Oregon State Capitol Building in Salem, Oregon

One special session of the Oregon Legislature is history, but a second is coming.

Gov. Kate Brown says she will hold off an official call until mid- to late-July, following last week’s three-day session that saw the passage of legislation to deal with police accountability, after-effects of the coronavirus pandemic and a few other issues.

State economists have projected a shortfall of $2.7 billion, resulting from reduced business activity and income tax collections, for the two-year $23.7 billion budget from the general fund and lottery proceeds.

Education, health and human services and public safety account for more than 90% of that spending. Virtually all of that shortfall affects the second half of the budget cycle that starts Wednesday, July 1.

“Luckily we are better prepared for this economic downturn than many others in my lifetime with state reserves and a rainy-day fund currently in place,” Brown told reporters the day after the session closed. “We are holding off a special session for the next few weeks to give Congress time to take action. I hope — I plead — that congressional legislators will hear the call from states across the country and step in with additional federal support.”

Oregon got $1.4 billion in federal aid from the $2 trillion coronavirus relief legislation, but states cannot use that money to offset budget shortfalls, only to pay expenses related to the coronavirus pandemic.

The Democratic-led U.S. House already has passed a plan containing more aid to states that, according to the Center on Budget and Policy Priorities, would give Oregon $3 billion now and $3.2 billion in May 2021.

Oregon’s shortfall for the 2021-23 budget cycle is projected at $4 billion.

The Republican majority in the U.S. Senate has balked at the $3 trillion price tag for the House’s HEROES Act. But the National Governors Association, led by Republican Larry Hogan of Maryland and Democrat Andrew Cuomo of New York, have urged more federal aid. As states with Republican governors such as Arizona, Florida and Texas face rising coronavirus infection rates and renewed restrictions on public activity, states’ finances will come into the spotlight.

The U.S. House plans to start its summer recess July 31; the Senate, no later than Aug. 10.

“I will be expecting to call in the Legislature quickly to look at budget reductions and plan for the next biennium,” Brown said.

Agencies already have submitted potential spending cuts totaling almost $3 billion — equal to about 17% of what they draw from the tax-supported general fund — and Brown has endorsed $150 million in savings so far. Lawmakers are unlikely to adopt some of the more drastic cuts, such as closure of 10 of Oregon’s 14 state prisons.

Brown did pledge to try to keep the state school fund, which supports public school operations, at the $9 billion that lawmakers budgeted. It accounts for 35% of general-fund and lottery spending.

Brown can cut spending across the board, but only the Legislature can cut selectively.

Selective hiring freezes and some layoffs are in effect, but so far, employee furloughs or rollbacks of negotiated pay increases are not.

“Everything is on the table as we turn to tackling the budget,” Brown said. “We are doing everything we can to squeeze every bit of toothpaste out of the tube to address the short-term budget crisis as we begin to plan for the next budget cycle.”

Oregon does have an estimated $1.6 billion in two main reserve funds — one for general purposes, the other earmarked for education — and up to $1 billion in an ending balance to be carried over into the next two-year cycle. But lawmakers are barred from spending all of the reserves in a single budget cycle, and the ending balance is never zero.

Lawmakers were just starting to look at proposed spending cuts and hear public testimony, beginning June 17, when Brown called the first special session.

Said House Republican Leader Christine Drazan of Canby: “While we passed historic bipartisan police accountability legislation, the session in many ways fell short, leaving Oregonians outside locked doors and the budget deep in the red.”

Senate Republican Leader Fred Girod of Lyons added, “This session has been a huge disappointment because we did not get the budget done, and Oregonians were locked out of the process.”

Senate President Peter Courtney, D-Salem, said federal aid will make a difference.

“If that does not happen, we’re going to have a much different special session, I’ll tell you that right now,” Courtney, who has been in the Legislature during four previous economic downturns dating back to 1981, told reporters. “I think it’s too early to tell how difficult it will be, how bloody it will be, until maybe the middle of July.”

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