02/05/2008

By JULIA SILVERMAN  / Associated Press

What a difference a year makes.

In 2007, Oregon had plenty of tax revenue, allowing lawmakers to increase spending by 20 percent and even create a rainy day fund. But 2008 is shaping up to be a different story.

The co-chairs of Oregon's budget committee painted an austere budget picture on the opening day of the monthlong 2008 session. Though they fielded requests for $75 million in new spending, State Sen. Kurt Schrader, D-Canby, and State Rep. Mary Nolan, D-Portland, called for restraint.

Schrader and Nolan presented two budget scenarios Monday. The one that goes into effect depends on Friday's revenue forecast.

With the national economy turning sour amid a deepening housing crisis, Schrader and Nolan said they expect a $25 million to $125 million drop in Oregon's income tax collections. Whether or not that happens, the two recommend saving 1 percent of the state's $15 billion budget — or about $140 million — in the rainy day fund, to help cushion cuts in schools, public safety and social services that could accompany a recession.

They've also told state agencies to prepare for a 2.5 percent cut in their services and supplies budgets, generating about $30 million that would be available to plug budget holes should prison costs or child welfare caseloads increase.

A few areas would still get extra funding, including $4.4 million to the state Lands and Conservation Department. That money would help process claims made under Measure 49, the revamped property compensation measure approved by voters in the 2007 election. Another $480,473 would go toward hiring an additional 39 state troopers to ensure 24-hour coverage of Oregon's two interstate highways.

Should Friday's revenue forecast stay flat, rather than drop, the budget could support more money for child welfare staff at the Department of Human Services, plus nearly $4 million more for programs aimed at seniors and the disabled. Schrader and Nolan said they would also set aside small amounts for affordable housing, water storage in the Columbia Basin, small business loans for veterans and disaster relief for Oregonians hurt by December's coastal storms.

Schrader and Nolan also warned about a host of other factors that could further threaten the state's revenue picture, including the unexpected popularity of the business energy tax credit program approved by the 2007 legislature and the federal government's economic stimulus package.

"The federal government does not seem to get it," Schrader said, referring to the checks that some in Congress and the Bush administration want to send out to juice the economy. "The state of Oregon is not going to follow in those footsteps. We are going to save money, because we don't know what's ahead of us."

Still, other legislators noted that the proposed budget doesn't take into account some of the financial obligations that are looming for Oregon, including a major overhaul of the state hospital system, and a recent court decision throwing out Oregon's $200,000 cap on damages against public agencies, which could push up insurance premiums.