Explanation of the Budget Forecast

       The latest Oregon state budget forecast was released this morning. The report confirmed the economic budget crisis that many of us have been warning our Democrat leadership that they must recognize and address.  We have been virtually begging leadership since the 2008 special session to begin proactive measures to curtail state government spending. We have been advising that the current rate of spending is both unsustainable and indefensible. Unfortunately, my warning that our state government is spending significantly more than it is making was shown to be prophetic by the forecast released today.

       Our state government agencies are now faced with the reality of slashing nearly $975 million from their budgets between now and June 30, 2009. These massive reductions must be made now because the agencies were allowed to continue spending money that the state did not have for the first twenty months of this twenty-four month budget period. Even these severe reductions may not be adequate given that during the past three months our state revenue income has been falling off by nearly $200 million each month. If this rate of revenue decline continues, the May budget forecast could trigger even more draconian cuts. Of course, that decline in revenue is being driven by rising unemployment.  The actual loss of Oregon jobs was more than 23,000 more than predicted for the fourth quarter on 2008.

       The figures clearly show that Oregon has a spending addiction. Our government expenses have been growing at an unsustainable rate. For instance, we had about $12.4 billion in general fund and lottery fund money available to spend at the beginning of the 2005 session which was around 10 percent more than what was available for the 2003 session. Subsequently, we had about $15.5 billion available to spend at the start of the 2007 session which was about 20 percent more than was available for the 2005 session. Rather than saving any significant amount, our legislative leaders have virtually spent it all. That $4+ billion increase in government expenditures has fueled more than a 30 percent growth in state government costs during the past four years. 

       The report released today predicts a reduction of $2.9 billion in revenue available to spend in the next two year budget period. To put that into perspective, the budget forecast was for more than $17 billion in available funding for that 2009-2011 budget period. Obviously that did not occur. However, the more than $14 billion that is now forecasted is still about $2 billion more than was available at the start of the 2005 session. That computes to more than a 15 percent increase above the funds available at the start of 2005.  It allows for an average 5 percent increase in spending for the past, the current, and the next budget period.

       Budget reductions within those parameters may be difficult but they are certainly achievable without significant increases in taxes and fees. During hard economic times our state government should certainly be restrained to an average growth of 5 percent per budget period. We should look at this situation as an opportunity to restructure, prioritize, and correct the size of our state government.

       The citizens of Oregon should know that, according to the Department of Administrative Services, the average Oregon state employee earns more than $68 thousand in annual compensation. The total cost of all the employee compensation increases, both negotiated and promised by Governor Kulongoski, exceed $650 million for the next budget period. Under these economic conditions, those increases are neither appropriate nor sustainable. Roll backs of salary increases and hiring freezes must be a part of the discussion during this time of economic distress. Moreover, evaluation of the costs of state employee benefits that are among the three most generous in the nation must be on the table as well.

Contemplated Closure of Kingsley Field

       The Legislative Fiscal Office issued their report on the projected budget cuts for the Oregon Military Department on Thursday. Upon reviewing that report, I discovered that the Military Department was contemplating the closure of Kingsley Filed if budget reductions requirements reach 20 percent of the Department’s general fund revenue. The current forecast certainly suggests that general fund budgets may be reduced by that much during the budget period beginning July 1, 2009.

       I discussed the poor judgment of that contemplated decision with Oregon National Guard Brigadier General Mike Caldwell during the Ways and Means Subcommittee on Public Safety on Thursday. After getting that conversation on the legislative record, I spoke by telephone with Colonel James Miller who commands the 173rd Fighter Wing at Kingsley Field to alert him the closure possibility. Our office has compiled a Kingsley Field 173rd Fighter Wing fact sheet for distribution to all the members of the Ways and Means Subcommittee on Public Safety. I have personally spoken to the co-chairs of that subcommittee regarding the foolishness of the contemplated closure. Further, I have sent letters to the Joint Committee on Ways & Means Co-Chairs Senator Margaret Carter and Representative Peter Buckley requesting their attention to the economic costs of this ill advised potential decision. The letter to the Co-Chairs is included as an attachment to this newsletter. Also provided below is the contact information for the Ways & Means Co-Chairs and the Co-Chairs to the Ways & Means Subcommittee on Public Safety, Senator Joanne Verger and Representative Chip Shields.

Senator Margaret Carter, Co-Chair
Joint Committee on Ways & Means
(503) 986-1722
sen.margaretcarter@state.or.us

Representative Peter Buckley, Co-Chair
Joint Committee on Ways & Means
(503) 986-1405
rep.peterbuckley@state.or.us

Senator Joanne Verger, Co-Chair
Ways & Means Subcommittee on Public Safety
(503) 986-1705
sen.joanneverger@state.or.us

Representative Chip Shields, Co-Chair
Ways & Means Subcommittee on Public Safety
(503) 986-1443
rep.chipshields@state.or.us

       Please remember, if you don’t stand up for rural Oregon, no one will!

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