Poor tax revenues may force another state budget cut.

Byline: David Steves The Register-Guard

SALEM - Just as House Republicans were proposing a modest bailout to avoid some state cuts Tuesday, another wave of bad budget news came in: The state's deficit could grow by $100 million or more by month's end.

The House's majority Republicans rolled out a $15.5 million "care package," that would spare the most needy senior citizens and disabled people from service cuts, as well as retain 40 Oregon State Police troopers and restore money for the state crime lab.

But the proposal was drawn up without input from legislative Democrats or the Democratic governor, who said it amounted to a short-sighted proposal that lacked consensus support and the money to sustain it into the future.

Senate President Peter Courtney, D-Salem, said it was difficult to even respond to the House GOP plan in light of the latest information on Oregon's shrinking revenues.

"To be frank, I'm thinking much bigger numbers," Courtney said.

He was referring to a Tuesday morning briefing with state revenue officials who said estimated payments of personal income taxes for the last quarter of 2002 were down 27 percent from forecasted levels - a big enough drop that overall general fund revenues could be down by $100 million or more.

If that number holds up when the next quarterly revenue forecast comes out on Feb. 28, the state's revenues will have been revised downward by $2.1 billion from the $12 billion the 2001 Legislature had counted on when it drew up its two-year spending plan for education, human services, public safety and other general fund programs.

And with only a few months left in that budget cycle, lawmakers are questioning whether they can push the shortfall forward into the next budget cycle, which starts July 1 - a tricky proposition, considering that Oregon's Constitution forbids deficit spending.

Courtney said he and other legislative leaders were seeking legal guidance regarding a new revenue shortfall so they can decide, "Do we jump on that right now, or do we carry it into '03-05?"

Speaker Karen Minnis, R-Wood Village, released the House GOP plan to deal with a small portion of the $310 million in cuts being implemented because of Measure 28's defeat last week. She said the bill being proposed by House Republicans to prevent some of the health and human service cuts and state police layoffs could be on her chamber's floor for a vote by week's end.

House Republicans proposed the legislation because their preferred approach - having the governor make alternative cuts instead of the ones authorized by the Legislature - is not constitutional. Specifically, lawmakers and Gov. Ted Kulongoski had discussed whether the Legislature could grant him permission to find other cuts instead of reducing services to seniors and disabled people, laying off 40 state police troopers, and curbing payments to nursing homes.

But the constraints of the bill passed in the Legislature's budget-cutting special session last fall, along with constitutional limits on the governor's ability to make selective budget cuts, force lawmakers to let the cuts stand or pass legislation changing them, Legislative Counsel Greg Chaimov said.

Because of this, Minnis said, "We felt like this would be the next prudent step in ordering the protection of the most vulnerable in the state of Oregon."

Minnis acknowledged that dipping into one-time money ran afoul of Kulongoski's vow to resist such short-term fixes that didn't address Oregon's long-term gap between revenues and spending levels created by the recession. But Minnis said she was hopeful the governor would work with lawmakers to prevent specific cuts, which were intended to be preserved in the next biennium.

"These are not programs that we're going to turn around and cut," Minnis said. "These are programs that will be carried into the '03-05 budget. So it just makes sense, rather than to cut them right now and add them back in '03-05, to make them part of this biennium."

Mary Ellen Glynn, spokeswoman for the governor, said Kulongoski remained opposed to the use of one-time revenues, especially with indications the state's revenue picture is worsening, rather than recovering.

Before the House Republicans' "care package" can reach the governor, it must pass the Senate. Although Republicans hold an edge of 35 seats to the Democrats' 25 in the House, the two parties each have 15 members in the Senate.

That chamber's budget chief, Sen. Kurt Schrader, D-Canby, said it was short-sighted for one faction in the Legislature to settle on programs it would rescue - despite the lack of consensus on which programs should be spared and how they would be paid for in the long run.

He said the proposal to bail out $15.5 million worth of programs for the final five months of the current budget "looks fairly innocuous, like it's not a big deal," he said. But the cost of continuing those same programs for the full 24-month budget cycle in 2003-05 would be $130 million. And if the state can't afford those services now, there are no guarantees it can find a way to pay for them the next time.

"This isn't a short-term process, it's a long-term problem," Schrader said. "And I'm afraid that's being lost on people."

HOUSE REPUBLICANS' CARE PACKAGE

Would divert one-time money from reserves, an approach used in last year's emergency budget-rebalancing sessions. Gov. Ted Kulongoski opposes using reserves because it's a short-term fix.

The plan would provide:

$7.38 million for the 8,000 low-income elderly and disabled people in the Medically Needy Program, primarily to help cover the costs of prescription drugs.

$6.26 million to maintain long-term care and Oregon Health Plan coverage for the 4,813 elderly and disabled people in "survivability levels" 10-14.

$1.2 million to immediately restore cuts to Oregon State Police forensics and 40 patrol positions that would otherwise be restored in July under governor's budget proposal.

$660,000 to continue residential care for 122 mentally ill people in three group homes.

The plan would tap:

$9 million from the lottery fund's projected ending balance

$3 million from the remaining Emergency Fund

$2.5 million from Oregon's share of the national tobacco settlement

$950,000 from incoming tobacco tax revenue

- House Speaker's Office, Legislative Fiscal Office.