Oregon Governor Kulongoski Announces Administrative Cuts to State Government and Three Year Fiscal Strategy

Cuts include management salary reductions and rollback of step increases; 5% cut to governor’s salary to be dedicated to State Common School Fund

February 19, 2009 -- (Salem) – Oregon Governor Ted Kulongoski today announced several administrative actions to create savings in the state budget immediately and into the next budget cycle. The Governor also unveiled a three year fiscal management strategy that maximizes federal stimulus dollars and state savings to help balance the state budget for both 2007-09 and 2009-11.

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The administrative savings the Governor announced today started with imposing a 5% reduction to his annual salary of $93,600 effective March 1, 2009. The Governor also announced that he is directing the monthly reduction of $390 to the Common School Fund.

Other administrative steps the Governor announced effective March 1, 2009 for state executives and managers include: salary freezes, canceling the new step for state managers that was effective July 1, 2008, and furlough days. These administrative actions will provide a savings of $6.2 million total funds, $2.5 of which are General Funds, for the 2007-09 budget.

For the 2009-11 biennium, the salary freeze would save about $122 million total funds and $56 million General Fund if it were applied to all employees. The Governor’s recommended budget already includes savings of $35 million General Fund for all employees taking eight furlough days during 2009-11.

“State employees of every rank are stepping up – doing more with less especially with demand for services only growing. With today’s announcement, state managers will help lead the way,” the Governor said. “What I announced today translates into pay cuts for thousands of state workers – and their families – across the state. I know this is a significant sacrifice so I want to say to all state employees – thank you for your continued commitment to Oregon, and to creating hope and opportunity for a better and brighter future.”

The Governor also announced his recommendation for how the state should distribute over the next 3 fiscal years the $2.2 billion from the federal recovery package and the state’s reserve funds.

In the American Recovery and Reinvestment Act, Oregon is expected to receive $820 million for Medicaid services and $570 million for education and other public services for use in FY 2009, FY 2010 and FY 2011. Combined with the state Rainy Day Fund and the state Education Stability Fund, this provides the state with a $2.2 billion safety net over the next three fiscal years – or 18 months.

“The bill that President Obama signed into law on Tuesday is a first step toward economic recovery for our nation and our state,” the Governor said. “But the people of Oregon must understand: This federal assistance will not solve our budget shortfall. It will help make some decisions a little less painful, but the money is simply not enough to prevent reductions to services that we all agree are important.”

The Governor laid out three options before the legislature for how to allocate the state safety net: 1) spend it all for the current budget; 2) save it all for the next budget; or 3) prudently plan and allocate wisely over three years.

“Option one – using all available funding for the current budget – is politically easy and politically popular. And I understand the enormous pressure legislators are under to pick that route,” the Governor said rejecting option one. “But that path is not only fiscally irresponsible – it sends a false message that everything is okay. While it might temporarily ease the pain – it will also result in deeper cuts – with longer and lasting consequences – that make it harder to recover from when the economy does rebound.”

The Governor also rejected option two – save it all – stating, “We cannot afford to fall behind – negating all of the progress we’ve made over the last several years to move Oregon forward.”

The Governor’s plan is based on option three, which he called a 20-40-40 plan.

“There is no escaping the reality that the budget shortfall we’re facing will require some reductions to core services like education. But we cannot afford extremes on either end: Cut now and spend it all later – or spend it all now and make devastating cuts later,” the Governor continued. “That leaves the third option – which also happens to be the right option: Find an approach that is prudent, responsible, strategic and balanced.”

The Governor’s plan dedicates a maximum of 20% of the $2.2 billion to help fill the shortfall in the 2007-09 budget, which in combination with the $350 million in cuts that the Co-chairs of the Ways and Means Committee outlined yesterday, will balance the budget by the end of the 2007-09 fiscal year on June 30, 2009, if current revenue forecasts hold.

Looking at the 2009-11 budget, the Governor’s plan dedicates 40%– or approximately $900 million – for 2009-2010 and the remaining 40% and approximately $900 million, which includes the state Rainy Day Fund and Education Stability Fund – for 2010-2011.

“Let me be perfectly clear – this plan will only work if the legislature holds off using the Education Stabilization Fund and Rainy Day Fund during this legislative session,” the Governor explained. “I will veto any bill that attempts to raid these funds during this legislative session.”

Recognizing that the state safety net does not solve the state’s budget challenges, the Governor closed the press conference with assurance that he and the legislature will work to prioritize programs that are critical to economic recovery and prosperity.

“We have difficult decisions ahead of us, and there is still some uncertainty about when this recession will bottom out and level out. But we can manage this tough budget environment and continue to make progress in key areas that are critical to a strong economic recovery,” the Governor said. “In partnership with the legislature, I will continue to make education a priority and work to create certainty for Oregonians and their families. That is the best way to make sure that for Oregon – this downturn is followed by a strong recovery and growing prosperity.”

Source: Oregon Governor