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
states credit rating.
The measure does not directly limit local government spending.
(See the Voters Pamphlet for explanation of this financial estimate)
Measure 48
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.
Financial Impact
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.
Federal Funding
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, veterans 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
states 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.
Committee Members:
Secretary of State Bill Bradbury
State Treasurer Randall Edwards
Lindsay Ball, Director, Department of Administrative Services
Elizabeth Harchenko, Director, Department of Revenue
Debra Guzman, Local Government Representative