Representative Dennis Richardson: Budgets cuts and consequences

By State Representative
Dennis Richardson,

The shortfall for the current two-year budget that ends June 30, 2009, has grown from $142 million to $855 million in less than three months. Oregon’s March Revenue Forecast was released today and details how Oregon’s revenues have decreased sharply. On the surface, this means state government must compensate for the loss of $855 million of expected revenue in the next 4 months. In reality, the trend downward is certain to continue and the shortfall will likely exceed $1 billion between now and the May Forecast. How will Oregon cope? It will take deep cuts in state expenditures and substantial reallocation of state revenue and resources.

Proposed Cuts in State Expenditures. Nearly $300 million of proposed cuts are being considered by the Legislature. Over the past six months, all state agencies have been providing 5% cut recommendation lists from their 2007-09 budgets. Although 5% may not sound like much, remember the entire cut must be made from the remaining funds in the final 4 months of the 24 month budget. Thus, the consequences to services and programs can be extreme. For K-12 education, it could result in closing schools two, three or even four weeks early. For the aged and the physically disabled, it would mean interrupted services by cutting 10-13% of local community workers and would result in chaotic cross-department seniority bumping. For developmentally disabled youth and adults, it would mean withholding benefits and assistance from hundreds of needy DD patients. The cut recommendations also include terminating promised payments to Oregon counties at a time when local government revenues are needed desperately.

Reallocation of State Revenues & Resources. In addition to the proposed cuts in spending, the current considerations include capturing and reallocating more than $70 million from other pools of money. For instance, the counties would not receive their share of $2 million of Video Lottery funds. Nearly $2 million in license plate fees paid by car owners to benefit the Cultural Trust would be diverted to the General Fund. Nearly $4 million of 911 Call Center funding””most of which benefits counties””would also be diverted, and this could result in the loss of substantial amounts of federal match funding. A very serious breach of trust, in my opinion, is the proposal to take $6.5 million of the Dammasch Housing Trust Fund (50% of the trust value). This trust fund was established to provide housing for mentally ill patients from the sale proceeds of the Dammasch State Hospital property. Although the state is spending substantial amounts of money to design and build a new state mental hospital, it has no right to unilaterally break its agreement to hold the Dammasch funds “in trust” solely for the purpose of providing housing for those who suffer from mental illness. Any other trustee who decided to “reallocate” $6.5 million of trust fund money would go to jail.

Recommendations. There is no question that the ’07-09 budget shortfall is real and is severe. There is no question about the need for both cuts and reallocations. The real question comes in deciding where to make the cuts and from which pools to take the reallocations. I believe we should reconsider the list of cuts and remove those that directly affect counties, cities, and programs for needy citizens. In addition, DD families and the families of mentally ill patients should be reassured that the State of Oregon honors its promises. Finally, the Legislature should remember that for small agencies and programs the timing of cuts is crucial. Think of it this way, if you were told you were going to lose $5,000 of income in the next 4 months, it could be devastating. If you were given 24 months to absorb the loss, it would be much easier to deal with it. So it is with small agencies and programs. The Legislature should give them notice of the cuts and apply the cuts to their 2009-11 budgets. It is too harsh to take a meat ax to their budgets in the final 4 months.

So where does the money come from to replace the losses of the proposed cuts and proposed reallocations discussed above? One source would be to take the money from large state agency ending balances. For instance, the Public Employees Benefit Board (PEBB) administers health benefits for more than 46,000 state employees and their families. PEBB will have a $131 million ending balance (unspent money) at the end of the 2007-09 biennium. PEBB’s proposed budget for the next biennium is $143 million, and at the end of 2011, it expects to have an ending balance of $133 million. Since PEBB’s money comes primarily from state agencies paying their share of health benefit assessments, the Legislature easily could reallocate $100 million of the accumulated excess money sitting in the PEBB account, and still leave a beginning balance of $31 million in their 2009-11 budget to ensure PEBB could meet any unforeseen contingencies.

By using funds sitting in the ending balances of state agencies to back-fill selected portions of the current budget shortfall, no days of school will need to be cancelled, no services will be lost by our most needy citizens, and no promises will be broken to the families of our DD and mentally ill patients. In so doing, the integrity of Oregon’s services (and reputation) will be preserved, and everyone’s attention can be focused on the more difficult challenge of balancing the 2009-11 Oregon State Budget.

Sincerely,

Dennis Richardson
State Representative

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Posted by at 05:35 | Posted in Measure 37 | 18 Comments |Email This Post Email This Post |Print This Post Print This Post
  • eagle eye

    So the schools might close 4 weeks early? I’m sure glad I got my kicker.

    • John in Oregon

      Actually eagle eye the legislature worked very hard to make sure there wouldn’t be any refund of overcollected taxes (the kicker).

      Back in 2007 the legislature declared a planned emergency in 2008. The “unexpected” “”emergency”” allowed the 08 special session to increase the budget to spend every dime collected. The governor was so ecstatic at how well that would work that he gave out $650 million in raises.

      So now with 4 months left in the current budget and $2 billion left to spend Oregon is $855 million in the red.

      I see an interesting compare and contrast between Oregon and Alaska.

      According to Wiki Oregon’s 2008 budget was $21.2 billion (1/2 of the $42.4 billion). Wiki puts the Alaska state 2008 budget at $5.5 billion dollars.

      An AP hit piece on Governor Palin informs us with the following information;

      — Alaska revenues are down based on an oil decline from $144 to $30 per barrel. (down by nearly 80%)
      — Governor Palin is cutting around $250 million from the 2009 state budget.
      — Alaska has a common reserve fund of $6.6 billion. (Built up by Palin and previous governors)
      — The Alaska school reserve fund has a 2009 balance of an additional $2 billion.
      — Other sources indicate Alaska has two other reserve funds totaling $2 billion.

      So………..

      Reckless Alaska has a budget of $5.5 billion and reserves of $10.6 billion.

      While

      Responsible Oregon has a budget of more than $42 billion, a deficit of $4 billion, and reserves of $740 million.

      • eagle eye

        Alaska has been the biggest porker welfare state in the country. That and sucking money out of the oil industry so the rest of us have to pay more for gas. Palin is a big fan maybe I should say pig fan of extorting from the oil companies. That’s why Alaska has about the highest spending and the lowest taxes in the country.

        • snow

          That was out of line

          • UO fan

            eagle seems pretty mild compared to some of the stuff I see here about public workers, Democrats, professors, teachers.

  • John in Oregon

    Its inescapable now. I have to admit the truth. I was wrong.

    I knew it was possible I could be wrong. But I never thought it would be for this reason.

    I cant ignore the truth. I heard the news Saturday and there it is. I was wrong, that’s all there is to it.

    For months now I have been predicting Oregon would be in the red $3 billion total for this and the coming biennium.

    Then Saturday I leaned the new figures. $855 million for this biennium and $3.1 billion for next. That’s $3.955 billion.

    So I publicly admit I was wrong. I missed the mark.

    The real red ink is spiting distance from $4 billion.

    I will try to be better next time. Really. Really I will try to be better next time.

    • spam i am

      Alaska? Its a welfare state completely dependent on oil and gas royalties collected from energy pumped off of federal lands. Sure they have a lot of money in the bank. Palin RAISED TAXES on the oil and gas industries to help build the account. So John…are you suggesting Oregon raise taxes on private industry to build up our savings…you closet socialist you?

  • OEA Teacher

    So the schools might close 4 weeks early? I’m sure glad I got my recent raise and now a longer paid vacation.

    Plus Republicans and the taxpayers will get blamed for a shorter school year.

    “For Kids”

    • Marvin McConoughey

      The critical flaw of union entrenchment in public education is becoming clear: It is the loss of labor flexibility. Wages are effectively frozen against downward adjustment at a time when budget deficits soar, employment is falling, and real wages for many are declining. The dead weight of nearly fixed union costs are harming Oregon, its citizens, and its future. Sure, we can blame the legislature, but it, too, is union influenced to a degree that largely robs legislators of their ability to perform well. It would take courage to withstand union strikes and courage is not the hallmark of the current legislature.

  • John in Oregon

    Sooooo let me get this correct. Alaska is a welfare queen because they collect an oil production tax.

    To which I would ask what about the Oregon timber severance tax or the California oil production tax. To which the reply would be, Oregon closed the forests and California closed the wells.

    Of course the discussion is about the budget. Which in Oregon means spending every dime before it is collected.

    But I take the meaning, Alaska is just a knuckle dragger while Palin and the Governors before her put money in savings. Alaska isnt proooogresssssive like Oregon.

    To the OEA teacher.

    I take the point. Any time the Oregon budget can’t be increased as planned then education, public safety and prisons take the “short fall”. But land use planning will that take a cut? That would be NO.

    • eagle eye

      To repeat: Alaska is a welfare queen, they suck money in from the rest of the country. A fact.

      Oregon is in such pathetic shape partly because, you’re right, it spends every dime.

      In part, on the kicker. Too big a knuckledragger to save for bad times. It has nothing to do with being progressive. And there is nothing conservative about the kicker.

      If the “OEA teacher” were really an OEA teacher, he/she would know that it will by unpaid leave, not more paid vacation.

    • spam i am

      John…Oregon forest landowners get TAX BREAKS. First, they pay taxes at far lower rates than the real market value by signing up for the forest land tax program. The tax rate is set at about $3 per acre in Western Oregon, depending on which County.

      The severance tax is a very small fee paid at the time of harvest only. Proceeds go into a kitty to pay for 2 things only: public relations to convince Oregonians on how great our forest lands are managed (worked on you I can see) and to help pay for the cost of forest fire fighting. Note I said “help” pay for. This tax is not high enough to cover all costs, so in effect people in urban areas subbsidize forest land and rural property owners by paying for fire fighting to protect their personal property (trees).

      These are facts. You can look them up yourself at: http://www.oregon.gov/DOR/TIMBER/how-forestland.shtml

      I can’t speak to the California situation, but would hazard a guess that far less oil is produced there than in Alaska, and the proceeds have to be shared amongst over 35 milion people instead of around a half million.

      No one said Alaska is a “knuckle dragger.” I’ve spent time up there and love the place and the people. But comparing Alaska finances to any other state is misleading at best, dishonest at worst. It is not hard to be a popular governor if your job involves figuring out how big a check to send to the voters every year.

      Alaska IS progressive on some issues. Marijuana decriminalization for example. And they use the oil money to build libraries and schools in even the tiniest, most remote villages. And teachers get paid a lot of money to teach in places like Nome, Kotzebue, and Eagle. It’s true they don’t spend much on land use planning, but with 95% of the state in public or tribal ownership, why would they?

  • OEA teacher

    Alaska has been far better off under Governor Palin’s leadership than Oregon’s parade of loose screws.

    Oregon is in such pathetic shape partly because, it spends every dime, unlike Alaska did under Palin. Oregon has expanded goverment at every opportunity while crying there was not enough even through the 90s.
    The kicker is no more than a limitation that enables the public to keep their own money and constrain the state form expanding even more.
    The kicker would never have been saved, that according to the liberal Democrats, including David Sarasohn, on a Seven Days episode.
    That’s progressive for you.

    The only conservative and safe place for the kicker is away from progresssives who are even now advancing more ways to spend more and take more from tapayers.

    eagle eye has not very good eye sight.

    The paid vacation is entirely accurate with a slight reduction in pay that is less than the last round of raises given.
    Big deal.
    If I had my way they really would not only see a reduction in pay but be forced to complete the school year too.
    “For Kids”

  • Reason

    There is 28 billion in the PERS fund, I’m all public employees would embrace the idea of helping their state out in these trying times.

    As long as they feel they can trust the government who use tax payer money to pay them. I’m sure a I.O.U. would gladly be accepted.

    I call on all state employees to call their representative and tell them that they are willing to invest in Oregon’s future!
    If this is down I would gladly sign over my next kicker check to re-pay their spirit of citizenship!

  • John in Oregon

    I offered a compare and contrast of the spending patterns of two states Oregon and Alaska.

    Calling Alaska names just doesn’t cut it. Despite the Republican corruption which Palin challenged nearly 6 years ago Alaska chose to retain income for the future. I could have used any of several other less familiar states to make the point of responsible budgeting.

    Representative Richardson spoke here of several ways to respond to the red ink. Moving funds around, back filling, ETC. While the current situation is urgent, I see an element of short-sightedness as well.

    I saw something in the news recently that provides context. Speaking about the Stimulus yesterday Obama said “If we agree on 90 percent of this stuff, and we’re spending all our time on television arguing about 1, 2, 3 percent of the spending in this thing, and somehow it’s being characterized in broad brush as wasteful spending, that starts sounding more like politics. And that’s what right now we don’t have time to..”

    At one level that’s totally accurate. Senator Specter said he was going through the bill line by line. Cutting and pruning in the spirit of compromise and accomplishment. The discussion intense on each small percentage.

    A truth tested by a simple question asked of Senator Specter by a legacy media reporter. “What about the government health care?” His sputtering response, “what health care?” said it all. Specter was so busy going line by line, hashing out unimportant minutia, trading goodies, he never noticed.

    On this other level is broad disagreement. Despite President Obamas statement that conservatives only disagree on some spending, federal control of health care, eliminating Clintons welfare reform, Unemployment Insurance expansion, Entitlement growth and all the rest in the bill are major issues of debate.

    Oregon spending is no different. A conservative budget would establish priorities;

    Public safety, police, fire.
    Public protection, prisons.
    Education.
    Enabling business (Free Enterprise).
    Then working down the list to —
    Land use planning.
    DEQ.

    Progressive spending is for needs.

    Government created jobs.
    Government created health care.
    Government approved education.
    And all the tools needed to manage those needs.

    As Representative Richardson pointed out, few choices are to be found for the current budget that ends in June.

    Going forward with the 2009/2010 biennium is another matter. Do we prioritize limited resources for public safety while providing the people liberty to find solutions OR do we view state government as the solution of peoples needs?

    There are some realties to consider. Since September local financial experts have been saying recovery would take 18 months with an up turn by late 2009. As recently as mid February that view had not changed.

    Late last week and this week the view did change. I am now hearing local experts talk in terms of recovery in 36 months.

    During the last 30 days the DOW smashed the $8,000 bottom and continued to fall. On the good side yesterday Ben Bernankie spoke out for the federal reserve with positive expectations. In response the market has stopped its skid at $7,100 showing an uptick and the possibility of a new bottom around $7,000. Hopefully it will hold there.

    All this shows a need to think seriously about how Oregon government should budget its resources in the coming two years.

    • eagle eye

      I have nothing against building a reserve fund, I favor it. That’s why I favor retaining the kicker for reserve fund purposes.

      • spam i am

        John…yes you offered a compare contrast. Nothing more. But you still seem to fail to acknowledge that comparing Oregon and Alaska budgets are not just apples and oranges, they are moose meat and filberts. I repeat…the Alaska state budget is funded almost entirely by high taxes on large corporations that pump out fossil fuels from underneath Federal land. Governor Palin, your heroine raised those taxes on energy companies just 2 years ago. This is why and only why they have been able to sock a lot of money away. It has nothing to do with fiscal prudence. Alaska spends $13K PER PERSON in state funds….by an order of magnitude numero uno in the United States. Oregon spends $5K PER PERSON and ranks numer 24. For what it is worth…Wyoming, another so-called fiscally prudent red state, is NUMBER 2 in state spending per person at nearly $9K. What do Alaska and Wyoming have in common? Lots of empty space and fossil fuels extracted from under federal lands. We don’t need no stinking government. Right!
        http://www.taxfoundation.org/research/show/287.html

        Alaska also ranks 2nd among 50 states in the total amount of federal payments it gets. Oregon? 48th. http://www.census.gov/prod/2008pubs/cffr-07.pdf

        Find another state to compare us with and I’ll stop picking on you.

  • John in Oregon

    Eagle Eye I think we have a basis for a worthwhile discussion. For sake of discussion I will assume the kicker was dedicated to a reserve fund.

    In the 2005 session the legislature budgeted to collect and spend for the 06/06 biennium. In 06 Oregon revenue accrued 1.1 billion in excess taxes that were over-collected. That would give us 1.1 billion in reserve in 07.

    In 2007 the legislature had an additional 2 billion in new revenue. Contrary to the advice of Kurt Schrader (our new congressman) the legislature spent all of the new 2 billion.

    In this case in 2009 we would have 855 million in red ink for 07/08. Using the 1.1 billion in reserves that would leave us 240 million going forward. But we face a 3.1 billion shortfall for 09/10.

    But lets assume that the legislature had followed Kurt Schrader’s advice spending an additional 1 billion on schools and saving 1 billion. Also assume the governor did not spend 650 million in raises.

    In that case now in 2009 we would have had around 250 million in red ink for 07/08. Using the 2 billion in reserves that would leave us 1.75 billion going forward with a 1.25 billion shortfall for 09/10.

    Choosing priorities and responsible budgeting is the issue. Other states have done it, Oregon can as well.

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