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Oregon budget should plan for rain

Gov. John Kitzhaber has released his proposed budget for the 2015-2017 biennium. As expected, it counts on more revenue coming in to state coffers than in the past two years — $1.8 billion more. While the governor proposes to spend nearly all of that money, we think lawmakers should exercise a bit more prudence.

The governor's budget proposal is just that — a proposal. The Legislature is responsible for enacting the budget, and is under no obligation to follow the governor's wishes.

The Democratic Party controls the Legislature, however, and has the ability to pass whatever it desires without a single Republican vote. The pressure on lawmakers from interest groups wanting to increase funding to their favorite agencies will be intense.

About half of Kitzhaber's $18.6 billion general-fund budget would go to public education, both K-12 and colleges and universities, and would include increases for both systems. The state's university presidents have already said the budget is a step in the right direction, but it's not enough. Given the state's massive disinvestment in higher education over the past decade or so, it will take more than a single biennium to make up the losses.

Kitzhaber's budget summary predicts a state budget surplus by 2021. That's based on some optimistic assumptions: First, that the state's reviving economy will in fact produce the additional money that has been forecast, and second, that pending court cases won't blow holes in future spending plans. 

If the Oregon Supreme Court throws out the Public Employee Retirement System reforms the governor bargained for last year to save $5 billion in future pension liabilities, it won't affect the 2015-17 biennium, because the PERS board has already set the premium rates state and local governments must pay. But it could jeopardize the rosy predictions of a budget surplus by 2021.

Another looming question mark is the federal lawsuit against the national health care reform law that could potentially end subsidies to health insurance consumers in states that are using the federal insurance exchange. Oregon set out to create its own exchange, but the website never worked. Kitzhaber says the resulting system, a "supported state-based exchange," will protect Oregon from losing those subsidies even if the Supreme Court overturns the federal law. That's what the state's lawyers say, but it's no certainty.

Finally, there is the kicker — the rebate to taxpayers that is triggered if tax collections exceed projections by 2 percent or more. That would be a hit approaching $300 million. Then there's always the possibility that the state's economy could take a turn for the worse, dampening the revenue projections.

The budget proposal has a $100 million ending fund balance, and Kitzhaber says if growth trends continue, that will increase to more than $800 million by the end of the biennium. If.

Rather than count on optimistic projections, lawmakers should put a significant amount of money aside in case conditions change. Increases for schools and colleges are warranted and appropriate. But so is saving for the next rainy day.