Oregon’s Budget: Hard Realities Face the State

By Don MacGillivray

Oregon’s economy has achieved its pre-recession strength, but the recovery has not reached all of Oregon. Significant investments have been made in public education and a college degree is more accessible for Oregon students these days. Access to health insurance covers 90% of Oregonians, an all time high.

Still there is never enough money to do everything. Oregon is looking at a $1.8 billion shortfall and this is a worry for Oregon’s leaders.

The Governor’s Proposed Budget values are for 1) a robust economy throughout the state; 2) a quality education from cradle to career; 3) healthy families; 4) safe communities and 5) careful stewardship of Oregon’s natural resources.

The priorities for the Governor’s biennial budget are to create family wage jobs throughout the state; further improve our education system and the high school graduation rate; ensure that Oregon families and communities are safe and resilient; protect children in foster care and other vulnerable people (especially seniors); further expand health insurance coverage; improve access to affordable, stable housing; invest in transportation infrastructure and ensure that Oregon has clean air and water.

Without creating a state budget that honors these criteria, Oregon lawmakers now and in the future will not please the voters of this state. The potential damage of the deficit may be widespread – larger class sizes, a longer school year, teacher layoffs, higher college tuition, more struggling seniors, people with disabilities, and families, reduced health care and fewer resources for public safety and the criminal justice system. Taking money from other program budgets is not an answer either.

The Governor’s total funds budget is $74.2 billion. With the state’s $1.8 million budget shortfall maintaining funding at the current service levels will be difficult.

The budget includes increased taxes on tobacco and liquor, fees on hospitals and insurers, and the closing of various tax loopholes. A hiring freeze will be necessary until the end of this year. These will help to address the shortfall, but there will be cuts without additional revenue.

According to Republicans, the fiscal situation is out of control and they have their own ideas about solving Oregon’s budget challenges. In fact the Oregon financial situation has been difficult since the tax reforms were made in the 1990s.

The Governor’s Proposed Budget provides an outline of all the state departments and areas that includes their functions, financial situation, and what is expected to occur in the next biennium. The majority of these budgets do not change by more than 5 percent from the 2015-17 biennium. It includes useful background information for understanding state program areas and their expectations for the next two years.

The overall budget figures are difficult to understand. Total state resources are $174 billion. Total expenditures are $74.3 billion. The difference is because the other funds are deposits in the Public Employee Retirement Fund (PERS) at $80.8 billion, the unemployment fund at $3.2 billion, the Oregon Health Authority fund at $2.2 billion, and smaller funds held by the Department of State Lands and the Common School Fund.

Budget discussions are about the use of money in the General Fund (currently at $19.7 billion or 11 percent of the total resources). The majority of this money comes from income taxes ($17.5 billion / 84%). Only one billion (5%) comes from corporate income taxes. Minor sources are the lottery (5%), other taxes (4%), the death tax (1.4%) and cigarette taxes (0.5%).

The primary State of Oregon Program Area Budgets are:

• Education, $13.5. billion, a 9% increase, sources (in billions) – General Fund $10.2, Fed. Funds $2.6, Lottery $0,5, & other funds $1.3.

• Human Services, $31.7 billion, a 2% increase, sources (in billions) – General Fund $5.3, Fed. Funds $19.3, Lottery $0.1, Other funds $7.2.

• Oregon Health Authority, $20.4 billion, a 1% decrease, sources (in billions) General Fund $2.2, Fed. Funds $11.6, Lottery funds $0.001, Other funds $11.6.

• Public Safety, $3.8 billion, a 5% increase, sources (in billions) General Fund $2.4, Fed. Funds, $0.6, Lottery $0.008, Other funds 0.87l.

• Economic and Community Development, $4.5 billion, a 24% increase, sources (in billions), General Fund $0.089, Fed. Funds $0.51, Lottery funds $0.15, Other funds, $3.8.

• Transportation, $3.9 billion, a 8% increase,sources (in billions) General Fund $0.052, Fed. Funds $0.13, Lottery $0.12, Other funds $3.6.

• Administration, $12.9 billion, a 10% increase,
sources (in billions), General Fund $0.24 bill. Fed. Funds $0.01 bill. Lottery $0.026, Other funds $12.6 bill.

The two year state budget begins July 1 in odd numbered years and is created in three phases. 1) State agencies define their needs 2) the Governor’s Recommended Budget is created from their work and other information, and 3) the legislature reconciles the governor’s decisions through a quasi-public process.

After adoption, this becomes the State Legislative Budget for the next biennium. If extreme circumstances occur between sessions, the Joint Ways and Means Committee makes adjustments to the budget.

Oregon has an unstable tax system that is fundamentally out of balance. Middle-class families pay more than their fair share for government services and statistics show corporations are not paying their fair share. Oregon has the lowest corporate taxes in the nation and this may be an option that could help to solve the revenue issue.

Both the Republicans and the Democrats know that, in spite of a strong economy, Oregon’s fiscal affairs have been unsustainable for many years. They believe that with honest discussion the solutions about spending and/or increased revenue will be found. Governor Brown has pledged to partner with the Republicans to find bipartisan answers to meet Oregon’s fiscal needs.

If cuts in this budget are necessary, they will be painful, yet they are unavoidable at the current level of funding. The conversation with the legislature will determine what the cuts will be and if additional resources can be found or created.

This is the “Oregon Way” and with cooperation and perseverance it will provide the best answers for Oregon’s budget challenges.

Oregon’s Budget: Hard Realities Face the State

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