2007 Legislature adjourns June 28 

It’s somewhat odd – but most welcome – to be issuing a legislative adjournment update on a Thursday in June before sundown. Lawmakers finished up Thursday around noon and skipped the more usual late-night/early morning finale. This was the shortest session since 1995 and one could argue one of the most ambitious. Democrats controlled both houses for the first time in 16 years, and they were determined to have a productive and orderly session. 

By and large they succeeded. Not everyone will agree with everything they did, but they deserve credit for setting an agenda, getting most of it done, and letting us all enjoy summer. 

They plan to return in February for a short 30-day session. But the goals and agenda for that return are not yet set. It’s all part of an effort by some leaders to show the voters of Oregon that it’s time for annual sessions. We shall see. 

By and large, it was a good session for the high-tech industry. Lawmakers invested in higher education overall and in our engineering initiatives specifically. They put money into new initiatives from the Oregon Innovation Council. They created a rainy-day fund (with a strong assist from the business community). They left in place a favorable Oregon corporate tax structure. They avoided regulating emerging RFID and VoIP technologies. 

Challenges ahead: lawmakers approved an ambitious manufacturer-financed statewide computer and television recycling program that AeA members will work to make happen. They failed to make much-needed investments in highway projects. And they passed a sweeping new mandate for alternative electric energy supplies that could impact rates for manufacturers in the future. 

Outlined below is a summary of major initiatives we were involved in as AeA. The normal type is our agenda going into the session. The boldface text shows the results. 


SPECIFIC LEGISLATIVE AGENDA ISSUES AND 2007 SESSION RESULTS 

Higher education and research advancements in technology 

AeA will continue its successful drive to enhance the quality and capacity of our public university engineering and computer science programs. The Engineering and Technology Industry Council (ETIC) is the main focus of these efforts. ETIC requests $34 million in new general fund support for 2007-09 to enhance the existing base budget of $22 million. Funds will provide greater access for students, enhanced excellence, greater research, and substantial private sector matching funds. A key element of this initiative is outreach to young students to encourage them to enter the technology degree pipeline. AeA will continue the AeA Technology Scholarship program in 2007 for top ranked high school students wishing to stay home in Oregon to study engineering and other related disciplines. 

AeA also supports continuing investment in the Oregon Nanoscience and Microtechnologies Institute (ONAMI), which has brought together academia, private industry, and federal support to advance nanotechnology research in Oregon. 

RESULTS: 

Governor Kulongoski budgeted $17 million for ETIC enhancements for 2007-09 on top of the existing $22 million base budget. Legislators initially approved only $7 million for the package, but due to heavy lobbying from AeA and ETIC supporters, they eventually approved $15 million, which will allow for hiring of 35 new professors. They also approved $12 million for investments in new laboratories and equipment for ETIC. The total investments constitute one of the largest targeted areas of industry-sector funding within the higher education budget and a major sign of legislative approval of this successful 10-year program. Tech companies will see more locally trained engineers over coming years and additional opportunities to do research with top-flight new faculty. 

Lawmakers also approved $28 million in new funding for the Oregon Innovation Council proposal, which includes $9 million in additional funding for the ONAMI research consortium 


Protecting the digital economy 

AeA will work with state agencies, lawmakers, and other stakeholders to craft identify theft protection legislation covering such areas as notification of customers when a breach has occurred in digital records. Such legislation should be modeled after existing legislation already in place in many other states. AeA also will monitor closely any other proposals to regulate online transactions and communications (such as legislation regulating spyware, or “phishing”). 

RESULTS: 

AeA played a central role in crafting an identify theft proposal that covers security breach notification, credit reporting freeze, and data safeguards. The final bill (SB 583) is in line with AeA’s national standards for reasonable legislation that protects consumers and is sensitive to the needs of the business community. No bills were introduced to regulate spyware or “phishing.” 

AeA also worked successfully to oppose a proposal from the state Public Utility Commission to subject Voice over Internet Protocol (VoIP) communications to state regulation. The Federal Trade Commission and some federal courts have said VoIP should be free from state regulation. 


State tax policy 

AeA will defend key elements of the existing corporate tax structure in Oregon while being open to changes directed at enhancing stability of the system. Specifically, we will defend recent changes in multistate corporate apportionment (“single sales factor”) and the increased cap for the R&D tax credit. We also support the state policy of remaining connected to federal tax code provisions. AeA believes Oregon needs a larger reserve fund for future downturns that could be achieved by raising the cap on the educational stability fund from 5% to 10%, as well as discussing ways to more quickly capitalize the fund beyond the current dedication of a portion of lottery revenues. 

Long-term, AeA believes that an overall examination of the state’s tax policy is warranted. Among the possible ideas to generate a better economic climate as well as increased stability include reductions in the capital gains tax and reductions in the state’s high marginal income tax rates, coupled with implementation of a consumption tax. AeA understands that any such discussion must be bi-partisan if it is to have any chance with Oregon voters. 

In the short-term, AeA is open to discussions about the corporate kicker (with the possibility of dedicating it to a reserve fund) and reasonable increases in the corporate minimum tax. 

RESULTS: 

AeA formed and led a coalition of business associations that successfully lobbied for a new rainy day fund for Oregon to help alleviate budget cuts in times of economic downturn (HB 2707). Initial capitalization of the fund will come from a one-time diversion of the Oregon corporate tax credit “kicker” for 2007. Passage of this fund avoided an alternative proposal to permanently repeal the corporate kicker. 

AeA successfully opposed various proposals to repeal existing pro-business tax incentives, arguing that such initiatives as the single-sales factor and the R&D tax credit have helped spur investment and job creation. AeA also stopped a proposal to require corporations to publicly disclose their tax returns. 

Lawmakers bogged down in efforts to revise the state’s $10 corporate minimum tax. The business community was prepared to support a modest adjustment to the tax, but Democrats in the House insisted that the change raise more than $100 million in new revenue. Business groups and the House Republicans were unwilling to support such a large amount. 

Lawmakers left with passage of HB 2530, which will set up a statewide commission to examine Oregon’s overall tax structure. AeA will monitor that process. 


Defending global sourcing 

AeA will oppose legislation that would restrict the ability of a company to sell products to the state if the company does work outside the U.S. Procurement policies should be based upon the best functionality to the agency and the lowest cost to taxpayers, not the geography of the product’s sourcing. 

RESULTS: 

AeA successfully opposed a variety of proposals that would have: limited the ability of companies to sell to the state if they do work offshore, opposed Fast Track trade authority for the President, and regulated foreign call centers. Despite the control of the Legislature by pro-labor union Democrats, AeA made the case that Oregon’s economy is tied to foreign trade and companies that compete globally (HB 2831, HB 2836, HB 2903, HB 3340, and HJM 18). 


Science-based environmental regulations 

AeA supports strong environmental protections that are grounded in science and provide certainty and timeliness. AeA will support funding for the Oregon Department of Environmental Quality to allow the agency to perform its regulatory functions in air, water, and hazardous waste. AeA supports efforts to clean up the state’s rivers and lakes, but will oppose unworkable and costly proposals to ban “mixing zones” in water discharge permits for industrial and municipal permit tees. AeA also opposes bans on the use of chemicals (e.g. certain flame retardants) that have not been shown to be an environmental threat. AeA will closely monitor proposals to address the issue of recycling used computer products (“E-waste”). 

RESULTS: 

AeA worked with business and environmental groups to ensure continued funding for the state’s Department of Environmental Quality. A well-funded DEQ keeps regulatory authority in Oregon, rather than with the federal Environmental Protection Agency. AeA also worked to defeat an unworkable ban on wastewater discharge “mixing zones” used by manufacturing facilities. It was replaced with language requiring a broad study of water quality in Oregon (SB 737). 

Lawmakers unanimously passed a new computer and television recycling law for Oregon (HB 2626) On this proposal, AeA stayed neutral because of differences among member companies. Hewlett Packard worked hard to craft the bill, which is based on the concept of producer responsibility. 

AeA also worked with the DEQ to prevent a rigid plastics packaging rule going into effect next January that would have created huge problems for manufacturers of electronic products. An initial finding that plastics recycling rates had fallen below required levels was revised upwards to preclude the new mandate. 


State procurement 

AeA supports efforts to encourage the state to purchase IT products and software locally from Oregon vendors. But AeA opposes laws or regulations dictating purchasing preferences for specific software or hardware platforms. Functionality and full lifecycle cost should be the controlling factors in procurement. 

RESULTS: 

The House held a brief hearing on proposals to study the use of open-source software in state agencies and require state documents to be stored in open source formats (HB 2005 and HB 2920). AeA did not take a position on either bill, and they didn’t move beyond the single hearing. State agency representatives testified that they already were addressing this issues. 


A business-friendly legal system 

AeA opposes proposals to relax rules on protective orders issued during civil litigation. AeA also opposes proposals to limit the use of noncompete agreements between employers and employees. 

RESULTS: 

No proposals involving changes in protective orders were introduced. The Senate passed legislation that made fundamental changes to the use of noncompete agreements by Oregon companies (SB 248). AeA worked successfully in the House to change the scope of the Senate bill, but it still limits some of the uses of noncompete agreements, precluding enforcement of agreements with exempt/low paid employees and limiting terms to no more than two years. 


Other issues of general business concern 

SB 838 will require an aggressive investment by investor-owned utilities in Oregon in alternative electrical energy sources between now and the year 2025. Major industrial users of electricity, including some AeA members, will closely monitor the future of this law, due to concerns that such mandates could drive up energy rates and the cost of production. Lawmakers also approved an expansion of the Business Energy Tax Credit, which may help some member companies reduce the internal costs of energy conservation improvements. 

SB 2 bans discrimination in Oregon on the basis of sexual orientation and HB 2007 creates domestic partnerships in Oregon for same-sex couples. Businesses will need to ensure that their human resource and benefits policies are in line with the new law. 

SB 1036 establishes a new excise tax on construction with the funds to be used to help build K-12 schools. The tool is an option that local school districts can choose to implement. AeA worked to place a cap of $25,000 on the new tax per building project (SB 1036). 

A transportation funding package of $100 million to bolster non-highway projects -- such as air, marine and rail – was approved. But despite the pleas from the business community for a more robust funding package for highways and congestion relief, lawmakers couldn’t overcome their partisan differences to finalize a spending proposal. 

This page was last updated on 06/29/07.  
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