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Pandemic & Legislature Reach a Turning Point

The pandemic has taken Oregon on a roller coaster ride over the past two weeks.
Pandemic & Legislature Reach a Turning Point

The pandemic has taken Oregon on a roller coaster ride over the past two weeks. On Friday, April 30, 15 counties returned to a more restrictive level of activity due to a fourth surge of the virus, only to be lifted several days later. Then, on Tuesday, May 11, Gov. Kate Brown (D) announced the state would soon stop using county-by-county risk levels for closures and, instead, focus on a new target and incentive—vaccinations and a full reopening. The governor said that counties could reopen, without most restrictions, if 65 percent of eligible residents received at least one dose of the coronavirus vaccine. She also said the entire state would reopen once 70 percent of the statewide population receives at least one dose of the vaccine. The shift in the response is a departure from the activity and capacity limits experienced throughout the state since the earliest days of the pandemic and a focus on incentives to motivate Oregonians to get their jabs and return to a more normal life.

In the legislature, the Ways & Means Committee began advancing its largest investment in public schools this week. The package of bills comprising the education funding package includes roughly $12 billion in funding for local school districts and education programs, which is substantially higher than past allocations. Over the past several weeks, local school districts and education funding advocates disputed some of the data used by legislative staff to determine spending levels, arguing that program cuts and layoffs may remain necessary in some school districts without additional investment.

On Wednesday, a budget subcommittee recommended a budget move that would draw $200 million from the education reserve fund, known as the Education Stability Fund, intended as a safety net for schools during economic downturns. Oregon’s constitution specifies certain triggers allowing the legislature to access those funds, including a revenue forecast projecting a reduction of state revenues by two percent or two consecutive quarters of declining employment. Neither the latest revenue forecast nor employment reports suggest the state meets either of those triggers. On Wednesday, the governor hinted at a rare veto threat of the budget maneuver, saying, “The Legislature is considering a potentially unconstitutional use of Education Stability Funds in the K-12 school budget which, if it were to become law, would cause unnecessary confusion and disruption for our school districts and students after a year of uncertainty during the pandemic.” The budget maneuver was originally scheduled for a final vote in the Ways & Means Committee today, but the chairs postponed the vote until a later date.

The legislature will reach a turning point in the session on Wednesday, May 19, with the release of the next revenue forecast. The forecast serves as the last snapshot of the state’s economy and anticipated revenues before lawmakers approve the state’s biennial budget. A year ago, state economists projected an economy in freefall and revenues taking years to return to their pre-recession levels. In each of the forecasts since the early days of the pandemic, the updated figures have presented lawmakers with a rosier economic outlook and state revenues lifted by federal financial support and the return of economic activity. There is a general expectation that next week’s revenue forecast will continue that trend, especially given the state’s continued easing of pandemic restrictions and return to more normal activity heading into the summer.

Despite the solid economic outlook, the forecast may lack the confidence that lawmakers expect from these final revenue estimates due to data issues. This year, the Internal Revenue Service delayed the federal tax filing deadline by a month until Monday, May 17, and Oregon followed suit. Typically, the economists can build their end-of-session revenue forecast on actual tax return information after receiving top-line information from the Oregon Department of Revenue. However, this year, the delay leaves forecasters only two days instead of the usual month between the tax filing deadline and forecast, which could mean a lack of actual data for the revenue forecast and increased budget uncertainty throughout the biennium. Thankfully, the legislature continues to hold a substantial reserve fund and an outsized carryover balance buoyed by the infusion of federal dollars from the American Rescue Plan Act.

After receiving the revenue forecast on Wednesday, the legislature should start to pick up the speed in crafting its biennial budget. That means the attention of lawmakers and advocates starts to pivot from the policy committees to the budget and revenue committees, where hundreds of measures wait for their turn in the process. Today also marks the beginning of the next crossover deadline. By the end of the day, the policy committees must schedule work sessions on the bills they intend to advance for the session. And, if a measure fails to receive a work session by Friday, May 28, the measure will become effectively dead for the session. Although the legislature is entering the final stretch of its session, there remains a lot of time and work remaining for the next six weeks.