”Grand bargain” session ends

Kitzhaber proclaims success in reforming PERS, funding schools

By Lauren Dake / The Bulletin / @LaurenDake

Published Oct 3, 2013 at 05:00AM

SALEM — After three long days at the state Capitol, Gov. John Kitzhaber said Wednesday the special legislative session had successfully taken care of issues with the state public pension system.

“The Public Employees Retirement System is off the table for this governor,” Kitzhaber said.

At the heart of the special legislative session, which adjourned Wednesday, was the governor's push to reform PERS.

The measure passed by the Legislature reduces retirees' cost-of-living adjustments and, prospectively, reduces the $14 billion unfunded PERS liability by 25 percent.

“We are done,” Kitzhaber said. “We are going to move on to other things that are important to Oregonians.”

It's a political victory for the governor, who is expected to announce whether he is running for an unprecedented fourth term later this month. But the special legislative session nearly imploded before it officially began.

By Wednesday, lawmakers had recovered and passed a package of five bills, comprising the so-called grand bargain, out of both chambers.

Senate President Peter Courtney, D-Salem, noted special sessions can end disastrously, and he would know; he's been through more than 15 of them. This three-day session seemed headed at times in that direction. Kitzhaber expected it would last only one day.

“We are finishing on Wednesday, when on Sunday we didn't have a plan, and we were in deep trouble,” Courtney said before pounding his gavel and marking an end to the 2013 special session Wednesday evening.

Talk throughout the week focused on how the grand bargain offered “plenty to like and plenty to hate.” It consisted of a complex package of bills that touched on a wide range of subjects from raising taxes on some, lowering taxes on others, trimming public pensions and tackling regulation of genetically modified agriculture.

The first two days were marked by delays and rescheduled hearings. Wednesday morning also started off rocky with a crucial bill unable to find enough votes to pass on the first attempt. Eventually, three Democratic lawmakers switched their votes and cleared the way for the entire package to pass. As part of the deal, Kitzhaber said he would only sign the bills into law if the entire package passed both chambers.

Despite the early delays, Kitzhaber and lawmakers were quick to point out how Oregon overcame partisan gridlock, unlike their counterparts at the federal level.

“I hope Oregonians today see we showed up. We showed up for work. We didn't draw a line in the sand and demand retribution. We didn't pout and we didn't walk away, despite it all, we came here today and got something done,” said House Republican Leader Mike McLane, R-Powell Butte.

The first, and perhaps the most difficult vote for some lawmakers Wednesday, was on a measure that raised taxes on some corporations and cut taxes for eligible small businesses. Ultimately, it passed. But not without first bringing the chamber to a standstill. After nearly an hour of behind-the-scenes conversations, three Democratic lawmakers changed their votes to ensure the provision's passage. Raising taxes requires a supermajority vote.

Rep. Phil Barnhart, D-Eugene, chairman of the House Revenue Committee, said House Bill 3601 had “some really good things,” but it also had components that “terrify” him.

Several lawmakers railed against the tax provision, in particular the component that cuts taxes for some small businesses.

Rep. Brent Barton, D-Oregon City, said it amounted to a “cash giveaway” to well-off lawyers, doctors, accountants and lobbyists. He asked what kind of message the Legislature is sending, when on the same day taxes are cut on lawyers and doctors, “we cut benefits for retirees?”

The measure raises taxes and generates $244 million in revenue in the current two-year budget cycle. It also lowers the tax rate for some small businesses, including “S” corporations, limited liability companies and partnerships.

Rep. Tobias Read, D-Beaverton, spoke in favor of the measure.

“It doesn't contain a Republican tax cut or a Democratic cigarette tax increase,” he said. “It's a compromise.”

On the Senate side, Tim Knopp, R-Bend, blasted the plan, saying if the state would “go far enough on PERS, we (wouldn't) need to raise taxes.”

And Knopp, who has been a vocal proponent of PERS reform, did not think the Legislature went far enough, despite the special session. Knopp voted against Senate Bill 861, which reduces the cost-of-living adjustments to public employees. He did vote in favor of the PERS bill, Senate Bill 862, which will remove future lawmakers from the system and prevent some felons from receiving their benefits. He said the bill addressing the cost-of-living adjustment was bad policy and did not substantially reform the system.

House Bill 5101 sends about $200 million to education programs throughout the state and creates a dedicated stream of revenue for mental health programs. The investment in mental health, Rep. Sara Gelser, D-Corvallis, said “is a game changer.”

“I believe we may be the first state with a dedicated source of revenue for community-based mental health,” she said.

Sen. Mark Hass, D-Beaverton, said the bill that will help local school districts hire more teachers felt like “the reward, the payday for those difficult votes we had earlier.”

And lawmakers passed Senate Bill 863, a later addition to the grand bargain, and meant to make the deal more palatable to Republicans. The measure would prohibit local government from regulating genetically modified crops. Proponents said it prevents a patchwork of laws and makes it less chaotic for farmers. Opponents feared it would prevent local control and help spread genetically modified crops.

Speaking as the Legislature neared adjournment of the special session Wednesday, McLane noted the many tense moments during the session and the months of negotiations that preceded it.

“It hasn't been smooth,” he said.

But later, he added, he's proud of the Legislature's work.

“All's well that ends well,” he said.

Bill breakdown

Senate Bill 861

• Changes the Public Employees Retirement System, including lower cost-of-living adjustments. For benefits up to $60,000, the COLA drops to 1.25 percent; for benefits greater than $60,000, the rate becomes .15 percent. A component softens the blow for retirees making less than $20,000.

• The measure may reduce the $14 billion unfunded PERS liability by nearly a third.

Senate Bill 862

Removes future lawmakers from PERS, could take benefits from convicted felons and changes how the “final average salary” for some PERS retirees is calculated.

Senate Bill 863

Prohibits local counties from regulating genetically modified crops. Excludes Jackson County.

House Bill 3601

• Raises taxes on some corporations and tobacco products.

• Gives a tax break to some small businesses.

• Expands a tax break for low-income families, curtails the senior medical tax break.

House Bill 5101

The appropriation bill, sends $100 million to K-12 and community colleges and dedicates certain funds for mental health and senior programs.