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Report: State costs to climb by 14.3 percent

The cost to maintain existing state services in the next two years will climb by 14.3 percent, or $2.7 billion, according to budget projections released Wednesday.

The state faces an estimated budget shortfall of $1.35 billion, according to the report by the Legislative Fiscal Office and Department of Administrative Services. Personnel and pensions, the state’s increasing share of the cost of the Affordable Care Act, rising human services caseloads and inflation are driving the costs, the report states.

The projected cost of maintaining state services in 2017-19 is about $21.75 billion compared with $19.03 billion in 2015-17. Personnel costs alone are projected to increase by 9 percent, according to the report. That includes raises in collective bargaining agreements and salary packages, health benefits and an increase in the rate for the Public Employees Retirement System. The projections are based on the state’s June economic and revenue forecast and could change with the September and subsequent forecasts.

A DAS spokesperson emphasized in a tweet that Wednesday’s projection is only a “starting point.”

The state’s budget picture could change dramatically if voters in November approve a controversial corporate sales tax measure. The 2.5 percent tax on the Oregon sales of certain corporations exceeding $25 million would yield an estimated $3 billion per year in additional state revenue.

Sen. Richard Devlin, D-Tualatin, a co-chairman of the Ways and Means Committee, has said state services likely will face cuts if the ballot measure fails. But he also has warned that the rising costs of the state’s pension plan in the next several years and the Affordable Care Act would quickly eat up that supplemental revenue.

With those expenses, “the money is gone from that measure, so you should quit thinking about all these other programs you would like to expand,” Devlin said earlier this month.

By Jill Rehkopf Smith
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