After Tumultuous Week, Oregon Senate Passes Historic School Funding Bill

After nearly a week of delay, and no fewer than three bills falling dead in its wake, a bill to inject $1 billion a year more into Oregon’s K-12 schools is on its way to the governor.

House Bill 3427, a new tax on large Oregon businesses, passed the Oregon Senate on a 18-11 vote along party lines Monday.

When it is signed by Gov. Kate Brown in coming days, Democrats will have accomplished the signature goal they brought to this year’s legislative session — one several senators said ranks as the most important bill they’ve ever had a hand in passing.

“Almost anything was worth this vote,” Senate Majority Leader Ginny Burdick, D-Portland, said afterward. “This is a historic, historic day.”

“I’ve been working toward an education package like this since I came to the legislature 18 years ago,” said state Sen. Mark Hass, D-Beaverton, who was key in crafting the tax. “I was always told it wasn’t really the right time .... This is our time. This is our time to fix it.”

Senate President Peter Courtney cast even farther back in history, in a somewhat jubilant meeting with reporters after the vote.

“The Oregon Trail is filled with wrecked wagons … but they kept going,” said Courtney, who laid out a litany of officials who’d failed to pass sizable tax bills in the past. “I wasn’t sure we would get there. I’m still numb. I’m not sure I believe this has happened yet.”

House Bill 3427, known as the Student Success Act, took a long and at times fraught path to get to this point.

Related: Senate Democrats Appear To Give Up Gun Control, Vaccine Bills To Get GOP Back

It began in early 2018, when leading lawmakers convened a bipartisan committee to tour the state, studying its educational challenges and learning what kind of funding it might take to improve them. The committee traveled thousands of miles, visiting dozens of schools and speaking with students, teachers and others.

“From my experience, there has never been a committee that was as comprehensive, open, transparent and inclusive,” said state Sen. Arnie Roblan, D-Coos Bay, who chaired the joint House-Senate committee.

Everyone in the Capitol seems to agree that Oregon schools need more money — particularly since the passage of a 1990 ballot measure that limited local property tax funding for schools, leaving the state ill-equipped to make up the difference.

But the popularity of funding for schoolchildren met brutal political realities when the question of how to tax businesses came up. Republicans and business interests have insisted that lawmakers address a ballooning debt in the state pension system, which threatens to take a sizable bite out of new tax revenue.

There was also disagreement about what form the new tax should take. Some of that was quelled in a last-minute deal legislative leaders struck with the state's largest business group. Under the agreement, they tweaked the tax rate and pledged to kill another revenue-seeking bill proposed by Gov. Kate Brown.

As crafted under that deal, the bill includes a 0.57% tax on businesses that have more than a million dollars in Oregon sales. Only receipts above $1 million are subject to the tax, and there are subtractions available for capital or labor costs. The package also includes a cut to personal income tax rates, since it’s expected to increase prices somewhat.

Money from the tax would be put toward three distinct areas. At least half would go to grants to state school districts for programs aimed at improving things such as graduation rates, reading levels and attendance. Around 20 percent would fund early childhood learning programs. The remaining roughly 30 percent would fund career-technical education programs and free meals at school for low-income students, among other things.

The Oregon House passed HB 3427 on a party-line vote in the wake of the deal with business.

Related: Oregon Legislative Leaders Present New Plan For Tackling Big PERS Debt

But the proposal ran into a opposition in the Senate, prompting a four-day boycott in which Republicans refused to grant Democrats the 20-member quorum needed to conduct business.

Republicans staged the walkout, they said, because their suggestions had been repeatedly ignored by Democrats, who control a supermajority in both legislative chambers.

The standoff ultimately prompted the involvement of the governor, who over the weekend helped hash out a deal: Republicans would return and allow a vote on the schools package if Democrats agreed to kill bills to tighten gun control and vaccine laws.

“I love Mother’s Day, because it all happened yesterday,” Courtney said. “Going into Sunday there was no way we were going to be here today. It was really that risky.”

Burdick, who was a chief supporter of the gun control bill, added: "This is not a pretty process sometimes, but we have a gorgeous result today."

Despite the concessions they'd won, Republicans were less inclined to see the beauty. In a series of speeches Monday, they railed against the tax package, saying it was unfair to businesses and consumers alike.

“This is not good for our state,” said Sen. Cliff Bentz, R-Ontario, predicting that businesses would be less likely to come to Oregon. “This does not make us more competitive than Idaho. This makes people want to flee Oregon into Idaho.”

Senate Minority Leader Herman Baertschiger, Jr., R-Grants Pass, said it was obvious why some businesses had supported the bill. “They’re just going to pass it on [to consumers],” he said. “It’s going to be regressive.”

Republican opposition to the bill was always certain, however. Far more important was the opinion of Sen. Betsy Johnson, of Scappoose, a moderate Democrat who does not shy from bucking her party leaders.

She has publicly shared Republicans’ insistence that lawmakers fix the state’s pension system, and made clear before voting Monday that she wouldn’t be the eighteenth vote necessary to pass the tax without assurances there would be progress.

Democratic leaders unveiled a package of tweaks to the state's Public Employees Retirement System, or PERS, last week.

“Leadership has promised me there will be meaningful PERS reform before the end of this session,” Johnson said. “I want to believe them .… I have chosen to believe them.”

If that promise falls through, Johnson assured, “I will help fight it at the ballot box.”