It's the Spending: Despite tax hikes, Oregon faces long-term funding crisis

Prior to the February Legislative Session, legislative leaders had nearly $300 million in reserve funds and $79 million in ending fund balance at their disposal to respond to an economic forecast that fell yet another $183 million from the last budget forecast. The bill to reign in exploding costs of Oregon's Business Energy Tax Credit, which will save the state $55 million, helped soften the blow of the declining revenue projection.  Despite falling revenue, legislative leaders still increased state spending by another $30 million in February, adding 200 more jobs to the state payroll. 

While the shortfall for the current biennium is manageable; it is the next round of budgets that will face serious cuts. Even with forecasted economic recovery at over 20 percent growth, including nearly 8 percent growth in non-farm employment beginning in 2010, Oregon still faces substantial shortfalls for 2011-2013.

Oregon's 2007-2009 state spending grew 20 percent from the prior budget and the 2009-2011 budget spent 9 percent over that figure. This continued growth in spending means that costs for 2011-2013 are already anticipated to exceed state revenues by $2.5 billion.

Some of the issues facing the next legislative budget include: increased obligation of General Fund dollars for debt-service for additional state borrowing; increased costs for public employee pensions, which have unfunded liability assessments as well as current rates of 8-14 percent of salary; replacement of one-time federal funds, a continued sluggish economic forecast and expectations of state employees for wage and compensation increases following salary freezes in 2009-2011; inflation for goods and services; and caseload increases in the Department of Human Services.

Since Oregon is not able to print its own money or deficit spend, legislators, having just concluded their jobless “jobs” session, are crossing their fingers for another federal bailout to get them through 2011-2013. Without federal assistance, legislators will face the same choices from 2009-2011: raise taxes or cut state budgets.

Work needs to begin now. AOI members should demand that the state get its fiscal house in order, including reigning in skyrocketing benefits and pension costs.