Governor Rolls Out "Education Budget"

Governor Kitzhaber outlined his budget proposal, which raises controversial issues about reforming public employee pensions, health care spending and prison sentencing.Governor Kitzhaber unveiled a budget proposal today that he called "first and foremost an education budget."  He said his budget "creates space for front-end investments in education and early learning by cutting back-end spending on health care and corrections." 

His 2013-15 budget, which was previewed by The Oregonian and Salem Statesman Journal today, puts controversial changes to the Public Employees Retirement System (PERS) squarely in the center of an effort to carve out more money for schools. And that could bump into political resistance from the newly Democratically controlled House.

Despite that, the atmosphere in the state Capitol was markedly different than in Washington, DC, where partisan wrangling continues over how to avoid plunging over the so-called fiscal cliff. While there is no looming fiscal cliff here, the governor's budget will only serve as the framework for the 2013 legislature to hash out a final budget with Democrats at the controls in both the House and Senate.

Senator Richard Devlin, D-Tualatin, already named to be Senate co-chair of the Joint Ways and Means Committee, was charitable toward the governor, as quoted in the Salem Statesman-Journal.  "I appreciate the governor's candor about the specific challenges we face in funding education and the Oregon Health Plan in the next biennium," Devlin said.  "With his recommended budget, Governor Kitzhaber has provided a good starting point for the budget negotiations ahead of us."

New House Republican Leader Mike McLane, R-Powell Butte, praised Kitzhaber for addressing PERS, but questioned the rosiness of revenue projections and the lack of any fund reserves to cushion the budget in case the economy falters in the next two years.

The governor's plan for more money for K-12 schools rests on the premise that the legislature will accept his recommendations to reform PERS in two ways:

• By limiting cost-of-living increases to the first $24,000 in retirement income; and

• By closing a benefit loophole for out-of-state retirees. 

Together, the two changes would save an estimated $865 million. The savings would be part of the governor's plan to increase school funding by 8 percent, allowing districts to hire 500 more teachers and reduce growing class sizes.

There are at least three other potentially controversial proposals embedded in the governor's budget. One deals with prison sentencing. While the detail awaits a report from the governor's Prison Sentencing Commission, the budget proposals do not allow Oregon's prisons to grow beyond the current 14,000 population, thus avoiding the need to build and operate another new prison.

Detail is sure to be controversial and no doubt will prod comments by crime victim advocates concerned that the governor's proposal will let violent offenders out of prison and by such critics as Clackamas County John Foote who already has been quoted as saying "you are not going to fix the state's budget by whacking away at state prisons." McLane, in his statement today, warned against going against minimum sentences mandated by a voter-approved ballot measure.

Outgoing Supreme Court Justice Paul DeMuniz, co-chair of the Prison Sentencing Commission, is expected to deliver detail to the legislature after it convenes next year.

A second controversial proposal revolves around health care spending. The governor has cut a deal with the state's major health care leaders through the Oregon Health Leadership Council that includes extending the hospital tax, devoting more money to the state's Medicaid program and continuing a plan to cut health care costs over the long-term.

In the Statesman-Journal today, the governor was quoted as saying that his budget "means lowering the cost of health care to make small businesses more competitive and better positioned to create jobs."

Third, the governor set up a debate in the legislature over the Columbia River Crossing (CRC), the new bridge between Portland and Vancouver, which has been beset by controversy for many months.

The governor's proposal devotes $450 million in bonding authority to cover Oregon's share of the project. One legislator summed up the controversy recently when he said he wanted to change the name from the CRC to the "I-5 Bridge Project" to get away from the negative perceptions of the past and the governor himself used the phrase "I-5 Bridge" as he advocated for this as a key part of his infrastructure investment proposals.

In line with bonding authority for the new bridge, Kitzhaber proposed $1 billion in public works investment to spur job growth and $10 million to align workforce training with business needs. He also wants more job-related daycare and expanded investment in need-based student aid for college students.

Early indications are that legislators believe the governor has provided a path toward a final, consensus agreement, something far different than what appears to be happening in the nation's capital.

House-Speaker Elect Rep. Tina Kotek, D-Portland, uttered a note of caution when she said PERS reforms will face some legal hurdles, but her counterpart, Senate President Peter Courtney, D-Salem, said the governor had done legislators a service by showing "us a plan to pay for" what he wants to do.  

"Everyone knows this won't be the final budget," Courtney said, "but he's shown us the roadmap."