Oregon lawmakers pledged to increase taxes on the timber industry and rein in its influence during this year’s legislative session. Instead, they handed the companies an unexpected gift — another tax break.

As the session wrapped last week, lawmakers gutted the remaining $15 million annual harvest tax paid by timber companies for cutting down trees. The move eliminated about $9 million in annual revenue that helps fund Oregon State University’s forestry research and the Department of Forestry’s enforcement of state logging laws. Money for the programs will temporarily come from the state’s general fund, forcing the costs onto taxpayers.

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The tax cut came in the final days of the session after the state Senate failed to pass a separate measure, approved by the House of Representatives, that aimed to overhaul the Oregon Forest Resources Institute. Lawmakers left in place nearly $4 million in annual harvest taxes for the institute’s budget, along with $2 million to fight wildfires. The institute had sought to discredit scientists and acted as a de facto lobbying and public relations arm for the industry, an August investigation by The Oregonian/OregonLive, OPB and ProPublica revealed.

Smoke rises from clear-cut land and mixes with fog at an industrial forest in Oregon’s Coast Range.

Smoke rises from clear-cut land and mixes with fog at an industrial forest in Oregon’s Coast Range.

Beth Nakamura/The Oregonian

While the funding for OFRI and for fighting wildfires is permanent, the portions of the harvest tax that fund Oregon State and the forestry department must receive three-fifths approval from lawmakers every two years to remain in place. This year, a dispute between the House and the Senate over the tax left lawmakers closing the session without agreeing to a renewal.

The result: Timber companies, including the real estate trusts and Wall Street investors who have become the largest owners of Oregon’s private forests, saw their tax burden lowered once again, marking a win for an industry that maintains outsized influence in state politics.

Despite shrinking its contribution to the state’s economy, the timber industry has donated more to Oregon legislators in the past decade than to lawmakers anywhere else in the nation.

Tom DeLuca, dean of the Oregon State College of Forestry, said he was “hugely disappointed” by the tax cut. He also said he was heartened to hear that lawmakers will tap the state’s general fund this year, but he worries what will happen if they fail to permanently restore the tax.

“It would be a major hit,” DeLuca said. “It’s hard to say how we would manage a hit like that. It does leave me with quite a bit of concern about how much stability there is there.”

An investigation last year by OPB, The Oregonian/OregonLive and ProPublica revealed that schools and counties lost an estimated $3 billion over three decades as lawmakers repeatedly cut the state’s severance tax, which assessed a fee on the value of the trees logged by private timber owners.

While the severance tax was eliminated for all but small landowners in 1999, timber companies continued to pay a harvest tax on the volume of trees they logged. That tax provides about $3.2 million annually to Oregon State’s forestry school, roughly 15% of its budget for research and a broad swath of projects.

During the session, House Democrats attempted to make the harvest tax permanent after several said they’d grown tired of how lobbyists and other lawmakers use it as leverage each session to bargain for other measures.

Three weeks ago, the House also passed a bill to cut OFRI’s budget by two-thirds, redirect the money to climate research and increase oversight of the institute. The bill included a requirement that the institute end its public advertising campaign.

The Senate killed the OFRI measure and voted to keep the harvest tax on a schedule to expire every two years. But the tax died when the chambers failed to resolve the dispute before the legislative session ended.

Charles Boyle, a spokesperson for Gov. Kate Brown, said Brown hopes ongoing negotiations between environmental groups and timber companies over the future of Oregon’s logging laws will “help build the trust needed for us to reach a negotiated reform package for the harvest tax in the coming months.”

Boyle said the governor is awaiting the results of an ongoing secretary of state audit of OFRI, which she requested in response to the news investigation. Findings from the audit are expected in July.

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The state’s largest timber lobbying group, the Oregon Forest & Industries Council, opposed eliminating OFRI but was open to a compromise that included maintaining the harvest tax, said Sara Duncan, a spokesperson for the group.

“In the middle of intense negotiations to find a compromise on OFRI, the biennial harvest tax bill was hijacked in a power play meant to end any successful resolution,” Duncan said. She added that the group looks forward to “more thoughtful and less politically motivated work in the coming months.”

Sean Stevens, executive director of Oregon Wild, an environmental group, accused Senate President Peter Courtney, a Democrat who represents Salem, of sinking the OFRI bill to appease Republican senators as the end of session drew near.

“There weren’t the votes,” Courtney said in a four-word statement responding to questions about whether he supported the OFRI bill or endorsed the institute’s lobbying efforts.

Stevens said the failure by leadership to pass forest policy and taxation reforms may have a silver lining.

”Maybe things are so broken that people will finally wake up to the problems and there will be solutions on the horizon,” Stevens said. “Sometimes you have to break things to fix them.”

The House effort to restructure the forest institute struggled in the Senate because the legislation passed by a narrow margin of 32-27, with five Democrats opposed, and arrived late in the session, said Michael Dembrow, a Democratic senator from Portland.

He said it was clear the bill wouldn’t pass without a compromise. But a flurry of late negotiations that Dembrow brokered between environmental and timber lobbyists were unsuccessful.

Dembrow said that he began the session believing OFRI could be reshaped to provide a more balanced perspective by focusing on workforce development and education for young people.

He said he now increasingly believes OFRI should be eliminated and its funding returned to the industry because of its leaders’ refusal to accept a version of the institute that doesn’t run misleading advertisements or try to influence lawmakers.

”If the industry wants to create their own ‘educational institute,’ then let them go ahead and do that,” Dembrow said. “It’s time for us to move on.”

Some House lawmakers, who supported redirecting funding from OFRI and increasing timber taxes, said the stalemate was necessary to show that they were unwilling to continue accepting the status quo. They said they intend to revive the harvest tax in future legislative sessions.

The Legislature’s decision not to renew the tax is a precursor to a bigger debate over timber taxes, said state Rep. Andrea Salinas, a Democrat from Lake Oswego who sponsored the bill to restructure OFRI.

“I actually think it’s us taking a pause to be like, ‘Oh, we’re going to take a step back because what we’re coming back for is going to be even bigger,’” Salinas said. “Let’s stop playing games here and go back to what we used to have in the ’90s, which was a real severance tax.”

The unexpected tax cut and promises to resuscitate the levy echo what lawmakers said when they eliminated the larger severance tax in the 1990s. After the first cut in 1991, lawmakers said the reduction in taxes was temporary. It wasn’t.

They eventually eliminated the tax entirely.

Thirty years later, Washington and California, neighboring states that tax logging, generate tens of millions of dollars more than Oregon each year to help pay for local government services.

This article was produced in partnership with ProPublica and The Oregonian/OregonLive. You can sign up for The Oregonian/OregonLive special projects newsletter, OPB’s newsletter and ProPublica’s newsletter. OPB is a member of the ProPublica Local Reporting Network.

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