Making up for lost time.

Byline: The Register-Guard

A chorus of "Happy Days are Here Again" would be premature, but the mood in Salem is celebratory. Gov. Ted Kulongoski has proposed a $15.3 billion general fund budget for 2007-09, up more than 20 percent from the current biennium. With a strong economy and Democratic majorities in the Legislature, Kulongoski intends to increase funding for just about every state-supported service while also building a rainy-day reserve of $900 million. Oregon may at last be completing its adaptation to Measure 5.

Measure 5, the property tax limitation approved by voters in 1990, shifted to the state primary responsibility for funding schools. Before 1990, the state provided just over a quarter of local school district's budgets. Since Measure 5 was fully implemented, schools have received about two-thirds of their money from the state. Measure 5 provided no new revenues to help the state absorb this massive new obligation.

State government's new burden could be shouldered only at the expense of other state programs. Higher education was a big loser - since Measure 5 its share of the state budget has declined by about half - but few state-supported programs were unscathed. The damage would have been worse if a robust economy in the 1990s hadn't pumped up revenues from the state income tax. The recession of 2001-02, however, showed that income tax revenues can decline as quickly as they rise, and all state services, including education, endured painful cutbacks.

The economy has been on the rebound for the past several years, and the resulting flood of income tax revenue permits Kulongoski to submit the most ambitious budget in at least a decade. The governor's proposal would allow the state to restore many of the cuts resulting from the last recession, and begin to reverse downward trends in state investment that date to Measure 5.

Higher education, for instance, would receive a 17 percent increase in its budget under Kulongoski's plan - enough to get the Oregon University System off a current track that is leading toward mediocrity.

The challenge will be to ensure that such investments can be sustained beyond 2007-09. That will require building up a savings account that can be used to cushion the effects of the next economic downturn. In the past, the need to adapt to Measure 5, the kicker law mandating that higher-than-projected revenues be rebated, and the immediate financial needs of vital state services prevented the state from banking surplus funds. Kulongoski's budget anticipates that the state can afford to spend and save at the same time.

Even with the House and Senate under control of members of his own party, approval of Kulongoski's proposals won't be automatic. The Legislature will have its own budget priorities.

The governor is asking lawmakers to fund a reserve account with money that would otherwise be rebated to corporate income tax payers. He also wants to increase the minimum corporate income tax, raise the tobacco tax and impose a tax on auto insurance premiums. Tax increases must be approved by a three-fifths supermajority in the Legislature, which means these proposals will need to attract some Republican support.

By one important measure, Oregon still has far to go before it can claim to have adapted to Measure 5. Even with the increase proposed by Kulongoski, spending on schools would be only 83 percent of the amount needed to meet the goals of the Quality Education Model. But many school districts fell far short of adequacy before 1990, and the governor's budget puts all Oregon schools on a rising trajectory. After nearly two decades, the shadow of Measure 5 is beginning to lift.