State's budget falls 9%

SALEM — Gov. Ted Kulongoski said Tuesday that some state workers will lose their jobs as a result of a 9 percent budget cut he has ordered.

"There will be layoffs," Kulongoski said at news conference as shocked state officials absorbed a jolt of bad budget news. Legislators described it in terms of "bombshell" and "out of the blue."

Income tax collections for 2009 fell short of estimates, state economists said, leading to a revenue shortage of half a billion dollars in two years of income that had been expected to top $14 billion.

Kulongoski said budgets will be trimmed by 9 percent during the rest of the state's two-year budget period, which ends in mid-2011. The savings will total $560 million, he said.

The governor, a Democrat in the last year of his two terms, said he used his authority to make across-the-board budget cuts rather than call the Legislature into session during an election year because he feared the lawmakers would dip further into the state's dwindling reserves or wind up in "partisan gridlock."

Having gone through two tough recessions, Kulongoski said, "I have learned ... that in a situation like this, that the best response is swift and decisive action."

Details of job cuts and other budget reductions are expected in the next two weeks, he said.

In the state's largest budget category, aid to elementary and secondary education, the cuts would total $237 million, Kulongoski said. That would wipe out an extra $200 million the Legislature gave the schools in February.

Even before the latest shortfall, the governor has been warning of a budget crisis next year and has assembled a team of advisers to recommend a "reset" of state finances.

The panel says the Great Recession has set the state's economy back so far that neither short-term budget fixes nor a decent economic recovery will allow it to pay for everything the government now provides.

In the short term, the governor and legislative leaders said higher education should have enough in reserve to cope with the cuts ordered Tuesday, and cuts in public safety may come hardest.

The state has been adding state troopers in recent years to restore full-time patrol coverage, a victim of the last recession. Cutting prison staffs or populations is difficult from both security and political standpoints.

"You cannot release dangerous people to the streets," said Senate President Peter Courtney.

Kulongoski said he would extend a pay freeze already in place for managers and would ask public employee unions to take a similar step, and he said the state would explore ways to cut in half the rate of increase in benefits spending. The pay and benefit savings would amount to less than one-tenth of the savings the governor ordered.

Kulongoski said there's hope that Congress will send states money to help with widespread shortfalls. Any such money would be targeted to schools and human services, he said.

Leaders of legislative Democrats, who hold 60 percent of the seats, said they would not immediately call a special session to make selective cuts, as one GOP leader urged. Either the governor or lawmakers themselves can call a session.

"Democrats facing election this November would rather let the governor make cuts to services with a hatchet than come into session and do the job right with a scalpel," said the Senate Republican leader, Ted Ferrioli of John Day.

House Speaker Dave Hunt said lawmakers still have $175 million in reserve and could use that to offset the most damaging cuts — once their impact is clear and once it's known whether the federal government will come to the states' aid.

State Economist Tom Potiowsky said most states with income taxes have had "April surprises" this year. Oregon's was heavily influenced by a falloff in capital gains earnings, the revenue from which has fallen by 80 percent in the last two years, said Josh Harwood, senior economist.

Potiowsky said the shortfall doesn't change a more favorable outlook for the state economy over the next year: The recession is over. Job growth is expected to resume, but weakly. A double-dip recession isn't likely, although the end of a buildup in inventories and the winding down of stimulus efforts will lead to a "soft patch" this year.

Share This Story