Oregon’s current general fund and lottery budget is about $14 billion after taking the approximately $600 million reductions required by the June revenue forecast,
The projected general fund and lottery revenue for the next budget period is $16 billion. Obviously, this means that about $2 billion more is projected to be available to spend during the next budget cycle than is being spent in the current budget cycle.
However, the Legislative Fiscal Office (LFO) projects the cost of maintaining the service levels currently being provided in the 2009-11 budget cycle will cost $18.3 billion in the next budget cycle. In “government-speak”, it appears that anything short of a four billion dollar increase in spending will require cuts in spending.
The LFO itemized the need to spend $4.3 billion more to provide essentially the same services.
The one time funding used in the current budget from federal economic stimulus grants, state reserve funds, and money swept from other fund sources amounts to $1.6 billion and must be backfilled with general fund money. That leaves about $2.7 billion in increased spending to explain.
The cost of public employee compensation is expected to increase 13.4%. That includes the reinstatement of furlough days with pay, step increases in salary of about 4.5%, cost of living salary increases of 4.5%, an 18% increase in the cost of health care benefits, Pension Obligation Bond payments, and a 6% increase in the rate that public employers must pay into the Public Employment Retirement System.
Other major adjustments include increases in human services caseload projections, at least a 13% increase in Oregon Health Plan costs, and significant increases in debt service resulting from borrowing during the current budget cycle.
Finally, a 1% ending balance reserve is built into the two year budget projection.
We should all keep in mind that the Governor’s revenue projections have
been notoriously inaccurate. But using those projections, we appear to have a
$2 billion increases in revenue with a $1.6 billion need to replace revenue that came from one time sources in the current budget. That leaves about $400 million more to spend in the next budget cycle for projected increases in debt service obligations and agency case load demands.
The projected “deficit” is certainly manageable if state government would only live within its means just as Oregon families must do during difficult financial times. Perhaps Oregon could learn from Governor Christy’s recent actions in right sizing the New Jersey budget.
Continued next week