Compromise within reach.

Byline: The Register-Guard

Gov. John Kitzhaber said Monday in Eugene that he would veto legislation that diverted money from the state's Common School Fund or postponed state payments to local school districts, both of which are keys to the Legislature's emerging budget-balancing plan. House Speaker Mark Simmons, meanwhile, stands four-square against increases in beer, wine and tobacco taxes or repeal of a voter-approved income tax cut, which are mainstays of Kitzhaber's plan.

That may sound as though the special legislative session that opens Friday is headed for a deadlock. But in fact the Democratic governor and the Republican legislative leaders are closer to an agreement than they appear. Neither side will need to surrender, but both will need to compromise.

A near-consensus has already emerged on the issue of program cuts. Kitzhaber and legislative leaders agree that about half of the $830 million budget gap should be closed by cutting state budgets. The governor proposes $414 million in cuts; the legislative plan would reduce spending by about $480 million. In the context of a $12 billion budget, the difference is not great. What's more, there has been remarkably little public protest against cuts of this magnitude.

The governor and the legislative leadership are further apart on the question of how to erase the rest of the shortfall. Kitzhaber's plan is weighted toward straightforward tax increases, while legislative leaders favor solutions that depend on borrowing and accounting shifts.

This disagreement contains a political paradox. Kitzhaber, who will leave office in a year, is proposing actions that would make the Legislature's budget-balancing task easier in the future. Legislators of both parties, who hope to govern in 2003 and beyond, are pushing for one-time remedies that would not relieve, and in some cases would aggravate, future budget shortfalls. The lame-duck governor is thinking long-term, while legislative leaders are embracing short-term measures that would eventually make their own jobs harder.

Kitzhaber has the strongest argument on principle: State government should pay for its current operations with current income. The legislative proposals are rooted in pragmatism: Tax increases require the approval of three-fifths of the members in both the House and Senate, and such majorities aren't likely to be found if other budget-balancing options are available.

It should be possible for the state's leaders to be both principled and pragmatic. Kitzhaber said Monday he might support borrowing from the Common School Fund, given reliable assurance that the debt would be promptly repaid. Legislative leaders' current repayment plan, which relies on interest on money remaining in the Common School Fund, could be improved. Similarly, the governor's chief objections to a delay in payments to local school districts are that the 2003 Legislature might reduce the payments, and that some districts would have to borrow funds until the checks arrived. The Legislature, through credit arrangements and other means, might be able to address those objections.

The Legislature, for its part, should acknowledge that Kitzhaber's proposed tax increases are modest, politically defensible and valuable to the state's long-term fiscal stability. Higher taxes on cigarettes, beer and wine would bring in $111 million in the current biennium, and more in subsequent budget periods. If the Legislature can't muster the votes to approve these tax increases, it should refer them to the May ballot. Oregon voters have supported cigarette tax increases in the past, and the state's beer and wine taxes are among the nation's lowest.

The Legislature should also let Oregonians decide whether to postpone, perhaps even repeal, Measure 88, which voters narrowly approved in 2000. The measure increases to $5,000 the amount of federal income tax that can be deducted on state income tax forms. When Measure 88 takes effect it will reduce state revenues by $131 million in the current biennium. Voters deserve a chance to say whether Oregon can afford to go ahead with a tax cut targeted at the upper income brackets.

Compromises along these lines would easily bridge the distance between the governor and the legislative leadership.