News Story

Despite Tax Hikes, Oregon Faces Long-term Funding Crisis

Legislative leaders have nearly $300 million in reserve funds and $79 million in ending fund balance at their disposal to respond to an economic forecast that fell $183 million short for 2009-2011. A bill to rein in exploding costs of Oregon's Business Energy Tax Credit, which has created jobs in the short-term, with less certain long-term benefits, will reduce this deficit by $55 million. 

The shortfall for the current biennium is manageable; it is the next round of budgets that will face serious cuts. Even with forecasted economic recovery at over 20% growth, including nearly 8% growth in nonfarm employment, beginning in 2010, Oregon still faces substantial shortfalls for 2011-2013.

Oregon's 07-09 state spending grew 20% from the prior budget and the 09-11 budget spent nine percent over that figure. This continued growth in spending means that costs for 2011-2013 are already anticipated to exceed state revenues by $2.5 billion. 

Some of the issues facing the next legislative budget include increased obligation of General Fund dollars for debt-service for additional state borrowing, increased costs for public employee pensions, which have unfunded liability assessments as well as current rates of 8-14 % of salary, replacement of one-time federal funds, a continued sluggish economic forecast and expectations of state employees for wage and compensation increases following salary freezes in 09-11, inflation for goods & services, and caseload increases in the Department of Human Services.

Since Oregon is not able to print its own money or deficit spend, legislators, still in the midst of their "jobless" jobs session, are crossing their fingers for another federal bailout to get them through 2011-2013. Without federal assistance legislators will face the same choices from 2009-2011: raise taxes or cut state budgets.


* This article was produced by the Oregon Restaurant Association