State budget cushion shrinking

SALEM, Ore. (AP) – Inaccurate revenue predictions are taking a sizable bite out of a $150 million cushion in the 2005-07 state budget, according to state officials who will report to a legislative panel this week.


Economists had forecast that $153 million would be left over when the two-year budget ends in June 2007.


But that estimate is being reduced by $55 million – mainly because of flawed estimates about how much federal money would flow into the Human Services Department, said interim Human Resources Director Bryan Johnston.


"There were mistakes by the department, faulty assumptions," Johnston said Monday.


The Legislative Emergency Board will take up the matter Thursday. Sharp questioning is expected from the board, which is the Legislature’s budget panel between sessions.


"We must have a budget that is reliable," said Rep. Dennis Richardson, R-Central Point, chairman of the board’s human resources subcommittee. "I want safeguards to ensure this doesn’t happen again."


"The problem is not just money, it’s the disruption," Richardson said. "Hundreds of thousands of people depend on these services."


Part of the poor revenue forecasting, Johnston said, came as the 9,000-employee department for the first time wrapped all of its spending into a single budget instead of sending lawmakers a separate budget for welfare outlays, for example.


Johnston said the "real difficulty is predicting revenues that come from 150 different sources."


Because of the inaccurate revenue forecasts, the state Human Services Department is able to repay only $22 million of $77 million that the Legislature gave it in May to manage cash flow at the end of its last budget.


An increase in caseloads has also contributed to the agency’s fiscal squeeze, Johnston said.


The Legislature’s fiscal office is warning that the some of the troubles likely will affect the current 2005-07 budget.


A report by fiscal analysts to the E-Board said the department’s next budget report, in January, "will likely include significant higher costs that exceed the budget" and that emergency funds or program cuts may be required to keep the budget balanced.


Also during two days of meetings that start on Thursday, the E-Board will hear from the Human Services Department on a proposal to remodel a floor at the Oregon State Hospital’s Portland facility to house about 30 of the 100 patients now living in a 122-year-old building at the main hospital in Salem.


An architectural report to the Legislature in May said the entire aging Salem hospital should be replaced and that the oldest building likely would collapse in a major earthquake.


Officials estimate the cost to remodel the Portland building, which now houses about 60 patients, would be at least $525,000.