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A no-growth budget.

Byline: The Register-Guard

Oregonians have been hearing a lot about a $3.5 billion shortfall in the state budget for the two-year period that begins in July. Yet Gov. John Kitzhaber's proposed budget contains $1.25 billion more than the budget for the current biennium - or, if one-time federal stimulus funds are counted, the amounts are roughly the same. The governor has adopted a more clear-eyed way of looking at state spending, one that is in closer accord with financial realities. It's a good start for the legislative session, and for Kitzhaber's third term.

On Tuesday, Kitzhaber unveiled a $14.75 billion general fund budget for 2011-13, with $200 million of that amount going into reserves. By the time the current biennium ends, the state expects to have spent $13.5 billion, plus $1.3 billion in federal stimulus funds. Those figures suggest that state spending in the next budget period essentially will be flat.

So where does the $3.5 billion shortfall come from? To maintain all state services at their current level, the state would need to spend an estimated $18.2 billion in 2011-13 - a 24 percent increase. The growth is a result of a variety of factors, including inflation, growing case loads, rising health care costs, heavy pension obligations and increases in employee compensation.

None of these pressures on the state budget can be ignored. Nor can they all be accommodated. State spending and state resources must be brought into line, and not just in the next biennium. If the state based its budgets on the amount required to keep all services at their current levels, the gap between revenues and needs would continue to widen, approaching $5 billion in the later biennia of the decade.

Kitzhaber embraced a new approach in his budget proposal. He began with the current spending levels, not projected needs, as a baseline - $13.5 billion, excluding the stimulus funds. With $14.75 billion in projected revenues, the result is a $1.25 billion increase in the next biennium. The governor attempted to allocate that money in ways that would improve Oregon's economy and prevent such costly social problems as crime and poor health.

That approach will have serious consequences for most state-funded programs, including the biggest ones. Public schools would receive only $5.56 billion in 2011-13, far short of the $6.5 billion Superintendent of Public Instruction Susan Castillo says is needed. The result will be teacher layoffs, larger class sizes and a shorter school year. Voter-approved mandatory minimum prison sentences for some criminals would have to be postponed or relaxed. Payments to doctors and hospitals for treating Medicaid patients would be reduced, leading some to stop treating those patients altogether.

These consequences will mean real hardships, but softening them in one area would worsen them in others. The state simply can't cover cost increases as it has in the past. Kitz haber's new paradigm keeps spending close to current levels, forcing agencies to find ways to control costs while making investments that should pay off in increased revenues or lower costs in the future. The primary flaw in the governor's approach is that he treats universities and community colleges as costs rather than as investments.

Kitzhaber's budget is only a starting point. At least one of his proposals - funding state police patrols with money from the gas tax rather than the general fund - would require voter approval. The Legislature may be able to find additional resources by reviewing tax credits and exemptions.

But the era of built-in double-digit increases in state spending is over. The $3.5 billion shortfall is the cost of business as usual - and it's $3.5 billion the state doesn't have.
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Title Annotation:Editorials and Letters
Publication:The Register-Guard (Eugene, OR)
Date:Feb 3, 2011
Previous Article:Time for Mubarak to go.

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