Budget Edition: Co-chairs' Proposal, Shortfall Questionnaire & More


Senator Floyd Prozanski
South Lane and North Douglas Counties
District 4

900 Court St. NE, S-417, Salem Oregon 97301
Capitol phone: 503-986-1704
Email: sen.floydprozanski@state.or.us
Website: http://www.oregonlegislature.gov/prozanski
e-Bulletin                     January 2017

If you're having trouble viewing this message, please visit my legislative web page at http://www.oregonlegislature.gov/prozanski/, click on "News" in the lower left-hand column and scroll down.

Dear friends,

    Thank you to everyone who attended my recent town halls! I enjoyed the thoughtful discussions about how Oregon can move forward. The primary topic was our state's $1.8 billion budget shortfall in light of Measure 97's failure. (See below for facts about the shortfall.) For residents of Senate District 4 who were not able to attend one of the town halls, I have put together an online questionnaire so you can share feedback and ideas with me. After reviewing the below information, please take a moment to complete the questionnaire: https://www.surveymonkey.com/r/TLMZPCK.

    The 2017 Legislative Session begins on February 1. This year's session is expected to last until late June or early July. If you plan to be in Salem while the session is ongoing, please don't hesitate to contact me to set up a meeting or so that my office can arrange a tour of the Capitol for you and your group. I'm also happy to facilitate the opportunity for young people from SD 4 to participate in the Senate's Honorary Page Program. This program provides a preliminary introduction to the Legislature. Pages learn firsthand about legislative procedure and how our state Senate functions. For more information, click here. To download the application, click here. (Participants must be at least 12 years old.)

    Below you will find information on:

- Oregon's $1.8 Billion Budget Shortfall
Co-chairs' Proposed Budget
        - Ways & Means Statewide Tour

    I hope this information is helpful and informative for you or someone you know. As always, feel free to share your comments, questions or concerns with me by phone, mail or e-mail.

                                                               Sen. Prozanski signature

Oregon's $1.8 Billion Budget Shortfall

    Our state faces a $1.8 billion shortfall next biennium, just to maintain current service levels. There are several drivers to this:

  • Federal funding for the Affordable Care Act is set to run out this biennium. There is little to no hope the current administration and U.S. Congress will allocate more Medicaid funding to continue offering health coverage to many of our most vulnerable populations. That accounts for $1 billion of the shortfall.

  • Increased state responsibility for funding public education will cost an additional $781 million. Some of those costs are met by diverting lottery revenue for certain programs.

  • The smallest of these drivers is increased PERS cost. The unfunded liability in the aftermath of the Oregon Supreme Court's decision striking down key elements of PERS reform from the 2013 session will cost another $354 million.

    Ballot measures also have a significant impact, increasing the shortfall. These measures redirect state spending to targeted areas, in some cases with no revenue identified to cover the cost. While I support the intent of the ballot measures passed last November, financial difficulties arise when there is no revenue stream to cover an item or if money has to be diverted from one service to fund another.

    Ballot measures over the years also affect government revenue:

  • Measure 5 (1990) imposed a state constitutional limit for school property taxes and Measures 47 and 50 (1996 and 1997) imposed additional strict constitutional limits on property taxes.

  • Measure 25 (1996) imposed a constitutional three-fifths majority requirement in the Legislature to raise revenue, making it more difficult to fund services.

  • Measure 86 (2000) mandated a kicker policy in the constitution, which diminished the amount our state can set aside in prosperous years for "rainy day" funds in anticipation of lean revenue years.

  • Measure 57 (2008) and Measure 73 (2010) increased sentences for drug, sex and property crimes, as well as sentences for driving under the influence of intoxicants. These have added to the costs of incarceration statewide. The measure did not provide a funding stream to cover the costs.

    The voters spoke loud and clear on Measure 97, rejecting the proposal for a gross receipts tax in Oregon. My colleague, Senator Mark Hass, has an alternative proposal that he is continuing to work on that would bring in new revenue through a more modest, but widespread, tax on corporations.

    We have a revenue problem in Oregon and it's something we're going to have to address. Corporations are not pulling their weight. By one measure, Oregon ranks 50th in the nation for business taxes. Corporations need to pay their fair share to fund public services in our state. Oregon's business taxes are 35 percent lower than the United States average, or $7 billion less per biennium.

  • Comcast's unpaid tax bill is $170 million.
  • Nonprofit hospitals made over $1 billion in profits.
  • Intel's offshored, tax-sheltered, profits totaled $26.9 billion.
  • Big pharmaceutical companies, in the meantime, jacked up specialty drug price costs for the Oregon Health Plan by 28 percent.
  • Cost-per-prescription for brand name drugs for OHP also exploded by 54 percent.

    I am confident that a solution can be reached. The business community has said they will come to the table for discussions. Hopefully, they follow through with meaningful input to come up with a plan that will provide adequate revenue for public services.
    All of these challenges exist in spite of a fast-growing economy. Oregon added 6,100 new jobs in October, and our state's unemployment rate has fallen to 5.3 percent. To maintain parity with population growth, Oregon needs to add 2,000 jobs each month.
    Since October 2015, our state has added 55,400 jobs, but job growth is beginning to level off, as we reach pre-recession job numbers. Oregon continues to outpace national job growth.

Co-chairs' Proposed Budget

    In preparation for the 2017 Legislative Session, the co-chairs of the Ways & Means Committee have compiled a budget framework laying out the stark realities and choices that Oregonians face, given our state's existing revenue and budget situation. Please view the attached summary of the budget levels contained in the co-chairs existing resources budget framework.

    The budget framework provides a preliminary look at how the Legislature can address the large and longstanding gap between the programs that Oregonians have prioritized and our ability to pay for them. The framework isn't a final budget; instead, it's a starting point for the discussion that we need to have with all of our communities. This framework is designed to help with those conversations. It also is based only on existing resources, with no new revenue or expenditures outside of what's currently provided by law.

    As a total percentage of General Fund (income tax and fees) and Lottery revenue, education maintains the same footing overall as it did in the current biennium, at 52 percent of spending. Combined with Human Services and Public Safety, those three items made up 94 percent of the General Fund Budget.

    In the upcoming budget, Oregon currently has $1.8 billion (8 percent) less than needed to fund existing programs (education, health care, public safety, etc.) at current service levels. The co-chairs' framework includes this gap; they did not assume any additional revenue in their framework.

    Without any additional revenue, this budget gap will mean painful cuts to schools and critical programs. People in every corner of our state will feel the impact of these cuts, including larger class sizes and shorter school years. Teachers will be laid off. Care programs for seniors, people with disabilities and struggling families will be reduced. Mental health care and drug treatment programs will be cut. Youth correctional facilities will be closed. This is what the budget might mean for our communities if we do not find additional revenue.

    Creating a budget that protects Oregonians' priorities will require us to improve efficiency in delivering critical services and to make difficult decisions about what won't get funded. But cost savings alone won't solve the problem. We'll need to have a conversation about how to make sure our revenue system is funding our priorities across our state. Without broader reform to our revenue system, future budgets only will be exposed to instability and systemic shortfalls.

Ways & Means Statewide Tour

    The Ways & Means Committee will hold a series of public hearings across the state beginning in February. The town hall events will be opportunities for Oregonians to provide input on the 2017-19 biennial state budget. In Senate District 4, the committee will hold a hearing on Saturday, February 25, from 1-3 p.m. at Lane Community College - Main Campus (Rooms 308-309, i.e., "The Forum").

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