Governor's Study Shows Oregon Faces Decade of Budget Deficits; Support for Unions Wanes in Illinois

A study conducted by Oregon Governor Ted Kulongoski shows that Oregon will not be bailed out by a rebounding economy, assuming of course the economy rebounds at all.

Please consider New report says Oregon faces decade of budget deficits

Oregon risks 10 years of crushing, multibillion-dollar budget shortfalls unless it immediately puts the brakes on spending and starts offering fewer services, cautions a new report released Thursday.

This is no attack by anti-tax or anti-government factions. The warning comes from Gov. Ted Kulongoski's "reset Cabinet," a group of trusted advisers he appointed to assess the state's long-term fiscal outlook and suggest changes.

"We find that Oregon faces a decade of deficits, during which we cannot expect to be bailed out by a rebounding economy or a more generous federal government," the report, says. If state spending is allowed to grow at its current rate, it goes on to say, "lawmakers and voters will find themselves again and again between the rock and the hard place of cutting services or raising taxes."

Why Oregon Must Reset State Government

Inquiring minds are investigating an Update from the Governor�s Reset Cabinet

We conclude that the state will face a decade of deficits if it tries to sustain the type and scope of services it now provides. Business-as-usual budgets will no longer suffice. Current services, as currently structured, will be unsustainable.

We must rethink and refocus our priorities, move from short-term budgeting to long-term planning and develop smarter ways to meet our responsibilities in the challenging years ahead.

In that process, we must reaffirm our common goals and judge what we are doing now and what we propose to change by well defined measures of success. In the end, we must be willing to adopt new ways to organize and deliver services, control costs and get the best value for our tax dollars.

Revenue growth is expected to resume as the economy recovers and should make up for the loss of one-time funds that sustain the current budget. The most likely scenario is that Oregon will have approximately the same level of general fund resources to work with in the next biennium (2011-13) as it has in the current biennium.

But increasing costs, needs and demands will drive the expenditure side of the budget far beyond its resources. When compared to the cost of maintaining the current level of services, the state faces a shortfall of more than two billion dollars, or 13 percent of its next budget � a shortfall that persists at that
two billion dollar level in budget projections through 2019.

As a result, we find that Oregon faces a decade of deficits, during which we cannot expect to be bailed out by a rebounding economy or a more generous federal government. In fact, trends in both categories could make our fiscal future even more challenging. It is important to recognize that Oregon is not alone. Most states face similar challenges. Some are beginning to talk about �reset initiatives� of their own.

Oregon Overestimates the Recovery, Underestimates What Needs to be Done

My sense is that states are all overestimating what the recovery will do. That aside, Oregon is a step ahead of others in realizing the recovery alone will not fix the problem.

The report made no recommendations even though it is crystal clear what needs to happen. For starters, the state needs to kill defined benefit plans for new hires. Next, the state needs to outsource everything possible with the goal of getting rid of all public unions.

Anything else is just pecking at the fringes of the problem.

Proposed Pay Freeze in Illinois

Please consider this editorial opinion in the Rockford Register. Our View: State�s fiscal fix needs to start with real pay freezes

If Illinois� elected officials truly are serious about creating a responsible budget, they would freeze the wages of all government employees.

No raises. No steps or lanes. No cost of living increases. Nothing.

Instead, the budget that Gov. Pat Quinn has proposed calls for $1.5 billion more in spending with $350 million of that money dedicated to increasing wages for government union employees.

Some of those raises range from 7 percent to 20 percent � unheard-of amounts in the private sector where most of the taxpayers work.

The taxpayers in the private sector have been getting their wages cut, their benefits slashed and have seen pensions go the way of the dodo bird.

Government union workers seem oblivious to the struggles of their private-sector counterparts. Illinois� unemployment rate is 11.2 percent, higher than the national 9.5 percent.

Union workers stage rallies that ask for tax increases that would further drain the wallets of taxpayers while providing enough money to keep their jobs and benefits safe.

Unions have refused to have their contracts renegotiated. They�ve resisted efforts to pay more for health costs. They�ve sued the state to avoid layoffs that would have helped the state save money. They seem to think the tax well is bottomless. ...

Jonathan who lives in Rockford says ...

Mish,

I live in Rockford, IL. Check out the Rockford Register Star editorial on a proposed wage freeze for state workers.

Obviously, their solution is tepid, but this is a VERY liberal newspaper.

If even they are writing things like this about the public employee unions, what you and others are doing is starting to sink in. Keep up the good work.

Jonathan

Thanks Jonathan. Union wages and benefits are the number one fiscal issue with states and scores of cities.

I am doing what I can to inform people what is happening.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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