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

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.