By Brian Krieg, president, FocusPoint Communications
When the Oregon Legislature reconvenes in February, most of its work will be focused on rebalancing the state budget and preparing for difficult days ahead. Oregon’s State Economist is now projecting lower revenue through the remainder of the biennium, which will result in a budget shortfall. Federal tax changes passed by Congress in HR 1 are the key revenue reduction factor along with a slowing of Oregon’s economy. The effects of tariffs on Oregon’s businesses are only starting to show up and may have further negative impacts on the state’s coffers. A significantly larger fiscal problem is the looming cut-off of Federal passthrough funding of billions of dollars for healthcare and food benefits for low-income residents.
It has been over a decade since the Oregon Legislature has had to grapple with budget deficits and the painful and challenging requirement of cutting funding to programs and services. Oregon’s constitution requires the Legislature to set and maintain a balanced biennial budget. During even numbered years they meet in a “short” session for five weeks starting in February to tweak the budget and make needed adjustments to recently passed legislation. With ever-increasing revenue it’s been a long time since they had to do the onerous task of trimming budgets and have instead expanded programs and wrestled with policy issues, often ones that were too complex for that short time frame.
Legislative leadership, the Governor, and budget staff have laid out the new budget problems in recent meetings and the necessity of acting quickly and decisively during the short session to spread the cuts thinner over time. The Ways and Means Co-chairs have informed everyone that cuts will happen—and to examine programs of interest to find reductions—or else the Chairs will make the cuts for them.
We are currently down to only a dozen legislators who were there in 2013, the last time serious cuts were still being made. And no one in legislative Leadership of either party was there at that time. The new reality of less funds will come as an unfathomable shock to many legislators. At least Governor Kotek has experience with cutting budgets.
Avoiding and learning from the mistakes made during previous budget downturns is critical. Legislators, lobbyists, and advocates will be searching every state agency budget looking for any unspent, non-allocated, or reserve funds to try to redirect to their own pet programs and services. In the past, this has led many to look at the budgets of the Oregon Building Codes Division (BCD) and the Construction Contractors Board (CCB) and cry “Eureka” when they see those agencies have reserves—and then try to pry those funds away. And the funding fights begin.
The pivotal factor is that BCD and CCB—unlike most state agencies, programs, and services—are not funded by taxpayers through the General Fund. BCD and CCB are “fee based” agencies whose funding comes from those in the construction industry who use their services, and those services must directly relate to the industry and the public’s safety. Importantly, Oregon law does not allow for the transference of these funds for other purposes. It’s not the Legislature’s money to redistribute. However, that doesn’t mean that others desperate for funding haven’t tried to creatively steal it in the past when times were tough.
Yes, BCD and CCB do have reserves, and they are strategic about having them. Both agencies are well aware of cyclical times in construction and set aside and grow funds to keep key staff and services intact when there is a down cycle and to be ready to quickly respond when an up cycle starts. In the case of BCD, they also have a role in backing up local government building programs, which will also be under significant budget stress. Reserves are also grown to provide for planned upgrades to systems that serve the industry that pays their fees. Defending the budgets and reserves of these two agencies will be a top priority and fight for the next few years.
Having lived through budget downturns before—and predicting it coming again—the construction lobby started an informational push during this year’s “long” session by testifying in the Ways and Means committees that oversee these agencies. More meetings with the Governor, Legislative Leadership, and the Ways and Means and Revenue committees are being planned to further remind them not to try to raid these funds or tie the agencies’ hands-on staffing and needed system upgrades. SMACNA is a key leader of these efforts.
Another source of funding some desperate legislators, lobbyists, and advocates will likely try to tap to keep services and programs afloat will be the State’s bonding capacity, in effect paying on a credit card for services that are consumed and that have no lasting asset or revenue generation such as construction projects.
The bulk of state bonding in the past has been used for significant tangible projects like roads, schools, water systems, and other needs that have significant up-front costs but long-term benefits, including the generation of income taxes to help defray their costs. Pressures to use bonding for short-term social services fixes will be intense, and if successful, will curtail the amount of funds for public construction work in the state. And if too much bonding is relied on for those temporary purposes, the state’s bonding rating will likely decrease causing further economic damage. We have seen that happen before and will lobby hard to avoid making that mistake again. ■
