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Tuesday, May 25, 2010

Governor Announces Budget Cuts

Posted by Stefan Kamph on Tue, May 25, 2010 at 2:36 PM

In response to a predicted $563 million state revenue shortfall in the next year, Oregon Governor Ted Kulongoski today announced that he'll use his authority to enact a nine-percent budget cut across the board, affecting all state services.

Oregon gets most of its revenue from personal and corporate income taxes. If people are making less money, so is the state.

Kulongoski:

I do not like the option of across-the-board cuts. I have always maintained that government services are not of equal value — that a Governor should be able to make more targeted cuts in one area to prevent greater harm in another.

The exact wording of the statute is “… and the Governor shall assume that all General Fund appropriations have the same priority… and shall reduce allotments by the same percentage.”

So I am left with only the allotment process to make cuts proportionately across the board to rebalance the state budget to zero.

The funding cuts affect already cash-starved recipients like schools and higher education, as well as public employee benefits. The current budgetary biennium ends in June 2011, and a salary freeze for state employees will extend until then.

Crown Prince Former Governor John Kitzhaber responded with a press release of his own:

I have spoken to Governor Kulongoski who is very aware of the steps that must be taken in this difficult situation and I fully support his decision to use executive authority to rebalance the budget through the allocation process.

Full text of Kulongoski's press release on the budget after the jump.

(Salem) — Today Governor Ted Kulongoski outlined a plan to rebalance Oregon’s state budget after the State Economist reported a more than half-billion dollar shortfall for the current 2009-11 biennium.

“This decline is significant and immediate action is required to keep the budget in balance,” said Governor Ted Kulongoski. “On one hand it is surprising, while on the other hand, I have consistently cautioned that we could see continuing declines in state revenues even as the economy begins to recover — and that we should be better prepared to deal with such declines. Today, unfortunately, the reasons for my cautions were confirmed.”

As provided under ORS 291.261, the Governor announced his plans to take action by exercising the allotment authority to reduce state agency spending for public services by approximately $560 million to rebalance the budget in alignment with today’s forecast.

As required by state law, this reduction will be equally distributed among state agency budgets and schools. At this time, the Department of Administrative Services is estimating the reduction will equate to about 9.0 percent of each agency’s budget for the remaining 12 months of the biennium.

“We could gamble and hope that the next forecast in September delivers a rebound and the hole is diminished, but the longer we wait, the deeper the cuts that will be needed to rebalance the budget in the remaining months of the biennium if that does not occur,” the Governor said. “Throughout my tenure as Governor where I have managed the state through two devastating recessions, I have learned — and am convinced — that in a situation like this, that the best response is swift and decisive action.”

That is why the Governor today directed state agencies to develop plans to implement the cuts needed to rebalance the budget for the remainder of this biennium. Agencies are instructed to report back in two weeks with their reduction list. The Governor is also directing state agencies to meet with their union representatives to explore alternatives to layoffs as allowed under existing contracts, such as additional furlough days.

“A 9 percent cut is significant and will most certainly lead to layoffs. But layoffs should be the last possible alternative,” the Governor continued. “I am directing state agencies to meet with their union representatives to explore alternatives to layoffs, such as furloughs or a reduced workweek, where feasible so that we can deliver savings while preserving as many jobs as possible.”

The Governor also announced the following personnel actions to be effective immediately, including:
Extending the salary freeze for executive service, management and unrepresented employees through June 2011, the end of the current biennium. This action will save the state $7.9 million in general fund.
Requesting public employee unions meet with the state to discuss extending the salary freeze to all represented employees, which would deliver a total savings of $12 million in general fund.
Asking the Public Employees Benefits Board (PEBB) to explore benefit changes to keep cost increases to 5% for the next plan year, as opposed to the nearly 10% increase as currently projected. Achieving this cost containment goal could save approximately $30 million in total state funds in the next plan year, which begins in January 2011.

“I am not taking these actions lightly, nor am I implying that state employees are in any way to blame for our circumstances. To the contrary, they have helped us weather a terrible economic storm,” said the Governor. “We owe them our respect and our gratitude. I am simply recognizing that difficult times demand difficult actions. And when times get even more difficult, as they just did today, I am asking again for their understanding and their cooperation.”

The Governor closed the press conference with another call for resetting state government. In acknowledging that there is the potential for additional one-time assistance from the federal government for health care and education, the Governor cautioned again that the state can no longer rely upon short-term solutions for what is a long-term problem and must end the practice of only budgeting in two-year increments.

“When my Reset Cabinet comes back next month with a menu of options for state government, we will be faced with some difficult choices, unpopular choices and controversial choices,” said the Governor. “But they will be the right choices if we want to end this up-and-down, invest-and-cut pattern of the last 20 years.”

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