Budget crisis, stalled legislation possible if Oregon voters reject Measure 101

As Oregon voters submit ballots to decide the fate of new health care taxes and, perhaps, the health insurance coverage of about 350,000 Oregonians, lawmakers and politicos are bracing for a sudden budget crisis if Measure 101 were to fail.

They worry that a "no" victory on Tuesday could also ruin the chances of any major legislation passing this session — which begins Feb. 5 — as all focus would be drawn to figuring out how to close a budget hole of between $210 million and $320 million.

"The reality is, if Measure 101 fails, we will have to spend the five-week session figuring out how to fund health care and minimize cuts to education, public safety and other critical services," House Majority Leader Jennifer Williamson, D-Portland, said in an email.

Previous coverage: Why Oregonians are voting in January on a health tax, and other answers

One of the main reasons lawmakers decided to schedule the special election for January is so they would have an opportunity to fill the resulting budget gap if the taxes on health insurance companies and some hospitals were to fail.

Those supporting the "yes" side say that there is no funding back-up plan and cuts will be needed to maintain the Medicaid population. However, the "no" side have a proposal they say will fill that hole.

Measure 101 aftermath isn't the issue most lawmakers want to address in February.

The major piece of legislation Democrats are looking to pass this session is a "cap-and-invest" bill aimed at reducing carbon emissions. The bill would create a greenhouse gas emissions cap and require businesses to pay a fee relative to the amount of pollution they produce.

Session preview: Legislation reducing Oregon carbon emissions set for 2018 session

It's a complex piece of legislation that's already been criticized by Republicans for being too ambitious for the 35-day short session.

If time and energy is then refocused on the budget, expectations are that the carbon emissions bill will get pushed to the back burner.

"It's not impossible, but the odds are going to go way down that anything is going to move," said Brad Reed of Renew Oregon, a coalition of 700 Oregon businesses and organization working to pass the carbon emissions bill.

Organizations that could be impacted by significant budget cuts also would shift away from previous priorities.

Melissa Unger, political director for SEIU Local 503, said if Measure 101 fails, her organization would be focused on limiting cuts to health care for its members, but there would be cuts that they couldn't stop.

There are a number of programs on the line already, Unger said, such as financial support for parents of children with disability. If an unexpected budget gap presented itself, this and similar programs could be beyond saving.

More: Unusual special election seeing modest voter turnout so far

"We would never have a chance to engage on those programs because not only would there be no chance to protect them, but we would have to be engaging in protecting against significant cuts (elsewhere)," Unger said.

Oregon Education Association President John Larson said lawmakers would be put in a position to have to choose between cutting Medicaid and cutting K-12 education, which makes up 11 percent of the budget

Either way, poor kids would be hurt, he said.

Those promoting a "no" vote disagree with many of those concerns.

Reps. Julie Parrish, R-West Linn, and Cedric Hayden, R-Roseburg, have announced a bill they say would fill the budget gap on its own and would help secure health care funding moving forward.

Some of the bill's components include creating an assessment on more health care companies, moving funds from the Tobacco Master Settlement to pay for the reinsurance program and issuing a new tobacco tax.

Their bill does not sunset after two years, which the law passed last year does.

Parrish said the sunset provision was included to put off making a final decision. Proponents of the law say the sunset was created to account for federal health care uncertainty.

“If voters send us into the short session with a mandate to fairly and equitably fund Medicaid, we need to use the 2018 session to craft a robust assessment program with the healthcare community that creates a sustainable funding path for the Oregon Health Plan in 2019 and beyond,” Hayden said in a statement.

Among Parrish and Hayden's concerns are that taxes under Measure 101 are unequal and could be passed on to businesses and students.

They say their bill addresses those problems.

A similar bill was introduced last session and received little support.

Rep. Dan Rayfield, D-Corvallis, said that's because the math doesn't work — the proposal double counts money and overestimates savings associated with a shrinking care population.

As a co-vice chair on the Joint Ways and Means Committee, Rayfield's focus this session is tied up in the outcome of Tuesday's vote.

If they want to fund health care for all 350,000 people, and are faced with a hole from the Measure 101 vote, cuts to major programs are almost a certainty, he said.

"When you're really trying to get large chunks of money, there's only so much you can to with small shifts," Rayfield said.

Complicating matters more is that no one knows exactly how much previously budgeted money the state stands to miss out on if voters reject Measure 101.

The measure's underlying petition, Referendum 301, only referred one of the two sections that dealt with a 0.7 percent tax increase on some hospitals. The referred section created the tax from October through the end of 2017, while the un-referred section handled January 2018 and forward.

Legislative Counsel Dexter Johnson issued an opinion last year that the referendum, therefore, could only remove the tax from October through December 31.

Parrish has said that if Measure 101 fails, it should be clear to the state that the intent of voters was to remove the hospital tax in its entirety.

She said if the state intends to push forward implementing the hospital tax under Johnson's reasoning, she'll sue.

If she does, the courts will determine whether lawmakers need to fill a budget gap of $210 million or $320 million.

However, lawmakers are concerned that a decision might not come until after the session wraps, which means they would face tackling a budget shortfall without knowing the exact amount.

Contact the reporter at cradnovich@statesmanjournal.com or 503-399-6864, or follow him on Twitter at @CDRadnovich.