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Arithmetic has no mercy

1/15/2010: This David Steves RG story is the most honest I’ve seen yet on what’s going on with state spending:

Question: What’s really going on with the state budget? One side says politicians in Salem behind the tax increase just increased state spending by $4.7 billion. The other side says the budget was cut by $2 billion. Who is right?

Answer: They’re both right. Tax critics are citing the state’s “all funds” budget, which grew from $51.2 billion in 2007-09 to $55.9 billion in 2009-11, a 9 percent increase. The “general fund” is the budget within this budget that tax-increase supporters are focusing on. It was $15.1 billion for 2007-09, until the recession hit. It went down in 2009-11 to $14.2 billion.

That’s not a $2 billion cut, you say? That’s right. The $2 billion figure cited by Democratic leaders is the difference between the $14.2 billion in approved spending and the $16.2 billion estimate of what it would have cost to keep up with growing case­loads, enrollment, medical inflation and previously approved government expansions.

Question: Why did the state’s general-fund budget get smaller when its overall spending increased?

Answer: Let’s look at the general-fund budget. Income taxes from households and corporations, plus lottery money, make up nearly all the general fund. The recession hammered those tax collections.

More than 130,000 Oregonians lost their jobs and investment income and corporate profits tanked. The amount of corporate and personal income tax revenue lawmakers could count on when they crafted the 2009-11 budget had fallen by $1.4 billion from what had been expected two years earlier.

Now, let’s consider the state’s all-funds budget. The general fund makes up just under a quarter of it. The rest comes from taxes and fees outside the general fund, as well as federal dollars.

The Legislature’s $733 million in higher taxes for the general fund through measures 66 and 67 are front and center now. But the state raised other revenue that doesn’t flow into the general fund, thereby boosting the all-funds budget. For example, the state increased the gas tax and DMV fees — a $568 million jump — for highway and bridge work. Plus, the state imposed $500 million in new taxes on hospitals and insurance premiums to increase health care for poor families.

In addition are hundreds of millions of dollars of fees, such as university tuition, that the state raised to offset dwindling income-tax revenues.

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