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Steps the Legislature Took to Protect Vital Human Services Could be Undone

What the state legislature did to protect human services; what we need to do.


Steps the Legislature Took to Protect Vital Human Services Could be Undone


In relationship to the Oregon Health Plan, the 2003 Legislature found revenues necessary to:

1. Maintain Oregon Health Plan coverage for the OHP Standard population. There will be no enrollment cap for that program.

2. Expand the Children's Health Insurance Program and the Family Health Insurance Assistance Program to people with incomes up to 200% of the Federal Poverty Level. (Up from 185% of the Federal Poverty Level).

3. Reinstate and protect medical supplies and emergency dental care, physician services, lab/xrays, and prescription drugs for the OHP Standard population.

4. Provide hospital coverage for the Standard population but limit the coverage to emergency and urgent care only.

5. Restore the Medically Needy program at a reduced level that will not cover all those who were previously eligible. The program will include prescription drugs for seniors and people with disabilities with incomes up to 133% of poverty level, but with the addition of significant co-pays (likely 30% to 50%) required of participants. In addition, there may well be a cap on the number of participants. Those who receive eligibility notices should apply promptly.

The start date for these programs, changes and expansions in January 1st, 2004.

Federal Government approval is required before the changes can be implemented and is not assured. Oregon is also asking the Center for Medicare and Medicaid Services (CMS) for approval to move the line up on covered conditions and services by 30 places. CMS has not responded favorably to requests to move the line even fewer places in the past.

If CMS approval does not come before January 1st or if CMS denies parts of the waiver request, the OHP budget will be impacted and other steps will be taken to keep it at projected levels.

While the budget approved by the Legislature restores many critical cuts that had been made prior to the Legislature's adjournment, it did not fully restore services to the 2001 funding level.


In short succession, the Senate passed HB 2152, the omnibus revenue package, on August 19th, followed by the House on the 20th. The House debated heatedly for three hours on this bill, which passed 36-22 to narrowly meet the three-fifths majority required for raising revenue.

Without this revenue package, there would have been inadequate resources to fund the approved budgets for state services.

The revenue package that the Oregon legislature approved is the fairest package that any state has adopted this year. Working families will pay more income taxes, but those in income brackets below $40,000 per year will pay only $14 per year in higher taxes. In addition, businesses will pay 34% of the new tax collections - a notable shift of tax burden from individuals to business taxpayers, who now pay less than 20% of the state's general fund taxes.

Here are the elements of the tax package. Unless otherwise noted, all of these changes will apply to the 2003 and 2004 tax years and continue through 2005 in the likely event that the ending balance this biennium is not higher than expected.

Impose a Graduated, Personal Income Tax Surcharge for Three Years: Personal income taxpayers will pay the largest portion of this tax surcharge - a total of $701.3 million. Small businesses (S-corps, partnerships and sole proprietorships) will pay approximately 12% of this amount; individuals will pay the rest. But most of the new taxes paid by individuals will come from households with incomes above $100,000 per year, who will pay 60% of the new surcharges. A household with income of $50,000 to $70,000 per year will pay approximately $8 per month in higher income taxes.

Who pays: Individuals and business owners, with most of the increases coming from those with household incomes above $100,000 per year.

Limit Seniors' Medical Expense Deduction: Currently, Oregonians 62 years old and older get to deduct every dollar of their medical expenses from their state taxes, as opposed to amounts above 7.5% of adjusted gross income for all other taxpayers. HB 2152 raises the age threshold for this deduction to 65 over three years and phases out the deduction for those with incomes above $50,000 for a single taxpayer and $100,000 for a couple. This change will raise $86.5 million.

Who pays: Persons aged 62 to 65 and those 65+ with incomes above $50,000 (single) and $100,000 (joint).

End Bonus Depreciation for Business Owners Who Buy SUVs: This change limits expense and depreciation deductions for SUVs, with exceptions for vehicles used in farming, timber and construction. It raises $9 million.

Who Pays: Business owners who buy SUVs.

Repeal the Extraterritorial Income Exclusion: This repeals a special exemption for corporate income from foreign sales corporations, raising $36 million.

Who Pays: Foreign sales corporations.

Reduce Corporate Tax Credits by 20% for Three Years: HB 2152 reduces tax credits for corporations for three years, but exempts affordable housing credits and lets corporations carry-forward their unused credits to future years. It raises $7.7 million net by the end of the 2005-07 biennium.

Who Pays: Corporations that benefit from tax credits.

Raise the Corporate Minimum Tax: This is the most significant tax reform of the entire legislative session. Remember when PGE/Enron paid only $10 in taxes last year? Under this provision, its minimum tax would be $5,000. All C-corporations would have to pay minimum taxes ranging from $250 to $5,000 based on their in-state sales. All S-corps would have to pay $250 to $500, based on their in-state sales. All this would add up to $149.7 million over the next two biennia.

Who Pays: All Oregon businesses.

Reduce Preferential Treatment of Corporate Dividends: This change cuts in half the dividend subtraction now applicable to dividends received by one corporation from another. Although only temporary, through 2005, it raises $60.3 million over three years.

Who Pays: Corporations that receive corporate dividends.

Reduce Discount for Early Property Tax Payments: This provision cuts the 3% discount for early property tax payments to 1.5%, beginning in 2004. This will raise $43 million in the last year of this biennium from homeowners (56%) and businesses (44%).

Who Pays: Homeowners will pay an average of $30 to $40 per year in additional property taxes; businesses will pay widely varying additional amounts.

Establish a Long-Term Care Provider Tax: This tax on nursing homes will also generate additional federal matching funds that will help the industry. It will raise $12.5 million for the state's general fund in 2003-05.

Who pays: Nursing homes.

Other portions of HB 2152 will extend a ten-cent-a-pack tax on cigarettes that would otherwise sunset next year and continue to use the proceeds for the Oregon Health Plan and assess a provider tax on managed care health plans to fund continued hospital coverage for OHP enrollees.


Oregon Republican Party Chair Kevin Mannix is spearheading efforts to refer the temporary tax increase to the voters. If those efforts are successful, HB 2152 will be on the ballot on February 3, 2004. Defeat of the tax increase would lead to budget cuts as outlined in HB 5077, and would likely force legislators back to Salem.

Oregon Health Plan and health service cuts that would result if voters reject HB2152 are outlined below. $265.8 million would be cut from the Department of Human Services. That reduction is broken into five components related to the Department's broad appropriation levels.

If House Bill 2152 is overturned, the actual reductions will probably be much deeper than the items listed below. The discrepancy arises because the savings listed below assume between 18 and 24 months of savings. The House Bill 5077 reductions total about 11 percent of the Department's total 2003-05 General Fund budget. The reductions, however, would not begin until May 1, 2004. By that date, the Department will probably have only about $1,396.8 million General Fund left in its budget. This delay in implementation increases the percentage of DHS budget that will be cut if voters reject HB2152 to about 19 percent.

Health Services. Target: $224.1 million.

-- Eliminate Oregon Health Plan (OHP) coverage for the OHP-Standard population, $172.0 million. This eliminates OHP services for about 85,000 people per month. This represents dropping about 20 percent of the current OHP enrollees.
-- Eliminate the Medically Needy Program, $18.0 million.
-- Eliminate Community Crisis Mental Health services for adults and children, $15.7 million.
-- Reduce Alcohol and Drug Abuse Treatment capacity, $7.7 million.
-- Eliminate Tobacco Use Prevention funding, $5.7 million.
-- Reduce children's psychiatric day treatment (DARTS), $4.9 million.

Seniors and People with Disabilities. Target: $18.6 million.

-- Eliminate funding for clients in Survival Priority Levels 12 and 13, $10.9 million. This would eliminate services for about 1,200 people per month. This represents dropping about 3 percent of the current clients.
-- Reduce funding for Oregon Project Independence, $4.0 million.
-- Eliminate General Assistance Program, $3.5 million.


1. DECLINE TO SIGN: The first step we can all take is to do our best to keep the referral of HB2152 off the ballot.

2. EDUCATE YOUR COLLEAGUES, YOUR NEIGHBORS AND YOUR FRIENDS about the impact of a no vote if the referral gets on the ballot for a February vote.

3. REGISTER TO VOTE. HELP OTHERS REGISTER TO VOTE. LAUNCH A VOTER REGISTRATION CAMPAIGN FOR OREGON HEALTH PLAN ENROLLEES IN YOUR COMMUNITIES. Voters should be registered 21 days before the election. Friday January 9th is a good deadline if you want your vote to count.

4. Help Eligible Uninsured Oregonians enroll in and stay enrolled in the Oregon Health Plan. Over 40,000 of Oregon's uninsured children are estimated to be eligible for but not enrolled in the Oregon Health Plan.

The Oregonian

8/24 Editorial

Seek real answers in tax debate--"After seven and a half months, some of Oregon's most conservative legislators could not come up with a budget that adequately covered Oregon's needs without a tax surcharge. They couldn't do it because it can't be done. When someone asks you to sign the referendum petition attacking the Legislature's brave, difficult action, ask what their plan is for the state to 'live within its means.' Ask them to be specific and do the math. If they can't give you a real answer, don't sign the petition."

E-Board Members:

Sen Peter Courtney, D-Salem; Sen Kurt Schrader, D-Canby; Sen Joan Dukes,

D-Astoria; Sen Avel Gordly, D-Portland; Sen Steve Harper, R-Klamath Falls;

Sen Ken Messerle, R-Coos Bay; Sen Frank Morse, R-Albany; Sen Jackie Winters, R-Salem Rep Karen Minnis, R-Wood Village; Rep Tim Knopp, R-Bend; Rep Randy Miller, R-West Linn; Rep Tom Butler, R-Ontario; Rep Susan Morgan, R-Myrtle Creek; Rep Dan Doyle, R-Salem; Rep Wayne Scott, R-Canby; Rep Gary Hansen, D-Portland; Rep Alan Bates, D-Ashland.

E-Board Dates: Nov 6-7, 2003; Jan 22-23, 2004; April 8-9, 2004; June 24-25, 2004; Sept 16-17, 2004; Nov 18-19, 2004

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