The rumors in the State Capitol and news media this week were that the Governor had torpedoed the Legislature’s Budget Rebalance Plan and the fragile agreement between the Democrat and Republican Co-Chairs of the Ways & Means Committee was in jeopardy. Nothing could be further from the truth. The Legislature has the responsibility to produce and maintain a balanced budget and the Co-Chairs of the Ways & Means Committee will do so, using both one-time measures and lasting government reforms.
With only eight business days remaining before the Legislature is scheduled to adjourn, this newsletter is to provide Oregonians with a status report.
First, I will clear up the apparent “dust-up” between Oregon’s Executive Branch and the Legislative Branch.
The founders of our nation and state created a form of government with inherent tension among its three branches. We remember from our civics class in school that, in general terms, the Legislature is elected by the voters to represent them in creating laws for the public good and to fund government operations. The Governor is elected as the State’s Chief Executive and the Executive Branch implements or “executes” the laws passed by and with funding from the Legislature. The Judiciary is to oversee a court system that resolves civil and criminal matters and determines the constitutionality of laws passed and enforced by the other two branches of government.
Two weeks ago the Co-Chairs, after weeks of serious and sometimes intense negotiations, presented a plan to Rebalance the State Budget.
The Budget Rebalance is necessary because some of the revenue assumptions made when the 2011-13 State Budget was passed last year failed to materialize. This has resulted in Oregon currently having a $201 million “budget hole.”
Part of the Co-Chairs’ plan included an agreement for approximately $30 million in state government “reforms.” For the purposes of the Rebalance, “reforms” can be defined as changes in the operations or structure of state government that will result in both short and long-term savings.
Before leaving office, Oregon’s previous Governor produced a Reset Cabinet Report. The Report sounded the same alarm I have been warning of for the past eight years—Oregon’s spending is unsustainable and its operations must be made more efficient, effective and economical.
The rising costs of state payroll expenses must be brought in line with the state’s revenue resources. According to Public Employment Retirement System (PERS) records, in 2006 Oregon had 38,000 employees and by 2011 the number of employees had increased to 47,000.
Oregon finds itself in a conundrum. While 9,000 state employees were added to the state’s payroll, Oregon’s revenue forecasts dropped by more than $4 billion.
Every family knows that when there is not enough money to pay its bills it must either raise revenue or decrease expenses. The same applies to state government. Experience has shown a government cannot tax its way out of a recession. Regardless of what economists are saying, Oregon’s unemployed, under-employed and foreclosed citizens testify to the fact. In Oregon the Great Recession is not over.
So, the Co-Chairs’ Rebalance Plan contains nearly $30 million of reforms—primarily coming from restructuring operations in the larger state agencies by eliminating many middle management and other positions that can no longer be afforded.
The current “flap” between the legislature and the Governor resulted from the Legislative Branch placing the Executive Branch in a difficult position. The Co-Chairs requested the Governor and the Director of the Department of Administrative Services (DAS) to compile a list of position cuts that would result in savings of approximately $28 million. Due to the time constraints of this one-month legislative session, those recommendations were needed in less than two weeks.
There are those in the Executive Branch who believe the Legislature has no authority to determine how many managers or supervisors agencies should have. The Legislative Branch retorts that all matters regarding “the purse” are within the constitutionally granted authority of the Legislative Branch. Such tension is to be expected—it is part of the “checks and balances” of our system of government. In fact, the U.S. Congress goes much further than our State Legislature. Congress, in many instances, actually dictates how many positions are allowed in a given agency or classification.
Michael Jordan, the Director of DAS, and his staff worked long hours trying to address the Legislature’s request, and were able to compile $7.5 million of the requested position cuts. The Co-Chairs are grateful for the herculean work performed by the dedicated staff at DAS and the agency directors in such a short timeframe.
Notwithstanding how difficult our request has been, after reducing the needed reforms by $7.5 million, the Co-Chairs still need an additional $20 million in operational restructuring reforms to implement the Rebalance Plan.
To solve this challenge the Co-Chairs, through the analysts in the Legislative Fiscal Office (LFO), will be working with the directors of agencies over the next few months to accomplish an organizational restructuring that will generate the needed financial savings and do so in a thoughtful and rational manner.
The agency directors will be allotted their agency’s share of the $28 million of needed reforms. They are to collaborate with LFO analysts and determine what changes in operational staffing will enable their agency to accomplish the needed savings while accomplishing their agency’s mission.
The Legislature is reducing the agency’s allocation for payroll and asking the directors to suggest how they can “lean” or reorganize their operational structures as needed to accomplish their agency’s mission within the revised budget limitations. In sum, each agency is to achieve its savings without cutting programs or services.
To place the request for creative operational reforms in context, I asked an agency director the question, “If your agency were being created today, how would you organize it to accomplish its mission within the allocated funds and collective bargaining contracts in place?”
In conclusion, with the dramatic and sustained reductions in revenue, Oregon has undergone a financial paradigm shift. Such long-term economic constraints make it clear. Operational reforms must be implemented. The Legislature understands this reality and will work with agencies to adjust budgets, staffing levels and operations accordingly.