Kitzhaber pushes pension cuts in proposed budget

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Associated Press

Posted on December 1, 2012 at 6:04 AM

Updated Saturday, Dec 1 at 6:04 AM

SALEM, Ore. (AP) — Gov. John Kitzhaber will propose an increase in funding for Oregon schools, but the money wouldn't be enough to reduce class sizes unless the Legislature cuts pension benefits for retired teachers and other public employees, his staff said Thursday.

The governor's budget proposal, scheduled for release on Friday, will include $6.15 billion in K-12 school funding over the next two years, according to a summary released by his office. That's an 8-percent increase over current funding, but not enough to cover the $6.3 billion it would cost to maintain the current level of service in schools.

Kitzhaber hopes his budget proposal will nudge lawmakers to cut back on public pension benefits for retirees in order to avoid forcing school districts to lay off more teachers or shorten school years.

Kitzhaber spokesman Tim Raphael said the governor built his budget on an assumption that the Legislature will approve two changes to the Public Employee Retirement System: The elimination of a supplemental pension payment intended to cover out-of-state retirees' income tax in Oregon. Out-of-state retirees pay income taxes in their home state, not in Oregon, so critics say they shouldn't get the supplemental tax payment. The other change would limit retirees' annual cost-of-living increase to $480 per year.

The governor's office says the pension changes would save school districts $253 million in the upcoming two-year budget period. Across all levels of government, the savings would be $865 million per biennium.

The governor's funding proposal is far too low to improve the quality of education, said Gail Rasmussen, president of the Oregon Education Association, the state's largest teachers union.

His proposed pension cuts are unconstitutional and shouldn't be counted on to deliver savings to school districts, she said.

"Our districts are still dealing with really bad, bad budget crises," Rasmussen said.

In an email sent Thursday to state workers, Kitzhaber said his budget would not require them to take more unpaid days off work to save money, as they've had to do for several years.

His budget also will assume that the Legislature changes criminal sentencing laws so the prison population grows by just 300 inmates over the next 10 years — 2,000 fewer than experts project under current laws.

Kitzhaber's pension and sentencing changes will be a heavy lift in the Legislature, where both initiatives are likely to present political risks for lawmakers.

Public-employee unions, which were instrumental in helping Democrats build their majorities in the Legislature, have a history of fighting pension cuts that hurt their members' pocketbooks.

"Gov. Kitzhaber has provided a good starting point for the budget negotiations ahead of us," Sen. Peter Devlin, a Tualatin Democrat who will be co-chairman of the budget committee, said in a statement.

Lawmakers risk being labeled soft on crime if they approve legislation that reduces prison time for criminals. The governor has long argued that spending on prisons is rising too quickly and diverting scarce tax dollars away from education and police. A commission he appointed is expected to recommend sentencing changes next month.

The $16.3 billion proposed budget for the general fund and lottery is a 10 percent increase over the current spending plan. It would leave $130 million unbudgeted to guard against unexpected costs or a weakening economic recovery.

The governor is required to submit a budget proposal to the Legislature, but the final spending plan must be approved by lawmakers. Kitzhaber and the Legislature have to contend with a $700 million gap between anticipated revenue and the cost of continuing government services at their current levels for two more years.

Kitzhaber will also recommend:

— $1 billion in infrastructure projects, including $450 million for a new Interstate 5 bridge spanning the Columbia River.

— More money to pay for daycare for low-income workers, boosting the program by 500 children.

— Additional funding for high school students to earn community college credits and to allow illegal immigrants to pay in-state tuition at public universities.

— $55 million for child safety, including more money for Child Protective Services and for community-based mental health services.

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