Lawmakers’ spending framework includes cuts, no new taxes

Claire Withycombe

EO Media Capital Bureau

The co-chairs of the Oregon Legislature’s joint budget-writing committee last week presented a spending plan that included cuts in services to reflect the state’s expected $1.8 billion shortfall for the next two-year budget cycle.

The $20.265 billion budget outline presented Thursday, Jan. 19, by Sen. Richard Devlin, D-Tualatin, and Rep. Nancy Nathanson, D-Eugene, reflects that shortfall and describes potential cuts to general program areas such as health care, education and public safety.

Devlin and Nathanson said the framework makes large cuts to key state services.

“To be clear, to be clear, we do not believe the resources as allocated in this document are sufficient,” Devlin said in remarks during a press conference at the Oregon State Capitol.

Senate Majority Leader Ginny Burdick said in a statement that the framework demonstrated a need for revenue reform.

The state’s Republicans, meanwhile, presented the framework as an opportunity to cut state spending. Both parties stressed maintaining “critical” services; the framework, if implemented, could mean changes ranging from higher college tuition costs to cuts in dental care for low-income people.

Gov. Kate Brown’s $20.8 billion recommended budget released Dec. 1, was put together assuming $897 million in new revenue gathered through new taxes and the closing two tax loopholes.

By contrast, under the framework presented by Devlin and Nathanson does not assume the new revenue Brown proposed.

Under the plan, the Oregon Health Authority spending would be 27.5 percent less than needed to maintain current service levels, while the Department of Human Services would receive 8.7 percent less.

Proposed cuts vary in size between K-12, higher education and other state education programs that don’t fall into those two categories, such as career technical education.

The co-chairs were also quick to note that cuts to some state services mean cuts to matching funds from the federal government.

It’s also unclear whether any direct cuts to federal funding may be coming down the pike under the new administration.

Much of the $1.8 billion shortfall comes from the loss of federal subsidies for health care costs for low-income Oregonians, and the mounting costs of the state’s public pension system, which faces $22 billion in unfunded liability.

This year, the state must now also pick up some of the tab for insuring additional Oregonians under the Oregon Health Plan, as a result of the Legislature’s decision to expand coverage in 2014 under the Affordable Care Act — a decision Devlin and Nathanson said they stood by Thursday. The federal government covered the initial costs of implementation.

Devlin and Nathanson attributed the deficit to a “fundamental imbalance” caused by these and other policies enacted in Oregon’s past.

Measure 5 in 1990, for example, reduced property taxes and required local public schools to be funded by the state’s general fund rather than by local taxes.

Senate Majority Leader Ginny Burdick, D-Portland, called the framework a “call to action.”

“The fact that we face such a deficit during a booming economic period in our state demonstrates the need for comprehensive revenue reform,” Burdick said.

She said legislators were looking for ways to maximize the state’s dollars but reiterated the need “to reform our revenue system to make sure it is fair to all Oregonians.”

House Majority Leader Jennifer Williamson, D-Portland, said the state couldn’t “afford to move backward.”

“We can’t afford to move backward in our investments in education, health care and critical services for struggling families,” Williamson said in a statement. “We shouldn’t shortchange our economic future by making it harder for students to get a good education. And I don’t believe that any Oregonian wants us to make these painful cuts.”

Jim Green, the head of the Oregon School Boards Association, called for both revenue and PERS reform in a statement Thursday.

“Our students need leadership on these two issues from the governor and our legislative leaders,” Green said.

Republicans, however, generally praised the framework.

In a statement, Sen. Jackie Winters, R-Salem, also called the budget a “starting point.”

“Now the work begins,” Winters said. “We have our work cut out for us to craft a sound, sustainable budget (that) benefits Oregonians, urban and rural alike.”

Sen. Minority Leader Ted Ferrioli, R-John Day, said the budget the co-chairs presented was “based in reality.”

“It’s time Oregonians understood the consequences of explosive growth of government and overspending, coupled with anti-business climate and restrictive anti-land use laws,” Ferrioli said. “The only way Oregon will get through the current budget crunch is by setting better spending priorities and demonstrating budget discipline.”

Rep. Greg Smith, R-Heppner, who is also House Republican Caucus Budget Chair, also framed the framework as an opportunity for “spending reform.”

“This Legislature has an opportunity this session to finally address the structural deficits that led us to this position in the first place,” Smith said, “and to put Oregon on the path to a more stable financial future.”

The co-chairs said Thursday that the Joint Ways & Means committee plans to release recommendations for the 2017-19 state budget after the next state revenue forecasts, which is due to come out Feb. 22.