Proposed by initiative petition to be voted on at the General Election, November 7, 2006.
AMENDS CONSTITUTION: LIMITS BIENNIAL PERCENTAGE INCREASE IN STATE SPENDING TO PERCENTAGE INCREASE IN STATE POPULATION, PLUS INFLATION
RESULT OF "YES" VOTE: "Yes" vote amends constitution to limit the percentage increase in state spending from biennium to biennium to the percentage increase in state population plus inflation.
RESULT OF "NO" VOTE: "No" vote retains existing statute capping appropriations on basis of personal income in Oregon; rejects adding constitutional provision limiting spending increases to population increase, inflation.
SUMMARY: Amends constitution. Oregon statute currently limits state appropriations to 8% of projected personal income in Oregon (with certain exceptions). If Governor declares emergency, legislature may exceed current statutory appropriations limit by 60% vote of each house. Measure adds constitutional provision limiting increase in state spending from one biennium to next biennium to percentage increase in state population, plus inflation, over previous two years. Certain exceptions to limit, including spending of: federal, donated funds; proceeds from selling certain bonds, real property; money to fund emergency funds; money to fund tax, "kicker," other refunds. Measure provides that spending limit may be exceeded by amount approved by two-thirds of each house of legislature and approved by majority of voters voting in general election. Other provisions.
ESTIMATE OF FINANCIAL IMPACT: The measure puts a new limit on state budget spending for each two-year budget.
It is unclear when the measure would first apply. If it first applies to the 2007-2009 budget, the measure would reduce money available to fund state services by $2.2 billion. If it first applies to the current budget, state spending must be reduced by $2.5 billion by July 2007, and expected spending must be reduced by $4.9 billion for 2007-2009.
The state budget now pays for public schools, health care, prisons, roads, bridges, forest fire protection and other services. In addition, the state transfers approximately 2/3 of its funds to cities, counties, school districts, and health care providers. The measure does not specify which programs would be affected by the spending limit.
The measure will limit state bond programs and will have a negative impact on the state's credit rating.
The measure does not directly limit local government spending.
(See the Voters' Pamphlet for explanation of this financial estimate)
Explanation of Estimate of Financial Impact
The measure creates a new limit on state budget spending. It would cap state government spending to increases in state population, plus inflation. The cap can be overridden by the approval of two-thirds of each house of the Oregon Legislature and the approval of a majority of voters in a general election.
The measure is silent as to when it first applies. Constitutional amendments become effective 30 days after being approved by the voters, but it is unclear from the language of the measure when it would first apply. If the measure applies to the current state budget, an estimated state spending reduction of $2.5 billion must be made within seven months by July 2007 (with no opportunity for the Legislature and the voters to override this reduction). Expected spending for the 2007-2009 budget must be reduced by $4.9 billion.
If the measure first applies to the 2007-2009 budget, the measure would reduce money available to fund state services by an estimated $2.2 billion.
The measure does not directly reduce state revenue.
State Budget Spending
The state budget pays for a variety of public services such as public schools, health care, prisons, roads, bridges, forest fire protection and other services. State dollars are used to repay debt, make contract payments, and pay for services required by federal law. The measure does not specify which government services will be affected by the spending limit. That decision must be made by the Legislature. Historically, spending on state government services has grown faster than the new limits that would be in place with the passage of this measure. The difference between the amount of money available to pay for state services and the amount that can actually be spent on these services will grow over time.
The federal government pays part of the cost of many social service programs such as healthcare, by matching the amount of money spent by the state each year. A reduction in state spending for those programs would also reduce the amount of money the state receives from the federal government.
State Bonds and Credit Rating
The measure will restrict the amount of bonds the state can sell in the future by including the expenditure of bond proceeds and repayment of bonds under the spending limit. The state sold $1.4 billion in bonds last year to pay for things like roads, bridges, veteran's home loans, and local economic development projects.
Oregon bonds are rated for quality. The higher the credit rating, the lower the interest costs on the bonds the state sells. This measure will have a negative impact on the state's credit rating by greatly reducing its financial flexibility.
Financial Impact on Local Governments
The measure has no direct effect on local governments. It may have the indirect effect of reducing the amount of money local governments receive from the state. The state transfers 2/3 of its funds to others, including public schools, cities, counties, and health care providers.
Secretary of State Bill Bradbury
State Treasurer Randall Edwards
Lindsay Ball, Director, Dept. of Administrative Services
Elizabeth Harchenko, Director, Dept. of Revenue
Debra Guzman, Local Government Representative
(The estimate of financial impact and explanation was provided by the above committee pursuant to ORS 250.127.)