Oregon state budget (2011-2013)

To address the gap created by state revenue estimates that are $300 million less than anticipated, legislative leaders from both parties reached a compromise budget rebalancing plan that avoids closing a prison in Salem and making $13 million in cuts to providers of in-home care to seniors and the disabled. The plan does not tap reserves or raise taxes. It also eliminates middle management positions. The governor opposes the middle management cuts, but his spokesman said that he would sign the budget once it receives full legislative approval. As part of the plan, some of the state's settlement with mortgage lenders over foreclosure practices will be retained to offset future revenue shortfalls or unanticipated spending.

The compromise was reached after lawmakers announced on Feb. 1, 2012, a budget rebalancing plan that avoid cuts to K-12 education and programs for seniors and the disabled, while creating a cushion in case the state suffers continued declines in revenues. After the co-chairs of the Ways and Means Committee developed a budget, and on Feb. 16, 2012, Gov. John Kitzhaber recommended amendments to that budget, including using reserves to avert the closure of Santiam Correctional Institution in Salem, block a further shift of inmates to other temporary beds, and ease or cancel some smaller cuts in education and human services. The Governor's full memo detailing his suggested amendments can be found online.

On December 13, 2011, Gov. Kitzhaber responded to lower than anticipated revenues by enacted a hiring freeze and capped enrollment in some safety-net programs, including Oregon Health Plan's "Standard" program which services those who do not qualify for Medicaid. Legislative leaders requested the action and will take up budget issues when they reconvene in February 2012.

Budget as originally passed

Oregon faced a $3.5 billion gap between projected revenue and the estimated cost of sustaining operations for two more years. The legislature bridged the gap and crafted a $14.7 billion two-year budget that left schools, social safety net programs and just about every other government service far short of their desired levels. The budget does not raise taxes. The budget leaves more than $460 million of projected revenue unspent. The $460 million ending balance meant that cuts were not necessary when revenues in Aug. 2011 dropped $200 million.

Gov. John Kitzhaber's settlement with state labor unions amounted to $42 million more than he had planned on paying in salary increases. The governor initially said that he would accept only a 6 percent increase in total compensation, amounting to $184 million from the general fund, and the legislature based the budget on that, but the Governor negotiated an overall increase is 7.4, percent, or $224 million, according the legislative fiscal officer. Kitzhaber did negotiate with unions that, for the first time, workers will pay 5 percent of their health premium costs.

State officials said in Sept. 2011 that they could not quantify how much money gets paid out for contracts, but conservative estimates place the figure at $100 million.

Gov. Kitzhaber sought a shift from managed-care systems to coordinated-care organizations in order to save $240 million. To do so, the House approved House Bill 3650 by a vote of 59-1.

Federal funds make up 24.9% of the $54 billion state budget. The total funds budget for 2011-13 is lower than the 2009-11 legislatively approved budget largely due to the 18.6% decline in Federal Funds, the combined General Fund and Lottery Funds budgeted expenditures are actually $1 billion more in 2011-13 than in 2009-11, an increase of 7.5%.

Legislative Proposed Budget

The two-year budget is projected to total approximately $14.6 billion. K-12 schools are expected to receive around $5.7 billion, accounting for 39% of the total budget. Spending on human services and Medicaid is expected to be 26% of the budget at $3.73 billion and public safety spending would receive $2.41 billion, constituting nearly 16% of the total.

Governor's Proposed Budget

On Feb. 1, 2011, Governor John Kitzhaber submitted his proposed $14.8 billion general fund budget , which is an additional $1.2 billion in expected revenue over FY2010-11. The Governor's budget can be found online. The governor's budget generally allocates to each agency the dollar amount it had in the prior budget, and then spreads the additional revenue funds among his top priorities, such as education. Gov. Kitzhaber asked the legislature to craft a budget based on the Feb. 15 revenue forecast, instead of waiting until the forecast in May.

In his proposed budget the governor said that state employee and school district unions must choose between jobs and layoffs. Employees will preserve more jobs, maybe their own, if they accept changes in compensation — paying some of their pension and more of their health-care costs.

Kitzhaber also said in his proposed budget that he wants the legislature to grant him authority to craft a unified state education budget encompassing pre-kindergarten, K-12, community colle and kill everyone A memo by the Department of Administrative Services, which oversees budget and management for the governor, and the Legislative Fiscal Office, which analyzes budget issues for lawmakers stated the assumption that labor costs will go up by 13.4 percent in the two-year cycle. The memo bases that finding on the following:

• An end to unpaid furloughs by state employees, who are scheduled to take 10 to 14 days off for savings during the current budget cycle.
• A resumption of step increases, based on longevity
• Cost-of-living increases estimated at 2.5 percent in the first year (2011-12) and 2 percent in the second year (2012-13).
• Increases of 9 percent annually in health-insurance premiums for the 2011 and 2012 calendar years.
• An increase of 6 percentage points in the state contribution to the Public Employees Retirement System.
• A continuation of payments on $2 billion of pension-obligation bonds, which voters approved in 2003 as part of a legislative overhaul of the public-pension system.

State Treasurer Ted Wheeler cautioned that adding more debt could result in a downgrading of the state's credit rating, resulting in millions of dollars more in interest when it issues more bonds. Wheeler said, "Once you decide you're not going to be fiscally disciplined, where does it stop?"

Governor Kulongoski and an advisory panel recommended that $500 million in savings could come from restraining growth in employee and retiree compensation. The panel also recommended $1.7 billion in cuts, all in an effort to start to close a gap of $3.5 billion between projected tax collections and current services and aid to schools in the next biennial budget.

Governor-elect Kitzhaber, who took office on Jan. 20, 2011, must submit his FY2012 budget proposal by Feb. 1, 2011. Kitzhaber presented some budget ideas after the election, including his desire to develop budgets over a 10-year span, instead of the current two-year period. He also appointed a handful of leaders from business, education, health care and other sectors to chair transition teams that will point out areas ripe for changes or cuts.