Kitzhaber: Pension, prison cuts tough but needed

SALEM, Ore. (AP) - Gov. John Kitzhaber acknowledged Monday he's asking state lawmakers to make politically risky decisions on public pensions and prisons but said tough choices are needed to improve education and shrink class sizes.

The Democratic governor delivered his annual state of the state speech to a joint session of the new state House and Senate after lawmakers took the oath of office. Legislators adopted rules and elected leaders but won't begin the legislative session until Feb. 4.

Kitzhaber used his speech to reiterate themes he's emphasized since taking office two years ago: The need, in his view, to slow the fastest-growing segments of the state budget and to ensure that the economic recovery doesn't leave poor and rural areas behind.

After persuading lawmakers in the last two sessions to target health care spending by coordinating care and preventing hospitalizations for low-income Oregonians on the Oregon Health Plan, he said it's time to look at expanding the same model to public employees and the private market.

His next targets for spending cuts will be prisons and government pensions. He said he's also open to raising taxes by eliminating or capping certain tax exemptions — a priority for many Democratic lawmakers and the public employee unions that helped elect them.

"We need to make room in the current budget if we hope to begin to reinvest in the classroom and critical public services," Kitzhaber told lawmakers, their families, Supreme Court justices and other dignitaries packed into the state House chamber. "I'm prepared to stand with you to make what will be a series of very difficult decisions to make that happen."

Projected prison growth will cost hundreds of millions of dollars that could otherwise be spent on educating children and keeping them from turning to crime, Kitzhaber said, urging the Legislature to approve sentencing changes proposed by a commission he appointed last year. The Commission on Public Safety proposed rolling back mandatory minimum prison sentences for certain crimes and boosting the amount of "earned time" that can be dropped from a prisoner's sentence for good behavior.

"I recognize, as all of you do, that the politics around any type of public safety reform are difficult," the governor said. "But I am asking you ... to find the courage and the honesty to recognize that if you are unwilling to act on this issue we will, by default, be choosing prisons over schools."

Kitzhaber has also proposed capping annual cost-of-living increases for retired government workers. Otherwise, he said, the higher costs of pensions for retired teachers will make it hard to improve education even as spending increases. The proposal has strong support among Republicans — many in the GOP would like to see even steeper pension cuts — but majority Democrats have been wary.

"We may not always agree on how to get there," said Rep. Mike McLane of Powell Butte, the Republican leader. "But I heard a lot of things I can agree with."

But there will be divisions, and McLane took a cautious approach to the governor's proposed sentencing changes.

"It's not an either-or proposition. Oregonians want both safe communities and good schools."

The economic recovery has lowered the unemployment rate and helped restore prosperity for some Oregonians, Kitzhaber said, but those gains haven't extended to rural communities, minorities and the poor.

"The word 'recovery' is warped if it is used at a time when the unemployment rates for white Oregonians are falling, but for African Americans, Native Americans and Latino Oregonians unemployment is rising," Kitzhaber said. "The word 'recovery' is the wrong word to use for a state with a 24 percent child poverty rate."

Kitzhaber's audience included more Democrats than it did when he last addressed a joint session of the House and Senate two years ago. The November election gave Democrats control of the state House with a 34-26 majority after two years sharing power with Republicans.

Rep. Tina Kotek, of Portland, was elected speaker, becoming the first lesbian to lead a state legislative chamber in the United States. She took the oath of office alongside her partner, Aimee Wilson.

Kotek urged her colleagues to listen, not to be afraid of different perspectives and not to shy away from robust but constructive debates.

"All the voices need to be heard, from the most vulnerable to the most well-heeled, if we are to meet our moral obligation to represent and serve all Oregonians," Kotek said.

Democrats retained control of the state Senate with a slight 16-14 edge. Sen. Peter Courtney, of Salem, was elected to a sixth term as Senate president — a position he's already held longer than anyone else in Oregon history.

Lawmakers will have a busy calendar when they return next month to formally begin their business.

The economy has stabilized, avoiding the massive budget deficits that lawmakers have faced in recent years. But the costs of providing government services are rising faster than tax revenues, and the Legislature will still have to cut millions in spending to arrive at a balanced budget.

On top of budget issues — including school funding, pensions and prison sentences — lawmakers also will confront environmental issues, transportation funding and immigration issues.

Copyright 2013 The Associated Press.