PORTLAND, Ore. (AP) -- Oregon Health & Science University and the state's trial lawyers have proposed a new limit for damage claims against government agencies.

The sides recommend the current liability cap of $200,000 be boosted to $1.5 million next summer, The Oregonian newspaper reported in its Thursday editions.

The recommendation needs approval from legislators, the governor's office, and other government entities that would be affected.

Many state agencies are covered by Oregon's tort cap, but OHSU has the most at stake because of the expense that comes with medical malpractice claims.

The state Supreme Court effectively tossed the liability cap last December when it gave the family of Jordaan Clarke permission to pursue a $17 million medical malpractice lawsuit against OHSU.

The boy suffered permanent brain damage when a breathing tube became dislodged in the recovery room following surgery. The justices ruled that government had the right to limit how much a person could recover, but said the cap was too low in Clarke's case.

Without a tort cap, it's estimated that OHSU would have to spend about $20 million annually for claims reserves, insurance premiums and administrative costs. The Supreme Court ruling prompted OHSU to raise tuition and cut jobs and services.

Legislative leaders appointed a task force to study the cap issue in time for next year's legislative session. The lawmakers, in turn, prodded the hospital and lawyers to negotiate.

The $1.5 million limit would start July 1, 2009, and increase by $100,000 a year for five years to $2 million.

In a statement, Gov. Ted Kulongoski said the proposal will ease the decision-making process as the various parties "seek the appropriate balance between protecting taxpayers' money and compensating victims of negligence."