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Governor’s budget recognizes reality

Rather than calling for broad-based tax increases, Gov. John Kitzhaber on Tuesday told state agencies to take the general fund revenue taxpayers are expected to provide over the next couple of years and live with it. In other words, the governor’s proposed budget simply accepts reality.

This wasn’t unexpected, but some of the usual people said the usual things. For instance, Susan Castillo, superintendent of public instruction, lamented in a news release that the $5.56 billion the governor would like to spend on K-12 education between 2011-13 “is drastically lower than the estimated $6.5 billion our schools need to keep up with inflation and maintain the level of current services to students.”

Inflation? Castillo must be referring to the soaring compensation costs that former Gov. Ted Kulongoski’s Reset Cabinet characterized as highly problematic to any state policy maker who values solvency.

Castillo’s response thus highlights the difficulty of the task both the governor and lawmakers now face, which is to convince state agencies and interest groups that taxpayers aren’t about to part with more money. And having done that, an even more difficult task awaits: preserving service levels.

To listen to Castillo, you’d think this would be impossible. But the $6.5 billion she’d like assumes a business-as-usual increase in salary and benefits costs. But business as usual ended for Oregon a couple of years ago when the bottom fell out of the economy, and most people have learned to focus more on what they still have and less on what they’d like to have. And what Oregon is expected to have during the coming biennium is a nearly 9 percent increase in general fund revenue. The state is expected to collect about $13.5 billion this biennium, and Kitzhaber’s budget assumes it will collect $14.7 billion during the 2011-13 biennium.

The state’s problem is simple, even if its solution isn’t: The cost of government continues to outpace the growth in tax revenue. To bring the two into alignment without a huge tax increase, the governor and Legislature will have to bring down costs. This will involve some reductions in service, to be sure, as the government work force is trimmed and unnecessary agencies eliminated. But reductions also must involve public employee compensation, particularly benefits, which is the sort of cost cutting that preserves service levels. The governor carefully avoided the subject on Tuesday, noting only that negotiations with employee unions would begin later this month.

What all of this adds up to is ... not much. The governor deserves credit for recognizing reality, which is that tax increases are off the table. But Oregonians don’t know yet how, exactly, the governor proposes to protect government services in the face of that reality. And that’s how he and his colleagues in the Legislature will be judged.

— The Bend Bulletin (Wescom News Service)

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