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When The Well Runs Dry 

Shortly before the Oregon Legislature released its revenue forecast last week, providing details of its budget for the fiscal biennium, State Economist Tom Potiowsky issued

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Shortly before the Oregon Legislature released its revenue forecast last week, providing details of its budget for the fiscal biennium, State Economist Tom Potiowsky issued a statement saying the dramatic freefall of the state's economy has ended, and a full recovery will be noticeable by 2011.

Try passing that off as good news to the 14.7 percent of Deschutes County residents currently unemployed (or 12 percent of all Oregonians), because nothing short of going back to work will kill the pounding hangover they feel brought on by the current recession, regardless of any speculative elixir Potiowsky or other Oregon economic experts may serve up in the weeks and months ahead.

"We are living by faith, hoping that some magic will come out of the sky and that we'll be able to sustain ourselves under current conditions," Sen. Margaret Carter (D-Portland) said at a recent Salem press conference.

Instead legislators are finding that they have to perform surgery on this ailing patient with a cleaver rather than a scalpel.

When the Legislature released its revenue forecast late last week for the next two years, predicting a $4 billion budget hole, some observers touting it as a small victory because the $4 billion gap is about $1 billion less than was expected, but it also seems to indicate any sort of recovery is still relatively far off.

"The bottom line for all of our cities, counties and citizens in Central Oregon is, I think there will be a reduction of state services overall in the 10 to 15 percent range," Sen. Gene Whisnant (R-Sunriver) said. "There was some discussion that there would be about a 30 percent cut, and that would have been unacceptable. You can't cut funding for state agencies by 30 percent and continue to deliver quality services."

A full 90 percent of Oregon's budget is dedicated to paying for schools, public safety and human service programs, so it's inevitable that at least some cuts will occur in those vital programs.

While the Bend La Pine Schools have yet to hammer out a budget for next year, initial estimates put the shortfall at roughly $10 million. And school administrators estimated that they would have to cut almost 50 teaching positions and another 15 support staff or risk cutting classroom days and programs.

Local human service programs include a vast array of county mental health services, such as help for the developmentally disabled, drug and alcohol addiction treatment, and other public assistance programs, including the Commission on Children and Families, which is a conduit for passing on state funding to Central Oregon nonprofits like the Mountain Star Family Relief Nursery, a provider of support to families at high risk for child abuse and neglect during the first four years of a child's life, and Ready Set Go, a volunteer effort that provides health-care home visits for "first-birth families with identified risk factors," Deschutes County Administrator Dave Kanner said.

The county already has reduced the number of hours its mental health staff works, from 40 hours a week to 36 hours, a 10 percent reduction that is the equivalent to losing 10 full-time employees, Kanner said.

The county's latest budget proposal which came out this week contemplates an overall ten percent reduction in spending, reflecting the sagging revenues both at the state and local level. If adopted, the budget would result in the loss of the equivalent of 32 full-time jobs about half of which would come from lay offs.

"No one saw this coming last September when the (economic) collapse happened," Kanner said. "We expected to see moderate growth into next year. We're already under serving one-third of the people who need assistance from county agencies, and after July 1, when the final budget is approved, we probably will only be able to provide assistance to one-quarter of the people who need it."

Gov. Kulongoski said he plans to create a "special cabinet of experts" sometime in July that will be in charge of finding alternative sources of revenue to help make up the funding difference for necessary public programs.

The Democrats' solution is a proposal to increase the corporate tax rate and income taxes for Oregonians who annually earn more than $250,000, mirroring President Barack Obama's solution, but also cutting back funding for essential social services by 15 percent or so, such as those discussed above by Kanner. However, one Bend senator claims to have found the money needed to plug the hole in the leaking budget, and it's already in the state's hands.

Sen. Chris Telfer (R-Bend), an accountant by trade and a member of Bend's City Council before winning her state election bid last fall, submitted an alternative budget proposal, the so-called "Back to Basics" budget, to the Legislature, with the support of fellow Republican senators Brian Boquist (Dallas) and Larry George (Sherwood), showing that the money Oregon needs already exists in the coffers of bureaucratic agencies to the tune of $3 billion.

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A majority of that "found" money exists in the form of loans or grant programs, like $200 million being held by the Department of Economic and Community Development for city services and regional business development programs, and legally it cannot be shifted from one agency's account into the state coffers, according to the state Legislative Fiscal Office (LFO). But there is approximately $600 million -- money qualified in the state budget as "other funds" - that the LFO confirmed can be dumped into the state budget.

On the surface, it seems that would more than make up for the $350 million lawmakers need to trim from the budget before the end of the fiscal year on June 30, and Telfer said even using just 20 percent of the $3 billion in "other funds" is better than the alternative of raising taxes on corporations and the wealthy.

"My feeling is that this is not the time to add millions to the budget by increasing corporate taxes and income taxes (on those earning more than $150,000 a year)," she said. "$500 million is a lot of money that could be used in the community to help stimulate the economy - to hire people. Let's learn to live within our means and keep government at the same level it is, and to leave schools to decide if they want to give pay increases to teachers or lay them off or close down schools or shorten school years. Let's fund it and let the regional school districts decide the best way for them to use the funding they have. We all need to share in this together."

Ross Day, executive director of Common Sense for Oregon, a conservative political watchdog nonprofit based in Salem, said Sen. Telfer's idea is realistic as a practical matter but not as a political matter.

"The quote-unquote other funds are fees collected by state agencies for services rendered, like a DMV fee for issuing new license plates, for example," Day said. "Everyone who wants to drive has to pay that fee - for the sake of argument let's say it's $100, and again I'm not picking on the DMV - but the cost to deliver that is not actually $100. What happens is the agency keeps the difference and can then use that money for other things if they need to. They are slush funds, really. For a lot of state agencies, it's not a blank check but it's pretty close.

The question Sen. Telfer and others are asking is: Are we looking at this the right way? Shouldn't we start by deciding exactly what services we ought to be providing and what they will cost us, and will that approach result in cuts, Day asked.

Rep. Stiegler says it's not that easy.

"When people start talking about other funds they are referring to fees and collected by state agencies and boards for specific purposes," she said. "Those fees are collected so those departments can continue to operate. The general fund can't support staff for licensing, professional conduct, complaint investigations or whatever else might come up - unforeseen circumstances... It's not like there is a lot of extra money running around out there, and if you take those fees away and use them for something else then how are those agencies going to continue to operate?"


OSU-Cascades Dodges The Axe

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After weeks of discussion, speculation and handwringing, it appears that Central Oregon's fledgling higher education experiment will be spared the budget ax. Under the new legislative budget proposal released May 18, OSU-Cascades avoided closure for the time being - the budget will not be finalized until July 1 and will likely come under scrutiny again during the 2011 budget sessions.

Rep. Judy Stiegler (D-Bend) said she worked with Central Oregon's legislative delegation - Rep. Gene Whisnant and Sen. Chris Telfer - to keep funding for OSU-Cascades in the current budget.

"OSU-Cascades is an important economic development tool for the region," Stiegler said. "It helps attract new business and enables employees and students to develop new skills - something that we need in a tough economic climate."

As the Oregon Legislature wrestled with how to cover the $4 billion budget shortfall, lawmakers eyed a 30 percent cut to the Oregon University System (OUS), through 2011, meaning some classes and programs throughout Oregon would be slashed and burned for good.

In the middle of this political maelstrom, sticking out like a sore thumb (as Stiegler put it) sat OSU-Cascades, Oregon's newest and smallest higher education facility. Some lawmakers wanted to see OSU-Cascades put on the chopping block in order to use the $3.5 million in annual state revenue the school receives (overall, the state annually pours $900 million into the OUS) for some other program, although no one has ventured to say exactly how that money would be used.

While no hard numbers exist on exactly how much the university contributes to the Bend's economy, Economic Development for Central Oregon Executive Director Roger Lee said OSU-Cascades is a critical piece of the local economic puzzle.

"A fair amount of our strategy for improving the local economy is based on growing knowledge-based jobs and industries," Lee said. "Given the fact that we will continue to grow outside of this economic period we're in right now, it would have been a real mistake and a misallocation of resources to divert those funds elsewhere."

Some cuts to education are inevitable - between 10 percent and 30 percent depending on whom you talk to, which could total as much as $1 million for OSU-Cascades. School Dean Becky Johnson said that the impact of any financial cuts will be absorbed by nixing new programs that school officials hoped to start during the upcoming fall term, such as a hospitality option in the business program and plans to begin offering an energy engineering management degree.


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