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Oregon state budget

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 $400 million of projected revenue unspent.^[1]

According to reports the "all funds budget" was $51.2 billion in 2007-09 and increased to $55.9 billion in 2009-11, a 9 percent increase. However, the "general fund" decreased from $15.1 billion for 2007-09 to $14.2 billion in 2009-11 and to $14.7 billion in 2012-13.^[2]

Oregon has a total state debt of approximately $58,019,973,000 when calculated by adding the total of outstanding official debt, pension and other post-employment benefits (OPEB) liabilities, Unemployment Trust Fund loans, and the budget gap. ^[3]

See also: The Oregon State Budget on State Budget Solutions

[edit] Next Budget Cycle FY2012-13

• See past state budgets

Budget Rebalancing Plan

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.^[6] 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.^[6]

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.^[7] 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.^[8] The Governor's full memo detailing his suggested amendments can be found here.

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.^[9]

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.^[10][11] The $460 million ending balance meant that cuts were not necessary when revenues in Aug. 2011 dropped $200 million.^[10]

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. ^[12] Kitzhaber did negotiate with unions that, for the first time, workers will pay 5 percent of their health premium costs.^[12]

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.^[13]

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.^[14]

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%. ^[15]

[edit] Legislative Proposed Budget

The coming 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.^[16]

[edit] 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.^[17][18] The Governor's budget can be found here. 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.^[18] Gov. Kitzhaber asked the legislature to craft a budget based on the Feb. 15 revenue forecast, instead of waiting until the forecast in May.^[18]

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.^[17]

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.^[19] 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.^[19]

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?"^[20]

Current governor Kulongoski and an advisory panel recommended that $500 million in savings could come from restraining growth in employee and retiree compensation.^[21] 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.^[21]

Governor-elect Kitzhaber, who takes office on Jan. 20, 2011, must submit his FY2012 budget proposal by Feb. 1, 2011.^[21] 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.^[22] 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.

[edit] Budget transparency

• See sample transparency legislation at the Sunshine Standard

Oregon currently has no statewide, official spending database online. However in February, a group of 27 legislators said they are sponsoring a bill, the "Open Books Oregon Project," that would require the state to create a searchable website by Jan. 1, 2010, listing revenue and expenditures for all state agencies.^[23]

• On June 27, 2009 the Oregon state senate unanimously passed House Bill 2500 which will lead to the creation of a website that tracks state spending. On June 30, 2009 the bill was unanimously adopted by the House and will now move to the Governor’s Desk. The non-partisan bill was written by State Representatives on both sides of the aisle, including: Arnie Roblan, Jefferson Smith, Kim Thatcher, and Gene Whisnant. The passing of HB 2500 marks the largest step towards government transparency in Oregon history.^[24]
• Oregon House Bill 2500 called for the creation of Oregon Transparency: Get to know the state's budget website was created.^[25] The measure required the Department of Administrative Services to create the site containing information about state agency revenues, expenditures, contracting, human resources and other data. The website developed and maintained by the Oregon Department of Administrative Services.^[25]

[edit] Government tools

The state has budget information on its transparency website.^[26]

The following table is helpful in evaluating the level of transparency provided by a state spending and transparency database:

Criteria for evaluating spending databases

State Database	Searchability	Grants	Contracts	Line Item Expenditures	Dept/Agency Budgets	Public Employee Salary
Oregon Transparency	Y	N	Y	Y	Y	P

• Oregon Transparency provides employee salaries, but does not include employee names or any sort of identification.^[27]

It came to light in September 2011 that state officials cannot quantify what is spent on state contracts. Ken Rocco, head of the Legislative Fiscal Office responsible for tracking state expenditures, said, "The total amount spent on contracts is reflected in the state budget but it is contained within what we call 'Services and Supplies' and we don't have specific details down to the level of what is purchased by contract versus other purchasing mechanisms."^[28]

See also: Evaluation of Oregon state website

[edit] State Budget FY2011

Oregon has a budget for FY2009-11 totaled $61 billion, up from $41 billion in 2005-07.^[29] Find the state’s FY2011 Comprehensive Annual Financial Report (CAFR) compiled by the state government here.

A technical change in tax-withholding tables effecitve January 1, 2011, means that the state will have nearly $100 million more for the current fiscal year.^[30] The positive budget forecast combined with the transfer of $57 million from higher-than-expected tax-amnesty collections means that the state is not facing more budget cuts for the time being.^[30]

Oregon received approximately $209 million from the federal government under H.R. 1586, a $26 billion plan to give states money for Medicaid and education that the President signed into law on August 10, 2010.^[31]

[edit] Legislative Emergency Board Actions

The state's Legislative Emergency Board unanimously approved spending nearly $18 million from state emergency funds to mediate cuts scheduled to occur in the second round of budget reductions this fiscal year, money which will preserve day care subsidies for poor working parents and allocate federal dollars to schools.^[32] In addition to the $118 million in federal stimulus dollars for the state's school, the Emergency Board also approved about $7 million to K-12 education, meaning that schools will not have to make additional cuts.^[32] The board also okayed $7.6 million from the state emergency fund to stave off cuts in state police.^[33] It had previously resorted to using reserve funds on July 22, 2010.^[34] Legislative leaders also plan to ask the Board at it's next meeting in December 2010 for $15 million for the Department of Corrections and $9.9 million for counties supervising low-level felons that otherwise would be in state prisons.^[33]

The Legislative Emergency Board consists of 20 members who decide budget matters between sessions, which it has done in this biennium.^[35] The emergency fund will increase because after Nov. 1, allocations made by lawmakers for specific purposes but are left unspent revert to the control of the E-Board.^[33] The Board can tap $54.4 million in the state's emergency fund and unspent allocations, as well as $33 million in other accounts, including the Oregon Lottery and savings from spending cuts in the Legislature, courts and secretary of state which are not subject to the 1951 law permitting the governor to cut the general fund to balance the budget.^[33]

[edit] Deficit and Budget Cuts

When the state budget deficit grew to possibly $1 billion in Aug. 2010, Gov. Kulongoski asked Democratic legislative leaders to "come to an agreement" to resolve the shortfall and warned agency directors about the growing budget hole and suggests the governor could once again order across-the-board budget cuts.^[36] The warning came days after Congress approved extra federal funds for states, with Oregon receiving $118 million for education and $144 million for Medicaid.^[36] That extra federal money, however, is insufficient to solve the state's budget deficit and therefore cuts are necessary.^[36] At the end of August, state revenues are down $373 million from earlier estimates.^[37] When passed, the FY2010-11 budget was $14.2 billion.^[37]

In addition to the 9% cuts previously ordered, state agencies submitted plans to cut an additional 8% for the remaining 9 months of the budget - from Oct. 2010 through June 2011, releasing a list of $377.5 million in proposed cuts.^[38][39] Schools, however, will remain untouched as lawmakers plan to rely on the $118 in federal funds and $34 million from the $100 million in the state education reserve, which Kulongski has consented to using after initially resisting.^[39] Some agencies altered their budgets to avoid cuts, such as the Department of Agriculture's decision to cover some of the $400,000 it will lose from its general fund operating budget as a result of lower state revenue projections with fees.^[37]

On May 27, 2010, the Governor responded to shortfalls in 2009 tax collections by ordering 9 percent cuts across the board in state budgets, which he said he would outline at a speech on June 25, 2010.^[40] The budget also did not include cost of living pay increases for state employees.^[19]

Figures released by the Oregon House Republicans show the Oregon Legislature's FY 2010-11 biennial budget had $1.6 billion in new taxes and fees and uses $1.258 billion in one-time federal stimulus money for a $52.9 billion total funds budget (two-years) 9.3% larger than the previous budget. ^[41]

The state found out it would receive $270 million in federal aid in August 2010, and $117 million of it is for education, which can be spent only to retain or hire teachers. While the state education department estimated the increased funding could spare the jobs of 1,600 teachers, uncertainty about the state budget prevents administrators from moving quickly. "There's only one thing worse and harder than cutting staff positions, and that's adding them back and then cutting them again," said Randy Schild, superintendent of the Tillamook School District, Oregon.^[42]

[edit] Budget Background

Oregon's budget covers two fiscal years (a biennium). This means it runs from July 1 of an odd-numbered year to June 30 of the next odd-numbered year. The current fiscal period is from July 1, 2009 to June 30, 2011. The budget development process has three major phases: Agency Request, Governor’s Recommended and Legislatively Adopted.^[43]

Agency Request Budget Agencies start the budget early in even-numbered years to develop their Agency Request Budget. This lays out agency finances and policies for consideration by the Governor. The Budget and Management Division (BAM) gives agencies guidelines to use in this process. Agencies send their budget request to BAM by September 1.^[44]

Governor's Recommended Budget The Governor and BAM review the budget request. They use the Governor’s priorities, budget policies and current law to make budget decisions. The Governor’s Recommended Budget document summarizes those decisions. It gives data on all the state’s revenues and expenditures. It also gives information on each agency’s budget. The Department of Revenue puts together a Tax Expenditure Report that is published at the same time. The Tax Expenditure Report outlines the various reductions available to residents for the income tax.^[45]

Legislatively Adopted Budget The Governor presents the Recommended Budget to the Legislature when it meets at the start of the next calendar year (January of 2009, during the 2009-11 biennium). Legislative committees review the proposed budget. They hold public hearings to hear from each agency and the public. Each budget bill has a Budget Report that presents the committee recommendations. The Legislature votes on each budget bill. The budget bills that are enacted into law make up the Legislatively Adopted Budget. Agencies carry out, or execute, the budget over the two year budget period. The Emergency Board can make some changes to the budget between legislative sessions. Special sessions may also be called to deal with budget issues. The Legislatively Adopted Budget and the changes to it make up the Legislatively Approved Budget.^[46]

The Oregon State Legislature convenes every two years in regular session on the second Monday in January during odd-numbered years, a date set by statute. Oregon Constitution does not specify a limitation on session length, however most sessions last approximately six months. During the interim, legislators serve on interim committees and task forces that study issues likely to be faced during the next legislative session.^[47]

Under a 1951 law, the governor possesses the authority to cut spending proportionately from the tax-supported general fund to avert a deficit.^[39]

[edit] Accounting Principles

Main article: Oregon government accounting principles

The Oregon Audits Division is the only independent auditing organization in the state with the authority to review programs of agencies in all three branches of state government and other organizations receiving state money. Authority for the responsibilities of the Audits Division is found in sections 297.010 through 297.990 of the Oregon Revised Statutes. Their audit reports are published online in a user-friendly, searchable format. The Division of Audits was established in 1929 by the state legislature to carry out the duties of the Secretary of State as the constitutional Auditor of Public Accounts. Gary Blackmer is the Director of the Audits Division under Oregon Secretary of State Kate Brown. Kate Brown was elected Secretary of State in 2008.^[48]

The Institute for Truth in Accounting (IFTA) rates Oregon “Timely” in filing the state’s Comprehensive Annual Financial Report (CAFR) – The annual report of state and local governmental entities. IFTA rated 22 states timely, 22 states tardy, and 6 states as worst. IFTA does not consider Oregon's CAFRs, and those of the other states, to be accurate representations of the state’s financial condition because the Generally Accepted Accounting Principles (GAAP) basis does not include significant liabilities for the pension plans and for other post employment benefits, such as health care.^[49] Oregon's CAFRs are annual publications of the Oregon Statewide Accounting and Reporting Services (SARS), State Controller's Division, Department of Administrative Services. The State Controller’s Division is responsible for statewide financial accounting, financial reporting, and administration of the statewide accounting system for state government. It prepares the Statewide Comprehensive Annual Financial Report (CAFR); administers statewide central disbursements; and provides professional fiscal guidance, training, and consultation to state agencies. John Radford has been Oregon's State Controller since his appointment by the Governor in 1989.^[50]

[edit] Stimulus

Oregon has received $1.9 billion in federal funding.^[53]

[edit] Public Employees

Main article: Oregon public employee salaries

Main article: Oregon public pensions

According to 2008 Census data, the state of Oregon and local governments in the state employed a total of 240,869 people.^[54] Of those employees, 162,483 were full-time employees receiving a net pay of $697,533,856 per month and 78,386 were part-time employees paid $91,446,734 per month.^[54] More than 55% of those employees, or 132,759 employees, were in education or higher education.^[54] Another report revealed that one of the highest paying public jobs in Oregon are correctional facility doctors, who make more then $250,000 annually.^[55]

[edit] External links

• State Budget Solutions, Oregon
• Model transparency legislation from the American Legislative Exchange Council is available at this link.
• Cascade Policy Institute
• Oregon Budget and Management Division
• Oregon State Legislature, Budget and Taxation
• Oregon state transparency website
• Oregon Transformation

[edit] Additional Reading

[edit] References

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