Ready, Set, 2023 Session!

The Takeaway

For the first time in nearly three years, Oregon lawmakers are beginning their 160-day session with legislators, lobbyists, and the public in the Capitol. The personalities driving the process have changed considerably since the last session, with new presiding officers, caucus leaders, and roughly a third of the legislature entering their first term of office. The first few weeks of this session have presented a more chipper tone than usual. Lawmakers are projecting hope and camaraderie in working together for the greater good. Perhaps it is lawmakers finally returning to mostly in-person lawmaking, the changing of the guard, or something in the water in Salem, but we will soon find out as the legislature begins tackling some of its most daunting challenges.

In previous sessions, substantive policies and politics took several weeks, if not longer, to come to a head, giving lawmakers time to orient themselves to the building, process, and traditions. Thus far, the session is shaping up to be anything but ordinary. Oregon’s political leadership, including the governor and speaker, asserts there is no time to waste in addressing the state’s most urgent priorities, setting some of the most aggressive deadlines in recent memory. These deadlines will likely consume much of the legislature’s attention and turn up the heat in the building in the coming weeks.

Housing & Homelessness

During her inaugural address, Gov. Tina Kotek (D) declared housing and homelessness her top priority as she took the reins of state government. As her first official action in office, the governor declared a housing state of emergency for the communities spanning the Interstate 5 corridor from Portland to Ashland. She also pledged to submit an urgent spending proposal to the legislature to make immediate investments to tackle Oregon’s housing challenges. On Thursday, she released the top-line details of her spending plan, which includes $130 million for additional shelter beds, pre-paid rental assistance, and rent guarantees to landlords with previously homeless tenants. House Speaker Dan Rayfield (D-Corvallis) previously called for the legislature to prioritize investments and structural reforms to secure additional housing and services for the homeless, saying the legislature should enact the package in the first 60 days of the session.

Securing Semiconductor Investments

In February, the U.S. Commerce Department will begin accepting applications for projects eligible for $52 billion in federal money for investments in semiconductor manufacturing. Oregon, which has one of the highest concentrations of chip manufacturers and employment in the country, is well-positioned for these investments. Unlike other federal spending initiatives, however, a precondition for chip manufacturers and their suppliers to receive federal money is to secure state and local incentive packages. Oregon has spent much of the last decade unwinding its business tax credits and other offerings to the point where the only material tax incentives are for local property taxes. Lawmakers must act swiftly to position the state for these investments.

Budget Challenges

The legislature’s cardinal task for every session is crafting a balanced budget. Oregon has enjoyed substantial revenue surpluses over the last few years due to federal pandemic aid, strong corporate profits, and personal income soaring to record highs. In November, however, the state economists warned lawmakers the party was coming to an end as the economy faces headwinds.

In December, the Legislative Fiscal Office issued a memo describing the state’s budget position. The authors wrote that Oregon’s current service level—the costs of sustaining all ongoing government programs and expenditures from the previous biennium—is $560 million less than anticipated revenues. Lawmakers will likely need to determine whether to balance that difference by belt-tightening, tapping reserves, or raising revenues.

Oregon lawmakers turned to individual and business tax increases during the Great Recession to shore up the state budget. It’s unclear, perhaps even unlikely, if the state’s economy could withstand another round of tax increases. In December, the U.S. Census Bureau released new migration data showing Oregon’s population declining for the first time in modern history. The driver of the state’s revenue stream for years is people moving to Oregon to work and live. Without strong migration trends, the state could find itself in a persistent and structural revenue hole that makes it difficult, if not impossible, to dig out.

Capitol Construction

If you are not already aware, Oregon’s State Capitol is undergoing a multiyear seismic and accessibility project. While the building is open to the public, access is limited and most common areas, including the rotunda and conference rooms, are unavailable. If you are visiting the Capitol, you may want to check the project’s website for the latest information about entrances and spaces open to the public.

Next Week

On Wednesday, February 1, Gov. Kotek will release her first recommended budget, a non-binding document outlining the spending requests and priorities from the Executive Branch. The Oregon Department of Revenue will also release its biennial Tax Expenditure Report, which outlines how the state spends money through the tax code, such as exclusions, credits, deductions, and exemptions. The release of both documents marks the unofficial start of tax and budget writing and all the accompanying shenanigans.