Driving Toward the Finish Line in Salem

A key date occurs this week in the legislature's bid to close down by its June 30 target date. On Thursday, May 12, economists will present the final state revenue forecast before the end of the session. That forecast will fuel the drive to the finish line. 

Most observers expect the forecast to bring a bit of good news in the form of an increase in state revenue that will make it easier for legislators to reach final decisions on state agency budgets.

Traditionally, the mid-May forecast is the signal for a mad dash toward the end of the legislative session – and, remember, when legislators come to Salem, the only act they are required to perform is to produce a balanced budget for the next biennium.  Of course, most legislators want to do much more than "just" produce a budget, but this year budget decisions will be particularly controversial as a stubborn recession has limited the availability of state tax dollars.

So far, only one major general fund budget has been approved, the one for K-12 schools, though some interests, especially House Democrats, say they want to tap further into reserve funds to increase money for K-12, always the most politically popular of the general fund agencies.

Budgets for human services (including health care), higher education, cops and prisons have not come out of the Joint Ways and Means Committee yet.  Leaders there have decided they will produce budgets balanced to the last revenue forecast, not the one due this week, so, if there is new revenue, it will be added to budgets rather than be a base upon which budgets are built.

Here is a look at some of the decisions that will be part of the end-game:

*  Legislators will decide how much money to devote to higher education – and how much freedom to give colleges and universities that say they are stifled by "state agency" regulations.  The consensus:  Higher ed institutions won't get the freedom they want, but if the governor's proposal for an Education Investment Board passes (Senate Bill 909), they will be included in that new way of doing business for all of education.

*  Legislators will decide how much money to devote to Oregon's corrections system, which continues to be funded almost exclusively by the general fund.

*  Legislators will decide how much money to devote to keep state cops on the road, but there also could be a ballot measure next fall to allow the state highway fund to be used to fund cops.

*  In what is perhaps the most pressing and controversial set of decisions, legislators will deal with the huge human services budget, which funds programs for citizens from cradle to grave.

Human services advocates worry they may be caught in a late-session budget squeeze.  If human services is the last budget to be approved in Ways and Means, it could end up being the "balancer" – the one that is cut to fund other budgets, which has happened in many past cycles.

This time around, another factor is in play.  It revolves around taxes on hospitals and insurers. The hospital tax passed in 2009 has what has been called "headroom" – room for the tax on hospitals to be increased by administrative action and the funds used to help balance the budget.  Under this approach, the hospital taxes become "state dollars," which then are used to generate federal matching funds in the Medicaid program.  Then, together, the state and federal funds are funneled back to hospitals to help finance the costs of Medicaid, which traditionally in many states, including Oregon, is underfunded.

Health insurance taxes also may be up for consideration in the budget end-game. In 2009, a 1 per cent tax was imposed on all health insurance premiums, and insurers were told by the legislature to inform policyholders that the tax money would be used to fund children's health insurance expansions.  However, at the moment, more money has been collected than has been used for children's health.  So, the appearance of a "surplus" has prompted legislators to review whether to re-allocate the dollars.  Health insurance lobbyists are asking legislators to live up to the terms, conditions and agreements in a memorandum of understanding (MOU) that was signed in 2009 to assure devotion of the dollars to children's insurance.

Key legislators say they want to live up to the MOU, but until final decisions are made, no one can be sure the insurance tax money will remain in its proper place.

Lurking in the background are Governor John Kitzhaber's proposals to re-organize government and, by extension, many private sector institutions that work with government.  His Early Learning Council proposals will not be implemented until the February 2012 legislative session.  The same could end up being true with health care transformation, though a joint committee is still laboring over the behemoth proposal to redesign the way health care services are delivered around the state.  The Education Investment Board also has not been approved on a final basis.  Each of these issues carries substantial implications for the 2011-13 budget. 

One other issue could dominate debates in the next few weeks – redistricting.  Legislators have taken testimony on a redistricting plan, but have not unveiled any recommendations.  If they do and the plan does not pass the legislature, then the redistricting task will fall to Secretary of State Kate Brown.

To say the least, it should be an interesting drive to the finish, with tight committee and floor votes in the offing.  As usual, there are many more adjectives than the word "interesting" that can be used to describe what's ahead.