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State budget gets cash infusion.

Byline: David Steves The Register-Guard

SALEM - Cash-hungry lawmakers got two helpings of good news Friday, when a ruling by the Oregon Supreme Court and an upbeat revenue forecast had the combined effect of offsetting more than $300 million in possible budget cuts.

The day started with the Oregon Supreme Court issuing its ruling that the state was not required to refund to taxpayers as much as $160 million in surplus federal Medicaid dollars. Later, state economists reported that the recovering economy would pump up income-tax revenue by $202 million beyond earlier expectations.

State Economist Tom Potiowsky said Oregon's economy continues to improve slowly. He said the state has added 60,000 new jobs, although they don't appear to pay as well as the jobs lost to the recession of 2000-01, which hit the high-tech sector particularly hard.

Legislative Democrats and Republicans alike rejoiced in the two developments, which arrived as they continue to try to stretch the state's dollars far enough to meet demands for spending on education, health and human services, public safety and other programs that rely on the state general fund.

But the two parties, which control the Senate and House, respectively, interpreted the news in different lights.

For the head of the Republican-controlled House, the revenue bump-up was one more reason to eschew increased taxes.

"If there was ever a question about raising taxes, this should put an absolute end to those discussions," said House Speaker Karen Minnis, R-Wood Village. "Oregon does not need higher taxes, and Oregonians will not accept them.'

Her Senate counterpart, President Peter Courtney, D-Salem, focused his reaction mainly on what Friday's developments mean for the spending side of the equation. He said he'd fully expected the Supreme Court to uphold an appeals court decision that the 2001 Legislature had broken the law when it declined to refund $116 million in surplus money resulting from a scheme to bring in extra federal Medicaid money.

Courtney said his only question was whether the court would tack on interest to the amount it would order refunded to taxpayers - bringing the tab to as much as $160 million. The decision that the money wouldn't have to be rebated at all caught Courtney off guard, he said.

Courtney acknowledged that the avoidance of a $160 million hit and the inflow of $202 million more would by no means erase the state's $1 billion revenue shortfall - the gap identified by state budget analysts between the $11.9 billion previously projected to flow into the state general fund and the roughly $13 billion cost of maintaining all programs at current levels.

Still, he said, the news made him hopeful about the Legislature's ability to prevent some of the most objectionable cuts it has faced.

"I can use the word `hope.' It's not an exaggerated word," he said. "I couldn't use it before today."

Lawmakers and Gov. Ted Kulongoski are under pressure to increase spending beyond the governor's proposed levels in nearly every area of the budget: the Oregon Health Plan, the Oregon University System, senior services, mental health and child protective services, community colleges, state police, and programs that help veterans returning from Iraq or who served in earlier conflicts.

But education appeared to be in front of the line for any increased revenue.

Both the governor and Senate Democratic leaders said they considered education a top funding priority for new dollars that come in, including those that materialized Friday. Kulongoski in December proposed a $5 billion, two-year budget for public schools, which education advocates have said falls short of the $5.4 billion needed to maintain current teacher staffing and avoid increased class sizes and a shortened school year.

"I intend to make certain that the monies from the forecast go to education, and to a rainy day fund, to ensure future stability for vital services," Kulongoski said.

Jonah Edelman, head of Stand for Children, the main activist group advocating for an increased education budget, said his group would continue to push for the reduction or elimination of tax breaks for corporations and wealthy households as a way to provide more revenue for education and public services. And he said the revenue forecast's prediction of a $60 million rebate to corporations under Oregon's "2 percent kicker" law would be targeted, too.

The Oregon Constitution requires the refunding of tax dollars that exceed the Legislature's official projection by 2 percent or more. State Revenue Economist Michael Kennedy said that while corporate income taxes are on track to beat the prediction in 2003 by 3.4 percent, personal income taxes and other general-fund resources were coming in at below the 2 percent threshold - meaning households are not expected to receive a kicker refund.

House Revenue Committee Chairman Tom Butler, R-Ontario, said he wouldn't be surprised if pressure were exerted on lawmakers to vote down the corporate kicker so it could be spent on services. But he said it was unlikely the three-fifths majorities in both chambers could be mustered, and said he personally preferred keeping the money in the economy, rather than giving it to government.

"We just don't have the stomach to reach out and grab for that," he said.

REVENUE UPTICK

Friday's quarterly economic and revenue forecast delivered news of increased revenue for the 2005-07 budget, which lawmakers currently are working on. Here are the key numbers:

Previously projected general-fund resources: $11.159 billion

Increased personal income taxes: $88.7 million

Increased corporate taxes: $15.6 million

lncreased other revenues: $1.6 million

Increased beginning balance: $96.3 million

Net increase: $202.2 million

Newly projected general-fund resources: $11.361 billion

- State Office of Economic Analysis
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Title Annotation:Legislature; Court decision on Medicaid surplus and an upbeat revenue forecast could offset $300 million in proposed program cuts
Publication:The Register-Guard (Eugene, OR)
Date:Feb 26, 2005
Words:939
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