Kitzhaber says his budget will restore stability for schools

Kitzhaber says his budget will restore stability for schools
Gov. John Kitzhaber talks about his proposed budget during a news conference on Friday.

SALEM, Ore. (AP) — Oregon lawmakers should change criminal sentencing laws to keep the prison population flat for the next 10 years, Gov. John Kitzhaber said Friday as he unveiled his budget proposal for the next two years.

The governor also urged lawmakers to cut pension benefits for retired government workers, saying the politically risky decisions are necessary to reinvest in education.

The proposed spending plan would lower the cost of government and restore public confidence in the state's priorities, setting the stage to ask voters to revamp the tax code sometime in the future, he said.

"We're in a much better place today than we were two years ago," Kitzhaber said, noting the state was looking at a $3.5 billion deficit when he took office at the beginning of 2011.

But Kitzhaber's budget rests on big gambles, and his proposal would be a net cut in funding for schools if he loses the bets.

He's assuming the Legislature will sign off on his plans to cut pension benefits and prison spending. His health care funding plan assumes lawmakers will extend a tax on hospitals and that the health care system will be able to significantly reduce the rate of health inflation.

Kitzhaber did not discuss specific changes to stop growth in the prison population, saying a commission he appointed will release recommendations next month.

"We're not talking about anyone who's locked up now. We're not talking about letting anybody out. We're not talking about shortening sentences," Kitzhaber said.

He added that the plan is to find "more creative ways to manage the nonviolent offenders."

Kitzhaber's proposal for $6.15 billion in K-12 school spending would not be enough to reverse years of cuts to teachers and school days. But if the Legislature allows them to save money on employee pensions, Kitzhaber said, school districts would be able to begin reversing the downward trend in school funding.

The proposal got a tepid reaction from some on both sides of the political spectrum, as liberals and conservatives found things to dislike.

The liberal group Our Oregon said the governor "missed an opportunity to provide real money for schools and critical services by closing big tax loopholes for large corporations and the rich."

Spokesman Scott Moore said it was too soon to say which tax breaks the governor would have eliminated.

On the right, House Republican leader Mike McLane of Powell Butte said the Legislature should cut deeper than Kitzhaber proposes into public pension benefits. There are elements that Republicans could support, McLane said, but the governor doesn't set aside enough money to guard against a slowdown in the economic recovery.

"Oregonians should understand that this budget is based on a number of assumptions that haven't been fully vetted by the Legislature," he said.

Kitzhaber's proposal would pay for $1 billion in new building projects, including Oregon's $450 million share of a new Interstate 5 bridge spanning the Columbia River. He did not recommend a specific funding mechanism, but others have proposed increasing the gas tax or vehicle license fees. About $275 million in bonds would pay for new buildings at community colleges and universities, including a new Oregon State University campus in Bend.

While the budget would continue funding for most safety-net programs at their current levels, it would require cutbacks in Temporary Assistance for Needy Families, the welfare program that provides cash assistance for low-income families. Federal rules cap participation at five years, but Kitzhaber proposes scaling the cap back to three years.

Kitzhaber proposes boosting spending on Child Protective Services and expanding the earned-income tax credit that helps low-income taxpayers.

He also would allow the state to accept 200,000 new Medicaid patients under the federal health care overhaul beginning in 2014. The new costs would be initially shouldered by the federal government.

Read more: Governor's budget proposal

Watch the governor's entire news conference: