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Kitzhaber calls legislators back After vetoing the Legislature's bills, the governor offers his third proposal to balance the budget, and says both sides have given ground By DAMIAN MANN Mail Tribune As promised, Gov. John Kitzhaber vetoed legislation Tuesday to balance the state's budget. But he also announced a significant compromise with lawmakers that reduces the financial bite to public schools. Under Kitzhaber's third proposal to balance the state's $12 billion budget, primary and secondary education would see a reduction of $50 million rather than $112 million as originally proposed. For Jackson County schools, this would carve about $2.5 million out of education, amounting to roughly $75 a student. The governor also agreed with legislators over the conversion of an Education Endowment Fund into a School Stabilization Fund that would raise $101 million. However, Kitzhaber wants to add rigorous conditions to the use of the fund to help education only during state deficits. This proposal would require voter approval during the May 21 primary election. With disagreements remaining over $351 million of what was once a $930 million shortfall, Kitzhaber has called another special session of the Legislature to begin Monday. "We are closer than it appears to agreeing on a balanced budget," said Kitzhaber. "We may still have disagreements about how best to solve that problem, but at least we will have taken a solid step forward." State Sen. Lenn Hannon (R-Ashland) agreed. "I think there really is a potential for closure," he said. "The public isn't served and Oregonians aren't served by this lengthy dispute." Hannon said the governor's latest proposal incorporates some of the budget measures suggested by the so-called "Group of 5," a bipartisan legislative panel that wanted to solve the budget crisis without raising taxes. Hannon was one of the five. The Legislature remains opposed to raising taxes as a solution to the budget problem, Hannon said. "What the governor is proposing is creating a 20 percent sales tax instead of creating a sales tax" - meaning a general sales tax. Kitzhaber proposes raising the 68-cent a pack cigarette tax by 50 cents, increasing beer and wine taxes and repealing or delaying a voter-passed increase in the federal income tax deduction. Hannon dislikes the governor's proposed tax increases on cigarettes or alcohol, but remains a supporter of creating a state sales tax that would specifically benefit the long-term financial health of education. Hannon in the past has proposed a 3-cent sales tax and a 2-cent business and occupation tax to help shore up the budget, which is dependent on income and property taxes, but lawmakers rejected his proposal. Kitzhaber vetoed six bills that would increase revenues, including borrowing from the 143-year-old Common School Fund, but has agreed to raise $284 million through other one-time revenue sources. He intends to veto another bill that would use 911 emergency service surpluses. While the financial picture for schools improved with the latest proposal, education is not out of the woods. "It doesn't mean it won't creep back up as part of the final outcome," said Kitzhaber spokesman Bob Applegate. Meantime, State Treasurer Randall Edwards injected some urgency to the situation. In a letter to legislators and Kitzhaber, Edwards said the state's cash flow situation likely will require him to issue short-term notes to borrow money to make a $600 million state school support payment that's due in May. "It is imperative that a signed, balanced budget be in place by the first week of March" to give him time to arrange the borrowing, he said. Local school officials, worried about potential staff reductions, cautiously welcomed the news that Kitzhaber and legislators have made progress in coming to an agreement. But Medford school board member Peggy Penland, who is on the governor's Quality Education Commission, said, "I still think there shouldn't be any cuts to education." Penland worries that Medford schools could lose more staff after leaving about 30 positions unfilled last year because of a $1.8 million shortfall. In a district with increasing enrollment, this would result in larger class sizes. Under Kitzhaber's latest plan, Medford schools would see a loss of about $1 million. "It is sad in those growing districts where you have to cut staff but more students are coming in," she said. Ashland school board member Amy Amrhein said her district will continue under the assumption that cuts of $2 million need to be made because of a combination of increased expenses and decreased revenues from the state. If the Legislature approves a $50 million overall reduction in education, then the district could reduce the amount of cuts it has to make, she said. "We're moving in the right direction," said Amrhein. "Let's keep going." Reach reporter Damian Mann at 776-4476, or e-mail [email protected] The Associated Press contributed to this story. Mail Tribune Home | Ottaway Newspapers, Inc. | Dow Jones & Co., Inc. | Privacy | Contact Us Copyright � 2001 Mail Tribune, Inc.