07:41 PM PST on Wednesday, March 30, 2005

By BRAD CAIN / Associated Press Writer

SALEM -- Oregon Gov. Ted Kulongoski boosted the amount of state aid he's proposing for local schools by $250 million on Wednesday, up from his initial $5 billion plan.

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Republican House Speaker Karen Minnis, meanwhile, offered up a plan she said would stabilize school finances in the future by permanently allocating one-half of all personal income tax revenue for public schools.

At a news conference, Kulongoski said that with an improving state revenue picture, he now wants the Legislature to earmark $5.25 billion for schools over the next two years.

Additionally, Kulongoski said he thinks the Oregon Legislature might be able to provide up to $5.4 billion for schools, if the state's economic recovery continues at its current pace.

"Oregon's future depends on investments we make in education today," the Democratic governor said at a news conference where he was joined by various education leaders.

The state will only be able to attract new business investment and keep existing businesses if CEOs of those companies are convinced the state provides decent public education, he said.

Senate Democrats are proposing spending $5.4 billion on schools, with some of the increase being paid — at least indirectly — by a new fee on car insurance and an end to $25 million worth of tax breaks.

House Republicans haven't said what level of school funding they will support for the coming two years.

House and Senate budget negotiators are currently trying to come to a compromise on school funding and are hoping to announce a figure sometime next week.

House Majority Leader Wayne Scott, R-Canby, said that in view of those continuing negotiations, Kulongoski's news conference seemed to have been done purely to "bolster" Kulongoski's political standing.

"I am disappointed in the fact that you have, once again, moved the goal posts on school funding," Scott said in a letter to the governor.

In touting her school funding plan, Minnis said it would stabilize the biggest spending item in the state budget, after several years of lean budgets that led to shorter school years and larger class sizes.

Minnis said her plan, if approved by the Legislature, would take effect in the 2007-2009 budget period and would not affect how much state support schools will receive in the coming two years.

Her plan would automatically earmark one-half of personal income tax collections for schools, up to an 8 percent increase in each two-year budget.

If tax revenue topped 8 percent, one-half of the additional revenue would go into to a school "rainy day" reserve that's now financed solely by lottery money.

The other half of the extra revenue would go into a "successful schools fund" that Minnis said would help schools meet specific goals, such as progress toward meeting the testing goals laid out in the federal No Child Left Behind act.

If tax collections didn't rise by 8 percent, the reserve fund would be tapped to ensure schools got a full 8 percent increase in state funding.

Democratic legislators and state School Superintendent Susan Castillo said they were concerned that the plan advanced by Minnis could end up squeezing school finances in the long run.

"Growth in the state school fund of 8 percent per biennium is unlikely to keep pace with enrollment growth and education cost increases, resulting in a continued decline in real resources for K-12 education over time," Castillo said.