Not using merchandise cards may be gift to state.

Byline: David Steves The Register-Guard

SALEM - The Oregon Senate delivered a "use it or lose it" message to Oregon consumers who fail to use their gift cards - those credit-card sized electronic bits of plastic that people give as presents when they can't think of anything else to give.

Consumers' and retailers' losses under Senate Bill 845 would become the gain of Oregon schools, which would reap interest on the cards' unused balance.

Under the bill, if a consumer failed to use a gift card within three years, the state would get the unused balance.

The proposal illustrates just how desperate lawmakers are to find new sources of revenue.

With both parties declaring taxes off the table for cash-strapped public services, the education lobby asked lawmakers to pass SB 845 as a way to scrape up more money for schools. Under the bill, once three years passed by without a gift card's use, it would be declared "abandoned property." Under that designation, merchants who issue the cards would be required to report their value to the state Department of State Lands. The unused balance would be deposited into the Common School Fund.

State revenue officials have estimated the switch would net $30 million to $40 million a year for the Common School Fund, with interest earnings that schools could spend starting at $2 million to $3 million in 2010-11.

The bill also prohibits retailers from imposing an expiration date for gift cards.

The bill pits two of the Capitol's strongest lobbies against each other, with education associations and unions backing the bill and retailers and the rest of the business lobby trying to defeat it.

The bill divided the Senate down party lines. It passed, 18-12, supported by every Democrat except one, and opposed by every Republican except one.

Chief sponsor Sen. Ryan Deckert, D-Beaverton, said the policy set by SB 845 was already law throughout the United States.

"We would be joining the vast majority of states who have adopted this language on gift cards," he said. "And then schools are benefited a little."

Republicans saw the bill as a grab by government for the monetary value of consumers' gift card as well as a financial hit on retailers.

"This is a back-door attempt to get someone else's money," said Sen. Roger Beyer, R-Molalla.

The bill would not apply to those increasingly anachronistic documents known as gift certificates - sheets of paper that a consumer redeems for the purchase of goods or services. It would apply only to gift cards, which are defined as a "prefunded electronic record" that relies on a microprocessor chip, magnetic stripe or other means for storing data on its value.

Retailers like to sell the cards, because when a customer buys one, he or she must pay the store the full value of the card. And sometimes the card is never used - handing the retailer a windfall profit.

The proposed law would not only channel that windfall to the state, but would require companies to spend money compiling reports to the state on the unused gift cards.

Citing these concerns, Senate Republican Leader Ted Ferrioli of John Day called the bill "a hidden tax on merchants."

Although the bill passed in the Senate, it faces an uncertain future in the House, where Republicans hold the majority.