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No easy solutions for state revenue shortfall

Reeling from the news of a possible additional $1 billion revenue drop for state government, area legislators plotted new strategies while a local senior services official said the cuts would cost lives among the elderly.

"If the governor wants to protect education, health care, renewable energy and transportation — hate to say it, but we would be killing people," said Don Bruland, director of Senior and Disabled Services with Rogue Valley Council of Governments.

He said those at risk would include people such as the elderly who now receive total care in nursing homes.

State economist Tom Potiowsky on Friday told legislators that a projected $1.2 billion shortfall for the biennium starting July 1 could rise to as much as $2.2 billion.

Potiowsky also said the projected $142 million revenue shortfall for the present biennium could increase by an additional $300 million to $600 million. The biennium ends June 30.

Potiowsky's prediction was not an official budget forecast, but was issued to help legislators plan for the months ahead.

Senate President Peter Courtney, D-Salem, predicted the final revenue shortfall would be greater than $2.2 billion.

He said tax increases proposed by Gov. Ted Kulongoski in December were no longer about creating new programs, but supporting existing ones.

"Now those taxes need to be viewed, literally, as survival," Courtney said. "The perception of those taxes must change."

Sen. Alan Bates, D-Ashland, chairman of the Ways and Means Subcommittee on Social Services — where cuts are expected to hit the hardest — said the new estimates still don't give legislators a certain picture.

"Because they cover such a large range, (the projected revenues) mean jobs are being lost so fast that it is unpredictable," he said. "No one knows."

Bates added that the projections are "stunning, the worst since World War II," and said President Franklin Roosevelt's comments in the 1930s about the Great Depression hold true today as well.

"It's being driven by fear itself, fear of spending and investing. Fear is driving the loss of jobs."

Rep. Peter Buckley, D-Ashland, co-chairman of the budget-writing Ways and Means Committee, said the numbers were not unexpected and indicate a long downturn ahead for the economy.

Legislators said they are studying cuts of 5, 10 and 15 percent in agency budgets but they won't know about the depth of cuts in social services until Congress finishes work on its stimulus package for states, Buckley said.

"It's a huge shortfall for the state, so the stimulus is essential," said Buckley.

To stimulate jobs, legislators are considering a short-term program of maintenance projects on higher education buildings and other state buildings, as well as a transportation infrastructure program similar to a proposed federal stimulus program, Buckley said.

Oregon officials are also counting on the federal aid. A plan unveiled Thursday in Washington, D.C. would in part put $120 billion into local schools over the next two years, which could offset some of the state's financial obligations for schools.

Mark Orndoff, director of Jackson County Health and Human Services, said it's not clear yet how the shortfalls would impact his departments, which deal with alcohol and drugs, children and families, mental health and other areas, but "it's not going to be good. This is a grave situation."

Bruland said the governor's budget, which was proposed before the latest, larger shortfall numbers were released, would not allow services for any nursing home patient with an income over $1,300 a month, a cutoff that would affect a significant percentage of clients in such homes.

"We would simply say, 'You don't qualify, even though you need round-the-clock services,' and that's unconscionable," said Bruland. He noted that Medicaid regulations prohibit discharging patients under such conditions or treating new patients differently than established patients.

"I don't know what we'd do," he said. "I can't imagine legislators or the public allowing it. I have faith in our legislators to look long and hard at this and prevent these dramatic cuts."

Potiowsky said he expected the economy to bottom out in the third quarter of this year and that Oregonians would feel relief by about mid-2010.

Rep. Dennis Richardson, R-Central Point, said the news likely won't get better soon.

"The truth is we're in a long-term recession," Richardson said, "and we should expect all revenue forecasts to be lower than the one before it."

Richardson said Potiowsky's predicted recovery time was optimistic.

"I hope he's right. But Oregon follows the federal government and it's unlikely Oregon will recover before the nation as a whole."

John Darling is a freelance writer living in Ashland. E-mail him at jdarling@jeffnet.org. The Associated Press also contributed to this report.