Gov. Kate Brown says she will not recommend a suspension of Oregon’s new corporate activity tax, contrary to what groups such as the Portland Business Alliance have asked her to do.
Brown made the statement Wednesday, April 22, in an hourlong video conference arranged by the alliance, which says more than 1,000 people listened in.
The governor and her chief of staff, Nik Blosser, also outlined their emerging plans for restarting public life and business activity that have been frozen by the coronavirus pandemic. As Brown spoke, the Oregon Health Authority announced 57 new cases for a total of 2,059; the death toll remained at 78.
Brown responded to a comment from Craig Smith, lobbyist for Food Northwest, formerly known as Northwest Food Processors Association. Businesses have organized in an attempt to persuade the governor and Legislature to suspend the tax for six months. Smith said a suspension would allow some businesses to retain money for cash flows while their activity is curtailed or shut down.
The new tax was approved by the 2019 Legislature to raise a projected $1.175 billion to pay for school program improvements under the Student Success Act. Quarterly reports are due April 30, July 31, Oct. 31 and Jan. 31.
Brown said she will ask the Department of Revenue not to penalize businesses for filing such reports late. She also said that businesses with less than $1 million in Oregon commercial activity already are exempt from the tax, proceeds from which go into an earmarked fund.
“We are not talking about your local pizza shop, corner store or your barber,” she said.
Public schools, which get the lion’s share of their operating money from the state budget, have been closed since mid-March and will remain closed through June.
“We know that closure of schools due to COVID-19 is going to affect children across the state. They are missing out on weeks of learning, even as our schools and our teachers are moving mountains to implement distance learning,” Brown said.
“The investment we make now in our schools via the Student Success Act will help our state’s children recover and get us back on track for the future of Oregon.”
Only the Legislature can suspend a tax, and lawmakers are unlikely to meet in a special session before the state’s next quarterly economic and revenue forecast on May 20.
Brown said the numbers are still being developed. But she said the state budget will be affected by the economic downturn — the number of unemployment claims filed in the past four weeks are more than double the 147,000 net jobs lost during the most recent recession in 2007-10 — and the resulting decline in personal and corporate income taxes, which account for more than 90% of Oregon’s general-fund state budget.
Brown also said that in addition to the usual increased demands on some services, such as state-supported health care for low-income people, the downturn has resulted in new staff expenses for the Employment Department and Oregon Health Authority and technology for state employees to enable them to work from home.
“We are going to face some difficult budget decisions in the coming months as those bills come due and our state revenues adjust to the new economic reality unfolding before us,” she said.
“But our normal tools (for cost-cutting) are not particularly helpful right now,” such as a hiring freeze.
The governor can order an across-the-board cut in most state agency budgets, but the limit is 2%.
Brown has joined governors across the country, Democrats and Republicans, urging Congress to approve aid to states and local governments. Congress did not do so in its latest $484 billion coronavirus aid package — most will go to small businesses and hospitals, and $25 billion will go toward virus testing — but the issue is likely to resurface in discussions about the next aid package.
Not business as usual
Brown and Blosser discussed elements of their emerging plan for reopening public life and business activity. Blosser said he hoped elements of the draft, which is being worked on by groups focused on specific industry sectors, would be made public by May 4.
Among the groups: restaurants, which have been limited to takeout and delivery services since Brown issued an executive order March 16; retailers, personal-care services and outdoor activities, all affected by Brown’s March 23 order for Oregonians to stay at home. Some businesses deemed essential, such as grocery stores and gas stations, were allowed to remain open.
Large-scale gatherings in churches, concerts and sports arenas are likely to be last to resume.
Brown restated the framework under which activity will be allowed to resume. Among the elements: widespread availability of testing and declines in the number of coronavirus cases; more personal protective equipment for health care workers, first responders, grocery and transit workers and adequate capacity in hospitals if there is a surge in cases; and tracking and isolation of infected people.
Results of a public opinion survey released by DHM Research of Portland just before Brown spoke indicate strong support in the state for all of those conditions.
Blosser said, even then, the crisis will end only when there is an effective treatment and a vaccine, neither of which exists now.
“Going back to business as usual, pre-COVID, is not going to be something that happens right away,” he said. “I think most of you know that — but it’s a sobering fact we all have to live with.”