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Oregon's rare loss from US tax law sets off political fight (copy) (copy) (copy)

When she released her proposed state budget for the two years beginning in July, Gov. Kate Brown didn't include any additional money for higher education — but she did express a hope that legislators would be able to push through a $1.9 billion tax increase, and that some of the extra money could be funneled to help hold tuition increases to 5 percent or less.

It's possible that part of Brown's strategy on this was to persuade education officials to lobby legislators to support the tax increase. The governor has declined to offer specifics about what sort of tax increase she'd like to see, and has left that task to the Legislature.

It's fair to say that some education officials have been, shall we say, cool to Brown's approach: For evidence, look no further than Oregon State University Ed Ray's state of the university speech, delivered last week in Portland.

"Under the governor's budget," Ray told a crowd of 700 or so OSU partisans, "universities would be forced to shunt even more costs onto the shoulders of students, and cut staffing and programs even more. Or both."

A little later in his remarks in Portland, Ray added this: "I appreciate the governor for seeking new funding, but I must plan the university's operations on what I know, not what I hope legislators and voters might approve at some future date."

And certainly, considering how tax proposals have fared in the Legislature and among the state's voters, it doesn't seem like a good bet to count on that extra dough just yet, especially since it's not at all clear yet what shape a tax increase could take.

To that end, Ray told the newspaper's editorial board last week that work to identify potential cuts is underway at OSU. (Linn-Benton Community College has launched a similar process.)

Although Brown's proposed budget is the first step, the process doesn't really get going until legislative committees release their first budget drafts. That will happen after state economists release their latest revenue estimates.

(As an aside, it's worth noting again that legislators likely will have a record amount of revenue at their disposal, but it won't be enough to cover increased costs. Two big factors drive those costs: the state's public pension system and the decision to expand Oregon's Medicaid health insurance plan, also known as the Oregon Health Plan.)

It seems unlikely that the Legislature's first budget drafts will follow Brown's lead in terms of higher education funding. But, beyond that, little about the final shape of state budget is clear yet — and state colleges and universities don't have the luxury of waiting until the Legislature is wrapping up its work in June to start thinking about their budgets.

Public universities also need to get approval for any tuition increases above 5 percent from the state's Higher Education Coordinating Commission — and Brown has intervened when she believes proposed increases are too high. (Complicating the situation is that the governor has declined to back the estimated $220 million it would take to keep tuition increases under 5 percent, unless lawmakers approve the $2 billion in new revenue.)

In the meantime, business groups are beginning to weigh in on the proposed tax increases: Sandra McDonough, president of the state’s largest business association, Oregon Business & Industry, told legislators last week that her group believes that a business activity tax would be fairer and less harmful to businesses than a gross receipts tax, which is based on sales. 

"We are committed to being part of the revenue discussion," McDonough said.

That's good to hear. But we heard the same thing two years ago, before these discussions went off the rails. In the meantime, higher education officials are charting out how they can make steep cutbacks in their operations — and if you were in their shoes, you'd be doing the same thing. (mm)

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