Down to the wire: Lawmakers face critical budget decision today

Down to the wire: Lawmakers face critical budget decision today

SALEM, Ore. (AP) — Oregon lawmakers have been straddling two paths toward a new state budget: One based on existing revenue and expenses, the other the product of a grand bargain that would increase tax revenue and lower costs for public-employee retirement benefits.

The Legislature reaches the fork in the road on Wednesday and is expected to choose its path.

The Senate is scheduled to vote on two key pieces of the state budget that have been delayed while Republicans and Democrats try to reach a compromise. Their passage would remove steep barriers that have so far prevented the passage of a spending plan that doesn't include pension cuts and new tax revenue.

At the insistence of Democrats, lawmakers have been discussing various ways to raise $200 million to $275 million in tax revenue, including phasing out itemized deductions for high-income earners and limiting a tax deduction for seniors' medical expenses. Republicans have demanded public-employee pension cuts to lower costs for state and local governments.

Democrats last week said they were considering another Republican proposal to lower tax rates for some small-business owners, but they backed off a bit on Tuesday after some on the left reacted furiously, calling it a tax cut for the rich.

Gov. John Kitzhaber said he's "very supportive" of the concept, but he wants to limit the scope. He said it's hard to predict taxpayers' behavior and he's concerned about unintentionally creating a way for taxpayers to lower their tax burden.

"We want to make sure we do this thoughtfully," Kitzhaber told reporters in a news conference. "So if we're going to put together a change in our tax code in a very, very short period of time, there have to be some checks and balances on it."

Republicans have agreed to curtail the types of businesses that would qualify and cap the rate at the first $10 million in income, but they're balking at Kitzhaber's demand that it expire.

If the business tax breaks expire, the Democratic tax increases would continue but the GOP tax breaks would not, said Sen. Larry George, R-Sherwood, one of two GOP senators at the center of the push for business tax breaks.

Two key budget bills have been on ice in the Senate as bargaining chips in negotiations over taxes and pensions.

One measure would provide $6.55 billion in funding for primary and secondary schools over the next two years, a 14 percent increase; the other would extend a tax on hospitals and nursing homes to help pay for Medicaid.

The school-funding bill failed in the Senate last week, when Democratic Sen. Chris Edwards of Eugene joined all 14 Republicans in opposition. He said he was holding out for a deal that would provide millions more for schools.

Edwards declined to say whether he'd change his vote to back the school-funding bill if lawmakers don't reach a deal by Wednesday. He said he was convinced that legislative leaders would reach a compromise and wasn't interested in considering the alternative.

"I'll cross that bridge if and when I get to it," he said.

Republicans have been blocking the hospital tax bill in hopes of wrangling Democratic support for more pension cuts, but several GOP senators have said publicly that the tax is necessary to balance the budget.

Copyright 2013 The Associated Press.