Rancor marks talks to remedy budget shortfall.

Byline: DAVID STEVES The Register-Guard

SALEM - In what could prove to be a gloomy preview of next week's fifth special session, Gov. John Kitzhaber and legislative leaders from both parties met Monday to discuss their politically volatile options to close what could be a half-billion-dollar budget hole.

The six lawmakers who participated in the negotiating session with Kitzhaber all agreed with the governor's assessment that the latest projected revenue plunge - $450 million - combined with a $50 million loss of bonding for schools means severe problems for education, human services and public safety.

But several sharp exchanges punctured the veneer of cooperation - primarily over questions about the role taxes should play, whether the Democratic governor or the Legislature's Republican majority should take responsibility for the solution and whether factions should set partisan differences aside and work together.

Kitzhaber said afterward he would roll out his own solution today as he has before other special sessions this year. And he said he plans to call lawmakers back for another special session next week, although he declined to select a particular day.

Recessionary gales have buffeted the state all year. The Legislature has already met in three special sessions to deal with a $1.4 billion drop in income tax revenue.

Kitzhaber earlier estimated the latest gap would be between $300 million and $400 million. He said Monday that new information indicates a shortfall of about $450 million.

The Legislature's fourth special session, concluded last week, dealt with two bills Kitzhaber vetoed. Lawmakers revived a bill that lets schools and community colleges avoid $267 million through an accounting maneuver, but couldn't override the veto of a bill to let the state borrow $50 million through bonds to pay for schools.

Kitzhaber appeared to approach the latest bout of budgetary bleeding with the urgency of an emergency-room physician - his former occupation.

He noted that with only 10 months left in the two-year budget cycle, the impact of the shortfall will only grow: Instead of a 5 percent cut to the entire $12 billion budget over two years, the cuts will jump to 15 percent to 20 percent in the remainder of the cycle.

"The longer we wait, the deeper the impact of any programmatic cuts will be," he said.

Kitzhaber told lawmakers the solution should be a combination of "permanent new revenue" and permanent program cuts - and that he would propose both.

Kitzhaber also warned that time will quickly run out if the Legislature considers referring a tax measure to the Nov. 5 ballot. State law requires such a referral to be done in time to get mail ballots to voters overseas, which means a deadline of Sept. 5, a week from Thursday. The latest the deadline could be pushed back is two days, he said.

Given the time crunch, he asked legislative leaders to agree to hold joint House-Senate committee hearings on cuts and taxes this week, so the Legislature could hear public testimony and act by late next week.

And he pledged to veto any bill that he disagrees with on the day it goes to him to prevent delays.

He pressed top lawmakers to indicate at the onset if they won't consider taxes as part of the solution, saying he could accept yes or no, but needed a quick answer so he and other state leaders could tailor their proposals accordingly.

"We don't have very much time here, so I don't want to go down a trail that won't be successful," Kitzhaber said.

Senate President Gene Derfler, R-Salem, expressed doubts about the success of a tax increase, but echoed the governor's call for immediate action that avoids partisan conflict.

Senate Majority Leader Dave Nelson, R-Pendleton, and House Speaker Mark Simmons, R-Elgin, both said they weren't interested in raising taxes and said it was up to the governor, not the Legislature, to propose a solution.

Simmons declined to commit to joint hearings, although he later said he was "fine to do that" after the governor releases a proposal.

Simmons, fresh from locking horns with Kitzhaber over his vetoes, said he wasn't prepared to agree to a special session immediately after Labor Day because he wanted to spend the weekend and part of next week conducting public hearings around the state on how to resolve the budget shortfall.

Some lawmakers suggested that if lawmakers couldn't resolve the problem, the governor could simply make the cuts to rebalance the budget.

But Kitzhaber said he was unwilling to make selective cuts because an earlier attempt led to a lawsuit from legislators who said that exceeded the governor's constitutional authority.

And across-the-board cuts, although within the governor's legal purview, would run afoul of the Oregon Constitution. That's because the Department of Corrections' proportional cuts could be made only by closing prisons and releasing inmates sentenced under the Measure 11 amendment, which sets mandatory minimum sentences for those convicted of certain crimes.

Near the end of the meeting, Kitzhaber asked Nelson whether he and other Senate Republicans were willing to offer their own proposal to make up the difference for any element of Kitzhaber's plan that they reject.

Nelson, who was participating by speaker phone from his district office in Pendleton, said they would. "We've done that three times," Nelson said.

At one point, Sen. Tony Corcoran, D-Cottage Grove, and Derfler began arguing over how much responsibility minority Democrats have and should take to provide votes for politically unpopular tax increases and budget cuts. Kitzhaber cut them off, saying, "Hey, you guys!"

At the insistence of Simmons, the 40-minute leadership meeting was opened to the media, an unusual move with the sensitive issues of program cuts and tax increases bubbling near the surface. He insisted on the format after what he said were instances in which the Democratic governor and legislative Democrats went back on commitments regarding the previous four special sessions.

After its conclusion, participants were hard-pressed to identify any progress.

"There was obviously a lot of anger and hostility," said House Minority Leader Deborah Kafoury, D-Portland.

"I find it very frustrating we're continuing in a partisan basis, rather than working together," Derfler said.

"This is set up for failure."

Kitzhaber said one of the most disappointing aspects of the talks was that lawmakers didn't seem to be in much of a hurry to confront the state's budget problems.

"There doesn't seem to be much urgency about this," he said.