'Agonizing’ Cuts on the Table

Oregon lawmakers this week said they are planning to cut as much as $800 million from the current 2007-2009 biennial budget.

State economist Tom Potiowsky last month told the Legislative Assembly that slowing revenue collections will widen the $142 million deficit by as much as $600 million, and lawmakers — who will receive an updated forecast Feb. 20 — are preparing for the worst.

“We have a plan in place to prioritize the list of possible cuts we’ve received from state agencies,” said House Speaker Dave Hunt, D-Clackamas County. “By the time we get the Feb. 20 revenue forecast, we should know the scope of the federal stimulus package and be able to quickly make the final adjustments to balance the ’07-09 budget.”

That’s a tough task because of the size of the cuts and the fact that the two-year budget cycle, which ends June 30, is more than three-quarters complete. The proposed cuts amount to 5% of the $15.1 billion biennial budget and about a fifth of the remaining spending. Lawmakers expect the shortfall to expand to $2.2 billion in the upcoming biennium.

“Everyone will, no doubt, be concerned by the enormity of the budget cuts we are facing in the remainder of the biennium,” said Senate President Peter Courtney, D-Salem. “We have to make hundreds of agonizing decisions.”

That’s because the Oregon economy is slowing rapidly. Unemployment surged to 9% in December from 5.4% a year earlier. Lawmakers are also pushing a $176 million bond-financed economic stimulus package of infrastructure spending, which was expected to pass the House this week after clearing the Senate last month.

Courtney and Hunt said they hope to make cuts to the operating budget quickly when the updated forecast is released, adding that they expect to know the details of the federal stimulus package by then.

The Democrats, who control solid majorities in both chambers of the legislature, said their goal is to minimize cuts to education and human services spending, but Republicans said the majority party’s real goal was to hike taxes as much as possible.

House Democrats this week passed a bill that would prevent businesses from using accelerated federal depreciation allowances — which may be included in the national economic stimulus bill — to decrease their state tax bills.

Republicans said the move amounts to a tax hike that would work counter to the federal efforts to stimulate the economy.

“We will have disagreements with President Obama, but we share his belief that Oregon businesses should have incentives to invest in equipment, machinery, and other goods,” said House Republican Leader Bruce Hanna. The Democratic legislation, he said, “only makes it more difficult for Oregon to reverse this economic recession.”

Democrats said the move would protect $67 million of revenue over the next two years.

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