, over the 4th of July holiday.
This report provides a summary of recent actions and proposals on a wide range of issues, including revenue reform, a comprehensive transportation package, and the sale of the Elliott Forest. It also provides a rundown of some key bills under consideration as the legislature nears another deadline for committee consideration of bills.
Students, Faculty, Staff, and Presidents Call for Increased Funding for Public Universities
In a letter to legislative leaders, students, faculty, staff, and presidents of the public universities called for at least another $100 million in state investments from the level proposed last month by Governor Kate Brown.
Our unified funding request highlights and supports the following reality: To keep tuition increases below five percent at most universities, and also preserve most financial aid and student support services, state investment in the Public University Support Fund (PUSF) will need to increase by at least $100 million above the Governor’s Budget—in the 2017-19 biennium.
You can find a copy of the letter on the OSU Government Relations website and coverage of the accompanying press release in The Oregonian.
Yesterday’s update regarding the Governor’s recommended capital budget had a couple of glitches and should have included a broader discussion regarding the OSU-Cascades project.
Governor Brown issued her recommended budget (GRB) for the 2017-19 biennium yesterday. Facing a projected state budget shortfall of at least $1.4 billion compounded by rising personnel and health care costs, the GRB includes many difficult decisions. This update provides a summary of the major elements affecting higher education in Oregon. To review the entire budget document: http://www.oregon.gov/das/Financial/Documents/2017-19_gb.pdf
Here is a brief review of Tuesday’s election and its implications for higher education in Oregon as we approach the 2017 legislative session.
The 2016 General Election
What happens during the 2017 legislative session will depend on how voters consider a number of measures that will likely be on the November ballot. Most noteworthy of these is IP-28, which would create a state corporate receipts tax. Proponents of the measure claim it will create revenues needed to balance the budget and improve services. Opponents claim the measure will create an unfair and unbalanced state tax structure that will place Oregon businesses in an unfavorable position. The Legislative Revenue Office presented an analysis of the measure to the House and Senate Revenue Committees last month. Proponents of the measure rebutted the analysis in a recent editorial in the Oregonian. (As a public entity, OSU does not take positions on ballot measures.)
May Committee Days
Throughout the year, legislative committees meet on a quarterly basis. Following the February 2016 short session, committees met in May. While a number of committees and task forces will meet occasionally over the summer, the next formal committee session is scheduled for the week of September 19th. Here are some highlights from the committee sessions in May:
Significant Policy and Budget Issues for the 2017-19 Biennium
Over the coming months, our efforts will be aimed at ensuring that legislators, the Governor, and stakeholders are aware of the dividends that have resulted from investments made in higher education during the 2015 legislative session. In preparation for the 2017 session, we will be highlighting how state bonds for campus capital projects and budget increases for student success initiatives and the OSU statewide public service programs (Extension, Agricultural Experiment Station, and Forest Research Laboratory) have significantly improved OSU’s ability to serve Oregonians.
These efforts will be aimed at making the case for continuing investments needed to maintain the level of student success and economic well-being that have resulted from our work during the 2015 legislative session. Here is a summary of seven significant initiatives and policy issues we will be pursuing over the coming months:
Lawmakers approached the February short session with a fundamental disagreement over what issues are appropriate for resolution in just 35 days. For this session, leadership sought to reduce the load by allowing each legislator to introduce only two bills. Nevertheless, legislators faced a wide range of well over 200 bills and a highly charged, divisive atmosphere. Although the deadlines for passing bills came quickly, the process by which bills were considered by the House and Senate slowed to a crawl when Republicans refused to vote for a “suspension of the rules” – resulting in the requirement that the entirety of all bills be read aloud when they were considered on the floor. (With the average reading time for bills at between three to four minutes per page, many bills took much longer to read than to debate and vote.)
One reason for the legislative divisiveness is the state’s initiative and referendum process, which this year presented legislators with two measures that were making their way to the November 2016 general election ballot. One, known as “IP 28”, would create a state gross receipts tax. The other would establish a statewide minimum wage. Legislative leaders had roughly four weeks to devise alternatives they believed would be preferable to the measures currently being circulated for signatures.
Opponents to the minimum wage increase contended that they would prefer to take the risk of losing at the ballot box, rather than accepting a more flexible alternative designed by legislators. On a generally party line vote legislators devised – and the Governor signed – a minimum wage compromise that ultimately caused petition backers to withdraw their proposal.
But given the state’s 3/5 majority requirement for passing revenue increases in the legislature, lawmakers faced little opportunity for forging a compromise tax package intended to head off IP 28. The corporate tax measure promises to be an expensive battle during the November general election.
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Here is a summary of the measures considered during the 2016 legislative session that affected Oregon’s seven public universities.
A. Unified Priorities across all Seven Universities
As with the 2015 legislative session, Oregon’s seven public universities worked together on a unified agenda. While additional funding was not forthcoming, the universities presented themselves as a unified force and generated one of the most active lobbying days during the short session.
College Completion Initiative: $15 Million to continue the education agenda. During the 2015 session, the legislature provided $700 million for Oregon’s public universities in response to a unified campaign for $755 million. The universities approached the 2016 session with hopes of additional funding targeted to address immediate and near term factors that impede student completion.
Result: The legislature did not provide any additional funding for university operating budgets.
Renewal of the University Venture Development Fund (UVDF) Tax Credit (HB 4072). First enacted in 2005, this tax credit encourages individuals to donate to Oregon’s public universities, including OHSU, to help convert university research into new companies and products. Over the last decade, universities have raised some $7 million, resulting in the formation of dozens of new companies that have created approximately 270 high wage jobs. Over the last five years, jobs created by UVDF support have generated a total of $4.35 million in income tax revenues.
The legislature did not renew the tax credit during the 2015 session and the credit expired at the end of 2015. In an effort to renew the credit so that donors could continue to participate in the program during the 2016 tax year, Reps. Andy Olson (R-Albany) and Dan Rayfield (D-Corvallis) worked with the seven public universities and OHSU to introduce legislation that renewed the program at the historic level – $8.4 million in tax credits. (The 2015 legislation sought to nearly double the credit cap to $15 million.) HB 4072 also included provisions that simplify and facilitate the timing and process by which donors can use the credits.
Result: With only one legislator voting “no” throughout the entire process, the legislature renewed the UVDF intact, enabling universities to use approximately $4 million in additional tax capacity – the full $8.4 million tax credit created in 2005.
Constitutional Ballot referral to enable universities to invest in equities (HJR 203). When the legislature passed the original bill that established university governing boards in 2013 it included a provision that enabled universities to invest their funds in equities (stocks). The intention was to provide universities with more investment options that could result in both higher yields and greater stability. Subsequent legal opinions indicated that the state constitution has to be amended to extend this opportunity to the universities, so they sought a legislative ballot referral to put the matter on the November 2016 ballot.
Result: HJR 203 passed the legislature and will be on the November 2016 General Election ballot. Passage of this measure will likely involve an effort to inform voters of the measure’s intent and impact.
An equitable approach for developing the 2017-19 Budget. Legislation that established universities as independent public entities resulted in state budget writers calculating future budgets that do not include an accurate calculation of Public Employees Retirement System (PERS) and public employee health insurance – Public Employee Benefit Board (PEBB) costs. This resulted in the determination during the 2015 legislative session that in order to provide the same level of services in the 2015-17 biennium – the “Continuing Service Level (CSL) –a 3.3% increase was all that would be needed. Because current statutes require the universities to cover these costs, an accurate calculation of PERS and PEBB costs for the current biennium would have involved at least an 8% CSL increase. The seven public universities sought budget note language during the 2016 session to direct the Governor to consider an appropriate CSL when compiling a budget for the 2017-19 biennium.
Result: In adopting SB 5701, the legislature adopted the following budget note:
The Subcommittee recognizes that the Current Service Level (CSL) is intended to estimate the cost of legislatively approved programs in the upcoming biennium. In 2009, the Joint Committee on Way and Means approved the adoption of a CSL model for the Community College Support Fund (CCSF) to reflect health benefit and retirement costs expected to exceed the Department of Administrative Services standard inflation rate.
To ensure consistency in post-secondary state support CSL calculations, the Department of Administrative Services (DAS) and the Legislative Fiscal Office (LFO) are directed to develop, in consultation with the Higher Education Coordinating Commission and the seven public universities, an estimated cost of applying the Community College Support Fund model to the Public University Support Fund, the Agricultural Experiment Station, the Extension Service, the Forest Research Laboratory, and Public University State Programs. The estimate will include data elements that the public universities will be required to submit to HECC in order to implement the model.
DAS and LFO will provide the estimated cost to implement the Community College Support Fund CSL model for Public University state support to the Emergency Board, through the Legislative Fiscal Office, by July 1, 2016
Universities will continue to seek provisions for state settlements on labor contracts to also be considered in the CSL. (Community Colleges are not subject to state labor negotiations.)
Individual University Capital Requests. A number of universities sought specific capital requests to address emergency or unanticipated needs or to shift already approved capital expenditures to other projects. (OSU had no projects on this list.)
Result: The legislature funded the five capital projects sought by OIT, PSU, and SOU.
B. OSU Specific Legislation
State Matching funds for a Federal Marine Energy Grant. In December Congress appropriated $5 million to the US Department of Energy to fund a competitive grant to further develop a wave energy test facility. This initial funding could grow over the next 3 to 5 years to a federal investment totaling of $40 million, with the expectation that successful competitors for the grant will provide at least a 25% match, or $10 million. The total project—federal and non-federal funds—is expected to be $50 million. Oregon will be competing with other states that are developing their own matching proposals for this long-term funding opportunity. The Coastal Caucus and other legislators sought an appropriation for the first installment of $1.25 million in state matching funds to enable OSU to compete for the initial $5 million in federal funding.
Result: With the passage of SB 5701, the legislature provided $800,000 to enable OSU to compete for the $5 million DOE grant. It is not clear whether or how OSU will address the additional $450,000 needed to fully meet the 25% match requirement.
Economic Development Investments for the 2021 International Track Championships (HB 4146). Last year Tracktown USA successfully bid to host the 2021 International Track Championships. The Governor worked with a coalition of supporters, including OSU to seek an increase in the statewide lodging tax to enable funding for the infrastructure needs for this event. OSU’s track facility is well positioned to serve as a training venue. It remains to be determined what funding may be available in 2017 to match philanthropic opportunities for the OSU track.
Result: After a process that considered alternative rate increases and implementation periods, the legislature approved a 0.8% increase in the statewide lodging tax.
C. Additional actions
ALS Endowment: Included in the final budget bill was a one-time $100,000 allocation that will enable the OSU Foundation to create and manage an endowment to provide scholarships for OSU students involved in research addressing amyotrophic lateral sclerosis (ALS). The funding is in honor of State Rep. Vic Gilliam (R-Silverton) who was recently diagnosed with ALS.
Endophyte Research: Endophytes are fungi found in grass stubble used as animal feed. The issue is important to the grass seed industry which, with the implementation of field burning bans, now exports grass stubble as animal feed. SB 5701 appropriated $100,000 for endophyte research to be matched by private dollars. “These funds are to be used only for endophyte research in support of Oregon’s fiber and straw export industry. A report to the Legislative Fiscal Office on how the funds were used in support of endophyte research and what was made possible by this additional influx of funds should be made by December 31, 2016.”
D. Other Higher Education Bills that Passed
SB 1540 Calls on the HECC and universities to determine the best method of increasing number of mathematics majors at Oregon universities.
SB 1558 Limits disclosure of records of college or university student health center, mental health center or counseling center, or records of health professional retained by college or university.
SB 1586 Requires universities to undertake a number of activities to encourage students to register to vote.
HB 4019 Requires universities to provide in-state tuition to dependents of Oregon residents who leave the state to serve in public service organizations.
HB 4021 Directs the State Treasurer to study possible refinancing mechanisms for student loans.
E. Increasing the Minimum Wage (SB 1532)
Governor Brown and Democratic leaders devised a phased-in minimum wage proposal that would pre-empt the November ballot initiatives seeking to increase the state’s minimum wage from the current $9.25/hour rate. The Legislature eventually approved SB 1532, which would phase-in minimum wage increases across three different regions based on their level of economic activity – the Portland metro area, a middle tier which includes Benton County and OSU, and rural/economically stressed counties.
The minimum wage hike will vary in how it affects universities, based on their locality, the number of workers at minimum wage, and the source of funds – tuition, student fees, or other funds such as housing and dining which employ a large number of minimum wage workers.
In short, both EOU and OIT may be largely unaffected because they are headquartered in non-urban or “economically distressed” counties. (The bill does not directly address what to do about universities with employees across the multiple wage rate zones.) Universities estimate that implementing the bill in 2017 will involve a $1.3 million increase in costs across all seven universities for the remainder of the current biennium. Almost half – $602,000 – would apply to OSU across all of the university’s activities whether paid for by general funds, federal funds, fees, or room and board. Assuming that OSU would not decrease the number of employees as a result of the increase in minimum wage, the OSU figure would grow significantly each year over the next three biennia: $771,000 per year in 2017-19 biennium to well over $1.5 million per year in future biennia.
The source of funding has yet to be determined. The preliminary analyses indicate that a quarter of the 2017 costs will accrue to state education and general (E&G) activities paid for either by tuition or general fund appropriations. A third of the costs will accrue to university housing and dining; a quarter will accrue to activities supported by student fees. The latter two involve funding streams that are entirely paid for by students.
While OSU student workers will be the primary beneficiaries of a minimum wage increase under SB 1532, they may also bear the burden of the increased tuition, fees, and housing and dining costs needed to pay these wages. It is also possible that those who receive work-study funding may see their wages increase but their hours reduced. State appropriations may help address the impacts to activities supported by “E&G,” but housing and dining and student fee supported activities cannot be supported by state appropriations.
Coverage of this issue can be found in the Oregonian.
The Governor’s statement following the legislature’s adjournment on Thursday, March 3 can be found here.
In our next update, we’ll look into the changes ahead for the Oregon legislature. With the March 8th filing deadline, the House will see a significant turnover, particularly in the Democratic ranks with nearly a third of the caucus membership retiring or moving on to seek higher office. With only half of its membership up for election, the Senate will see fewer changes.
If you’re interested in supporting OSU in Salem, join the Beaver Caucus.
On Wednesday, Governor Kate Brown issued an outline of her key objectives for 2016, including the short legislative session, which convenes on Monday, February 1. Under Oregon’s Constitution, legislators must adjourn by Saturday, March 5.
One of the most significant items on the Governor’s list is her proposal to increase the minimum wage. The proposal includes a six-year phased-in $13.50/hour statewide wage, with a $15.52 wage for the Portland Urban Growth Boundary to address that area’s higher cost of living. (Oregon’s current minimum wage of $9.25/hour is the nation’s second highest.) Democratic legislative leaders are interested in enacting state minimum wage legislation in February to stave off a November ballot measure that would involve a two-year phase-in of a $15/hour wage.
Legislative budget writers have asked universities to identify the potential fiscal impact of the Governor’s proposal. Impacts will likely involve activities that are funded by tuition and state appropriations as well as activities that are funded by auxiliary funds (such as athletics and housing and dining). Student fees are also used to support some on campus minimum wage jobs.
A number of the Governor’s other priorities may be of interest to various units at OSU, including:
House Republican Leader Mike McLane issued a response to the Governor’s priorities, which you can find here.
University Priorities for the 2016 session
Not included on the Governor’s list of priorities are a number of legislative initiatives supported by OSU and the other public universities in Oregon, including OHSU. Chief among them is the renewal of the University Venture Development Fund (UVDF) tax credit. Reps. Andy Olson (R-Albany) and Dan Rayfield (D-Corvallis) have joined to introduce HB 4072, which would renew the credit for a six-year term. For information on the bill, see our UVDF Fact Sheet.
Universities are also seeking $15 million in increased funding to continue progress made last session to increase student completion rates. While the legislature’s Ways & Means leadership appear to believe that additional funding will be scarce, universities and students contend additional funding is needed to maintain improvements attained during the 2015 session.
Other university priorities include support for a legislatively referred constitutional amendment to enable universities to invest in equities. The original bill that established university governing boards in 2013 included a provision that enabled universities to invest their funds in equities (stocks). The intention was to provide universities with more investment options that could result in both higher yields and greater stability. Subsequent legal opinions indicate that this change cannot be accomplished through statutory changes; the state constitution has to be amended. As a result, the universities are seeking a legislatively approved ballot referral to put the matter on the November 2016 ballot.
Universities are also seeking an equitable approach for developing the 2017-19 budget. Legislation that established universities as independent public entities resulted in state budget writers recommending future budgets that do not include an accurate calculation of Public Employees Retirement System (PERS) and public employee health insurance – Public Employees Benefit Board (PEBB) – costs. During the 2015 legislative session, budget writers determined that a 3.3% increase would be needed to provide the same level of services in the 2015-17 biennium – the “Continuing Service Level” (CSL). Universities claim an accurate calculation of the state-mandated PERS and PEBB costs for the current biennium would have involved at least an 8% CSL increase. Because uncompensated PERS and PEBB costs will be borne by students and will erode current state investments in student success, universities are seeking a legislatively endorsed process by which a more accurate and equitable methodology is used to calculate the CSL for 2017-19.
OSU-Specific Bills
State matching funds for a $5 million Federal Marine Energy Grant. In December, Congress appropriated $5 million to the US Department of Energy to fund a competitive grant to further develop a wave energy test facility. This initial funding could grow over the next three to five years to a federal investment totaling $40 million, with the expectation that successful competitors for the grant will provide at least a 25% match, or $10 million. The total project — including federal and non-federal funding — is expected to be $50 million. Oregon will be competing with other states that are developing their own matching proposals for this long-term funding opportunity. Coastal legislators are pursuing state legislation for 2016 that would appropriate the first installment of $1.25 million in state matching funds to enable OSU to compete for the initial $5 million grant. Last week, the House Energy & Environment Committee agreed to carry the proposal as a committee bill.
The Session Ahead
University Lobby Day: Mark your calendars! All seven universities will be holding a unified lobbying day on Thursday, February 11. Activities for the day will include individual meetings with legislators seeking support for the higher education agenda, as well as a reception. Register to participate here. More detailed information will be forthcoming in the next week. If you have questions, please contact Karli Olsen.
Bill Tracking: The OSU Government Relations Office will be tracking legislation throughout the month-long session. While the volume of bills will not be nearly as great as during the six-month session, timelines will be extremely fast. For example, legislative committees have about ten days to approve bills before the bills become ineligible for consideration. If you are aware of issues that you’d like us to track, please contact Karli Olsen.
Legislative town halls with local legislators:
If you have questions or would like additional information about any of the items above, don’t hesitate to contact us.
Jock Mills, Director, jock.mills@oregonstate.edu
Karli Olsen, Coordinator, karli.olsen@oregonstate.edu
For Federal matters: Gabrielle Serra, Federal Relations Director, gabrielle.serra@oregonstate.edu