Oregon facing $3 billion budget crisis next biennium (2017-19)?

Jeff Kruse

by Sen. Jeff Kruse (R-Roseburg)

The big news this week was the revenue forecast, which is up an additional $463 million. This means there is an additional $1.75 billion in this budget cycle. On the front end we should keep in mind the fact the revenue forecast is an educated guess as to what the economy will do over the next two years. The state economists work in consultation with business and labor leaders to come up with the projection, which was announced on Thursday. The May forecast is what the Legislature uses to create the budgets for the next biennium. One complicating factor is the fact that while the current biennium ends on June 1, the final numbers won’t actually be “trued up” until September.

Uncertainty in revenue forecast presentation

The one thing we know for a fact is the forecast will be wrong, as it always is. The real question is by how much it will be off. What was interesting in the presentation to the Revenue Committees Thursday was the level of uncertainty in the presentation. While it is normal and appropriate to mention all of the mitigating factors that might ultimately change the numbers, this time it appeared the level of confidence in the projection was significantly less than normal. The question at this point will be how much of this new revenue projection leadership will choose to spend now and how much they will hold in reserve. Because of the way the Ways and Means process is currently working I doubt if anyone outside of the Co-chairs, the Speaker and the President actually know. What we do know is that we should be able to get the K-12 funding level to $7.5 billion without tax increases.

PERS decision could cause $1 billion hit to budgets in two years

Interestingly, what isn’t being talked about is the budget crisis we will be facing in the next biennium. The first issue is the fact the Supreme Court threw out most of the PERS reforms the Legislature did in the “grand bargain” last year. Many of us voted against the measure because we knew it would not survive the legal challenge. Interestingly there are some [PERS] reforms we could do that we think could stand up in court, but leadership doesn’t want to talk about it, probably for political reasons as well as the fact the impacts will not be felt at the state level in this budget cycle. They will, however, be felt at the local government and school district level. At all levels of government we could be facing over a $1 billion dollar hit in budgets in the next biennium.

Medicaid expansion – fed payments going away, Obama Care tax provisions & Cover Oregon

The second issue is the Medicaid expansion population. At this point the federal government is paying 95% of the costs, but that will end next year. If we are going to maintain coverage on this population in the next biennium the price tag for the state will probably be over $1 billion. Additionally, unless Congress repeals Obama Care, the tax provisions in the Act could cost the state an additional $1 billion in 2017. None of this is even factoring in the liability the state could be facing with both the failure of Cover Oregon and the fact we failed to hit the metrics connected to the additional federal dollars we received for Medicaid outside of the expansion population.

$3 billion budget crisis in two years – Dems counting on a miracle

When all of this is added up it is clear that Oregon probably will be facing a budget crisis in two years that could total over $3 billion dollars. All of this is known and, at this point, being ignored.

I think it would be prudent for the Governor and the leadership in the legislature to acknowledge what we will be facing and begin to plan for it now. It appears, however, that they deem politics and the next election cycle to be more important.

Maybe they think that if they ignore it a miracle will happen and they will be saved. However, even if we were to accept the overinflated revenue forecast, the reality is the economy will not be able to grow us out of this hole. It is time for real planning and all we are getting from leadership are empty wishes.

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Posted by at 07:49 | Posted in Government Spending, Obamacare, OR 78th Legislative Session, PERS, State Budget | 9 Comments |Email This Post Email This Post |Print This Post Print This Post
  • guess who

    As the liberty mutual ad says Maybe you should ask why we still have the same legislatures in place who promised the public employees such generous dipping into the trough into the future .

  • IhateLiberals

    Oh well – you folks deserve the government you have!

  • Jonathan

    Mr. Kruse does not explain how Obamacare is going to cost Oregon $1billion in tax revenue.

    The Medicaid solution is simple: if the federal government doesn’t pay for the expansion it promoted, then scale it back again. If there’s no money, there’s no money.

    Finally, re PERS, it’s very hard to believe that the Republican ideas for PERS “reforms” are going to be any more legal than what just got shot down. The ideas I’ve heard strike me as far more clearly illegal.

    If Kruse is right, why have the Republicans been calling for more education spending than the Democrats? Should be preparing for hard times ahead.

    And oh, if the state blows the excess revenue on the kicker, don’t expect public employees to be stepping up to pay for maintaining services.

    It will be time for Oregon to tighten its belt, as they like to say!

  • Myke

    Its comforting to know that the Portland metro area, and other state bastions of liberal largess, will now, after killing the economic engine from the rest of the state, be picking up the tab for their electoral follys. Then again, being a state of firsts, there’s always bankruptcy.

    • guest

      Omen!

  • Bob Clark

    History does repeat itself with Oregon Health care, and yet the public’s memory is very short. The Oregon Health Plan started out in the early 2000s gloriously, but within a year or two it hit the skids and health service provision went to that of a lottery. Democrats pursue a flat soviet style world while GOP seeks to let individuals sort out things, finding the Uber like solutions of the world. The Flatheads versus the dynamos. I know what side I prefer.

    • Eric Blair

      The name was changed in the early 2000’s… but the program started around 1994.

      Other than that, yes, please keep referencing Democrats and Soviet governance as being essentially the same. That sort of exaggerated hyperbole will serve you well.

      • Colin Oscopy

        Polyps and who knows what else lurk in the anal channels of Ethereal Blair?
        If there’s a classical gas to clear the smelly air of his Putin on the kibitz, let it be scent out here and know.

        • Colin Oscopy

          I need to apologize again. Until I got Obamacare, I couldn’t afford my meds. Now I can, and I need to thank all of you for putting up with me. Right now is a new start. I’m so happy.

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