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Enough GOP senators return to end Oregon tax bill standoff (copy)

Republican state senators returned to the Oregon Senate in Salem on Monday, ending a standoff, and paving the way for a vote on a tax on businesses scheduled to raise more than $1 billion a year for K-12 schools. 

The halls of the state Capitol in Salem likely still are reeling from the events of the last few days, in which Democrats and Republicans agreed to a deal that led, swiftly, to the passage of a tax on certain Oregon businesses that could toss an extra billion dollars or so each year into the state's K-12 public schools.

There will be time later to examine the details of the deal, in which Democrats agreed to drop a proposal to tighten the state's vaccine mandates and also killed an omnibus bill containing a variety of gun control measures. In return, Republican senators agreed to return to the Capitol, ending a four-day walkout in which the Senate couldn't do any business because it didn't have the necessary 20 members for a quorum.

On their return Monday, Democrats wasted no time in passing House Bill 3427 on an 18-11 party-line vote. (Republican Sen. Jackie Winters of Salem was excused.) The measure is on its way to Gov. Kate Brown, who is certain to sign it.

The bill calls for a gross receipts tax of 0.57% on a business' gross receipts over $1 million; it's estimated to affect 40,000 or so businesses in the state. The first $1 million in sales is exempt from the tax. Businesses will be able to subtract 35 percent of either their labor or capital costs from their total sales. All the money generated is intended to go to K-12 schools, which raises an interesting question about how much money will be available for the state's higher education system, which also has been underfunded by Oregon for generations now; the answer to that question now rests in the hands of the Legislature's budget writers, who will doubtless be paying close attention to the state's next revenue forecast, which is due today.

You'll recall that there was talk from Brown earlier about possibly earmarking some of that wealth from the business tax to higher education, but that was widely perceived as an attempt by the governor to line up political support for the tax from higher education officials. And it became clear early on that legislative leaders intended from the start of this effort to ensure that all the money went to K-12 schools.

But there also was talk from Brown, back in her inaugural speech in January, that the state would hold school districts accountable by ensuring that "new dollars are used to improve graduation rates, reduce class sizes and provide a full school year."

To its credit, the bill does include measures designed to ensure that school districts are accountable for the infusion of revenue they're expected to get beginning in the 2020-21 school year. That's important for plenty of reasons, and here's a big one: Even though this is a tax on businesses, you'll be paying some of the freight as those businesses pass along the increased tax. (To compensate for that, the plan includes an 0.25 percentage point personal income tax cut for all but the highest income earners.)

Half of the money raised will be distributed as grants to local districts, and 20 percent to programs for toddlers and preschoolers. The remainder will be divided between funding for career and technical education and initiatives meant to prevent dropouts.

Districts will have to submit plans about how they will use those funds to improve graduation rates, decrease chronic absenteeism and improve outcomes for historically underserved students. Smart districts will figure out ways to involve their stakeholders in the creation of those plans, and will work hard to reach out beyond the usual crowd that attends school board meetings. Those districts will also include benchmarks that clearly show what progress they're making (or aren't making) and will make a point of calling attention to them, regardless of whether the news is bad or good. After all, those districts will remember where the money is coming from. And they will understand that taxpayers are expecting results. (mm)

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