Predictions become reality

By Sen. Doug Whitsett (Distr. 28)
For the Independent

In a June 23rd e-newsletter I wrote “State income from taxes has been steadily declining for more than three years. The state economist has predicted a dramatic reversal of that three-year trend in state revenue. He now assumes that the state’s income will cease its freefall and increase by more than $100 million during the next two years. His predictions for the past three years have been both uniformly over-optimistic and demonstrably incorrect.” The actual revenue collected during the 2009-11 budget period was more than one billion dollars less than the state economist predicted would be available.  “Never the less, his predicted revenue increase is being considered hard revenue by legislative leadership. That yet to be realized income is being included in budgeted spending just as if it actually existed.”

The new September revenue forecast now predicts total general fund
and lottery revenue to be $199.2 million less than the former state
economist’s over-optimistic prognostication made last May. The fact of
the matter is that state revenue is simply continuing its more than three
year free fall. In my opinion, that progressive deterioration will continue
until your legislature takes positive action to address the causes of our
statewide economic malaise. We cannot and will not experience
improving state revenue until our private sector employment recovers.

Thank goodness that Ways and Means co-chair Representative
Dennis Richardson stood by his principles and insisted on maintaining
$460 million in reserve ending balances. Dennis was much maligned by
representatives of organized labor, the press and even his Democrat
Ways and Means co-chairs. Our state budgets would already be
underwater and in need of immediate reductions without his principled
stand and conservative foresight. As it is, nearly half of that financial
cushion has evaporated in the first two months of the twenty four month
budget period.

Unfortunately, the state economist’s incorrect prediction is not the
only unsound assumption adopted in crafting Oregon’s budgets. As I
also wrote in that June 23rd e-newsletter “The Oregon Health Authority
budget assumes $239 million in savings during the second year of the
two-year budget cycle. The proposed savings is alleged to be the result
of some yet to be defined transformations in how medical care is
delivered in Oregon. In my opinion, no meaningful savings can be
achieved without at least dealing with medical liability reform and
creating some form of price negotiation at the point of medical care
delivery.”  When I asked the Governor what the contingency would be
if that savings did not materialize he responded that at that time there
was no plan B. Virtually the entire reserve balance is wiped out in the
event that this savings fails to materialize.

Unconfirmed assumptions were also adopted that additional health
care savings in excess of $50 million could be realized. In addition, I
would estimate the outcome of the recently completed public employees
labor negotiations will add more than $50 million to the stress on our
“balanced” budgets. Moreover, the current budgets are constructed for
state agencies to utilize more than half of the budgeted revenue during
the first year of the biennium in anticipation of increased revenue
becoming available in the second year of the budget period.

Taking all these factors into consideration, the first constitutional
annual Legislative session to be held in February may become an
interesting exercise in budget reductions.

Gail and I will be participating in the Oregon Conservative Policy
Summit located in Medford on August 29th and 30th.  The conference is
focused on identifying the specific reasons for Oregon’s private sector
economic malaise and setting Legislative agendas to address those
causes. Specifically we hope to identify obstacles to private sector
hiring and job creation. We look forward to spending a great deal of
time listening to what our Southern Oregon business community has to
say about the nature of Oregon government.

Please remember, if we do not stand up for rural Oregon no one will.

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