SAN FRANCISCO - Oregon Gov. Ted Kulongoski yesterday proposed a $50.1 billion all-funds budget for the 2009-2011 biennium that includes both tax increases and slower spending growth to deal with a weakening economy.

The Democratic governor asked lawmakers to increase general fund spending 6% to $14.7 billion from $13.9 billion in the current biennium. The increase in spending is less than a third of the 20% increase in the current biennium.

Looking beyond the general fund, the governor said he had cut about $1.2 billion of spending from the current services budget, which is the spending level needed to maintain all current programs.

"We don't have the money to do everything that needs to be done in the next two years," Kulongoski said.

General fund revenues are expected to rise 16.5% to $14.8 billion from $12.7 billion. Under Kulongoski's plan, Oregon would end the budget year with a $100 million surplus, and it would not dip into its $733.9 million of appropriated reserve funds.

Kulongoski spokesman Rem Nivens said the governor asked legislators to leave the appropriated reserves intact and to budget for an ending fund balance because the state faces uncertainty about the revenue outlook.

"We don't know how bad this is or where the bottom is," Nivens said. "Gov. Kulongoski doesn't want to create a situation where we're going to pay for programs and then cut them in six months."

The governor would increase the state's $10 corporate minimum tax to $25 to offset weakness in personal income tax collections in the general fund. Outside of the general fund, he proposed increases in cigarette and health care provider taxes to pay for health care spending.

The governor last month proposed hikes in vehicle registration fees and gasoline taxes to pay for a $500-million-a-year increase in transportation infrastructure spending. That spending takes place outside the general fund.

"This is a time of crisis and challenge," Kulongoski said in his budget message, which pushed lawmakers to continue to increase spending on transportation infrastructure, health care, and education even as they are forced to cut most other areas of the budget.

Kulongoski will have to win a three-fifths majority of the Legislature for his tax hike proposals, but that got easier last month after Democrats picked up supermajorities in both houses.

The state's economy and budget have deteriorated sharply in recent months. The jobless rate rose to 7.3% last month from 5.4% a year earlier, according to the Oregon Employment Department.

Last month, the general fund revenue forecast for the 2007-2009 biennium was cut by $165.9 million to $12.7 billion, state economist Tom Potiowsky said in a quarterly forecast that revealed a $142.1 million deficit in the current biennial budget.

Kulongoski ordered state departments to cut spending by almost 5% for the remainder of the 2007-2009 biennium.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.