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Agency plans for 17% from general fund 'extremely drastic,' but tax collections expected to be short.

PMG FILE PHOTO - The division of Oregon's 2019-21 budget from the tax-supported general fund ($22.4 billion) and lottery proceeds ($1.3 billion). Agencies have submitted plans for a general-fund cut of 17% in the second year of the cycle; Gov. Kate Brown said she hopes federal aid will cushion the blow from shortfalls in income tax collections.Gov. Kate Brown says she hopes federal aid will cushion the blow of proposed state spending cuts that could amount to 17% of their shares of the tax-supported general fund.

Brown made the statement Monday, May 11, a few days after state budget officials received plans from agencies on how they would cut a total of $3 billion. The plans have not yet been made public, and Brown described them as "a planning exercise to explore all options."

A spokesman for Brown said all agencies have submitted their plans.

The state government faces a shortfall of as much as $3 billion in the current two-year budget cycle, which ends in mid-2021, because of expected shortfalls in personal and corporate income tax collections. Those sources account for more than 90% of the state's general fund budget of $22.4 billion, and the state is almost halfway through the budget cycle.

The next official economic and revenue forecast is Wednesday, May 20.

"We haven't made any final decisions, and the agency plans serve as important information gathering at this point. We know a potential cut of this magnitude would be extremely drastic," Brown said.

"Whether the state will need to implement this level of cuts will be dependent on several factors, most importantly the need for additional federal funding to support state services, including our K-12 public school system. I will continue to work with Oregon's congressional delegation in calling for more federal support."

Democrats, who have a majority in the U.S. House, have called for more aid to state and local governments as part of any new federal aid plan for relief from the economic downturn caused by the coronavirus pandemic. Republicans, who have a majority in the U.S. Senate, are resisting more aid — and the administration of President Donald Trump is taking a wait-and-see stance that could run into mid-June.

States, plus local governments with populations of more than 500,000, got $150 billion in aid from the CARES Act that Trump signed on March 27. But the law, and proposed U.S. Treasury rules, bar them from using the money to offset budget shortfalls. The money must go toward costs they have incurred since March 1 to fight the pandemic.

Oregon's share of that money will be a maximum of $1.6 billion. The state has received an initial payment of $871 million, which has been deposited into state coffers. Portland has received $114 million, Washington County $104 million, and Multnomah County also will get a share directly from the U.S. Treasury.

Some smaller cities and counties, and the legislators representing them, have called on Brown to give them shares of the state's amount.

The Republican and Democratic leaders of the National Governors Association — Maryland's Larry Hogan and New York's Andrew Cuomo — have called on Congress to approve $500 billion more for states and to make the already-approved aid more flexible.

Brown has endorsed both steps, and on Monday, she also signed a five-state letter urging $1 trillion in federal aid.

The letter says in part: "Though even this amount will not replace the decline in revenue that we forecast, it will make a meaningful difference in our ability to make up for COVID-19 revenue losses. This aid would preserve core government services like public health, public safety, public education and help people get back to work. It would help our states and cities come out of this crisis stronger and more resilient."

The letter was signed by the governor and legislative leaders in California, Colorado, Nevada, Oregon and Washington. Except for the minority leader in the California Assembly, all the signers are Democrats.

Though Brown has the authority to cut across the board, only the Legislature can cut budgets selectively. A special session of the Legislature is more likely to occur after the May 20 forecast.

"I am committed to doing so in a thoughtful, collaborative manner that explores all tools available," Brown said in her statement.

The state budget has two reserve funds with almost $3 billion available. One is a general reserve; the other, which comes from lottery proceeds, is earmarked for education. Under the laws that set them up, however, lawmakers cannot spend all of the reserves in a single budget cycle.

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