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Leaders already were at work on $1 billion plan blending cuts and fund shifts, but no federal aid.

PMG FILE PHOTO - The Oregon State Capitol in Salem.Gov. Kate Brown has made it official: She has called Oregon lawmakers back into a special session starting Aug. 10 to close a $1 billion gap in the state budget.

Lawmakers met June 24-26 to pass other bills related to the COVID-19 pandemic and policing policies.

The Oregon Legislature's chief budget writers have proposed to shield state aid to schools, but cut almost $400 million in other spending and draw down reserves to offset reduced tax collections during the pandemic, when business activity and public life have been curtailed.

Their plan does not hinge on federal aid to states, which Democrats have included in a $3 trillion plan that cleared the U.S. House on May 15 — but Republicans have omitted from their $1 trillion plan pending in the U.S. Senate.

In her message, Brown said Oregon will have to save some of its reserves to balance the 2021-23 budget that starts 11 months from now, given that tax collections are unlikely to fully recover. More than 90% of spending from the general fund, the state's most flexible sources, comes from personal and corporate income taxes.

Brown said:

"These decisions will not be easy. Oregon has been smart with our reserves and saved for a rainy day, preparing us to weather this economic storm. But if we use too much of our savings now, then we'll be stuck with an even bigger budget gap for the next biennium. Putting off tough decisions this summer will only leave us with impossible choices next January."

Agencies, at her order, had submitted cuts adding up to just under $3 billion. However, Brown has endorsed about $150 million in savings, leaving many of the details for other changes to lawmakers.

She, like the Legislature's chief budget writers, left the state school fund at $9 billion that lawmakers approved last year for the two-year cycle. To do so, the legislative budget plan calls for using $400 million from the Education Stability Fund, which consists of Oregon Lottery proceeds earmarked for a reserve. (The state budget also has a general reserve and ending balances, which only the Legislature can tap.)

Six budget subcommittees reviewed details and heard public testimony about the proposed spending cuts in a series of virtual hearings July 22-24.

Hopes for federal aid

"Unlike the federal government, Oregon must balance our state budget," Brown said. "State and local governments have been left reeling from the economic downturn. For months, we have waited for Congress to take action, and it is still my hope that they will include aid for states and local governments in the coronavirus relief package currently being negotiated."

The House plan, known as the HEROES Act, provides for $500 billion in aid to states in two installments — one within 30 days, and the other in May 2021. According to the Center on Budget and Policy Priorities, a Washington, D.C., think tank, Oregon would get $3 billion in the first round and $3.2 billion in the second round. Local governments and school districts also would get money.

The earlier $2 trillion CARES Act, which President Donald Trump signed March 27, provided $150 billion to states — $1.4 billion to Oregon and a total of $276 million directly to Portland, Washington County and Multnomah County — but none of that money can be used to offset shortfalls in tax collections.

But the Senate's majority Republicans have balked at the House's price tag. Their $1 trillion plan has no money for aid to state and local governments.

The Oregon Legislature's Emergency Board is scheduled to meet Wednesday, Aug. 5, to draw more money from the state's share of aid from the CARES Act for coronavirus-related expenses, including testing and personal protective equipment. An item for a racial equity fund also is on the agenda; it is unclear whether this is a reworking of the E-Board's July 14 approval of $62 million for a fund to benefit Black families and businesses.

Brown also said this in her message:

"We need to preserve critical services like health care, education and senior services during this pandemic. And, we must do more to address the disparities in state support for Oregon's underserved communities, particularly our Black, Indigenous, Latinx, Pacific Islander and other communities of color. I would like to thank legislators for beginning this work already, and I look forward to rolling up our sleeves and crafting an updated budget that serves all Oregonians."


In statements issued afterward, Senate leaders offered their reactions:

• Senate President Peter Courtney, D-Salem: "COVID-19 upended our economy and put state services at risk. We need to address the budget. Key budget legislators have been working on this for months, now is the time to get it done.

"In the June special session we passed policy bills, we made progress on police reform, and addressed immediate COVID-19 needs. We have another long session coming in January. Now is the time for the budget. That must be our mission this special session."

• Senate Republican Leader Fred Girod of Lyons: "Senate Republicans have been willing to work on the budget since before the governor called the first special session earlier this summer. If we diverge from the stated purpose of addressing the budget, this second special session will make a mockery of the legislative process yet again.

"Policy bills should be off the table. The focus should be on the budget."

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