ALAMEDA, Calif. — Oregon’s troubles are not over.
The state, which had to close an almost $4 billion budget gap in 2009, now faces a new shortfall in excess of half a billion dollars.
“There are no good answers and no easy solutions to the current shortfall,” Gov. Ted Kulongoski said Wednesday in a news release detailing plans for across-the-board 9% spending cuts. “With a shortfall of this magnitude, we are limited in our options to balance the budget — and the longer we wait, the more painful and deep the cuts.”
In its latest forecast, released May 25, Oregon’s Office of Economic Analysis cut more than $525 million from its March revenue projection. The general fund is expected to bring in $12.68 billion for the 2009-11 biennium, which would leave a $577 million hole on June 30, 2011.
“On net, nearly all of the decrease for the June forecast is associated with lower-than-expected personal income tax collections during the current tax season and a small decrease for the 2011 fiscal year,” the report said.
Kulongoski, a Democrat, immediately announced that he would use his authority to ask departments to submit plans for across-the-board cuts, while working on less blunt alternatives.
After the revenue forecast came out late last month, members of the Legislative Assembly’s Republican minority called for an immediate special session. Lawmakers normally meet in regular sessions in odd-numbered years.
Republicans initiated a process that could trigger a special session, which would be called if the legislative administrator receives ballots from a majority of the members in each house.
Leaders of the Democratic majority took a “hold your horses” approach.
“No one has all the facts yet,” House Speaker Dave Hunt, D-Clackamas County, said Monday in a news release.
“We need more time to analyze the proposed cuts and develop a bipartisan solution to buffer schools and other essential services from the worst of these cuts,” he said. “The legislature should be fully ready and clearly aimed before we fire off a special session.”
According to the governor’s office, Kulongoski has what is called an “allotment” authority that permits him to reduce spending in the face of a shortfall, a reduction that must be equally distributed among state agency budgets and schools.
Kulongoski delivered his list of across-the-board cuts Wednesday, though he appeared to be leaving a wide opening for both lawmakers and state employees to negotiate alternatives.
“These cuts are significant and will most certainly lead to layoffs. But layoffs should be the last possible alternative,” he said. “I expect management to meet with their union representatives to explore alternatives to layoffs where feasible so that we can achieve savings while preserving as many jobs as possible.”
Kulongoski also said his administration would lobby Washington for help.
“I am hopeful that Congress will act quickly to provide needed emergency assistance to help us preserve school days, prevent teacher layoffs, and ensure our most vulnerable citizens continue to have access to health care,” he said.
Federal stimulus funding was one of the three legs in the stool used to balance the state’s budget last year, along with more than $2 billion in spending cuts and $727 million in tax increases, targeted at businesses and high-income individuals.
Opponents of the tax hikes petitioned to force a referendum in January, in which voters approved both tax increases.
The Kulongoski administration posted its preliminary list of cuts this week. But final reductions won’t be announced until the end of the month. Republicans argued that it is time to get into session to work for alternatives.
“The governor’s across-the-board cuts completely ignore the priorities that Oregonians value,” Sen. Bruce Starr, R-Hillsboro, said Wednesday. “A special session would give us the chance to protect the services that matter most.”
Hunt on Wednesday issued a press release emphasizing that Democrats control the decision-making process.
“In close conjunction with the Senate and the governor’s office, we’ll develop a plan to mitigate the worst of the proposed cuts,” he said. “Whether and when we meet in special session will be a decision we’ll make once we’ve had time to do the needed analysis.”
Senate President Peter Courtney, D-Salem, Monday made it clear that any special session would be quick, as in a one-day special session in 2006 when the decisions had been negotiated beforehand.
“We had a plan going in. We had the votes. We passed five bills in one afternoon,” he said in a release. “We avoided turning the people’s business into political theater in the middle of an election year.”
Oregon’s general obligation bonds carry ratings of AA from Standard & Poor’s, Aa1 from Moody’s Investors Service, and AA-plus from Fitch Ratings.
The state is planning its annual tax and revenue anticipation note issue, for $850 million, on June 21. Citi is managing the deal. That will be followed by $72 million of GO bonds to be sold competitively on July 12.