Stateline Story

Budget Shock in Oregon

  • May 28, 2010
  • By John Gramlich

Oregonians made headlines in January when they approved $727 million in tax hikes on corporations and the wealthy. Supporters said the move was necessary to avoid perilous budget cuts to schools, which in some parts of the state already are operating on four-day weeks.

But this week, Oregon fiscal analysts dropped a new bombshell on lawmakers and voters alike: Due to weak income tax collections, a fresh, $563 million hole has opened in the budget, and deep education cuts are likely.

"The sheer size of the drop"- announced Tuesday (May 25) — "stunned lawmakers, who listened in stony silence as state economist Tom Potiowski and senior economist Josh Harwood went through the numbers," The (Portland) Oregonian reported from Salem, the capital.

The announcement has injected new drama into an election year that already was shaping up as a referendum on government spending, particularly in Oregon, where the bitter campaign over January's tax hikes is still fresh in mind.

Outgoing Governor Ted Kulongoski, a Democrat, announced he would address the shortfall by making across-the-board cuts, asking state agencies to prepare for 9-percent reductions. But Republicans quickly demanded a special session, saying they wanted to make more targeted cuts and spare public education. If Kulongoski makes across-the-board cuts, education would get hit the hardest, The Oregonian reported.

The two men vying to replace Kulongoski quickly seized on the news. John Kitzhaber, himself a former governor and the Democratic nominee, said he supports unilateral cuts by Kulongoski, while promising, as governor, to "directly confront the difficult but necessary task of reducing both the size and scope of state government."

Chris Dudley, a former professional basketball player and the Republican nominee, used the shortfall to call for a special session and turn the tables on Democrats, who made school funding a central point of their ballot campaign last year to raise taxes. "If educating our children is our number one priority," Dudley said, according to The Oregonian , "we cannot treat it like every other state agency."