Children and education were the apparent winners, and human services the loser, in the two-year budget that Gov. Ted Kulongoski unveiled Monday for lawmakers.
"We don't have the money to do everything that needs to be done in the next two years," he said at a news conference. "But I propose a budget that invests in the future by investing in children, working families, businesses and economic opportunity during these challenging times."
Now it's up to lawmakers, who start their 2009 session Jan. 12, to make the difficult choices.
"Everybody who reads this budget is not happy," said Senate President Peter Courtney, D-Salem, who questioned some of the proposed cuts.
The proposed budget of $16.1 billion comes from the general fund, which consists largely of income taxes and lottery proceeds — sources over which legislators have the most discretion. Total state spending for the next two years is greater because of earmarked funds.
The proposed budget still is more than the $15.1 billion budget of the current two-year cycle. But it is down about $800 million from a forecast in late August — and it may drop more.
Kulongoski proposed various tax increases to raise money for specific programs. Under state law, the governor must present lawmakers with a balanced budget.
"Government has been spending at a break-neck speed, creating unsustainable program growth despite almost $1 billion more in revenue," said Senate Republican Leader Ted Ferrioli of John Day. "Now is the time to counter that tax-and-spend mentality."
But Democrats, who hold 60 percent majorities that allow them to raise taxes and fees without Republican help in both chambers, saw it differently.
"I want to emphasize that much of the increased revenue we're talking about comes from raising the corporate minimum tax and asking health-care providers to pay more to help us cover more people," said Rep. Dave Hunt, D-Gladstone, the incoming House speaker.
The budget spares some cuts to the Oregon State Police, which is on the verge of getting 139 more patrol troopers. It maintains beds for the Department of Corrections and the Oregon Youth Authority, but Kulongoski does not propose as much as experts estimate to implement a voter-approved ballot measure to increase prison time for repeat property and drug offenders, and provide drug treatment.
Education
Kulongoski cushioned the budget blow on education, which accounts for more than half the state's discretionary spending.
"As long as I am governor, we will not close our school doors early — and we will not close the doors of opportunity to the many thousands of Oregonians whose American dream is to attend an Oregon college or university," he said.
The state school fund would rise to $6.4 billion, although the $147 million increase would not keep pace with inflation.
"The governor has admirably held the line for education, but he hasn't made progress," said Dana Hepper, a spokeswoman for the Stand for Children advocacy group.
Kulongoski said he is not prepared to tap the education reserve fund, which will have $393 million in it by mid-2009. But he said would ask lawmakers to spend up to $225 million from it if other sources do not materialize by the 2010-11 school year.
"We can't simply grab the savings now when we're probably only in the first phase of this economic and revenue crisis," he said.
An advocate for community colleges said the budget proposes to drop state per-student support from $2,799 to $2,648 per student, based on an enrollment estimate of 183,155 full-time students.
"In 2003, when Oregon's economy tanked and our citizens were out of work, cuts to community college funding forced reduced access to job-training programs across the state," said Andrea Henderson, executive director of the Oregon Community College Association. "While in his speech the governor sounded like he wanted to avoid that scenario, his budget actually reduces the colleges in real dollars."
Universities
The Board of Higher Education said earlier it did not expect Kulongoski to propose an increase in direct state support comparable to the 18 percent that the university system got in the past two years.
But a smaller 5.3 percent increase to $916 million "will enable the system to hold steady and in some cases gain ground on its advances in enrollment, student retention, and increased numbers of degrees made possible by investments by the governor and Legislature," said a statement issued by Chancellor George Pernsteiner.
The budget does assume that the board will increase tuition 3.8 percent in each of the next two years, linked to growth in household income.
Student aid under the state's newly expanded Oregon Opportunity Grant program would increase from $106 million to $163 million. The average award would be $2,317 next school year, and $2,475 in 2010-11.
Human services
"It is a truism that when the economy goes down, the demand for governmental services goes up," Kulongoski said.
But he said maintaining current levels at the Department of Human Services would require a 28 percent increase.
Even though Kulongoski proposes to increase human-services spending in absolute terms, from $3.3 billion to $3.5 billion in the general fund, the cuts will affect virtually all human-services programs.
Child-welfare protection was largely shielded from cuts, however. Health care would be extended to virtually all of the 116,000 children without it, and 75,000 to 100,000 adults, if legislators increase existing provider taxes on hospitals and health plans.
"With the significant burden of an increased hospital tax, Oregon's policy makers could be creating the perfect storm for an increasingly fragile health care delivery system," said Andy Davidson, president of the Oregon Association of Hospitals and Health Systems.
The proposed budget includes $43.3 million for increased staffing at Oregon State Hospital, and $296.8 million for continued construction of a new hospital in Salem scheduled for completion in 2011.
But Courtney said the proposed cuts in other programs may go too deep.