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Governor report warns of deficit crisis

May 21, 2010

Governor Ted Kulongoski
Press Release and Summary

Reset Cabinet issues an analysis of state services and fiscal future to educate the public and decision makers in advance of final recommendations next month

Salem – Governor Ted Kulongoski today received an update from the Reset Cabinet he created in September 2009 that provides a thorough analysis of the fiscal vulnerabilities of the state created by the current economic crisis and the long-lasting effects of the recession in Oregon.   The analysis, the most comprehensive to date, reveals that Oregon will face deficits over the next ten years, rather than the surpluses projected before the recession, if state government continues to try to sustain the type and scope of services it now provides.

“The recession has dramatically altered Oregon’s fiscal future. What was a decade of stability is now a projected decade of deficits, at the same time that the state faces greater demand for the services it provides,” said Governor Kulongoski. “If we do not fundamentally change the services we provide and how they are delivered, the state will not be able to meet its responsibilities to our citizens. Priorities must be re-examined in order to continue to support our schools, help families in need and keep our communities safe.”

The Governor created the Reset Cabinet last September recognizing that the state would be facing difficult choices during the slow economic recovery. The initial findings of the Cabinet confirm the Governor’s concerns about the state’s long-term financial position.

The Reset Cabinet states that Oregon is emerging from this recession with reduced revenues, higher costs and greater demands for the services it currently provides, which reveal a much different fiscal future for the state than previous projections.

The updated data, combined with the loss of one-time federal stimulus funds and use of state reserves, means that Oregon will not be able to meet the current or future demand for services under the existing structure of state government.

“The magnitude of this problem must be understood by the public and decision-makers alike, and there isn’t just one solution to this problem,” the Governor said. “With this new fiscal reality, we can no longer budget biennium to biennium, using short-term fixes. We need to look long term to bring greater fiscal stability to Oregon.”

The Reset Cabinet is soliciting comments from the public as they work on a menu of options for resetting state services, which will be delivered to the Governor next month.

The menu of options will include new ways to organize and deliver priority services and control costs and will:

– Prioritize current services, offering new ways to realign what we should do with what we can afford to do;
– Identify lesser-impact services that can be eliminated;
– Reduce the size and scope of services by focusing on serving persons with the greatest need; and
– Identify efficiencies to reduce the current and future cost of services.

To read and comment on the Reset Cabinet’s analysis of state services and Oregon’s fiscal future click here or visit http://governor.oregon.gov.


Overview — Resetting State Government

On September 3, 2009, Governor Ted Kulongoski signed Executive Order 09-13 creating a cabinet of individuals, representing both the public and private sectors, to develop options for resetting state government in order to preserve and improve the critical services it provides to Oregonians.

By resetting the priorities and functions of government, the state will better serve the interests and needs of Oregonians in the face of limited state revenues, restrictive state and federal spending mandates, and diminishing resources from the federal government.

The cabinet will present its menu of options to Governor Kulongoski in June. Those options will assist the Governor, his successor and the 2011 legislature in charting a path through the deficits that are predicted to continue over the next decade as Oregon and the nation recover from the recession.

Click to view the full report (Governor’s Reset Cabinet May 2010).

Why Oregon Needs to Reset State Government

The long-term effects of this recession on the nation and Oregon are just now coming into view. Economists report that as a result of this recession, the state is facing reduced revenues, higher costs and greater demand for services as many continue to rely on the state for assistance and as Oregon’s population grows. As a result, Oregon cannot continue to fund public services at the levels funded today.

Furthermore, restrictive state and federal policy and spending mandates adopted over the last twenty years, have made it difficult for the state to adapt and meet the greatest demands of citizens, particularly during economic recessions.

In response to this new fiscal reality, we must reprioritize the services provided by state government and change how we deliver those services in order to support our schools, help families in need and keep our communities safe.

Read more about why Oregon needs to act now.

Background: Core Responsibilities of State Government

With 93 percent of the general fund budget, the state provides services in three main areas: education, health and human services and public safety.

The state’s fiscal position will challenge the status quo in each of these service areas. Without changing the way we organize and deliver these services, and control their costs, we will be forced to make significant reductions in each.

The cabinet is analyzing the delivery and financing of these services, knowing that Oregon, like many other states, will fall short of sustaining the services now in place.

Read more on the services state government currently provides to Oregonians.

Analysis: Fiscal Crisis Facing Oregon and Nation

While the state has a balanced budget in place through June 2011, we now know that state government will face persistent deficits over the next decade without significant changes in how it provides services to its citizens.

With cuts already made to the current budget and with reserves largely exhausted, the services the state provides are rapidly becoming unsustainable.

The cabinet is working to identify ways in which the state can eliminate its deficits in the early years of the next decade and put the state on a sustainable path for the remainder of the decade.

Read more about the fiscal reality Oregon faces.

Share your thoughts on the fiscal crisis facing Oregon.

Confronting the Challenge: Options for Resetting State Government

The cabinet is developing a menu of options for resetting the services provided by state government. Those options will represent the opportunity Oregon has to reset state services so that it can continue to meet its obligation to Oregonians — as citizens and taxpayers.

Read more about what to expect from the Cabinet.

  
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Discuss this article

Bob Clark May 21, 2010

Two suggestions which would sharply reduce the cost of state and local government: (1) Raise the minimum retirement age for those in PERS from 55 years of age to at least 62 years of age. It’s grossly unfair for public employees to be retiring with full benefits in their mid 50s while most other citizens are lucky if they can retire by the age of 66. (2) Raise the state employee contribution towards healthcare insurance premium from zero presently to at least 10 percent.

Other suggestions: Reduce income tax rates so as to induce more private sector employment. Adding private sector employment reduces unemployment stipends, food stamp stipends, and medical care stipens. As for the Oregon Health Plan, more rigorously means test by dropping income thresholds downs towards $30k per year or lower, and/or make it a loan recoverable if the treated person regains financial health and can repay the loan.

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