Budget deal raids reserve accounts.

Byline: David Steves The Register-Guard

SALEM - Anxious to close the book on one of Oregon's most painful budget cycles, lawmakers and Gov. Ted Kulongoski spent Thursday closing in on a half-billion-dollar deal that relied mainly on borrowing money and raiding assorted reserve accounts.

At the same time, legislators prepared to restore previously approved cuts to human services, public safety and courts, some of which will go into effect today.

After a full day of closed-door negotiating, Republican and Democratic leaders from both the House and the Senate said they were nearing agreement on a plan that taps as much as $518 million to keep the budget balanced for the final four months of the 2001-03 spending cycle.

"I think everyone has got extreme indigestion," Senate Republican Leader Bev Clarno of Bend said of the emerging budget-balancing deal. "But we realize we have to do the budget fix for '01-03 so we can get on to putting a budget together for '03-05."

The budget-balancing package, which lawmakers hoped to complete by the middle of next week, would come after revenues plunged 20 percent from what the 2001 Legislature had planned for when it put a $12 billion budget together.

Today's quarterly revenue forecast is expected to require about half that total; legislative leaders Wednesday revealed that lower-than-expected tax collections in recent months has prompted estimates of a $245 million drop in revenue from earlier projections.

Beyond that, economists have said the state budget faces the risk that poor spring tax collections will worsen the budget picture by $100 million or more.

In addition, lawmakers have decided they must:

Buy back $37 million in cuts to human services and public safety programs - either because the reductions have been deemed intolerable for frail elderly and medically needy or because of legal constraints.

Set aside an extra $125 million just in case revenue collections through the June 30 conclusion of the biennium exceed the Legislature's current "worst-case scenario" predictions.

Add it all up and lawmakers face a hole as deep as $507 million with only four months left in the two-year budget cycle.

To close that potential gap, lawmakers have been working toward agreement on a $518 million package, which would leave them with about $11 million to spare.

More than half of it - $300 million - would come from borrowing. Lawmakers plan to get the money by selling bonds, which would be repaid either with money from Oregon's share of the national tobacco settlement or a combination of other future revenues.

The next biggest single source of money: the $112 million left in the education rainy-day fund that voters created just last fall.

After that, the Legislature would raid $91 million currently sitting in 15 separate reserve accounts - ranging from the $625,000 in a Waste Tire Recycling Account to the $15.5 million principal that is supposed to earn interest for the Oregon Housing Trust Fund.

Because of the politically and legally sensitive nature of taking money away from accounts that were dedicated for specific purposes - such as helping unemployed people, aiding local governments and paying for public transit - lawmakers plan to simply set the stage for a money grab of about $38 million from those accounts. The money would be transferred into the general fund only if the next revenue forecast in May dips low enough.

After already cutting programs by $1.1 billion, the Legislature has come up with just $15.6 million in additional spending reductions for the coming four months.

That's because legislators are more concerned with restoring than adding to the cuts already made, said Chuck Deister, spokesman for House Speaker Karen Minnis.

"The speaker's overriding concern has been that the most vulnerable, the people who truly cannot care for themselves, get the care they need," he said.

The "add-back" list, which the House passed at about $15 million earlier this month, would more than double under the latest plan. It calls for:

About 3,000 impaired senior citizens and disabled people to continue receiving care.

Poor people to continue getting prescription drugs under the Oregon Health Plan.

Partial restoration of indigent legal defense.

Less severe cuts in reimbursements to nursing homes and assisted living facilities.

Coverage of drug costs through the Medically Needy program for HIV and AIDS patients and people who might otherwise reject transplanted organs.

Continued residential care for about 122 mentally ill adults.

The restoration of 40 trooper positions and 40 forensic science positions in the Oregon State Police that had been cut.

The continuation of community mental health for children. THE REVENUE PICTURE

Where the money would come from:

Rainy day fund for schools: $112 million.

Borrowing by selling bonds: $300 million.

Assorted reserves and accounts: $91 million.

Program cuts: $15 million.

Where the money would go:

Anticipated revenue losses from today's revenue forecast: $245 million.

Anticipated revenue losses if the May economic forecast is bad: $100 million.

Ending balance if things get worse: $125 million.

Restoration of program cuts: $37 million.