House Passes Bill Cutting Small Business Taxes & Expanding Access to Senior Medical Deduction to Low & Middle Income. With the passage of SB 861 on Wednesday, the Senate acted to reduce the $13.2 billion PERS unfunded liability by nearly $2 billion and put millions back into local classrooms in future budget cycles. The Oregon House of Representatives voted to implement additional measures to control the growing cost of the Public Employees Retirement System. The bill changes the cost of living adjustment to benefits. It also includes temporary supplemental payments for low income PERS retirees through 2019.
“With an unfunded liability of around $13.2 billion, the Public Employees Retirement System is a program on tenuous financial ground. We must act to fix PERS,” said Rep. Mike McLane (R – Powell Butte) the House Republican Leader. “While this measure does not solve the problem, it does provide an additional reduction of about $1.9 billion to the unfunded liability, which is a step in the right direction.”
In a separate bill, SB 862, the Oregon House passed three new provisions to provide additional accountability to the system. First, the bill removes the conflict of interest related to PERS for future legislators by placing them in a 401(k) plan instead of PERS. Second, it makes sure a PERS member’s final salary is not “spiked” by additional benefits like health insurance payments. Finally, it permits criminal restitution judgments to attach PERS benefits to compensate victims of felonies.
“This is not a complete solution, but it is a step in the right direction,” said Senate Republican Leader Ted Ferrioli (R-John Day). “This proposal moves the ball down the field, providing some relief to classrooms, police departments and other core services. We have more work to do, but this is a productive next step.”
Combined with savings from action taken in the regular session, PERS liability will be reduced to $11.3 billion, a 30 percent decrease from the beginning of the year. It is projected to reduce local employer contributions by 2 percent, representing major savings to school districts and local governments. The reforms adopted Wednesday will limit the cost of living increases for retirees, while protecting low-income pensioners with supplemental payments. The legislature also approved SB 862 which will remove future legislators from the PERS system and stop pension spiking with health insurance.
“These are common sense reforms that allow for significant re-investment back in classrooms,” said Senator Bruce Starr (R-Hillsboro). “The policy changes also increase the accountability and transparency surrounding PERS, allowing the future legislators to govern without even the appearance of an interest conflict.” Because of the high costs to local services like schools, Republicans have been pushing for PERS reforms for the last two years.
The changes agreed to by the legislature today are the result of months of conversations with Democrats and represent part of a bi-partisan agreement.
“After years of underfunding, the legislature is poised to make historic investments in kids, seniors and the mentally ill, because Republicans and Democrats committed themselves to finding a compromise,” said Senator Chuck Thomsen (R-Hood River).
“This is what happens when people are willing to put aside their differences in order to move Oregon forward.”
House Bill 5101, which passed the Senate 27 to 1, authorizes a number of key budget expenditures, including:
o $100 million for Oregon classrooms to hire teachers, reduce class sizes and lengthen the school year
o $15 million for community colleges to freeze tuition increases
o $25 million to the Oregon University System to freeze tuition increases
o $41 million for senior programs that prevent elder abuse and improve the quality of long-term care
o $20 million in dedicated funding to mental health care “Republicans recognize that we have a job to do: governing Oregon in a way that makes this a better place to live, work and play,” said Senator Bruce Starr (R-Hillsboro).
“The best path for Oregon typically means working with Republicans and Democrats to find a common solution. It is not the easy way, but it is the better way.” The Oregon House of Representatives also voted to provide Oregon’s small businesses with one of the largest business tax cuts in state history. The same legislation modified an increasingly expensive senior medical deduction to rein in cost and focus it on low and middle income Oregon seniors. The measure, HB 3601, reduces taxes for Oregon businesses who file as Schedule E, which includes many LLCs, S-Corps, LLPs and partnerships.
“Small businesses and family-owned businesses are the heart of Oregon’s economy and we granted them relief today,” said Rep. Mike McLane (R – Powell Butte), the House Republican Leader.
Further, the measure also coverts the senior medical deduction into a subtraction on state income taxes, which allows lower income filers who do not itemize deductions to take advantage of the program. It then caps the use by single filers making over $100,000.00 per year and joint filers making $200,000.00.
“This change reins in cost while simultaneously making the medical deduction available to more lower and middle income seniors,” Rep. McLane said.
The measure was part of the package of bills being considered by the Oregon Legislature during the special session called by Governor John Kitzhaber.
Kevin Curry Communications Director House Republican Office 503-986-1351 503-805-6016 (cell)
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