The Student Success Act, touted as a solution for funding woes facing Oregon schools, has been decried by some Douglas County business owners as bad for business and bad for consumers.
Supporters for House Bill 3427 say it will raise more than $1 billion dollars in school funding. The additional revenue will come from a commercial activity tax of 0.57% on gross receipts for businesses that make more than $1 million in a fiscal year, beginning in 2020.
The Oregon Senate approved the bill Monday, and Oregon Gov. Kate Brown signed it Thursday. This comes after a four-day Republican walkout to deny Democrats the necessary quorum to vote on the bill. Republicans returned after concessions from state Democrats paved the way for the bill to be approved.
Roseburg Area Chamber of Commerce President Debbie Fromdahl opposed the bill in April, stating in a written statement that the legislation would be harmful to businesses and consumers.
“Gross receipt taxes are harmful to Oregon businesses and consumers,” Fromdahl wrote. “Ultimately, any new taxes will fall on Oregon’s businesses and adversely affect consumers — mostly our own citizens.”
She said she sees businesses becoming more inefficient in efforts to mitigate the cost by moving operations in-house or out-of state.
Mike Freed, who owns Freed Estate Winery in Winston, said the bill won’t affect his business since it does not meet state criteria for the commercial activity tax. That doesn’t change the fact that he thinks the bill is a tragedy for the entire state.
“There are many industries out there that have a very, very thin profit margin,” Freed said. “What if they only clear net $50,000 a year? They still have to pay the tax. It’s an unreasonable burden on business — Oregon business. It wouldn’t surprise me if it drives some business out of Oregon.”
Along with HB 3427, the Oregon Legislature is also considering other bills such as House Bill 2020 and House Bill 2029. Fromdahl said if all of them passed, they would create more than $5 billion in commercial taxes.
“Please understand that $5.67 billion in new taxes and fees is too big a burden for local businesses, especially in economically-challenged rural Oregon!” Fromdahl wrote.
Since grocery stores would be excused under the tax, Timber Country Coca-Cola President Bruce Hanna is checking to see if that includes his family’s company as well.
“Overall, it’s just disappointing to me that the Oregon Legislature continues to tax Oregonians, specifically businesses that are creating jobs instead of taking care of their spending problem,” Hanna said. “It’s not that Oregon can’t grow and business can’t succeed, but the Legislature needs to take responsibility for the spending and not just tax Oregonians more and more. For any business that falls in there, the bottom line is they’re going to pass the cost on.”
Freed said the current plan floated by state Democrats and others is the wrong solution to reform the Oregon Public Employees Retirement System. Republican lawmakers had said they would block a vote on the Student Success Act until Democrats promised to move forward on meaningful public pension reform.
“I’m saying the Legislature and the governor have to find a better way to more equally spread the burden of the hole they’ve gotten themselves into, especially public employees pensions,” Freed said.
Lee Paterson, interim superintendent at Roseburg Public Schools, said he is thrilled to see the state making education funding a priority, but he said the school district is waiting for the funding to be finalized before enacting any planned programs.
“We’re excited about the potential for increased funding, but there are still a lot of questions to be answered; specifically what the timeline is,” Paterson said. “We have issues in our budget that we have not been able to fund because of the limited funding that we have. We can operate at the same level we are currently, but we can’t provide new programs that we’ve kind of been anxious to start until that money is assured.”
Some of the Republican senators said they would consider a referendum if the act was not carried out well.
“The gross tax has been (placed) before the voters twice, and twice the voters turned it down by large majorities,” Freed said. “It’s a way to evade the will of the voters. I think that’s wrong.”
Oregon spent about $1,000 less than the nation on each student, according to the most recent data available from 2016 from the National Center for Education Statistics. The act will increase the Student Success fund by about $2 billion for each biennium and decrease personal income taxes by 0.25%.
Camron Pope, a teacher and president of the Roseburg Teachers Association, lobbied for the bill because he wants what’s best for his students.
“It’s going to give our students more access to services,” Pope said. “So when they do leave our system, they are ready to turn to jobs and be kind of pre-trained. I understand that this is going to be a financial impact to businesses, including small businesses in Douglas County, but I hope they realize they are investing in our future, and they are investing in kids who grow up in Douglas County and will want to stay in Douglas County.”