Illinois Valley News

A revenue forecast given Tuesday, May 25 shows that the State of Oregon is $577.1 million short of meeting its financial obligations from now through June 30, 2011.

The forecast originally showed the state facing a $562 million shortfall. But that figure was adjusted Thursday, May 27, when officials realized that they overstated cigarette tax revenues by $14.5 million.

During a May 25 press conference, Gov. Kulongoski described the decline as “significant.“

“On one hand, it is surprising, while on the other hand, I have consistently cautioned that we could see continuing declines in state revenues even as the economy begins to recover “ and that we should be better prepared to deal with such declines,“ Kulongoski said.

The governor said that he is reluctant to call the Legislature into a special session to rebalance the budget, as some Republican lawmakers requested. He said that such a move is an “uncertain process with no guarantee of success and the unfortunate potential for partisan gridlock in an election year.

“The current law,“ he added, “provides a mechanism for the governor to resolve budget crises of this kind through the use of the allotment authority, which requires across-the-board reductions in equal proportions in all programs.

“This is the authority I am exercising today.“

In an emergency situation such as this, Kulongoski said, “the best response is swift and decisive action.“

As such, he has directed all state agencies to prepare financial reductions of nearly 10 percent. Those agencies will report back to him within two weeks with their reductions list, “which we will release to the public in full transparency for what these cuts will mean for Oregon and the public services our citizens rely upon every day,“ Kulongoski said.

Kulongoski said that the cuts will be “significant and will most certainly lead to layoffs.

“But layoffs should be the last possible alternative,“ he said. “I am directing state agencies to meet with their union representatives to explore alternatives to layoffs, such as furloughs or a reduced workweek, where feasible, so that we can deliver savings while preserving as many jobs as possible.“

Also announced by Kulongoski is an extension of pay freezes for state management and unrepresented employees through the end of the biennium, which is June 30, 2011. He also has asked the Public Employees Benefits Board to “explore benefit changes to keep cost increases to 5 percent for the next plan year, as opposed to the nearly 10 percent increase as currently projected.“

Rep. Dennis Richardson (R-Central Point), a member of the budget-writing Ways & Means Committee, said that he was “not surprised“ at the dismal revenue forecast. He long has maintained that state government is living beyond its means.

“There is no way to continue what we“re doing,“ Richardson said. “We may be at the tipping point.“

Fall-out from the revenue declines might still be felt during the 2011 legislative session, Richardson said.

“Whoever“s in charge of passing the budget next session is going to be unable to avoid dealing with this reality,“ he stated.

“It“s going to be a very stressful, difficult session, because politically, the public sector unions want to spare their members from pain.

“But in reality,“ Richardson continued, “there“s no way to avoid major cuts in programs and hopefully, a new form in the way government services are provided.“

Kulongoski“s second term in office will expire prior to the 2011 legislative session, as he is prohibited by law from serving a third consecutive term. However, the two persons vying to replace him issued statements May 25 about the state“s deteriorating financial situation.

Republican Chris Dudley won his party“s nomination in the May 18 primary election. The shortfall is the “direct result of a lack of leadership and common sense in Salem,“ he said.

“Neglecting private-sector job growth, of course, will result in a decline in personal incomes and tax revenue,“ Dudley commented. “We need to lower the cost of government. I have proposed doing this 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. Reviving our economy is the only long-term way to balance our state budget without raising taxes.“

Dudley“s opponent in the Nov. 2 general election is Democrat and former governor John Kitzhaber. He observed that the state“s revenue picture has gone from “severe to critical.

“The sooner we start taking steps to control costs 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.

He noted that he supports Kulongoski“s decision to use executive authority to rebalance the budget through the allocation process.

“We must all recognize, however, that the Oregon State Government of tomorrow will not do as many things as it does today, nor in the same way,“ Kitzhaber said. “Securing our future requires an aggressive and certain restructuring, consolidation and reform of the way public services are provided while matching the resources we do have within our highest priority needs.“

Richardson said he hopes that the crisis will prompt state government to begin empowering county and city municipalities to take the lead in providing services.

“What we really need to do, of course,“ maintains Richardson, “is change this state“s focus in government and transition responsibilities and revenues to local government so that the assets and priorities of Josephine County could be determined by Josephine County and not Multnomah County, because they“re different.

“We need to drastically cut back the overhead consumed by state government and use that money to direct it toward Oregon“s most needy, toward public safety and toward changing Oregon education and reforming it into something we can be proud of,“ he concluded.

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