Bumpy ride, thin cushion.
The Legislative Emergency Board succeeded Thursday in avoiding some penny-wise, pound-foolish budget cuts to state human services programs. The sensible nature of the restorations and the modesty of their size underscore the importance of adequate budgetary reserves. Given a two-year budget cycle that ensures a need for budget revisions, along with a deep recession that is forcing a thorough recalibration of state spending, Oregon should take the lesson to heart.
A revenue projection in May showed a $577 million shortfall for state government in the remainder of the 2009-11 biennium. Gov. Ted Kulongoski responded by ordering all state agencies to reduce their budgets by 9 percent. Kulongoski did not choose to wield the blunt instrument of across-the-board cuts; it was the only instrument he had. State law prohibits selective budget cuts by the governor. The law is intended to keep a governor from altering the Legislature's budgetary priorities, but the result in this case was a number of budget cuts that made little sense.
A good example is Project Independence, a program that for 35 years has helped keep older Oregonians out of nursing homes by providing in-home care. The program is an efficient use of public funds, because nursing home care, often subsidized by Medicaid, can cost more than 10 times as much as in-home care. While saving money, Project Independence improves people's lives by allowing them to stay in familiar surroundings. But after the governor announced the budget cuts, thousands of people received letters informing them that payments for their in-home care would no longer be provided.
The Emergency Board, which makes limited budgetary adjustments between regular or special sessions of the Legislature, voted Thursday to restore $17 million for Project Independence and other programs for the elderly and disabled. The money will come from a Department of Human Services fund that is meant to cover the cost of increased demand for services. Growing caseloads will become harder to accommodate as a result, but the restorations are justified.
Oregon would be better off if lawmakers could draw on an adequate budgetary reserve fund to avoid destructive budget cuts. Some progress in this direction has been made, but Oregon's rainy day fund is not big enough to provide protection in the stormy climate created by the current economic downturn and a volatile system of public finance. The scarcity of reserve funds leaves the Emergency Board little room to maneuver in softening the harshest effects of across-the-board cuts.
If the 2011 Legislature needs a reminder of the need for a cushion during bumpy budgetary rides, it should remember how close Oregon came to losing Project Independence.