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$200-$300 Million Heist

Unfortunately it happened almost a year ago. We're already screwed; we just have to decide how we want to take it. Read below about the trail left by the legislature as it decided we don't need basic healthcare or schools ... and nullified our decision to keep our tobacco settlement funds. Please feel free to comment and/or add information.
$200 Million Dollar Heist

SB832: $200 Million Dollar Heist
... one way or another

The ballot during the May 21st election contains two measures, 10 and 11, that change the Oregon constitution and award OHSU more power and more of our public money.

Measure 10's objective is to allow private gain from discoveries that were funded, at least in part, with public money. Its stated purpose is to allow "public universities and colleges to hold and dispose of stock received in exchange for technology they create."

No one has scrutinized publicly the initial rationale and wisdom of the original proscription in Oregon's constitution versus the ramifications and equitability of? now allowing a publicly funded university to have interest in private companies. Where is the public payoff on public monies? In uncertain projections of medical advances and jobs? What about direct public equity in profits made?

Measure 11 changes the Oregon constitution to create an exception to the constitutional debt limitation for general obligation bonds and directs the State Treasurer by law to issue general obligation bonds that would obtain net proceeds not to exceed $200 million to finance the capital costs of the Oregon Opportunity Plan, created by OHSU to expand their bio-tech industry. The total cost to Oregon over 20 years is estimated at $316 million.

If Measure 11 passes, general obligation bonds, backed by a direct promise on behalf of the State of Oregon to pay the principal, premium, if any, and interest on such bonds, can be issued and paid out of the general fund, taxes levied to pay the bonds, the tobacco Master Settlement Agreement money, or from other sources of revenue ... In contrast to higher interest revenue bonds backed solely by Master Settlement Agreement money from Oregon's settlement with big tobacco companies. Passage of Measure 11 purports to save $31.5 million over the next 20 years versus the higher interest revenue bonds.

Either way, we're footing the bill, a $316 million dollar bill if Measure 11 passes, and more if it doesn't ... while 370,000 of us have no access to basic healthcare ... while schools are closing ... while janitors are losing living wage jobs. The questions on the ballot now pertain only to how we want to be screwed.

What to do now? Demand accountability from your elected representatives and OHSU. Call. Don't make this easy.

3 burning questions to ask the public servant of your choice:

  • Where is the tobacco settlement money right now?
  • In what form does it exist right now?
  • Where exactly is it going?
?? [toc:]

Sponsors of SB832:
Senator David Nelson
nelson.sen@state.or.us


Rep. Mark Simmons
simmons.rep@state.or.us

Co-Sponsors of SB832:
Senator Kate Brown
brown.sen@state.or.us

Senator Margaret Carter
carter.sen@state.or.us


Senator Bev Clarno

clarno.sen@state.or.us

Senator Verne Duncan
duncan.sen@state.or.us

Senator Ted Ferrioli
ferrioli.sen@state.or.us

Senator Tom Hartung
hartung.sen@state.or.us

Senator Ken Messerle

messerle.sen@state.or.us or messerle@att.net

Rep. Dan Doyle

doyle.rep@state.or.us

Rep. Dan Gardner
dgardner381@cs.com

Rep. Betsy Johnson

betsy@betsyjohnson.com

Rep. Karen Minnis
minnis.rep@state.or.us

Rep. Greg Smith
smith.g.rep@state.or.us

Rep. Bruce Starr
repstarr@brucestarr.org or
starr.rep@state.or.us

Rep. Ben Westlund?
westlund.rep@state.or.us

Rep. Bill Witt?

witt.rep@state.or.us

Table of Contents of Background?
History of the Tobacco Settlement
History of the Money Grab
- HB2007 & Measure 89
- SB 832
- Measure 11

Oregon's Attorney General opposed HB 2007 and Measure 89
Governor John Kitzhaber reservations about SB832
Clarifying SB 832 - What was the emergency?
Rationale for Oregon Opportunity Plan
Town Hall Meeting - Budget Cuts January 23, 2002
Transparency Troubles
Programs Suffering

General Information Sources
Correspondence re: SB832
?? [toc:] [/TOP]

State Treasurer:
Randall Edwards
ost.webmaster@state.or.us

http://www.ost.state.or.us/wrapinit.htm

Tobacco Settlement FAQs

History of the Tobacco Settlement

  • 46 states, including Oregon, settled with 6 tobacco companies in December of 1998

  • Waiving their rights to further sue those tobacco companies

  • In order to collect part of the $195,918,675,920 promised as part of the settlement through 2025.

  • State of Oregon v. The American Tobacco Co., et al., Circuit Court, Multnomah County, No. 9706-04457 (Or.)
  • Current OR Settlement Funds:
    $180,588,729.87 paid to State of Oregon through 2001
    • Distributed through General Fund
  • The basis of the suit leading to this settlement was state burden of caring for people with smoking-related disorders.
  • So, states are encouraged to spend money from the Master Settlement Agreement on treating smoking related disorders and prevention, but there is no provision in the Master Settlement Agreement (MSA) as to how the money is spent.
    • "Funds will be appropriated according to state law"
?? [toc:] [/TOP]
History of the Money Grab ? [/TOP] [toc:]
  • HB 2007 was passed in the Legislature in 1999 and "Referred to People" on the 2000 ballot:
  • ... as Measure 89
    • To allot an annual payment of 7 percent, up to a maximum of $10 million over the life of the fund, is available to the Oregon Health Sciences University for the Oregon Health Sciences University Medical Research Partnership
  • ... which FAILED.
    • 58% to 42%
  • So, the Oregon Senate introduced SB832 on February 2, 2001:
    • Declared an emergency, July 1, 2001
    • Allotted approximately $200 million of the tobacco settlement to OHSU
      Directed Oregon Health Sciences University to create Oregon Opportunity Plan (OOP) to capitalize on biotech opportunities
    • Authorized issuance of revenue bonds to be paid from tobacco Master Settlement Agreement, proceeds to be used for Oregon Opportunity program costs.
  • So, instead of "... an annual payment of 7 percent, up to a maximum of $10 million over the life of the fund" (Measure 89)
  • The Senate (SB 832) dedicated approximately $32 million per biennium up to $200 million to OHSU/Oregon Primate Center expansion
?? [toc:] [/TOP]

HB2007

Measure 89

SB832

Measure 10

Measure 11

Which brings us to Measure 11 on the May 2002 ballot ? [/TOP] [toc:]

  • Will change Oregon Constitution to allow OHSU to use
    • General obligation (G.O.) bonds
    • Instead of the more expensive revenue bonds
  • G.O. bonds would net c. $200 million as opposed to revenue bonds netting about $165 million due to a higher interest rate
  • Bond proceeds will finance construction of new research facilities and recruitment 300 new researchers to Oregon

Measure 11 - "Buying" Votes

  • Voters' Pamphlet Arguments Pro/Con: $500 a pop
  • 1 Argument in Opposition
    • Arguing against the proposed tram to OHSU
  • 13 Arguments in Favor
    • 7 of which were posted by Jim Hulden of the Oregon Opportunity Committee
  • That's $3,500 worth of propaganda
  • Did we pay for that?

It's this incongruity of resources that allows politicians like Ron Wyden to assert he has no knowledge of any organized opposition to the biotech expansion plan

?? [toc:] [/TOP]

Measure 11

Arguments in Favor

Lone Argument Against

Ron Wyden Congressional Field Hearing - April 2002

The wages of untrained lab-techs, such as are used at the Oregon Primate Center may be even lower ... other entry level or "unskilled labor," lower still

No guarantees of family wage jobs for most job-seekers

?

Oregon's Attorney General, Hardy Meyers opposed HB 2007 and Measure 89 in 1999: ? [/TOP] [toc:]

  • "I opposed HB 2007 in the legislature and will oppose Ballot Measure 89," Myers said. "The measure indefinitely locks up almost all the settlement proceeds despite urgent needs related to expansion of health insurance, programs of smoking prevention and cessation, and enforcement of consumer protection laws, especially those related to youth access to tobacco products."
  • "The measure also commits almost all the interest earnings to programs which, although worthy of added public support, are not directly related to the use of tobacco, especially by minors. According to the Oregon Health Division, 1 in 4 Oregon teenagers smokes regularly. We obviously have a significant problem that needs our immediate attention," Myers said.
?? [toc:] [/TOP]

Oregon's Governor John Kitzhaber reservations about SB832

Governor Kitzhaber testified in favor of the bill, but had two major concerns:

  • 1. Overall impact of the cost of the program on the general fund
  • 2. Overall impact of the costs on the ability of people to get basic healthcare here in Oregon
    • SB 832-A SENATE REVENUE COMMITTEE PUBLIC HEARING April 2, 2001

1. Impact: General Fund

  • Dark side of biomedical research has to do with the cost of new diagnostic and therapeutic procedures ... cost of healthcare today is the major barrier to access to basic healthcare services for many Oregonians.
  • 370,000 Oregonians, or 11% of the population, lack financial means to access healthcare services ...
  • OHSU claims an investment now will save costs in the future
    • But that is not the history of medical technology
    • New diagnostic and therapeutic procedures increase healthcare costs system-wide

Rhetoric v. Reality

  • OHSU has historic mission to
    1. Care for the poor
    2. Teach the next generation of healthcare professionals
  • Increased focus on generating revenue from patient care often diminishes:
    • Care for low-income sufferers of serious complex chronic disease
      • Serious complex chronic diseases do not make money for hospitals
    • Time available for teaching

2. Impact: Healthcare Access

  • Healthcare costs growing in double-digits
  • Public and private payers manage that cost increase by reducing access
    States generally change income eligibility levels for Medicaid
    Private sector reduces dependent coverage or drops coverage altogether
  • ... or ...
  • Amounts paid to providers are reduced
  • Either way, number of people who do not have access to healthcare increases

Three main questions to consider:

  • Eligibility: Who is covered?
  • Benefits: What is covered?
  • Cost: How is it paid for?

Overall Impact on Healthcare

  • Need to consider broadening coverage floor before raising research ceiling
  • Policy and higher social priority dictate we ensure everyone in Oregon has access to basic healthcare services before investing in new, expensive technologies
  • Should be direct return on investment, ensuring access for medically indigent

Work group requested to:

  • Examine implications of high technology on access to basic care
  • To include:
    • Representatives from OHSU
    • Representatives from the Governor's office
    • Interested legislators
    • Others
?? [toc:] [/TOP]?? [toc:] [/TOP]

From statements made during SB 832-A SENATE REVENUE COMMITTEE PUBLIC HEARING April 2, 2001

Clarifying SB 832

What was the emergency?

  • "I'm not exactly sure for the reason behind the emergency clause. The emergency clause in this particular bill may have had to do with allowing OHSU to get the program up and running without having to wait 90 days after session until the bill goes into effect."

Bruce Anderson Legislative Director House Majority Office

?? [toc:] [/TOP]

Is the current budget crisis less of an emergency?

Where are our legislators and their emergency appropriation bills now?

Rationale for Oregon Opportunity Plan

www.ohsu.edu/about/opportunity/
Increasing Medical Research at OHSU Will Benefit all Oregonians
  • "Each dollar invested in OHSU returns $14 in direct educational, health care, and research services, and another $35 in indirect benefits for Oregon communities."
?? [toc:] [/TOP]

Based on what data? Source materials please...

  • In 1999, the biotechnology industry created 437,400 jobs nationwide.1 OHSU scientists, who have introduced more than 400 inventions since 1985, played a role in this economic boom.

How many jobs in Oregon?

What is the median pay?

OHSU Delivers Statewide Economic Benefits

  • OHSU scientists have introduced about 408 inventions since 1985. Patents from these inventions have been licensed to companies worldwide and represent a growing revenue stream
?? [toc:] [/TOP]

Source data please? Where is that revenue stream flowing?

  • Drives $2 billion in regional economic activity annually
SOURCE DATA PLEASE.
  • Returns more than $22 million per year to the state through employee income taxes
How gracious of them.

So how much income tax does OHSU itself pay ... compared to state money it gets? SOURCE DATA PLEASE.

  • Rural Health Institute - $5 million of the funds requested from the state legislature - matched by another $5 million from privately raised funds - will be invested in a Rural Health Institute
  • HERON - Health, Education, Research Oregon Network - $5 million more - also matched by $5 million in privately funds - to develop and extend high-speed Internet network connecting with more than 179 leading university and research institutes nationwide
What safeguards ensuring this happens?

Medical Breakthroughs at OHSU

  • OHSU scientists have introduced three to four inventions a month for the last two years.
    • The link that appears to document these "inventions" merely lists self-proclaimed breakthroughs which may never prove themselves worthwhile
      • http://www.ohsu.edu/about/mission/research/breakthroughs.shtml
  • The university has earned more than $7 million managing patents and intellectual property rights, earning $2 million last year alone.
    • But they're asking for, and will get, $200 million
    • When OHSU makes money on patents and intellectual property, does the tax payer who financed the research get any of that money?
    • Where does that money go?
?? [toc:] [/TOP]

List of inventions and their development history please.

"Breakthroughs"

When OHSU makes money on patents and intellectual property, does the tax payer who financed the research get any of that money?

Where does that money go?

Brian Druker's Cancer Drug: Oregon's Lost Opportunity

Glivec: It was developed in a test tube

  • OHSU's intention to expand its animal research facilities will not lead to more of these valuable discoveries
  • The fact that there are over 100,000 deaths from FDA-approved drugs per year is spurring research into drugs tailored specifically for each individual ...
?? [toc:] [/TOP]

?

If humans are that different from one another, what possible CAUSAL benefit comes from testing on NON-HUMAN ANIMALS?

Benefits of the OHSU/OGI Merger

  • 2001 merger will accelerate the transfer of technology from the lab to the private sector, in part by creating and attracting new companies
  • The total research funding for the combined institutions is currently more than $210 million annually
  • One project : computer chip implants for medical treatments
?? [/TOP] [toc:]

?

?

(Chip? implants from the government. yippee.)

Town Hall Meeting - Budget Cuts

January 23, 2002

  • This Town Hall meeting was called to discuss an actual state of emergency instead of one invented to expedite an agenda
  • Among those present: Senator Kate Brown and Representative Diane Rosenbaum
  • Kate Brown professed no recollection of the bill (SB832) she co-sponsored or the $200 million dollar deal to OHSU

Kate Brown Pleads Ignorance

  • Asks for opportunity to research and respond to 3 questions:
    • Where is the tobacco settlement money right now?
    • In what form does it exist right now?
    • Where exactly is it going?
  • Kate Brown never responds.
?? [/TOP] [toc:]

Senator Kate Brown
503-986-1700
900 Court St. NE, S-323
Salem OR 97301
Fax: 503-986-1080
brown.sen@state.or.us
http://www.leg.state.or.us/brown/

Dear Senator Brown, (Feb 22)

On Wednesday, January 23, 2002, I attended a town hall meeting, at which you were present, regarding Oregon's budget crisis. I asked you why, after Oregonians voted down Ballot Measure 89 (which would have given OHSU $43 million over 15 years), the legislature passed SB832, giving OHSU approximately $200 million for expansion of the Oregon Regional Primate Research Center ... from a fund that exists at least in part because of the tobacco industry's success in using animal research to prove tobacco did not cause cancer.

You said you did not recall the bill at all, did not know that OHSU/ORPRC was getting money from the tobacco settlement fund, did not think it was a "done deal," that if it is a "done deal" the funds can't be reallocated to Oregon's education, OHP or programs for the indigent because "contracts are probably signed," that you had no idea where the tobacco money is, in what form it exists or what is to be done with it. You asked that I give you my email address so you could research it and get back to me. You have had approximately one month to do so, and I eagerly await your reply.

Senator Brown Was Too Busy to Respond

  • Too busy to fulfill her promise and provide straight-forward information about SB 832 and the $200 million
  • Because she's writing about dog parks

http://www.portlandtribune.com/archview.cgi?id=10996

... in the same issue of the Portland Tribune that addresses Measure 11 and the controversy surrounding it

http://www.portlandtribune.com/archview.cgi?id=10907
http://www.portlandtribune.com/archview.cgi?id=10887

Some legislators were kind enough to respond to our queries

They say the $200 mil of settlement money is to be used as debt service

But, their answers never quite explained, in plain language:

  1. Where the tobacco settlement money is RIGHT NOW.
  2. In what form it exists RIGHT NOW.
  3. And where exactly it's going.
?? [/TOP] [toc:]

Transparency Troubles

  • Having to work so hard to get information impedes true representational democracy
    Citizens seem to be considered adversaries
  • Legislators seem unwilling or unable to obtain and provide the public with an accounting of what public money is used for at OHSU
  • OHSU retains a murky private/public status whereunder it enjoys the protections of both and the accountability of neither
  • For a private institution, OHSU has an awful lot of our money and wants even more
    WE WANT TO SEE THE NUMBERS. WE WANT TO SEE EXACTLY HOW OUR MONEY IS BEING SPENT.
?? [/TOP] [toc:]

Programs Suffering

Oregon Project Independence (OPI) (http://www.co.multnomah.or.us/ads/commcare/opi.html)

  • Program of in-home services designed for people who do not qualify for Medicaid but are low-income and need services to prevent premature institutionalization.
    • Clients who receive OPI services are as frail as those qualifying for Medicaid. Multnomah County received $1.3 million per year for OPI services. The State OPI budget is approximately $6.5 million per year.
  • OHSU is conducting misguided animal research trying to "cure" Alzheimers while budget cuts are stripping seniors of their property and dignity

Indigent/Low-Income Care

Ironically, organizations such as OHSU and the March of Dimes spend a lot of money on animal research, seeking "cures" for conditions they admit are created by a lack of access to medical care, especially pre-natal care

Their money-grubbing denies funds to programs that PROVIDE such care, perpetuating those very problems

?? [/TOP] [toc:]
General Information:

OR State Senate information: http://www.leg.state.or.us/senate/senateset.htm
OR State House information: http://www.leg.state.or.us/house/houseset.htm
2002 Voters Guide - Measures: http://www.sos.state.or.us/elections/may212002/guide/mea.htm

?? [/TOP] [toc:]
Correspondence re: SB832

Initial Letter

Dear Senator/Representative,

I'm looking for some clarification on SB 832, which you cosponsored. From the 2001 session, it authorized money from the Tobacco settlement to be used for OHSUs Oregon Opportunity plan. I am unclear on what revenue bonds are. Will OHSU be only able to use revenue from these bonds and the principle remains the property of the state? I also would like to know why this bill was passed as an emergency measure. What was the emergency? I realize that in November we will be voting on changing the state constitution in regards to these bonds but no one seems to understand exactly what is happening with this 200 million dollars of tobacco money and OHSU.

Legislative Responses:

Representative Bruce Anderson <Bruce.Anderson@state.or.us>

Thanks for your email on SB 832. The Chief Sponsors on the bill were Sen. Dave Nelson, the Senate Majority Leader, and House Speaker Mark Simmons. Rep Minnis was a co-sponsor on that bill along with 16 additional senators and representatives. The OHSU website (http://www.ohsu.edu/about/opportunity/) has quite a bit of information on this program. Here's a great summary from that website on what this program is and how it is funded: "The Oregon Opportunity is an initiative to accelerate and expand OHSU's biomedical research activity. OHSU will raise $300 million from private sources. Gov. John Kitzhaber has signed into law Senate Bill 832, the "Oregon Opportunity Act," authorizing up to $200 million for investment of research facilities at Oregon Health & Science University. Senate Bill 832 dedicates approximately $32 million per biennium of National Tobacco Settlement funds for the construction of research labs and other facilities." Revenue bonds are allowed by the state constitution and are funded by revenue-generating activities (e.g. lottery, highway user fees [like the gas tax]). Revenue bonds are one method of raising funds for the program under SB 832. Another option for funding under SB 832 are general obligation bonds issued by the state - but those are contingent on House Joint Resolution 19 (now known as Ballot Measure 11) being passed by the voters at the May Primary Election. In either case, money from the Master Tobacco Settlement would fund the repayment. I'm not exactly sure for the reason behind the emergency clause. If a bill has no stated effective date, unless it is vetoed by the Governor, it has 90 days from the moment the Legislative Session adjourns until the Act becomes operative. The emergency clause in this particular bill may have had to do with allowing OHSU to get the program up and running without having to wait 90 days after session until the bill goes into effect. Please let me know if you have other questions on this bill.

Regards,
Bruce Anderson
Legislative Director House Majority
Office 503.986.1400
Fax 503.986.1347

Senator David Nelson <Nelson.Sen@state.or.us>

Thank you for contacting me. I appreciate your interest in the Oregon Opportunity. Many bills are passed with an emergency clause even though there is no emergency. It is an opportunity to begin implementing immediately rather than in the normal 90days. In this case, the emergency clause enabled OHSU Foundation to begin raising funds privately as soon as the bill was passed and signed by the governor. The tobacco money is to be used for debt service on the bonds only and since the tobacco money is thought to be at greater risk than general obligation bonds the state will be able to save $35M dollars in debt service if the ballot measure passes. The $200M from the state through bonding and the $300M raised privately by the Foundation is a public - private partnership that will bring the biotechnology industry to the forefront in Oregon. It will further diversify our economy and will help rural areas of the state through Eastern Oregon University, OIT and likely Southern Oregon and Bend. Labs in these sites will serve as incubators to state up businesses that can function in rural parts of the state.

Dear Senator Nelson,
Thanks for answering my question about SB 832. I now understand the emergency clause but I still need a very straightforward explanation of the bonds. Are the bonds money that is being given or being loaned to OHSU? Is it accurate to say that OHSU is being given 200 million dollars of the tobacco settlement? The money is to be used for debt service, does that mean they are being given the money in addition to the bonds? Whose is this debt? Sorry for not understanding but if we are going to be voting on part of this money, lay people need to be able to understand it. Thanks -


The tobacco money is used to pay off the debt so there is not a double dipping situation. the idea is that the private sector will raise an additional 300 million to help create the bio tech industry. A billion dollar industry would return 90 million each year to the tax coffers of the state. This is a sound economic idea that will benefit schools and health care by creating more tax revenue and expanding the base of our economy. Please support the ballot 10 and 11.

David Nelson
Senate Majority leader


Senator Ted Ferrioli <Ferrioli.Sen@state.or.us>

OHSU will use these funds to research, develop and bring new medical technologies, including treatments and pharmaceuticals to market--retaining an equity interest in the new developments. SB 832 allows the sale of bonds, using the tobacco settlement money--and lottery funds--to repay the bonds. In this way, $200 million is available to invest in OHSU research and development at low interest rates with guaranteed repayment. Why? To quickly improve Oregon as a medical technology center.

Thanks,
Senator Ted Ferrioli

Thank You for all your hard work and research 20.May.2002 23:01

Mike-d. cimokru@hotmail.com

This web page is done very well.
I like how there is links to everybodys'e-mail and there part in the event.
Keep up the good work.

Tobacco funds update 07.Apr.2003 13:19

show us the money

Oregon settlement funds through 2025 -- $2,248,476,833.11

Oregon total thru 2002: $275,996,942.88

Oregon total thru 2003: $372,308,091.44

 http://www.tcsg.org/tobacco/settlement/totalfunds.htm