The Oregon Legislature is going to have to take some hard votes in 2019 to address the Public Employee Retirement System’s unfunded obligation, according to Rep. Greg Smith.
“We have to deal with an issue that none of us created,” he said.
The representative for District 57 spent an hour with the Hermiston City Council on Monday, answering their questions about the upcoming legislative session and how the League of Oregon Cities’ six legislative priorities might fare. While cities would like to see more money spent to address issues such as mental health care and homelessness, Smith said the state’s $22 billion obligation to PERS presents some challenges. The state has a bill due, he said, and it’s time to pay.
Smith said he believes the best way is to issue pension bonds, which would stabilize the bill for government entities such as schools. He likened it to a family that gets in over its head in credit card debt and goes to the bank to refinance their debt into a single payment. The refinance may make it easier on the family to get a handle on their problem, but they still need to figure out a way to either increase their income or cut their expenses to free up money to start paying off their debt.
In practical terms for the legislature, that means raising taxes or cutting spending. Voters won’t be happy about new taxes, but they also won’t be happy about cuts to public safety, health care or education.
“It’s going to be hard,” Smith said. “The question is whether the Legislature has the fortitude to make those hard decisions.”
PERS reform falls under the League of Oregon Cities’ second highest priority of cost containment and revenue reform. The other part to that priority — property tax reform — is one that Smith told councilors they shouldn’t count on being tackled in the 2019 session. A repeal of Measure 5, which caps property tax revenue for cities, would take a vote of the people. Smith said he had no problem voting to refer the question to voters, but didn’t see a majority of the legislature being willing to do so.
One revenue reform Smith said he felt sure would take place in the 2019 session is implementation of a carbon tax. However, Smith said he had a feeling the money raised by taxing carbon-producing businesses for emissions would go toward the Department of Environmental Quality to fund more regulations and monitoring, not into education or the PERS liability.
While Smith doesn’t support that idea, he said it’s important for legislators in the minority to come to the table for discussions on legislation they don’t support in order to “make it less intrusive” for rural Oregon when it inevitably passes. Eighty percent of legislators live within an hour’s drive of the capitol, he said, and are writing bills from that perspective. Smith feels an obligation to his district to make sure Eastern Oregon is included in discussions so that he can negotiate changes to the bill that will mitigate harm to rural Oregon.
“If you pound the table, they say ‘That’s nice, now go sit over there,’” he said.
It’s a lesson many freshman legislators have to learn, and Smith said Eastern Oregon is mostly represented by freshman legislators right now, with longtime rural representatives such as John Huffman leaving The Dalles and Ted Ferrioli leaving John Day. It has created a real leadership vacuum, he said, as rural Oregonians have lost representation by people who sit on key committees and understand how the governing process works.
“That really puts us at a disadvantage,” he said.
District 57 is well-positioned in that regard, however, because Smith serves on a long list of influential committees. Most significantly, he is vice chair of the House Revenue Committee and co-vice chair of the Joint Committee on Ways and Means. That means Smith has influence on both the revenue-raising and the spending side of the legislature — something that he said is almost unheard of in Oregon.
As for the LOC’s other priorities, Smith said the number one priority voted on by city councils — mental health — is also on the legislature’s mind and would definitely come up in the upcoming session.
“As a state we are going to pay for people’s mental health care; the question is how are we going to pay for it?” he said. “Are we going to do it wisely and compassionately?”
He said he supported Umatilla County’s desire for an expansion at the county jail to better deal with inmates who are dealing with mental health issues.
As for other priorities that are more specific city concerns, Smith said he would get together with city leaders in his district during the session and talk about how he could best support those priorities. One example of that was the LOC’s sixth priority of preserving cities’ ability to contract with a third party on building inspections. The legality of that has been called into question. City manager Byron Smith said if that isn’t addressed Hermiston would no longer be able to do the city of Umatilla’s inspections.
During the work session councilors brought up various other concerns and questions on topics, such as forest health and funding water and sewer infrastructure for small cities that can’t afford needed projects.
Councilor Jackie Myers brought up the transportation payroll tax that came into effect in July and is coming due for employers now. Myers, who works as an accountant, asked Smith how she should answer clients who ask what the tax is for. She also complained that the state does not have the online infrastructure set up to take payments, forcing accountants to fill out forms by hand and get a check from the employer and mail it in.
Smith and assistant city manager Mark Morgan explained the payroll tax goes toward public transportation, such as bus systems and ride shares. By statute, 90 percent of the money generated in each county must stay in that county, which is expected to generate more than $1 million per year that Umatilla County will be able to spend on expanding public transportation options in the county.
Smith said he was surprised to hear Myers’ complaint about how difficult the state was making it to pay the tax, and said when he saw the director of the Oregon Department of Revenue at a call center open house in Fossil on Tuesday he would definitely bring it up and see what needed to be done to fix it.
Contact Jade McDowell at firstname.lastname@example.org or 541-564-4536.