03:57 PM PST on Friday, February 25, 2005

By CHARLES E. BEGGS, Associated Press Writer

SALEM -- Legislators got a double dose of good news Friday, with word that projected revenues for the next state budget had jumped by $200 million and of a win in a court case that otherwise would have required more than $100 million in refunds to taxpayers.

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The day began with the victory in court, after the state's Supreme Court judges ruled that the 2001 Legislature had authority to reduce "kicker" refunds by $113 million by shifting money between funds.

That reduced by one-third the refunds due to taxpayers that are required when revenue in a two-year budget period ends up topping estimates by at least 2 percent.

"This is a day of hope," said Senate President Peter Courtney, D-Salem.

He said while an added $200 million is no "panacea" for the state's budget squeeze, legislators now can talk about putting some more money into education, social services and other programs that took heavy cuts when the economy slumped.

Gov. Ted Kulongoski said state school support is his first priority for the additional money.

His said the proposed $5 billion in school funding in the budget that he sent lawmakers last month was "a a starting point -- not an end game -- given the revenues available to me at that time."

Legislators are under pressure from school backers to boost state aid to $5.4 billion. Education lobbyists say that's the minimum needed to head off more classroom crowding and shortened school years.

But Courtney and Canby Democratic Sen. Kurt Schrader, the Senate's budget chief, said the additional money needs to be spread around to also help out community colleges and such programs as assistance for low-income, frail seniors.

As for $5.4 billion for schools, "I don't see how we get there, even with this money," Schrader said.

Outlining his forecast, Tom Potiowsky, the state's chief economist, told legislators that his office may have underestimated the increased tax collections that would be produced by last year's solid economic growth.

"We may have been pessimistic on the revenue outlook," Potiowsky said after releasing his new numbers to a joint meeting of the Senate and House revenue committees.

All told, estimated revenue for the 2005-07 budget is $325 million higher than in a December forecast, which came in at just under $12 billion.

That total includes the $120 million that Gov. Ted Kulongoski last month asked the lottery to produce, mainly by adding slot-machine type games to its video poker terminals.

Lawmakers will get one more projection, in mid-May, before they finish with the new budget.

Kulongoski wants to use the added lottery revenue for state police, while some lawmakers want to use it for education.

Potiowsky said Oregon ended 2004 with job growth of 2 percent for the year, the first annual gain after three straight years of losses due to the lingering recession.

Citing a national firm's outlook for this year for the country's economy as "good, but not great," Potiowsky's report said "the same phrase fits well" for the state.

House Speaker Karen Minnis, R-Wood Village, said the brighter new forecast makes it obvious there's no need for any talk of any tax increases.

"If there was ever a question about raising taxes, this should put an absolute end to those discussions," Minnis said. "Oregon does not need higher taxes and Oregonians will not accept them."

Kulongoski has said he wouldn't support tax increases, and most leaders of both parties have agreed that option is not on the table this year.

Nonetheless, Jonah Edelman of Stand for Kids, which is pushing for more school support, said legislators still need to consider raising new revenue by eliminating some tax breaks and raising the "appallingly low" $10 minimum corporate tax.

He said he realizes schools aren't likely to get all of the additional revenue.

The new forecast "doesn't mean our problems are solved," he said. "The Legislature has a lot of work to do to make sure we get a no cuts budget for schools."