Oregon faces more budget woes — $577 million

Oregon public employee union leaders say they aren’t interested in opening their contracts in the wake of a quarterly revenue forecast revealing a $577.1 million shortfall for the 2009-11 budget.

At a press conference following the May 25 forecast by state economist Tom Potiowsky, Gov. Ted Kulongoski ordered state agencies to reduce their budgets by 9 percent. He said the financial crisis requires “swift and decisive action,” and stressed that he believes the cuts are best left up to him and his staff.

In that regard, Kulongoski pointedly said he would not call the Legislature into a special session, though he noted that body does have the ability to call itself into session.

The following day, members of the Senate Republican caucus called for an emergency special session. To do so requires a majority vote of state senators and state representatives.

Democratic leaders who control both the House and Senate indicated little interest in calling a special session, although they didn’t rule it out entirely.

Kulongoski outlined several options for cutting back. To save approximately $30 million, he is asking the Public Employees Benefits Board (PEBB) to explore benefit changes to keep cost increases to 5 percent for the next plan year, as opposed to the nearly 10 percent increase that is currently projected. He announced that a pay freeze for executive and unrepresented state workers would be extended through June 2011, and he asked service Employees International Union (SEIU) Local 503 and the American Federation of State, County and Municipal Employees (AFSCME) to agree to the same extended pay freezes. In particular, both unions have clauses in their contracts that would see step increases “unfrozen” in September. Kulongoski now wants to re-open the contracts in an effort to gain concessions from the unions that would total approximately $19.9 million in General Fund savings.

“We are not interested in re-opening our contract,” said Ken Allen, executive director of Oregon AFSCME Council 75. “One, a contract is a contract. I know our members understand that, and I think the public does, too.

“Two, and moreover, it’s time for state management service to share the pain of the state’s economy. The state keeps talking to us about ‘shared sacrifices,’ but we’ve already sacrificed several times over.”

Leslie Frane, executive director of SEIU Local 503, said “nobody has more at stake in an equitable resolution to this fiscal dilemma than front-line state workers and the Oregonians we serve. We are both already feeling more than our fair share of the pain of recent cutbacks.”

The union officials reminded the governor that half the state workforce — the front-line workers who actually do the state’s work — earn less than $40,000 a year.

Allen suggested that any further cuts be focused on management staff that do not provide direct services to the public.

“We are highly unlikely to accept cuts that simply shift costs onto the shoulders of office assistants, social workers and forest rangers already struggling with the effect of the recession and unpaid furlough days,” Frane said.

Potiowsky predicts the state will collect $511 million less in revenue this fiscal biennium than he predicted two months ago. The revenue forecast is $900 million lower than the state’s original 2009-11 budget, which runs from July 1, 2009 to June 30, 2011.

“We could gamble and hope that the next forecast in September delivers a rebound and the hole is diminished, but the longer we wait, the deeper the cuts that will be needed to rebalance the budget in the remaining months of the biennium if that does not occur,” Kulongoski said.

The only “good news” by Potiowsky was his projection that income taxes and lottery proceeds are still at $16 billion for the 2011-13 budget cycle — in other words, that estimate hasn’t gotten any worse. But $16 billion is still $2.5 billion short of maintaining state services at the current level, Allen said. Closing that gap will be the top priority of the 2011 Oregon Legislature when it convenes in January.

(Editor’s Note: Don Loving, public affairs director for Oregon AFSCME, contributed to this report.)