Oregon’s Budget Crater Remains a Political Mystery

Legislative leaders who convened the 2017 session today are calling Oregon’s $1.8 billion budget hole one of the biggest challenges in recent years, but how to meet the challenge, balance the budget, grow the economy, preserve essential services and pass a transportation funding bill remain a political puzzle.

Legislative leaders who convened the 2017 session today are calling Oregon’s $1.8 billion budget hole one of the biggest challenges in recent years, but how to meet the challenge, balance the budget, grow the economy, preserve essential services and pass a transportation funding bill remain a political puzzle.

The 2017 Oregon legislative session convened today amid a torrent of newly introduced bills and an eerie silence on how lawmakers will cope with a $1.8 billion budget hole.

Senate President Peter Courtney says he doubts whether votes exist in the Oregon Senate to raise additional revenue or pass budget with deep spending cuts. “It’s a very bad situation,” he says. House Speaker Tina Kotek called the 2017 session “one of the most challenging in quite a few years.” However, identifying problems and agreeing on solutions are very different.

Legislative Republicans have named their price for considering additional revenue – changes to the Public Employees Retirement System and “pressing down the cost curves” of state programs. When commitments are made to pursue business-friendly policies to grow the statute’s economy and cut back on state government costs, House Republican Leader Mike McLane said, "Republicans will sit down and talk about revenue reform."

Republican leaders also have signaled a reluctance to work on a transportation funding package without lowering the low-carbon fuels standard adopted in the 2015 session. “I’m hopeful that the process [to develop a transportation package] this year won’t be hijacked by the left again,” said Senate GOP Leader Ted Ferrioli.

Clouding the state’s fiscal challenge are uncertainties floating across the continent from the nation’s capital in the form of turning Medicaid into a block grant program and possibly triggering a trade war with key Oregon international trading partners.  Both could have implications on the state’s budget in the 2017-2019 biennium.

Meanwhile, the political upheaval in Washington, DC generated by the new Trump administration, especially the President's immigration executive action, has served as a convenient foil to distract attention from Oregon’s policy and financial issues.

Governor Brown has focused on maintaining access to health care through Oregon’s expanded Medicaid program, passing a transportation investment package and addressing the state’s housing crunch. Her suggestion to permit rent control is likely to stir up lively opposition.

While Brown has expressed willingness to look at ways to bring revenue and spending into better structural alignment, she hasn’t offered a process or plan to do so. The governor has urged Oregon business leaders to bring a plan to Salem. Kotek asked business leaders to sit down with others to discuss how to achieve financial alignment. That has led to pushback from business groups and the news media urging political leaders to step forward with a plan – or at least a path to a plan.

The legislature has until early July to figure out what to do on the budget. The pressure is on now to figure how to do it.