This Oregon Legislature has the largest opportunity to increase spending in many decades. The Governor, now calling the decades-long established "Governor's Recommended budget", the "Governor's Hope & Opportunity Budget' proposes to take advantage of it in full.

The Governor's proposed spending for 2007-09 stands at a record $49.22 billion--of which the more usually-cited General Fund will be a record $15 billion--or 12% of total outlay. Personal income tax is to supply 74% of General Fund revenue or $11.2 billion with corporate income tax at 4.% or $850 million.

Predictably, the largest element will be for K-12 education--just over $6 billion. Higher Education is written in at $4 billion and "other education" for another $2.5 billion. With significant Democratic majorities in both Senate and House, Governor Kulongoski appears likely to win Legislative approval for most of these whopping increases. Since Oregon' s Constitution requires that the budget be balanced, it is the major inflow of new income tax dollars expected which makes this possible. The fiscal '09 anticipated General Fund includes an expected $1.36 billion ending balance--or nine percent of its total. This is truly the "Rainy Day Fund" so devoutly wished-for by would-be big spenders. The much-discussed General Fund is only a little more than a quarter (28.l% of the total state budget.

Dramatic improvement in our national economy is responsible for the jump to the $15 billion level from the previous bienniums' $12 billion level, as Oregon depends--much more than most states--upon income tax collections to sustain its government. Most casual observers do not realize that the General Fund--that $15 billion--is only 12% of state biennial resources. The other major slices--other than Education's 27%? "Human Services" $12 ¼ billion or 26%, Economic & Commercial Development $5.1 billion or 11%, Administration $7.9 billion (16%), Public Safety $4 billion or 8%, and Transportation $3.5 billion: 7%.

But reducing the question to the much more discussed General Fund, state K-12 school support's $6 billion tops spending at $6 billion or 41% of the total. Higher Ed comes in at less than a quarter of its total outgo-- $859 million, or 6% of the General Fund. Community Colleges get another $508 million and: "Other Education", $592 million.

The anticipated $14.9 billion to be spent by this coming General Fund compares with $12.67 billion in the current period and $12.71 billion in the previous '03-'05.

As to state employe jobs? They are to rise to 50,023 from the current 47,488 and '03-05's 47,193.. Covered by the General Fund: to 13,327 from 12,677 now and 12,716 in '03-05, just before the worst of the Recession became effective. Much of the increase in payroll will, of course, be in state payroll for education: to rise to 13,327 from '07's 12,678. This does not include the teachers and other employes of the individual school district--despite their funding coming largely from the state. Public Safety is to rise to 9086 from 7848, including 139 state police.

Where is the new money for education coming from? federal funds are up to $880 million from $866 million currently--not much hike there. The lottery is up a bit-- $631 million from $516 million. But miscellaneous "Other Funds" rise to $3 billion from $1.73 billion. K-12's $6 billion is less than half the money which flows to education ($13.55 billion altogether).

The income tax is the biggest factor in the General Fund (93+%). For the '07-09 biennium now being molded, it is expected to bring in $12.2 billion, up from $11.l billion in the outgoing '05-07 budget, or 88% of the General Fund. The corporate income tax is estimated to bring in $778 million or 5.9% of the coming General Fund against $738 million currently. The Lottery (often lumped with the General Fund but legally separate) brings in an anticipated $1.1 billion

The $13.6 billion total pot for Education is a 13.2% increase compared with the current '05-07 legislatively appropriated budget. General Fund and Lottery contribute $8.l billion of this- a 16.4.% increase. The $6.06 billion portion headed for K-12 is $250 million more than the professional education lobby's projected "Essential Budget" level. Despite the gush of income tax receipts, government cannot resist pecking for spots of additional revenue. For instance, the minimum income tax for a corporation is slated to increase. The corporate "kicker" is scheduled for the proverbial "Rainy Day Fund" rather than for repayment to those who were required to overpay into it.

Funding for K-12 schools will exceed $3 billion for the first time (barely missing that in the currently outgoing '07 budget.) That publicized amount is far from what the state actually spends on K-12 schools. Other categories: $56.4 million to pay gambling profits on lottery bond debt backing education revenue bonds, $27.9 million for reform school education programs, $263 million for grant-in-aid programs (up one third), $96 million total (39 million of it an increase) for Oregon's pre-kindergarten program, early intervention special education $105 million state plus $33 million in federal funds, $2.6 million for computer connectivity. There are also unspecified amounts for a community schools initiative, and $250,000 for civics education including a chess program, student leadership program, summer food service and early literacy programs. So the $3+ billion listed for K-12 does not nearly state the whole proposal. Money goes to nearly 200 school districts plus 20 education service districts.

Higher Ed comes in at another $4.9 billion--compared with $4 billion currently, and $3.8 billion for the '05 biennium. The Governor, however, assures students that tuition will no longer rise faster than inflation. The Governor's proposal would jump General Fund's contribution for Higher Ed to $827,000. from $706,000 currently and $671,000 in fiscal '05 (tuition, etc. make up the balance). Higher Ed, if the Governor's proposal is adopted, wins 6.3% of the General Fund up from six percent in '05, with its number of employes rising to 18,000 from 15,600 currently and 16,l00 in '05.

Governor Kulongoski's hope is that the additional Higher Ed funding will handle increased enrollments, fulfill maintenance needs, retain staff and lower student-faculty proportions. Tuition is up 52.7% since 2000, but its increase in this budget it slated to be limited to 3.4% each year of the biennium. $8 million will go for faculty salary increases. Major construction projects at Higher Ed campuses are inked in at $1,566,000.and at the Community Colleges at $1,617,000.

Human Services will bring up staffing to 9893 from the 9300 level. Its cost will rise to $12.25 billion from $9.2 billion in '03-'05 (up 20.9%) and $10.22 billion currently. Much of the spending increase is presented as restoration from cuts suffered during the recession. Its "Healthy Kids" program is to provide health insurance for 102,000 of the now uncovered 117,000. Funding is to come from an increase in tobacco taxes. Some 10 to 15,000 low income adults are to be added to the Oregon Health Plan. Human Services' State "Commission on `Children and Families" adds $6 million to the cost of its 'Healthy Start" program to send state employes into more than half of homes of families expecting or having first children. Another $2.5 million budget of $1,55 will go to Crisis Relief Nurseries serving "abuse and neglect" households of children under six. Two nurseries will be added to the present nine. Human Services staff will rise to (700 from 9180.

Transportation remains at a cost of $4.57 billion with 4700 employes. This area draws less than one percent of its revenue from the General Fund. Gas taxes are its primary source. ODOT (Oregon Department of Transportation) will march into bridge repair and rebuilding on 365 projects. ODOT's budget will rise to $3.53 billion from $2.73 billion currently and $2.68 billion in "03-05. But the General Fund contribution to this cost drops 24%. Much of the increased cost is due to bridge reconstruction which has completed its planning phase.

With such divisions as "Wide Support Services" up to $485,000 from $293,000, "Children, Adults & Families" up to $2.5 million from $2.1 million, and "Seniors and People with Disabilities", up to 2.8 million from $2.2.and with "Long Term Care Ombudsmen", up 35.6%,.Human Services covers many aspects of disorganized life.

Public Safety grows to 9491 employes from 8000. This includes a 24% increase in state police, up 139 sworn state officers. The recommended Public Safety budget rises to $873 million from the current $524 million level and from $429 million for '03-05. Much of the cost of 139 added troopers and 46 sworn positions on patrol will be funded by auto insurance rate increases of $23.8 million. A new division--titled Oregon Wireless Interoperability--in state police, will provide a single emergency response wireless structure for all state agencies Added forensic scientists will work with DNA and similar newer techniques.

For miscellaneous "Program Area Agencies such as the Employment Dept., Economic & Community Development and Veterans' Affairs, a drop, both in cost and in personnel is recommended. The total spending for this group is to drop to $5.17 million from $5.29 million currently. Number of employes is to be cut to 1673 from 1874 currently and 1930 in '05-07. Employment is funded largely by employer-paid "unemployment" taxes. Federal support funds are being depleted over time.

Natural Resources includes some 14 agencies from the Columbia Gorge Commission to the Watershed Enhancement Board. Its number of employes will remain constant at 5400+ but cost will rise to $1.55 billion from $1.36 billion currently. State Forests, State Lands and Fish & Wildlife are included. Unpredictable Forest Fire control and Willamette River are centered here.

A host of agencies certify and regulate various professions, most through one to seven employes. Chiropractors, dentists, nurses, druggists, accountants, etc. fall under this range which totals 1600 employes on a budget of $879,000 compared with $697,000 in '05-07. The "Advocacy" commission which monitors the effect of legislation on blacks, Asians, Hispanics and women has been cut to two employes from six. Liquor Control Commission employment is to rise to 238 from 213 in '05-07. The Public Employment Retirement Commission (PERS) is on a roller-coaster. From 420 employes in '05-07, it dropped to 380 currently but is slated to recover to 403 in the coming biennium. There are 210,000 public employes covered in Oregon plus 105,000 retirees receiving monthly checks.

The Judiciary is set for a major boost to 2325 people from 2092 currently at a cost projected to rise 61% to $776,000 from $482,000.

The state's bonded debt is $8.8 billion, of which $4.2 billion is backed by general obligations on property although no state property levy is anticipated. An additional $1.4 billion is owed in Certificates of Participation which incur payment from the General Fund. The state expects to sell an additional $2.02 billion in bonds and CoPs in the coming biennium--a decrease of $1.5 billion from '03-05. About three eights of the new bonding will be for Transportation. Of the reminder about 250 million is for Higher Ed.

The Legislature itself, while not part of the Governor's recommendation, is not cheap, rising to a proposed $28.6 million cost, up 4.3% from $20.7 million in '03-05.

Of more social than budgetary importance, but still cogent; the immigration issue!

Several bills are in gestation. Of most budgetary impact: one to use lottery funds to reimburse hospitals for otherwise unpaid care for illegal immigrants. author: Tom Butler (R-Malheur). Another, with Governor's blessing, to require applicants for driver's licenses to prove citizenship. There has been massive abuse in this area, success for illegals in obtaining licenses provides a document which opens many other avenues, often to questionable activities. HB 2270. SB397 requires Human Services to verify the citizenship of applicants for public assistance. Another much abused portal to public funds. A slight outgo cutter: HB2459 from Representative Donna Nelson (R-Yamhill), et. al., makes English the state language, circumventing any requirement that state employes or documents also use Spanish. The bill appears likely to fail, resulting in an initiative for the '08 ballot. There are 1l to 12 million illegal immigrants in the U.S., mostly Spanish speaking.

Measure 37, the recompense for government action which reduces private property value, has attracted a huge number of claims (6350) --more than 1000 in Clackamas county alone. Statewide, claims should take about 18 months to clear. A compromise bill appears likely, giving this Legislature time to deliberate the impact of any largescale approval of claims.

There is a companion document to the Budget (nearly as big), called the "Tax Expenditure Report", which reviews all tax breaks (tax unlevied), "tax expenditures", under the apparent assumption that all revenue of right belongs to the state so any lapse in the state's "take" through exclusion, deferral, or omission a "tax expenditure" by government.

Ir reports that it is in the interest of the state that lawmakers "identify and analyze tax expenditures and make decisions on whether the expenditures should be continued". Estimates of "the revenue loss" to the state which they cause is examined. More than 16,000 such "expenditures" are listed. State agencies were asked to list relevant "holes" in the state's take. Whether these restraints by the state in levying more tax "achieve their purpose" and are a "fiscally effective means" was studied by 31 state employes Their revenue impact is intended to measure what is being "spent" through the tax system. Tax expenditures "represent revenue loss to the state and local governments".

The estimate is that these "tax expenditures" cost government $25.8 million during the current biennium and will cost $28.6 million in the 07-09 biennium unless revised. Two thirds of that is in income tax results. The report contends that "governments in Oregon "spend more" through special provisions in the tax code than they do through direct outlays. In other words, if these provisions in the tax laws were repealed, government could more than double its "take'. in property, income, transportation, tobacco, alcoholic beverage and related taxes. In property tax, "tax expenditures" are listed at more than twice the amount actually levied. Property tax' three largest--but cogent examples--are "the exemption of intangible property ($11.1 billion), exemption of federal property ($2.5 billion), and the exemption of state and local property ($1.6 billion). In all of these cases, the state avers a "right" to have levied the tax which it has foregone. In income tax, the report expects to forego nearly $2.8 billion These "expenditures" include personal income tax exemption credit, exclusion of employer-paid medical benefits and deduction of home mortgage interest. All of these, the state, through its "Tax Expenditure" report implies it has a right to levy which it has foregone.

So how will government react with the public taxpayers this session? As always, government wants more of the funds people have earned and saved. In addition to the extra billions which a fine economy is producing in personal and corporate income tax flow, here is what the governor also wants the legislature to give government out of the public's earnings:

l) To keep the corporate income tax "kicker" refund rather than to return this excess extraction from business earnings as now required by law.

2) To double the current level of fees on business filing.

3) A surcharge on new car insurance.

4) To increase DEQ (Environmental Quality) and vehicle registration fees (vs global warming)

5) A surcharge on car insurance.

6) Additional fee on price of each house sold.

Taxpayers Assn. of Oregon estimates that these taxes may cost the average Oregon household an additional $450 annually.

The list does not, of course, include the proposed increase in cigarette tax which would rise to approximate Washington's at $4.02 per pack, hopefully causing a substantial drop in smoking. (28 million fewer packs per year, one estimate. Current tax is $1.175 per pack. Oregon's population is only a little more than three million!) The legislative discussion is to use the added tax to provide health insurance for all Oregon children who now lack it (estimated at 117,000). That level of tax would add an estimated $180 million to the '09 budget.

The Legislature has, of course, the option of reducing the personal and corporate income tax rate which is now among the highest in the U.S. and has proven a deterrent to bringing or keeping business headquarters or plants in Oregon. Its preferred alternative is to establish the "Rainy Day" fund with the extra income tax flow, instead of keeping spending under control and regarding the fiscal biennium's ending balance as the Rainy Day fund, which it truly is. Instead, many legislators believe a specially designated fund must be established--with a unknown pride of fiscal lions set on guard to keep the inevitable spenders at bay.

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