SALEM -- Oregon lawmakers return to Salem on Wednesday facing some daunting challenges: a struggling economy, deep budget cuts and major changes to health care and education.
The top priority, legislative leaders say, will be further trimming a budget that was already hacked last year. Nothing is off the table, they say.
Barely a quarter of the way into a two-year spending plan, lawmakers already are looking at tough choices about which services will see their funding shrink. Prisons and social service programs will probably be hardest hit, officials say.
Budget writers are "looking at mitigating as much as possible the pain that might occur," said Sen. Jackie Winters, R-Salem, who serves on the Ways and Means committee that oversees budgeting. "But I won't say that it won't occur."
Projections released in November showed the state will take in $300 million less than lawmakers assumed when they wrote the budget for the general and lottery funds, the two accounts lawmakers have broad leeway to control. The next revenue forecast will be released Feb. 7 and could show an even steeper decline.
Some of the shortfall can be covered by reserve funds built into the budget last year to guard against a struggling economy. Any cuts would be in addition to $3.5 billion sliced off last year.
Borrowing money won't be an option. State Treasurer Ted Wheeler has said Oregon's debt capacity is nearly at the historical target; no more than 5 percent of the general fund can be spent on interest payments. The Legislature's borrowing capacity will be constrained until September 2013, when Oregon will pay off $450 million borrowed by the 2003 Legislature, Wheeler said.
Lawmakers will convene in an election year for the first time since voters decided the Legislature should meet annually; it used to meet only in odd-numbered years. The state Constitution limits the new even-year sessions to just 35 days, and Legislative leaders have said they'll try to wrap up in the 29 days of February.
The budget is just one item on a packed agenda.
Gov. John Kitzhaber wants to advance his major health care and education initiatives. Lawmakers approved broad frameworks for both last year but told Kitzhaber to come up with more details and come back for approval.
That leaves some of the difficult questions to be decided next month.
On education, Kitzhaber is asking the Legislature to approve "achievement compacts" that would allow the state to spell out expectations for student achievement from school districts and community colleges. The compacts would be nonbinding, at least initially, but some school districts and the state's largest teachers union have raised concerns about how they would work and what metrics they would measure.
"I still feel fairly confident that we're going to get most of what we need to move forward," Kitzhaber said.
On health care, the governor wants approval to create "coordinated care organizations" that would integrate care for the state's Medicaid patients with a goal of eliminating duplicated services and improving preventative care.
Republicans in the Senate have said they'll fight the bill unless it includes limits on pain and suffering awards in medical malpractice cases.
In addition to Kitzhaber's priorities, both parties have announced their own agendas.
Republicans are proposing an array of tax credits and other incentives that they hope would spur businesses to hire. They want to increase disposable income with a tax cut for low- and middle-income families and a $250-per-child tax credit. They also want to lower capital gains taxes, give tax breaks to businesses that hire unemployed workers and increase logging in state forests.
"This is obviously a very aggressive agenda," said Rep. Kevin Cameron of Salem, the House Republican leader. "We're leading with this agenda."
Democrats have their own job-creation ideas, including spending on new infrastructure, loans for small businesses and more access to worker retraining and job placement services at community colleges. They also want to target foreclosures, requiring banks to maintain foreclosed properties and to mediate face-to-face with homeowners struggling with their mortgages.
"We're really focused on doing what the state can do right now to get jobs created, get people back to work," said Rep. Tina Kotek of Portland, the Democratic leader.
A number of other issues are likely to get significant discussion:
-- Relief for counties hard-hit by the loss of federal payments that went to counties struggling from the long decline in revenue from logging on federal land.
-- Modernizing the tax code to clarify taxing rules for data centers.
-- Health care coverage for workers who provide in-home care to seniors.
-- A tax-deferral program intended to help seniors stay in their homes, which has seen a sharp decline in participation after the Legislature changed the rules last year.
