By Taylor W. Anderson

The Bulletin

Oregon’s bills are set to grow by $2.7 billion in the next two-year cycle, state economists said Wednesday, a more than 14 percent growth over the 2015-17 budget.

But there will be only about half as much added revenue available to pay the higher bills, and the economists project Oregon lawmakers will grapple with a $1.35 billion shortfall.

The gap outlined in a tentative budget projection released Wednesday foreshadows a heated debate that will play out in the coming months over ways to either find more revenue or cut costs. A group backed by public employee unions is calling for a tax increase — in the form of Ballot Measure 97 — that would bring in $6.1 billion for the next budget.

Paying for pension rate increases for state government and school district employees covered by the underfunded Public Employees Retirement System will cause expenses to climb by $316.2 million, the forecast shows.

Raises for most executive branch employees negotiated in late 2015 were estimated to take $246.6 million from the general fund in 2017-19. Adding cost-of-living increases and other employee expenses brings that total increase over the current budget to $355.2 million. Another $145 million is included in anticipation of future raises for state employees.

Paying for expenses in the 2015-17 budget, such as higher state costs for Medicaid expansion under the Affordable Care Act, will lead to a $626.1 million increase, the estimate shows.

A five-year offset from the federal government under the ACA worth $1.9 billion is also ending, and the Oregon Health Authority in May applied for another round of what are called waivers. That money provided $1.2 billion for the first two of the five years.

Legislative Fiscal Officer Ken Rocco said the budget anticipates funding the agency at current levels, as though the waiver weren’t in place. If the agency receives the money, the budget gap would fall.

Groups interested in the budget process quickly weighed in on the forecast, put together by employees at the Department of Administrative Services and Legislative Fiscal Office.

House Republican Leader Mike McLane, of Powell Butte, called the projected shortfall a “crisis of Democrats’ own making.”

“Oregon does not have a revenue problem; we have a leadership and priorities problem,” McLane said. “Republicans stand ready and willing to put in the hard work necessary to put Oregon back on the path to (a) sustainable fiscal future.”

The Oregon Center for Public Policy, a left-leaning economic research group, tied the budget shortfall to the upcoming vote on Measure 97, the proposed 2.5 percent tax on C-corporations with gross annual sales over $25 million.

“This November, Oregonians will face a clear choice: Vote ‘Yes’ for Measure 97 or endure more than a billion dollars in cuts to schools and other key public services,” the group wrote in a release.

The tentative budget released Wednesday is known as what’s called the budget for current service levels, the cost of maintaining the government at levels approved by lawmakers and Gov. Kate Brown for 2015-17. It takes into account the most recent revenue forecast along with cost increases.

Brown will release her own proposed balanced budget by December before legislators convene in February and begin debating their own version.

Rocco said the tentative budget will continue changing in the coming months as revenue and expense estimates change.

“If the (next) forecast says things are doing better and we’re up $200 million in revenue, that (deficit) automatically goes down,” Rocco said.

— Reporter: 406-589-4347,