A Balanced Budget?

July 1, 2001By Chuck Sheketoff

There they go again. The Oregon Legislative Assembly and Governor Kitzhaber "balanced" the budget, for now. Unfortunately, it is balanced on the backs of the Oregonians harmed by cuts in programs and services they rely upon, ranging from education to human services, corrections, and public safety.

An old adage says that the Governor proposes and the Legislature disposes. This session, the Governor proposed a budget he should have disposed of himself. The budget Kitzhaber gave to the Legislature proposed using a federal Medicaid financing scheme that is phasing out over the next four years. He also proposed using $200 million of unspent payments from the national tobacco industry lawsuit for education and other programs. In future biennia when the bills come due for the programs funded with these tobacco settlement and Medicaid dollars , the money won't be there. When the Governor proposed his budget, he admitted it was "unsustainable." He was right.

The Governor said that if budget forecasts before the end of the legislative session showed increased tax revenue, his first priority would be to use those funds instead of the tobacco settlement funds. Unfortunately, unlike every legislative session since 1993, Oregon's economy didn't come through. In fact, the final general fund forecast was $340 million less than the Governor anticipated when he proposed his budget. And the forecast for future biennia, 2003-05 and beyond, was bleaker: $436 million less than when the Governor prepared his budget late last year.

Worse, the Bush Administration's proposed federal budget paints an even darker picture for Oregon. Federal domestic discretionary spending has big impacts on education, training, employment and social services. Head Start, school renovation grants, youth opportunity grants, and class size and teacher financing programs in Oregon are slated for real budget cuts under the President's budget. All Oregonians will see less federal help than what we currently receive.

A few wise accounting moves by legislative leaders helped spare some of the program cuts in the final state budget. But like the budget Kitzhaber originally proposed, the final budget is balanced on one-time tobacco settlement dollars and soon-to-dry-up Medicaid-loophole funding. To make matters worse, the Governor and the Legislature agreed to a substantial tax cut for large businesses starting in 2003, and will be sending the typical taxpayer a $75 tax refund this fall (the most economically comfortable, the top one percent of taxpayers, will get about $3,000). The Legislature's own forecasting model showed that the corporate income tax cut will not even come close to paying for itself in increased economic activity and tax revenues. Term-limited legislators and Governor Kitzhaber will not be around to be held accountable for creating the fiscal problems in future biennia.

Matters will get worse if the economy slows or takes a dive not anticipated by state economists. The Legislature once again left town without creating a rainy day fund to prepare Oregon for such downturn.

In good economic times our leaders could get away with creating budgets that did not consider the future. Now, as our economy slows, we are feeling the effects of this fiscal irresponsibility. The 2001 Legislature chose to ignore all of the warning signs - less revenue, large gaps between what is needed and what we have - and instead wrote a budget based on immediate needs and political expediency, without considering the consequences.

Our leaders are being Pollyannas about the economy, doling out tax cuts and relying on stopgap funding in the hope that Oregon will escape a future recession and return to windfall years. It is the same as a family depending on the Lottery and loans to get out of a financial bind. Wait a minute. The Legislature does that too.


Posted in Education.

More about: medicaid, revenue