Oregon is facing 10 years of projected deficits and a $560 million budget shortfall for the current 2009-2011 biennium, creating a financial bind for state services, as Gov. Ted Kulongoski prepares across-the-board cuts to reconcile current state spending with the budget gap.
The $560 million shortfall is just shy of 10 percent of the spending budgeted for 2011, a staggering cut considering most state agencies have already enacted pay-freezes and involuntary furlough days.
Last September, in recognition of Oregon’s changing finances, Kulongoski created a seven-member special cabinet, called the Reset Cabinet, which was designated to analyze the fiscal vulnerabilities of the state in the wake of the economic crisis of 2008 and the subsequent recession in Oregon. The Reset Cabinet announced last week that Oregon will face deficits for the next 10 years, rather than the surpluses projected before the recession, if the legislature tries to maintain the current scope and quality of services the state now provides.
On May 25, Kulongoski emerged from the Senate Review Committee and announced his plan to exercise his gubernatorial “allotment authority” to administer service cuts across the board in response to a $560 million budget hole for the current biennium. The number for the deficit came from state economist Tom Potiowsky in a quarterly revenue forecast, who explained to the governor that declining state revenues resulted in the shortfall.
“When 93 percent of your budget goes into three places — education, public safety and human services — and with a cut of this magnitude, no agency can be held harmless,”
State spokesperson Anna Richter Taylor said. “It very likely will result in layoffs, although that is the option of last resort.”
Taylor said state agencies are now preparing their 10 percent cut lists, which must be submitted to the governor’s office by June 8. She emphasized this was not something the governor takes lightly, but that by acting now the state could avoid more treacherous cuts in years to come.
“The reality is the state does not have $560 million to fill this hole,” she said. “There is 50
million in the emergency fund, and another 100 million in reserve, but the longer we wait to make these adjustments, the bigger that hole gets.”
The two major party candidates for the gubernatorial race both weighed in on the budget shortfall this week: Democrat candidate John Kitzhaber came out in support of Kulongoski’s use of allotment authority to cover the shortfall, and Republican candidate Chris Dudley criticized the current legislature in Salem for their spending.
“The massive shortfall in revenue is the direct result of a lack of leadership and common sense in Salem,” Dudley said in a press release. “We need to lower the cost of government … by ending automatic budget increases, reducing state employee health care premiums and curbing PERS costs. And on the revenue side we can increase tax collections not by raising taxes, but by creating new taxpayers.”
Kitzhaber made a statement acknowledging the necessity of Kulongoski’s call for across-
the-board cuts, and alluded to fundamental flaws in the structuring of Oregon’s budget.
“The sooner we start taking steps to control cost and rebalance spending in this biennium, the more flexibility we will have next year to address the deeper structural issues which are putting our state at risk,” Kitzhaber said in his statement. “The worst scenario would be for the next legislature to have to spend the first few months of the session dealing with the revenue shortfall in the current biennium before turning to the far more urgent task
of definitively resolving Oregon’s underlying structural budget deficit.”
Taylor said the legislature is hoping for some relief from two bills pending in Congress, which would provide Oregon with one-time federal assistance in the form of $200 million for the department of human services and $270 million for K-12 and higher education.
In a statement Kulongoski released about the budget, the governor shared his frustration over the state’s financial predicament, and acknowledged one-time federal assistance might be less of a solution and more like a band-aid on a bullet wound.
“As welcome as those federal funds will be, they will provide at best only a short-term solution,” Kulongoski said. “We cannot rely on federal assistance to put Oregon on a sound
fiscal path, just as we cannot afford to engage in wishful thinking about future revenues.”
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State faces 10 years of budget deficits
Daily Emerald
May 26, 2010
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