Governor plans capital projects.

Byline: David Steves The Register-Guard

2 0 0 7 L e g i s l a t u r e

SALEM - If Gov. Ted Kulongoski has his way, next year's legislative session will leave a lasting mark on Oregon in the form of new education buildings, railway station improvements, emergency radio towers and other construction projects totaling more than $3 billion.

The governor's proposal to borrow heavily to finance all those capital projects also could leave Oregon taxpayers with increased debt for years to come.

Kulongoski often calls himself a "public works" Democrat in the mold of Depression-era President Franklin Roosevelt, whose New Deal borrowed heavily to pay for dams, park trails and other public projects that created millions of jobs.

Kulongoski campaigned on the promise to position the state on the leading edge of economic growth in the future, particularly with technology, renewable energy and health care.

Kulongoski said his proposal to spend $3.2 billion on capital projects - up from $1.2 billion in the current biennium - reflects his social and economic goals.

"You end up improving the infrastructure, you create jobs, and I think you improve the economy overall," he said. "So I think it's a win, win, win every way you look at it."

He proposes spending for buildings on college and university campuses, to educate workers and advance Oregon's most promising economic sectors.

Locally, that includes $15 million for a technologically up-to-date Health and Wellness Building at Lane Community College to train nurses, dental hygienists and other health care workers, as well as $30 million for a building in the University of Oregon's Integrative Sciences Complex.

Kulongoski's capital spending plan for universities would be the highest since World War II, and also includes $113.5 million to whittle down a list of deferred maintenance items, ranging from replacing worn stair treads and rotting window frames to adding elevators and fixing roofs.

In all, Kulongoski proposes borrowing $401 million, to be repaid by the state, for campus projects - a figure that towers over the $32.5 million in state-paid bonds for university capital construction in 2003-05.

He also wants to spend upwards of $1 billion on other building projects:

$82 million toward replacing Oregon's crumbling psychiatric hospital with three regional facilities.

$486 million - spread over a period of several years, and including radio towers and equipment - to install a new communications network for first-responder agencies such as police and fire departments.

$100 million in lottery-backed bonds for "Connect Oregon" transportation projects, aimed at improving public transportation, the aviation system, the rail network and marine ports. The governor and the Legislature launched Connect Oregon with $100 million in 2005. The plan calls for paying for capital projects through bonds and other forms of taxpayer financing, with only a fraction of the construction funds siphoned from services such as prison operations, education, health plan reimbursements or state police redeployment.

Even before the governor's budget recommendation, past borrowing had ensured that a growing share of Oregon's general fund would go toward repaying debt - from 3.7 percent this year to a projected 5 percent in 2009.

The State Debt Policy Advisory Commission indicated in April that because total personal income in the state has increased, the percentage of state general fund money going to debt payment should start dropping in 2010. But Kulongoski's recommendation to more than double the amount of capital-related borrowing reopens questions about that projection, state officials say.

Outgoing House budget chief Wayne Scott, R-Canby, worries that if the economy sours, money being committed for debt repayment will be badly needed to keep basic services intact and avoid higher taxes. "It's a recipe for a lot of heartache in the future," Scott said.

One of the items that concerns Scott is a $21 million project to add 500 parking spaces at the Capital Mall in Salem.

"If you do the math, that's $42,000 per stall," he said.

Democratic Sen. Kurt Schrader, co-chairman of the Senate Joint Ways & Means Committee, expressed similar concerns. He said in the end, the Legislature most likely will whittle down the wish list.

The Canby lawmaker said he plans to set priorities for the governor's capital spending recommendations based on two criteria: spending for projects that position the state for future economic success, and addressing maintenance that's been put off during revenue-lean years.

Schrader said it was more important to him that the state provide the services citizens demand before driving up debt too much for bricks, mortar, asphalt and rebar. "If we throw all that money to debt service, that's less programs we can fund, less teachers we can buy, less improvement to the higher education underfunding that's been going on," he said.

Kulongoski dismissed the notion that his plan would overburden the state's capacity to repay debt. The governor said he'd struck the proper balance between the immediate demand for services with the state's long-term infrastructure needs.

"It is a lot of money, there's no doubt," Kulongoski said. "But I think it's what the public wants us to invest in."

INCREASED SPENDING

Gov. Ted Kulongoski has proposed a big run-up in state spending, through borrowing and direct spending, for capital projects - primarily buildings, and road and bridge construction and repair. Here are key figures from the past three spending cycles:

2003-05:

Statewide borrowing approval: $514.3 million

Statewide capital spending: $1.3 billion

University and community college capital spending: $44 million

2005-07:

Statewide borrowing approval: $725.4 million

Statewide capital spending: $1.2 billion

University and community college capital spending: $165.5 million

2007-09 (proposed):

Statewide borrowing approval: $1.63 billion

Statewide capital spending: $3.2 billion

University and community college capital spending: $401 million

- Sources: Oregon Department of Administrative Services, Legislative Fiscal Office