Leadership Summit to Explore Oregon’s Budget
The 2016 Oregon Business Plan Leadership Summit will focus on Oregon’s unstable fiscal foundation and the challenge the 2017 Legislature faces as it attempts to craft a budget for the 2017-19 biennium.
Considering that few states have recovered from the Great Recession as well as Oregon has, it is counter-intuitive that balancing the budget would be a towering task for legislators. But income just addresses one side of a balance sheet, and the state’s expenses are growing even faster than its tax collections.
State revenues at the end of 2015 were 16% higher than at the peak of the recession in the fourth quarter of 2008. Personal income tax revenues were up 15.2% in 2013-2015 over 2011-2013 and corporate income tax revenues were up 26.3% over the same period.
Yet, the state still is expected to fall about $1.4 billion short of revenues needed to maintain current service levels during the next biennium. There are multiple reasons for the shortfall, but two stand out: Public pension and Medicaid costs are soaring.
Schools, cities, state agencies and other public employers will see a 44% increase in their obligations to the Public Employees Retirement System (PERS), from $2 billion to $2.885 billion, according to forecasts. Unless they can reduce PERS payments or increase revenues by a similar amount, they will have to make cuts in other areas of their budgets.
Medicaid costs also are likely to increase sharply. Oregon added more than 40,000 Oregonians to Medicaid in recent years, with the federal government covering much of the cost. Even before the election, Oregon was scheduled to assume part of those costs. President-Elect Donald Trump’s pledge to overhaul health care changes enacted through the Affordable Care Act raises the possibility of other additional costs.
The Legislature will have to make cuts that erase recent gains in health care and education, reduce PERS costs, raise revenues or reach a compromise that incorporates some combination of those actions.
Addressing this challenge is crucial to Oregon’s economy. Without a stable fiscal foundation, the state will not be able to make the key investments needed to improve early learning opportunities, boost high school graduation rate, and make college more affordable.
Plan to attend the Leadership Summit December 5, 2016 at the Oregon Convention Center to participate in this important conversation. For more information, including online registration, click here.