Oregon State Capitol STOCK

An interesting thing happened last week in Salem: The Legislature's chief budget writers released the first draft of the state's spending plan for the next two years — and the plan is built on existing revenue. It doesn't require any tax increases. It sets aside an extra 1 percent for the state's rainy day fund to prepare for a possible economic downturn.

In other words, it's a budget that corresponds to an unusually high degree with reality in Oregon.

Naturally, nobody liked it. 

Well, that's not entirely true: Senate Minority Leader Herman Baertschiger Jr., a Republican from Grants Pass, offered praise: "For the first time in my career in the Senate, it is refreshing to get a glimpse at a budget framework that is fiscally responsible and will leave a healthy ending balance."

House Republicans were less impressed, saying the budget draft fails to adequately address rising costs in the state's underfunded Public Employees Retirement System.

State education leaders bemoaned the plan, which includes $8.9 billion in funding for K-12 schools, an 8 percent increase over the current budget and about $100 million more than the cost to continue providing current service levels. For higher education, the budget proposes $3.1 billion in spending, a 7 percent increase over the current budget but 4.4 percent less than the current service levels; higher education leaders said that was unacceptable and would result in tuition increases and program cuts.

The budget from the three co-chairs of the Legislature's Joint Committee on Ways and Means (Rep. Dan Rayfield of Corvallis, Sen. Elizabeth Steiner Hayward of Beaverton and Sen. Betsy Johnson of Scappoose) also seeks to hold the Oregon Health Plan harmless, requiring no changes in eligibility or benefits. 

But, aside from K-12 education and the Oregon Health Plan, the plan in general calls for a reduction of about 5 percent in state services. 

The irony in the budget is that it foresees a record amount of general fund and lottery revenue for the 2019-21 biennium — and, in fact, the $23.2 billion budget represents a 10 percent increase over the current biennium. But that isn't enough to keep track with costs, in particular rising PERS premiums and costs associated with the Oregon Health Plan, the state's Medicaid program.

To help deal with those gaps, the budget submitted last year by Gov. Kate Brown calls for finding an additional $2 billion in the form of new business taxes. But Rayfield said the Ways and Means chairs weren't willing to bet on any new taxes: For starters, he said, there's no guarantee that the Legislature will be able to pass new taxes, and even if it does, the taxes likely would be referred to voters.

"I don't want to belittle the impacts of this budget in any way, shape or form," Rayfield told us. "But we had to create a budget with the resources we had."

The budget from the Ways and Means chairs is meant only as a general framework for state agencies, and doesn't spell out funding levels for specific agency services. The heads of subcommittees now will be tasked with overseeing the budget process for those agencies.

That's an effort Rayfield said will require courage from those subcommittees: In particular, he said, legislators will face a strong temptation to tap into that extra 1 percent the budget seeks to funnel into the state's rainy day fund. Every legislator, he said, "has a pet project. ... People are going to have to make difficult decisions about stuff like that."

But shortchanging that fund may mean additional fiscal calamity when (not if) the economic downturn arrives. 

The proposed budget isn't perfect, not by a long shot — and none of the chairs would make that claim. But it is crafted with an eye on fiscal reality. We'll see if the 87 other legislators in the Capitol can keep that reality in mind as the session progresses. (mm)

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