SALEM — Oregon lawmakers and Gov.-elect Tina Kotek will face difficult decisions about government spending priorities in next year’s legislative session, due to the expiration of federal pandemic aid and the expected slowdown in windfall tax revenues that fueled huge growth in the state budget. Many of the outlays approved by Oregon’s Democratically controlled Legislature over the last three years were one-time expenditures. But lawmakers also signed off on things that add to the cost of government in future budgets, such as hiring more state workers and awarding employees

year

after

year

of sizable raises. Now, state budget analysts project that lawmakers could set aside $350 million next year to cover two years of pay raises that Kotek will negotiate with public employee unions, according to a

legislative budget document

released Tuesday, Dec. 6. That would be a 60.5% increase in the set-aside for state worker compensation hikes compared with the $218 million budgeted for raises in 2021-2023. “The amount was increased to reflect the current inflationary environment and additional positions added in the current biennium,” Legislative Fiscal Officer Amanda Beitel told The Oregonian by email. Overall, Oregon’s Legislative Fiscal Office calculated that it would cost $30.7 billion in state general fund and lottery revenues to simply maintain the current level of programs and services for another two years. That’s a 28% increase from just four years ago, when the 2019-2021 state budget was $23.9 billion, according to Beitel. Financial officials at the Department of Administrative Services did not immediately have figures available Dec. 7 that would show whether agencies are on track to spend their entire 2021-2023 budgets. Oregon never experienced a budget shortfall during the pandemic, as personal and corporate income taxes surged. Now, lawmakers could have to solve a $560 million shortfall next year due to a combination of factors including inflation and the expansion of government programs funded with prior windfalls. One anticipated cost outside of Oregon leaders’ control is the roughly $700 million hole in the projected 2023-25 Medicaid budget from the expected expiration of temporary federal pandemic aid. Filling that shortfall with state general fund dollars accounts for roughly one-third of the projected 26% cost increase to maintain current human service programs, according to Beitel. State economists in November said it’s likely the state will enter a

mild recession

sometime next year and that the booming income tax revenues that consistently outstripped expectations for the last decade will slow during the next budget cycle. In fact, state economists have been predicting for years that tighter budget years lie ahead. For 2023-25, the state school fund, the biggest chunk of the state budget, would need to grow by 2.3%, to $9.5 billion, to maintain current service levels, according to the Legislative Fiscal Office. That figure is based, in part, on the estimation that the premium school districts pay into the state pension system for the next two years will be 15.16% of payroll, slightly higher than the 14% in the current biennium but lower than the 18% from the previous two-year budget cycle. Teachers unions and the association that represents school boards have in the past criticized legislative budget analysts’ calculations of the amount of money it would require to maintain current service levels as too low. This budget cycle is no different: On Dec. 6, the Oregon School Boards Association’s Executive Director Jim Green said in a statement that the legislative analysts’ figure “is woefully inadequate … That is not anywhere near what we are experiencing in our schools with inflation.” The association said it would take $10 billion, up $700 million from the current $9.3 billion state school fund budget, just to hold steady. The association did not mention legislative budget analysts’ statement that expected faster growth in schools’ revenue from local property taxes would help offset a more moderate increase in their state funding. The state is on track to have $2 billion saved up in a general rainy day fund and a specific account for “education stability,” according to state economists. However, lawmakers can only appropriate money from the savings accounts by a three-fifths vote, and that will require bipartisan support next year because Republicans picked up enough seats this month to eliminate Democrats’ state House and Senate supermajorities. Any move to tap those funds would likely raise questions about the long-term sustainability of Oregon’s state budget, given expansions in programs and services in recent years.

SALEM — Oregon lawmakers and Gov.-elect Tina Kotek will face difficult decisions about government spending priorities in next year’s legislative session, due to the expiration of federal pandemic aid and the expected slowdown in windfall tax revenues that fueled huge growth in the state budget.

Many of the outlays approved by Oregon’s Democratically controlled Legislature over the last three years were one-time expenditures. But lawmakers also signed off on things that add to the cost of government in future budgets, such as hiring more state workers and awarding employees year after year of sizable raises.

Now, state budget analysts project that lawmakers could set aside $350 million next year to cover two years of pay raises that Kotek will negotiate with public employee unions, according to a legislative budget document released Tuesday, Dec. 6. That would be a 60.5% increase in the set-aside for state worker compensation hikes compared with the $218 million budgeted for raises in 2021-2023.

“The amount was increased to reflect the current inflationary environment and additional positions added in the current biennium,” Legislative Fiscal Officer Amanda Beitel told The Oregonian by email.

Overall, Oregon’s Legislative Fiscal Office calculated that it would cost $30.7 billion in state general fund and lottery revenues to simply maintain the current level of programs and services for another two years. That’s a 28% increase from just four years ago, when the 2019-2021 state budget was $23.9 billion, according to Beitel.

Financial officials at the Department of Administrative Services did not immediately have figures available Dec. 7 that would show whether agencies are on track to spend their entire 2021-2023 budgets.

Oregon never experienced a budget shortfall during the pandemic, as personal and corporate income taxes surged. Now, lawmakers could have to solve a $560 million shortfall next year due to a combination of factors including inflation and the expansion of government programs funded with prior windfalls.

One anticipated cost outside of Oregon leaders’ control is the roughly $700 million hole in the projected 2023-25 Medicaid budget from the expected expiration of temporary federal pandemic aid. Filling that shortfall with state general fund dollars accounts for roughly one-third of the projected 26% cost increase to maintain current human service programs, according to Beitel.

State economists in November said it’s likely the state will enter a mild recession sometime next year and that the booming income tax revenues that consistently outstripped expectations for the last decade will slow during the next budget cycle. In fact, state economists have been predicting for years that tighter budget years lie ahead.

For 2023-25, the state school fund, the biggest chunk of the state budget, would need to grow by 2.3%, to $9.5 billion, to maintain current service levels, according to the Legislative Fiscal Office. That figure is based, in part, on the estimation that the premium school districts pay into the state pension system for the next two years will be 15.16% of payroll, slightly higher than the 14% in the current biennium but lower than the 18% from the previous two-year budget cycle.

Teachers unions and the association that represents school boards have in the past criticized legislative budget analysts’ calculations of the amount of money it would require to maintain current service levels as too low.

This budget cycle is no different: On Dec. 6, the Oregon School Boards Association’s Executive Director Jim Green said in a statement that the legislative analysts’ figure “is woefully inadequate … That is not anywhere near what we are experiencing in our schools with inflation.” The association said it would take $10 billion, up $700 million from the current $9.3 billion state school fund budget, just to hold steady.

The association did not mention legislative budget analysts’ statement that expected faster growth in schools’ revenue from local property taxes would help offset a more moderate increase in their state funding.

The state is on track to have $2 billion saved up in a general rainy day fund and a specific account for “education stability,” according to state economists. However, lawmakers can only appropriate money from the savings accounts by a three-fifths vote, and that will require bipartisan support next year because Republicans picked up enough seats this month to eliminate Democrats’ state House and Senate supermajorities.

Any move to tap those funds would likely raise questions about the long-term sustainability of Oregon’s state budget, given expansions in programs and services in recent years.