Last week, the Legislative Fiscal Office released their summary for budget actions taken by the recently adjourned Legislative Assembly. The stark differences between those actions, and the budget efforts during the 2009 Legislative Assembly, are worth noting.
 

In 2009, the Legislative Assembly was firmly controlled by super-majorities of Democrats in both legislative chambers. Many members appeared to be in denial that we were facing the worst recession in recent history. They rejected the reality that state revenues were in near free fall. Legislative leaders insisted that traditional expense based budgeting be continued. That current service level budgeting automatically increased projected costs at double digit rates.
 

Budgets were enacted by that Legislature that increased overall state spending more than 18 percent. At least $1.6 billion in new taxes and fees were created. More than a billion dollars in one time funding was made available from the federal government. Virtually every dime of that money from new taxes, fees and federal grants was incorporated into the budgets. As if that were not enough, they borrowed money right up to the State’s credit limit. Budgets grew so fast that Oregon needed to hire more than 1,500 new state employees in order to run through all of the money in that spending binge. Unfortunately, not much money was put aside in state reserve funds and in the projected ending balance.
 

The reality of the recession became apparent during the ’09 –’11 budget cycle. State revenue continued its near free fall requiring budgets to be repeatedly reduced. By the end of that budget period there was no ending balance, virtually all reserves had been spent, and some creative accounting was required to be exercised in order to close out the balance sheets.
 

Following the 2011 elections the Legislative Assembly is more evenly divided by party affiliation. The House of Representatives now has thirty members from each party and Democrats hold only a one vote advantage in the Senate. The new Legislature is definitely more focused on fiscal responsibility.
 

The most significant change was to adopt a revenue-based financial plan wherein only the amount of money that we are relatively confident we will have to spend is budgeted. For the most part, the budgets were developed using the amount of money that was actually spent during the 2009-11 budget period including the sequential reductions in spending made necessary by revenue shortfalls. The spending plan that resulted is strikingly different.
 

The current budget reduces over-all state spending by more than 7 percent from the amount of money that was actually spent during the 2009-11 budget periods. The number of public employees paid from state funds was substantially reduced. The more evenly balanced
 

Legislature was able to accomplish this significant reduction in spending, and the downsizing of state government, without levying noteworthy new taxes or fees. It also set aside substantial reserves that will be available to prevent the need for future reductions in the event that State revenue continues its downward trend.
 

The Legislative assembly also enacted several laws crafted to improve productivity and accountability in the public sector. It is expected that we should be able to receive more bang for our bucks through the implementation of these bills and through the executive actions taken by Governor Kitzhaber.
 

Although this budget is a much more responsible spending plan, it continues to exhibit many fiscal flaws.
 

Legislative leadership continued its pattern of borrowing right up to its credit limit. In fact, some bond debt restructuring was done in order to reduce bond debt payment. The savings from that restructured debt should have been used to pay down existing debt. Instead, the increased borrowing capacity was used to borrow even more money. All that debt must be repaid with interest over time, and all the money needed for that debt service will not be available to purchase services in future budgets.
 

The Legislative leadership also failed to address most of the basic budgetary cost drivers. According to former Governor Kulongoski’s reset cabinet, more than three out of every four available general fund and lottery dollars are spent on compensation for public employees. Yet the escalating costs of public employment retirement, health care insurance and paid leave were totally ignored. Those costs alone drive up the cost of employee compensation more than ten percent each budget period.
 

In short, while fiscal conservatives did not accomplish all that we believe needed to be done, we did make significant progress toward a smaller, more accountable and more fiscally responsible state government.
 

Remember, if we do not stand up for rural Oregon… no one will.
 

Best,
 

Doug