A New Approach to State Budgeting

The long-awaited governor's recommended budget for 2011-13 landed at the Capitol with a bit of a thud last week, if only because of its size and unintelligible character, written as it was by budget analysts.

But, Governor John Kitzhaber did much better. He emerged on Tuesday, February 1, with a particularly significant first step on the path toward a new way of budgeting for state government services.

In his announcement on Tuesday, the governor did not mention once the number that has gained a lot of notice lately – a $3.5 billion gap between what it will cost to keep the government operating for two more years and the amount of state tax revenue economists say will arrive in state coffers.

What Governor Kitzhaber focused on instead was that current tax rates would produce more money – $1.2 billion more, in fact – in 2011-13 than they produced in 2009-11.  And he proposed how he would allocate that "increased revenue" to fund his top priorities, including his early childhood initiative.

Think about that! No mention of the fabled $3.5 billion!

Now, if you are a state agency head or manager, what the governor said and did is troubling because it will require you to live for the next two years with what you had in the last two years, with no allocation for the increased cost of doing business, for caseload increases in a down economy (especially in human services), for "roll-up costs" when a program started for part of the biennium in 2009-11 then must be funded for 24 months in the next and for money for salary and compensation increases for employees (though, in some cases, the level of compensation will be subject to collective bargaining negotiations this year).

If you are a Republican state legislator, you tend to like the governor's approach. Consider what House Speaker Bruce Hanna, R-Roseburg, said:

"What I appreciate is he's starting from a flat-funding level. I also appreciate he's not going out there espousing a $3.5 billion shortfall (in the cost of continuing current services). He's much more reflecting there's $1.2 billion to $1.4 billion in new dollars."

The Senate Republican Caucus released a statement echoing Hanna: "We are excited that the Governor is building his budget on some of the principles we have been trumpeting for the past four years. The governor seems to understand we have to make a change from an expenditure-based budget to a revenue-based budget."

If you are a Democrat state legislator, you were more muted in your comments, but still you did not stand up to criticize the leader of your party.

And, if you are The Oregonian newspaper, you took note of what the governor did in this way:

"Kitzhaber has dropped the traditional strategy of stressing how much the state has to cut from the cost of continuing current services. Instead he has largely given each agency the dollar amount they had in the last budget - and then allocated the additional $1.2 billion in expected revenue among his top priorities, such as education. It's the kind of approach that Republicans have been pushing for years, saying that budgeting at "current service levels" assumes an ever-spiraling cost of doing everything. Supporters of that approach counter that it's unrealistic to ignore the impact of inflation and population growth."

The devil will be in the details of this new approach, of course. Anyone who reads the governor's budget document comes away with far more questions than answers and, along the way, the governor will have to provide more detail and, in some cases, will have to propose specific bills to achieve his objectives.

Consider the early childhood initiative. The governor wants to group a number of children and families programs under something called an Early Childhood Learning Council, with a director of the new entity established in his office. No one knows yet how the existing programs will be moved around and whether, for instance, the governor's early childhood approach includes just young children or encompasses those up to age 18. Nor does anyone know how the proposed new entity will coordinate the K-12 school system, which has more money than anyone devoted to children.

Answers to those questions will emerge over time in this legislative session.

For now, the governor, to his credit, has embarked on a new way to deal with the reality of limits in state government funding.

Image via KATU