Governor signs off on lawmakers' plan to keep state afloat.

Byline: David Steves The Register-Guard

SALEM - Gov. Ted Kulongoski swiftly brought an end to the state's most recent budget crisis Tuesday, signing into law the Legislature's package of a half-billion dollars in bailout bills.

The Democratic governor signed all five bills a few hours after the House approved them - all a day after the Senate approved the budget-balancing package.

The rapid-fire action puts into place a plan to keep the 2001-03 budget solvent for its final four months, in which economists say state revenues could fall $345 million short.

Kulongoski emphasized after a brief bill-signing ceremony that the measures would simply keep programs afloat until the budget cycle ends June 30 - primarily by borrowing and transferring money from reserves and emergency funds. But the state's ongoing recession-caused revenue woes will continue.

"We all agree on one thing: that this state is in a fiscal crisis," he said as legislative leaders looked on. "Our public services have gone through round after round of cuts. We are seriously endangering the social safety net in Oregon."

Kulongoski had proposed a two-year budget of $11.4 billion for 2003-05. But last week's revenue forecast indicated a $468 million drop in income taxes from previous projections.

And that comes on top of legislative budget writers' conclusion that Kulongoski is relying on too rosy an outlook. By his own reckoning, Kulongoski's budget proposal could be from $700 million to $1 billion out of balance.

The Democratic governor gave mixed messages regarding how best to avoid more emergency cuts to schools, colleges and universities, human services and public safety programs for the 2003-05 budget, which starts July 1.

In his scripted comments, the governor stuck to the notion that his economic recovery agenda - boiling down regulations, beefing up marketing of tourism and home-grown products, fixing bridges and inventorying "shovel-ready" industrial land - will make the difference.

"The only way out of this fiscal crisis is to grow the economy of this state," he said. "Through targeted investment, administrative leadership and aggressive marketing, I believe we can grow our economy."

But later, in an exchange with reporters, Kulongoski said he was working on a revised budget that would reflect the downward revision in projected revenues for 2003-05.

Kulongoski gave no details, other than to say he was looking at both the spending and revenue sides of the budget. He said he expected the Legislature to continue discussing and to put forward smaller-scale proposals to increase revenues, such as tinkering with the property tax for schools, expanding state-run gambling through video lottery machines, boosting taxes on beer and wine and trimming tax breaks.

"I haven't changed my position on a general tax," said Kulongoski, vowing to oppose such a measure for 2003-05. "I think there are a lot of these individual issues the Legislature is going to raise, and I think it is going to be part of the debate."

Lawmakers said they, too, were prepared to turn their attention to the next budget cycle. But Tuesday represented one last chance to linger on the politically challenging and often contentious business of absorbing a net drop of $2.1 billion in general-fund resources since the 2001 Legislature finished writing its two-year budget. Most of that work occurred in last year's unprecedented five special sessions.

Top lawmakers primarily expressed regret that they'd found themselves unable to avoid most of the budget's $1.1 billion total program cuts - many of which resulted from the January defeat of the Measure 28 tax increase that many Republican legislative leaders campaigned against.

"I wish we could have done more. I wish we could have done more for mentally ill, medically needy and for seniors," said House Speaker Karen Minnis, R-Wood Village. "But I am grateful and thankful we could pull together."

Earlier Tuesday, the House passed four of the five budget bailouts by overwhelming margins. The fifth bill, which drew the bare 36 votes required to pass by a three-fifths majority, takes $5.4 million in tobacco tax revenues earmarked for local governments' transportation for seniors and people with disabilities. That money would be released only if the May revenue forecast dips far enough below current projections.

Many House members returned to the recriminations of last year's special sessions, exchanging barbs over the dangers of using one-time money to pay for ongoing services and questioning colleagues' unwillingness to increase taxes to avoid program cuts. But most of these criticisms were followed by votes for the package.

Rep. Bob Ackerman, D-Eugene, was one of the few House members to vote against most of the bills in the package. He questioned the decision to borrow money to avoid a deficit, citing the founding document's requirement that the Legislature provide revenue to pay for current state expenses.

"I have always maintained that borrowing money to balance the state budget and pay for basic state services is irresponsible and quite possibly unconstitutional," he said. "Borrowing tomorrow to pay our bills today is just poor fiscal policy."

BAILOUT PLAN FOR THE 2001-03 BUDGET

Relies on $300 million in borrowing through bonds, which would be repaid with Oregon's share of the national tobacco settlement.

Takes the remaining $112 million in the education rainy day fund, which voters established last fall.

Taps $91 million from 15 different reserves, with a portion being held in reserve unless the next revenue forecast in May dips low enough to trigger its use.

Trims $15.4 million, mostly from administration.

Restores about $38 million in reductions, primarily to health care and state police staffing.

Provides enough money to cover last week's $245 million downward revision in state revenues and leaves about $225 million in reserve if things get worse in the final four months of the current budget.