Looking to the future, the state of Oregon is facing a difficult predicament: cutting the state budget or increasing revenue while simultaneously maintaining such threatened public services as education.
To help determine this, the Secretary of State’s office recently released a report detailing financial trends dating back nine years, hoping to explain the budget deficit’s causes and offer solutions for lawmakers seeking to shrink the state’s expenditures by more than $3 billion over the next two years.
According to the report, past financial trends were favorable in comparison to other states, but are now looking grim as the state moves forward. Oregon’s many challenges include increased costs in K-12 education, a sharp decrease in the state’s rainy day fund and the doubling of its long-term debt over the past decade.
“These negative trends can be guides to help Oregon keep its financial situation in order, so our objective was to show many of the many drivers for Oregon finances over the past nine years, which helps to explain the situation that we currently find ourselves in,” said Andrea Cantu-Schomus, Secretary of State spokesperson.
The report shows that revenue coming from the federal government in the form of various services and public programs has increased from $6 billion in 2002 to $10 billion in 2010. Of these federal funds, nearly $4.9 billion goes to Medicaid, Supplemental Nutrition Assistance Program, Temporary Assistance for Needy Families and other human services.
In addition, a high unemployment rate — currently affecting 150,076 people in Oregon alone, according to the 2005-09 American Community Survey — has increased federal assistance for unemployment compensation by 220 percent, or $1.2 billion, from 2009 to 2010.
“We are at, or near, a low point in state revenues, but we are at, or near, the high point in terms of human need,” Gov. John Kitzhaber said in the opening statement of his proposed budget.
“Balancing the next budget will require some very difficult choices. It will require managing to a clear set of priorities and in a way that reflects our long-term vision. And it will require leadership with the courage and discipline to look beyond the next two years to where we want Oregon to be in 2020 and beyond.”
The sharp increase in the amount of Oregonians living in poverty has put an increased stress on public assistance funding. According to the American Community Survey, a person’s poverty status is determined by comparing a person’s annual income to a set financial threshold that varies by family size, number of children and age of householder. For example, a family of four with a gross annual income below $22,050 would be living in poverty.
According to the Secretary of State’s report, nearly 11.6 percent of the state’s population was living in poverty, but that number increased 10 years later when nearly 14.3 percent of Oregonians lived in poverty. Currently, the most recent data provided by the 2005-2009 American Community Survey shows nearly 13.6 percent of all Oregonians living in poverty.
“We hope that (legislators) can use some of the information in the financial condition report to make some decisions, but legislators are having a very challenging time to fix the budget at this time,” Cantu-Schomus said. “There’s some really tough decisions that have to be made. All the divisions within the state are working their hardest to work with the legislature to try to help as best as we can.”
In an attempt to address these financial strains, substantial cuts to public programs have already been considered. According to the governor’s proposed budget for the 2011-13, state education programs will be experiencing a 4.5 percent deduction from the original amount approved by the legislature for the 2009-11 biennium from over $14.2 billion to $13.6 billion.
“Cuts will be made,” Cantu-Schomus said. “We are in an economic downturn. We are facing a budget deficit, and we can’t provide services at past levels.”
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