The Compromise
A Study in Policy Craft
In May 2019, Oregon passed the Student Success Act, the largest investment in public education in the state’s history. The law created a Corporate Activity Tax, generating roughly $1 billion per year for schools, early childhood programs, and student services.
But achievements like this don’t happen through conviction alone. They happen through coalition-building, and coalition-building requires trades that nobody loves.
One provision of the SSA has drawn criticism from the Oregon left: Section 67, which preempted local jurisdictions from creating new commercial activity taxes, preventing other cities from replicating Portland’s Clean Energy Fund model. That preemption, critics argue, was a giveaway to corporate interests and a betrayal of local self-governance.
The criticism is understandable. It’s also ahistorical.
To understand why the SSA took the shape it did, you have to understand the decades that preceded it.
Oregon’s school funding had been in structural crisis since the early 1990s, when Measure 5 capped property taxes and shifted the funding burden to the state’s General Fund. That fund relied on personal income tax, a volatile revenue source that swung with economic cycles. The result was chronic underfunding: larger class sizes, gutted electives, disappearing counselors, and a K-12 system near the bottom nationally in per-pupil spending.
Labor and education advocates tried to fix this. In 2010, OEA helped sustain two modest tax increases challenged at the ballot. In 2012, they won redirection of the corporate kicker to K-12 education. These were incremental gains, and they weren’t enough.
Then came Measure 97 in 2016, a gross receipts tax that would have raised $6 billion per biennium for schools and state services. The business community responded with more than $20 million in opposition spending. Voters rejected it.
The lesson was clear: Oregon’s education advocates could not win a major revenue fight without splitting the business community. A united corporate opposition had the resources to kill any tax measure, whether at the ballot or through a legislative referral.
In late 2018, a coalition called the Coalition for the Common Good emerged, bringing together parties that had been on opposite sides of every major tax fight for decades.
On the one hand, the Oregon Education Association, SEIU Local 503, and Oregon AFSCME Council 75, the state’s major public employee unions, pushing for revenue reform for years.
On the other hand, Nike, the Oregon Health Care Association, and the Russell Development Company, corporate and business interests with their own reasons for wanting a predictable tax framework.
The coalition’s founding letter called for investments that could “adequately fund strong schools and essential public services” alongside a state “where businesses can grow and thrive.” Those aren’t compatible sentences. Making them coexist was the point.
The political logic was simple. Democrats had won supermajorities in both chambers in the 2018 midterms, the three-fifths threshold needed to pass a tax increase without Republican votes. Governor Kate Brown had made education funding her priority. And the unions had learned from Measure 97 that passing a tax was only half the battle; they also had to ensure it could survive a business-backed referendum.
Getting Nike into the coalition took the teeth out of the opposition. But Nike didn’t join out of civic altruism. It joined because the coalition offered something in return.
The SSA’s Corporate Activity Tax was modeled partly on Ohio’s commercial activity tax, a structure the Coalition for the Common Good had championed. Oregon Business & Industry, the state’s largest business lobby, proposed an alternative value-added tax. The final legislation blended both: a 0.57 percent tax on gross receipts over $1 million, with a 35 percent deduction for either labor costs or cost of goods sold.
For businesses, this was a concrete new tax obligation. For Nike, which makes most of its money outside Oregon, the exposure was limited but not trivial. The company agreed to support it, or at a minimum, not to bankroll an opposition campaign.
In exchange, the legislation included provisions favorable to business interests. The most consequential was Section 67, preempting future local commercial activity taxes. Existing taxes were grandfathered. Portland’s Clean Energy Fund, approved by voters in November 2018, survived because it predated the April 1, 2019, cutoff. But no new local gross receipts taxes could be created.
From the corporate side, this was rational. Portland’s PCEF imposed a 1 percent surcharge on large retailers with $1 billion or more in national revenue. If every major Oregon city passed a similar levy, each with its own rates, thresholds, and compliance requirements, the cumulative burden would be unpredictable. Preemption locked in a single, statewide tax framework.
From labor’s side, accepting the preemption was the cost of $1 billion per year for schools. After watching Measure 97 die under $20 million in corporate spending, OEA and its allies made a calculation: a guaranteed, permanent investment in education was worth more than preserving the possibility of future local tax measures that might or might not pass, and might or might not survive legal challenge.
This is what coalition politics looks like. Not everyone gets everything. Everyone gets something. And what gets built lasts longer than anything either side could have built on its own.
The critique of preemption rests on a counterfactual: that without it, Oregon cities would have passed a wave of PCEF-style taxes to fund progressive local priorities. Maybe. But consider what happened with the PCEF itself.
Portland’s Clean Energy Fund has generated far more revenue than projected, roughly $200 million per year, compared with original estimates of $44 to $61 million. That windfall created its own political problems. City officials debated diverting the surplus to fill budget holes. A city auditor found the program lacked adequate performance tracking. Governor Kotek’s tax advisory group recommended restructuring or replacing the tax. And the program faced scrutiny over grant management, including the revocation of a $11.5 million grant after revelations about the recipient’s background.
None of this means the PCEF is a failure. It has funded clean energy projects in communities that need them. But the idea that replicating this model across Oregon would have been straightforward, uncontested, or uniformly successful is a dubious assumption, not a fact.
Meanwhile, what happened: $1 billion per year flowing to every school district in Oregon for smaller class sizes, mental health supports, counselors, and career education. Districts across the state are using it.
The SSA survived because it was built to survive. When Oregon Manufacturers and Commerce filed a veto referendum to send the tax to the ballot, the coalition held. Nike didn’t defect. The unions were organized and funded. A follow-up bill (HB 2164) made technical modifications that derailed the referral effort, and OMC abandoned the campaign.
Had the SSA passed without corporate buy-in, rammed through on party-line votes with no business support, the referral almost certainly would have succeeded. Oregon voters overturn laws through veto referenda 65 percent of the time. The $20 million that killed Measure 97 would have reappeared. And Oregon’s schools would still be waiting.
The preemption wasn’t a betrayal of progressive values. It was what made the whole thing stand.
A persistent tension between ideological purity and pragmatic achievement marks Oregon’s political culture. The SSA sits in the middle of that tension. It is the most progressive education funding victory in the state’s history and a deal that required concessions to corporate power.
Holding both truths at once is uncomfortable. It’s easier to find villains, to locate individuals who made concessions and assign them blame for the parts of the deal you don’t like. But that framing misunderstands how legislative coalitions work. Every party at the table traded something to get something. The alternative to the trade wasn’t a better deal. It was no deal at all.
Oregon’s schools are better funded today than at any point in three decades. That didn’t happen because one side defeated the other. It happened because people who disagreed about many things agreed to build together, and accepted that what they built wouldn’t be everything any one of them wanted.
That’s not a failure of progressive politics. That’s how progressive politics wins.