A disturbing aspect of both the Governor's Recommended Budget and the co-Chairs' budget is the disproportionate cuts ODF was dealt.  Natural Resources agencies in general saw larger reductions than other state functions.  ODF faced larger General Fund cuts than any other Natural Resource agency. 

 

OSWA should proactively address this issue in the interim, with a coordinated plan to reach out to legislators to communicate the importance of ODF to family forest landowners.  OSWA can play a valuable role in convincing legislators to remedy the disproportionate budget treatment ODF continually faces.

 

Prior to the session, Governor Kulongoski's Recommended Budget (GRB) included a cost-shift to forest landowners by increasing their historical 50% share of base fire protection at the district level to 55%.  The final ODF budget restores the 50-50 split between forest landowners and the General Fund.
 
The fire insurance policy deductible's first $15 million has been paid by forest landowners, with the General Fund picking up fire costs of $10 million until the $25 million deductible had been reached.  In recent years, below normal fire seasons have resulted in forest landowners picking up all of the deductible, albeit less than $15 million.  OSWA and the Oregon Forest Industries Council sought sharing of emergency fire costs with the General Fund from the first dollar spent for the deductible. This matter was not sufficiently resolved in the GRB or the co-Chairs' Budget. 
 
Fortunately, members of the House Agriculture & Natural Resources Committee had previously voted unanimously to support sharing of emergency fire costs from the first dollar spent by passing HB 2215.  HB 2215 also extended total landowner obligation to $15 million. The final ODF Budget resolution does not include sharing emergency fire costs from the first dollar.  However, due to pressure from supportive legislators, HB 2215 was amended to keep landowners' share limited to $10 million rather than $15 million as it has been since 2003.
 
Administrative costs were first included as forest landowner shared costs in 2007.  However, legislative budget writers eventually changed the proposal, took funds from a State Forest/County Funds account and added a "Budget Note" calling for a study of forest landowner in-kind contributions to the fire program.  Since 2004, in-kind contributions from forest landowners were assumed to match or exceed the so-called landowners' share of administrative costs.   The final ODF Budget does not include a forest landowner cash contribution to Administrative costs.
 
Private Forests Budget
The Governor's Recommended Budget (GRB) also recommended reductions in ODF's Private Forests Program that affected reforestation and water quality protection.  However, the GRB became irrelevant once the Ways & Means co-Chairs' Budget was released.  Prior to the release of the co-Chairs' Budget, budget-writers had sought 30% cut lists from all state agencies.  Following the release of the 30% cuts list, the Ways and Means Committee conducted a series of public meetings throughout the state in April, in order to receive testimony from citizens regarding the possible budget cuts.
 
On May 6, OSWA members from around the state came to Salem to offer testimony to the Ways & Means Natural Resources Subcommittee on the ODF Budget.  Forest landowners packed the hearing room and an adjacent "overflow" room.  OSWA members also came to the Capitol the previous month for the OSWA Legislative day on April 28.  The statewide public hearings, individual meetings with legislators and subcommittee testimony all helped lead to a positive resolution of the ODF Budget issues.
 
To maintain Stewardship Foresters at ODF, OSWA and OFIC offered to continue to pay the Forest Products Harvest Tax share of Forest Practices Act enforcement at the current 2007-2009 rate.  This mitigated the impact of the General Fund reduction in ODF's Private Forest program by restoring funding for seven field foresters.
 
The End Game
Following release of the co-Chairs' Budget and direct lobbying from small and large forest landowners and their OSWA and OFIC lobbyists, the ODF Fire and Private Forests Program Budgets were resolved.  It took patience and brinksmanship on behalf of legislators and landowner representatives to achieve a compromise which ended up better than the GRB and co-Chairs' Budget, but the state's difficult financial times required more from forest landowners and timber producers than in prior biennia.
 
In addition to fully funding the fire program, the final budget maintains the 50-50 split between forest landowners and the General Fund, does not include a forest landowner cash contribution to fire program administrative costs (landowners provide in-kind services which more than offset administrative costs), restores ODF forest stewardship positions by timber operators agreeing to pay for Forest Practices Act enforcement at the same rate as in 2008, and lowers forest landowner share of the fire insurance deductible from $15 million to $10 million. 

 

OSWA originally supported spliting fire costs 50-50 from the first dollar spent.  The reduction from $15 million to $10 million was in exchange for the deductible costs not being split from the first dollar spent.  Forest landowners will pay the first $10 million of the $25 million deductible.

 

Ways & Means Committee leaders agreed to meet with forestland owners during the legislative recess to discuss fire funding issues.  It is likely that fire budget issues will once again be addressed during the 2010 legislative special session.
 
Climate Change/Carbon
Climate change legislation was considered by the legislature from January through June.  Dozens of bills were introduced, but the major attention was focused on one Senate bill, SB 80, and one House bill, HB 2186.  Governor Kulongoski introduced SB 80, which would have allowed the Department of Environmental Quality to establish a carbon Cap & Trade Program for Oregon.  HB 2186, also from the Governor, was a complementary measures bill dealing with transportation and fuels.
 

OSWA's legislative goal was to insure that any climate change legislation passed during the session ensured that carbon stored on Oregon family woodlands would qualify as an offset.

SB 80 grabbed attention when Governor Kulongoski made impassioned testimony at a hearing referring to SB 80 opponents as "Salem Beltway Naysayers."  The remainder of the five hour hearing included forest landowners, farmers, small business owners, manufacturers, and labor and utility representatives urging lawmakers to reject SB 80 because a Federal government Cap & Trade system for the nation would be more equitable and SB 80 further threatened Oregon's already hurting economy.
 
The original SB 80 was modified by a legislator work group into legislation that would cap carbon emissions to achieve aspirational goals adopted in 2008.  Those targets were reductions from 1990 emission levels that utilities estimated would cost $14 billion to achieve.  After hearing that, the legislator work group directed utilities, businesses, forest landowners and environmental interests to come up with compromise carbon legislation.
 
The parties met for weeks and developed several versions of compromise legislation that were ultimately rejected by environmentalists.  OSWA coordinated with forest landowner representatives on the work group to ensure the provisions allowed forests to provide for offsets of carbon emissions.
 
Unfortunately, after legislative attorneys created the compromise in the form of legislation, environmentalists backed away from the compromise.  The Governor's Office also withdrew support.  It appears that Governor Kulongoski, with the support of environmentalists, will issue an Executive Order addressing climate change.  State agencies will regulate carbon emission reduction administratively, under existing authority.  Washington Governor Chris Gregoire issued such an Executive Order after climate change legislation failed during their 2009 session.
 
Unlike SB 80, HB 2186 withstood several rounds of changes and passed at the end of the session.  The bill requires DEQ to study many of the transportation provisions that were required in the original bill.  However, HB 2186 does require Oregon to adopt and implement a Low Carbon Fuel Standard (LCFS) by July 2011.  The final bill language includes off-ramps should low carbon fuel prices increase by more than 10%, or if supplies are not adequate.  In addition, the legislature can re-address the LCFS when it meets in 2010 and in 2011 prior to July.
 
The arena for climate change regulation and forestry offset provisions now shifts from the legislative arena to the Governor's Office and the administrative arena.  Governor Kulongoski is expected to issue an Executive Order directing state agencies to implement as much as current authority allows of SB 80's Cap & Trade program. 
 
It is important for OSWA to be involved in this administrative/political process dealing with climate change to ensure that family forest landowners can play a role in providing carbon emission offsets from carbon sequestration of forests.
 
Inheritance Tax Relief
OSWA did not pursue inheritance tax relief this session after the declining economy and state revenue forecasts threatened ODF's Fire and Private Forests programs and these matters became the overwhelming priority.
 
Land Use Parity
Like inheritance tax relief, OSWA's long-term goals to achieve parity with agriculture regarding transportation fees and land use were subservient to ODF's budget.   However, the following bills were introduced on behalf of OSWA and progress was made in educating legislators about our interest in parity with agriculture transportation and land use laws:
 
HB 2898 would qualify pole buildings as forest management service buildings.  A brief hearing was held in the House Land Use Committee where OSWA testified in support of HB 2898 and explained that the bill would create parity among tree farm owners and other agricultural producers.  No further action on the bill occurred.
 
HB 3319 would allow trucks that are used for forest management purposes, not log hauling, to be registered as "Farm Vehicles" with lower fees.  Even after an intense lobbying effort by OSWA staff and members, the bill was not heard by the House Transportation Committee and subsequently died.  The interim offers opportunities for OSWA to meet with legislators about farm plates to lay the groundwork for a future effort. 

 

HB 3322 would allow a second dwelling on forestland.  Like the above bills, HB 3322 did not succeed.  In fact, the House Land Use Committee Chair could not be convinced to even hold a hearing.  This matter deserves attention during the interim to advance OSWA's objectives in anticipation of future actions.