SALEM — Despite the rosiest forecast in years, one of the Oregon Legislature’s chief budget writers and the state economist urged caution as lawmakers make final decisions on state spending for the next two years.
The state’s latest forecast, which lawmakers heard Thursday, projects not only a $473 million rebate to taxpayers from the current cycle but also hundreds of millions more available for schools and state services in the next cycle.
Still, the state budget will be on the hook two years from now. That’s when public-pension contributions for state and school employees will have to rise as a result of a recent decision by the Oregon Supreme Court — at least $500 million for the cycle — and Oregon will no longer get extra federal payments for medical care of low-income people.
“So we are trying to have a measured approach by using some of these dollars to invest now in education, health care and public safety — and trying to keep an eye on where we are heading in 2017,” said Rep. Peter Buckley, a Democrat from Ashland who is House co-chairman of the joint budget committee.
Lawmakers’ tasks were made easier by the forecast, which directed that 40 percent of the higher projection go to the state school fund. Oregon’s 197 school districts draw the lion’s share of their operating costs from the state budget.
That total amounts to $105 million more, in addition to the $7.255 billion that Democratic majorities pushed through in April.
“This forecast will automatically mean $105 million more for our schools. It will allow us to balance the budget, give money back to taxpayers and get out on time,” said Senate President Peter Courtney, D-Salem.
The school fund also will get $61 million more from projections of excess corporate income tax collections, which under a 2012 ballot measure are no longer rebated to businesses.
But Republicans and school advocates want a minimum of $7.5 billion in the state school fund.
It normally takes about 30 days for lawmakers to make final budget decisions, although the Oregon Legislature does not vote on the state budget as a single package. Instead, lawmakers approve a series of individual agency budgets and an end-of-session budget reconciliation bill, which contains add-backs.
State Economist Mark McMullen said he had planned a more conservative forecast, because while Oregon’s economic indicators are generally good, not all that much has changed since the state’s previous forecast on Feb. 19.
“What has changed is business and consumer sentiment, particularly in Oregon,” he told lawmakers.
At the same time, he added, “we do not know if any of these additional revenues are real yet.”
McMullen said it’s a good time, while times are good, for Oregon to build up reserves, even though three funds will contain about $900 million by the end of the current two-year budget cycle that ends June 30.
That’s about 5 percent of the tax-supported general fund and lottery proceeds.
“If the Legislature can keep the feeding frenzy at bay in the next couple of weeks and put away some of this money – through the ending balance or the reserve fund – I think that would be prudent for the state right now, given the uncertainty involved here,” McMullen said.
But the spending pressures are on.
“With nearly $1.75 billion in new revenue this budget cycle, we can fully fund education and provide for all the needs of Oregonians without new taxes,” said Senate Republican Leader Ted Ferrioli of John Day.
Buckley and Sen. Richard Devlin, a Democrat from Tualatin and the other budget co-chairman, had already compiled an add-backs list totaling about $150 million. However, that list compiled back on Jan. 14 included $20 million more for schools, which were aided with the earmarking of the new forecast.
Other groups also want a share of the $264 million made available through the new forecast:
Community colleges are seeking $15 million more, although the Legislature’s budget writers raised their total by $35 million over what then-Gov. John Kitzhaber proposed back on Dec. 1. Their add-back list would bring community colleges up to the target.
The seven state universities also want more to restore direct state support to pre-recession 2007 levels. Their presidents issued a joint statement that said in part: “While other sectors of the budget have had funding restored, higher education has not. The result has been higher tuition, reduced student services, and a more expensive and uncertain path to a post-secondary degree. This trend cannot continue.”
Human services, which the Legislature’s chief budget writers pared $140 million from the governor’s budget recommendations, will seek restorations of at least $40 million. Sen. Alan Bates, a Democrat from Medford who is co-chairman of that budget subcommittee, said the numbers of enrollees in mandatory programs such as welfare and food assistance remain stubbornly high, so costs have not gone down as much as was hoped.
Public safety wants more. Budget writers reduced grants to counties for community supervision of some offenders from $58 million proposed in the governor’s budget to $20 million.
Sen. Chip Shields, a Democrat from Portland who is co-chairman of that subcommittee, also said lawmakers will have to spend more than the $5.2 million Kitzhaber recommended from the tax-supported general fund for fish and wildlife enforcement by the Oregon State Police. Fishing and hunting license fees have borne those expenses for those troopers in the past, but are falling short.