Amid the gloom, a 'sense of resolve' to solve Oregon's budget woes

There was a mix of optimism and worry Thursday in a third floor hearing room inside the Capitol.

The prospect of filling a $1.8 billion budget hole was, and is, daunting for the legislative leaders who gathered in that room for the annual legislative preview hosted by The Associated Press ahead of next week's start of this year's legislative session.

Hovering heavily over that hole, as if waiting to plunge the state into further crisis, were the big issues that have plagued the state for years: Getting a transportation package passed to heal Oregon's ailing infrastructure, and what to do with the state's retirement system.

The budget gap is being driven by primarily three things: health care costs, as the federal government's contribution to the state diminishes; the state's responsibility to pay PERS recipients; and three ballot measures passed by voters last November that required spending for veterans, career and technical education, and Outdoor School.

There was some of the usual partisan bickering among the gathered Senate and House leaders. Republicans, especially, said they felt their initiatives to sit down and talk with the Democrats had been blunted by that party, which controls the Legislature and the governor's office. But there was an overall sense that the state is in trouble and that a coming together was needed to solve its problems.

"I've been eating my Wheaties," joked Senate Majority Leader Ginny Burdick, a Democrat who represents a district in Portland. "It's going to be a difficult session."

But she added, "I'm encouraged by the fact that there's a sense of resolve across party lines, across geographic lines. There really is a sense of resolve that I'm picking up that makes me optimistic that we will be able to get through it."

But there could be an "obstacle," as Senate Republican Leader Ted Ferrioli, a Republican from John Day, put it: The low-carbon fuel standard, a bill passed and signed by Gov. Kate Brown during the 2015 session that was aimed at reducing carbon emissions in the state. It certainly was an obstacle that year, as it was a major factor in derailing the first effort at getting a transportation package passed.

Republicans argued then and now that it raises gas prices and hurts consumers, especially in the rural areas of the state. It may still be an issue this year.

"We are trying to get folks to understand that perhaps the low-carbon fuel standard is an obstacle, and the reason for that is we can't tell whether the low-carbon fuel standard will add 19 cents or a dollar" to the cost of fuel, Ferrioli said.

A couple hours later during her own session before reporters, Gov. Brown cited statistics from the state Department of Environmental Quality that show so far the standard has only increased fuel costs by a quarter of a penny.

Ferrioli said, however, there is room to compromise on the issue and even on the issue of increasing revenue via taxes. But Republicans insisted that Democrats needed to get serious about spending, the increasing size of government and reforming the state's retirement system, known as PERS.

"We're willing to tackle these issues, but our love isn't unconditional, but we're willing," he said.

Brown said she's open to having a conversation about spending, but only to a point.

"I've been really clear with legislative leadership that we must sustain our investments in early childhood education. I'm not willing to cut that," she said. "If they have suggestions about where to cut program areas, I welcome those."

Senate President Peter Courtney, a Democrat known for his dramatics, was the least hopeful of getting a balanced budget passed before the end of the session -- state constitutionally required by July 10 -- but expressed his responsibility to remain optimistic for the good of the process.

"I'm trying to figure out a way to feel good, to feel optimistic," he said. "I understand from my staff that I gotta be upbeat and positive, otherwise it was going to affect people."

Over on the House side, Democrat House Speaker Tina Kotek of Portland and Republican Minority Leader Mike McLane of Powell Butte, avoided the verbal shootout they had during last year's AP preview, but the tension was still palpable.

"(Kotek), as the Speaker, continues to advocate for a system that Oregonians don't trust and don't believe is fiscally responsible," McLane said, adding later Democratic leadership had gotten the state into the fiscal jam it finds itself in today.

"Things are not going to add up unless we do something different on revenue," Kotek responded. "We can streamline, we can be effective as possible, and we will certainly dig into every budget that we have done for the last decade to find the most cost efficiencies. At the end of the day, we will still have a problem, and I'm looking for folks who want to lead and actually lead in their districts to solve the problem."

As for the governor, Brown said her goal for the session is "supporting our struggling Oregon families as well as benefiting everyone."

She said her main focus will be on education, health care and a transportation package. As for that package, she wants it to reduce congestion, invest in mass transit and contain a means to seismically retrofit the state's roads and bridges.

"Not only by making these investments will we create jobs, but we will continue to ensure that Oregon's economy continues to grow in every single corner of the state," she said.

Last December the governor laid out her budget proposal for this session that contained cuts that she found "absolutely unacceptable." But it also contained revenue raising measures like increasing tobacco taxes and increasing taxes on some hospitals and insurance companies.

"I want to move forward on my revenue proposals. I'm certainly open to any other solutions that the Legislature has, but I am not willing to dis-invest in our education, and I'm not willing to shortchange our school children," she said.

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