Kulongoski's hard choices.

Byline: The Register-Guard

Ted Kulongoski avoided talking about tax reform during his gubernatorial campaign. Before Oregonians can be persuaded to change the state's system of public finance, he said, their confidence in government must be restored. At the time, that seemed like a convenient way to dodge a commitment to a specific vision of Oregon's future. Now, as governor, Kulongoski has presented a state budget that shows he meant what he said. His budget clarifies Oregon's financial choices in a way that promises to rebuild public trust.

Oregon will have about $11.4 billion in its general fund in the two-year budget period that begins July 1. It would cost $13.5 billion to roll the current budget forward, with allowances for pay raises, inflation and added demands for services. Kulongoski refused to paper over the $2.1 billion difference by relying on accounting maneuvers, rosy economic assumptions or revenues from unapproved tax increases. Instead, his budget shows Oregonians what their government can realistically afford to provide.

A hard pay freeze is the most striking feature of Kulongoski's plan. There would be no cost-of-living adjustments or step increases for state employees. Nor would the state provide money for such increases to state-funded agencies such as local school districts. If Kulongoski can make the pay freeze stick, the state would avoid about $1 billion in added spending during the 2003-05 biennium.

About half of those avoided costs would come from freezing school teachers' and administrators' pay. School employees' salaries are determined by local school boards, not the governor or the Legislature. Nothing would prevent school districts from granting salary increases in 2003-05, or from honoring increases promised in existing collective bargaining agreements. But Kulongoski warns that the state won't pay for any such increases, forcing school districts to choose between salary increases and further cuts to educational programs.

Oregonians are sure to witness many efforts to soften the pay freeze proposal in the legislative session that convened Monday. But Kulongoski has drawn the baseline for any such discussions: Each dollar in added pay will have to be matched by a dollar's worth of reduced spending or increased revenue. It no doubt pained Kulongoski, a Democrat and former labor lawyer elected with strong union support, to make this proposal. But by including the pay freeze in his budget, the new governor has shown a willingness to spend his political capital.

He has also shown a grasp of where Oregonians' spending priorities lie. The pay freeze would scale back future state spending by only half the amount required. The other $1 billion would come by squeezing state programs. The governor's budget would fund kindergarten through 12th grade education, public safety, corrections and child-welfare programs at relatively generous levels. The tightest budgetary contractions would occur in social services agencies and the Oregon Health Plan.

Kulongoski's priorities are a subject of legitimate debate. A greater investment in higher education, for instance, would yield substantial economic and social dividends, and many of the most vulnerable Oregonians - notably senior citizens and the mentally ill - would suffer under the governor's plan. But the familiar accusation that budget cuts have been crafted to blackmail Oregonians into accepting higher taxes can't be lodged against Kulongoski. Not only does his plan include no new taxes, it attempts to protect state services Oregonians say they value most.

The governor's budget is built on speculation in one important respect: It assumes the state can shave its projected increase in Public Employees Retirement System contributions by $124 million. By including lower pension costs in his budget, Kulongoski has put a price tag on the failure of legislative reform efforts - if lawmakers can't lighten the PERS burden, they'll have to find $124 million elsewhere.

The principles underlying Kulongoski's budget - that state government should live within its means, promote economic recovery, protect children and achieve greater efficiency - are sound. Incorporating those principles would go a long way toward rebuilding the public confidence that will be needed for a future attempt to create a more stable system of public finance. Oregon's new governor is off to a good start.