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2013–15 Legislatively Approved Budget Expenditures

 

2013–15 Legislatively Approved Budget Expenditures

Source: Department of Administrative Services, Chief Financial Office

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Source
Department of Administrative Services, Chief Financial Office

 

Overview
Oregon has a biennial budget. Budgets begin July 1 of odd-numbered years and continue for two years. Oregon law requires all state and local governments to balance their budgets. How does the state government’s budget work? The state receives money from a variety of sources which are grouped into funds. These funds are known as the General Fund, the Lottery Fund, Other Funds and Federal Funds.
The total Legislatively Approved Budget for the 2013–15 biennium was $62.5 billion. This is 17.2 percent more than the 2011–13 total actual expenditures of $53.3 billion. The General and Lottery Funds portions of the 2013–15 budget amounted to $16.8 billion, which is $2 billion more than actual expenditures in 2011–13.

 

General Fund
The 2013–15 Legislatively Approved Budget included approximately $15.9 billion in the General Fund for a 25.5 percent share of the total budget. The General Fund is largely made up of personal and corporate income taxes collected by the Oregon Department of Revenue. The personal income tax makes up the largest share of General Fund revenue. It accounts for about 87.4 percent of projected revenue for 2013–15 as of the June 2014 quarterly revenue forecast. Corporate income taxes are about 6.4 percent of the total revenue amount. Other sources make up the remainder. The largest of these are the cigarette tax, estate tax and the liquor apportionment transfer.

 

General Fund appropriations provide funding to agencies that do not generate revenues, receive federal funds or generate sufficient other funds to support their approved programs. Agencies do not actually receive cash from the General Fund. Instead, they expend against an appropriation from the General Fund that is established for general government purposes up to the amount approved in their budget bill. Because General Fund monies can be used for any public purpose and the amount of the General Fund is limited, competition for these monies is keen.


2013–15 General Fund and Lottery Funds
Budgeted Expenditures

 

2013–15 General Fund and Lottery Funds  Budgeted Expenditures

 

Source: Department of Administrative Services, Chief Financial Office

In 1990, voters approved Ballot Measure 5. This reduced local property tax rates, which reduced local revenue and, in turn, shifted much of the responsibility for funding public schools to the state’s General Fund. The 2013–15 Legislatively Approved Budget had $8.6 billion, or 51.6 percent, of the General and Lottery Funds being spent on education.

 

General Fund revenues for the 2013–15 biennium are expected to total $15.7 billion. There was a balance carried over from the prior biennium of approximately $337.3 million, after a dedicated transfer of $136.9 million was made to the Rainy Day Fund. As of December 2014, the revenue forecast was $264.7 million above the “Close of Session” forecast, bringing total resources to $16.2 billion. The updated projected ending balance for 2013–15 is $260.2 million.

 

Lottery Fund
The Lottery Fund derives from the sale of lottery game tickets and from the Video Lottery. After prizes and lottery expenses are paid, revenue flows to the Economic Development Fund. A portion of the Lottery Fund is constitutionally dedicated to be spent in specific ways. The remainder is distributed at the discretion of the Legislature for economic development.


The 2013–15 Legislatively Approved Budget included $838.7 million of expenditures from the Lottery Fund, which is about 1.3 percent of the total budget. Dedicated spending accounted for about 38 percent of that amount, and debt service accounted for another 29 percent. The remainder was distributed to the State School Fund and a variety of other projects. Overall, about 60 percent of the Lottery Fund is dedicated to education.


Other Funds
The 2013–15 Legislatively Approved Budget included $27.6 billion in Other Funds for a 43.9 percent share of the total budget. Other Funds revenue generally refers to money collected by agencies in return for services. Legislative actions may allow an agency to levy taxes, provide services for a fee, license individuals or otherwise earn revenues to pay for programs. These Other Funds are often separate and distinct from monies collected for general government purposes (General Fund), and they may be based on statutory language, federal mandate and legal requirements or for specific business reasons. Some funds are “dedicated” in that the income and disbursements are limited by the Oregon Constitution or by another law. Other Funds may not be moved from one major program to another. Consequently, competition for these monies is limited.

 

2013–15 General Fund and Lottery Funds Expenditure

 

 

Source: Department of Administrative Services, Chief Financial Office

 

Federal Funds
The 2013–15 Legislatively Approved Budget included $18.2 billion in Federal Funds for a 29.3 percent share of the total budget. Federal Funds are monies received from the federal government.


State Budget Process
Oregon state agencies develop biennial budgets according to instructions provided by the Department of Administrative Services, Chief Financial Office. This budget development process begins in even-numbered years, well before the Legislative Assembly convenes in January of the odd-numbered years. Agencies are required to prepare and submit their budget requests for review by the Chief Financial Office by September 1. These budget requests consist of narrative descriptions of agency programs, completed forms, and reports from the Oregon Budget Information and Tracking System (ORBITS).

 

Agencies begin by building a current program budget, which is the amount of money needed in the new biennium to continue all existing programs. An agency may request changes to this budget through policy packages, which describe the purpose and the amount needed. Agencies also must identify program reductions and performance targets. For their 2013–15 budget requests, agencies began the process in March 2012 and submitted their completed requests by September 2012. An agency’s budget provides an outline of what an agency does, what it costs, and how many people are involved.

 

After they pass a review by the Governor’s Office and the Chief Financial Office, the budget requests become part of the Governor’s Recommended Budget. Because the governor has a legal obligation to submit a balanced budget for all of state government, the Governor’s Recommended Budget includes the proposed budgets for the Legislative Assembly and the Judicial Department. However, because of separation of power principles, the governor’s budget recommendations are advisory only for the other two branches, the Secretary of State’s Office and the State Treasurer’s Office. The governor presents the Recommended Budget to the Legislative Assembly when it convenes in January of odd-numbered years.

 

When the Legislative Assembly is in session, a subcommittee of the Joint Ways and Means Committee hears each agency’s budget. At the budget hearings, an agency presents its budget request and answers questions asked by members of the committee. Staff members from the Legislative Fiscal Office and the Chief Financial Office are also present at the budget hearings. Members of the public may attend the hearings and request an opportunity to testify. At the end of an agency’s budget hearings, the agency’s budget goes to the Joint Ways and Means Committee for a vote and then on to the full House and Senate for a vote. The agency’s budget may be amended at any point in this process, although changes typically occur during the subcommittee hearings. After passage by both houses, an agency’s budget becomes its Legislatively Adopted Budget for the biennium, and it goes into effect July 1 of odd-numbered years. If the Legislature makes changes to the adopted budget in special sessions or through the Emergency Board, it becomes known as the Legislatively Approved Budget.


2013–15 General Fund Revenue Forecast by Source

 

 

Source: Department of Administrative Services, Chief Financial Office

Kicker Provision
The Oregon Constitution requires the governor to provide an estimate of biennial General Fund revenues.
In 1979, the Legislature placed a condition on those revenue estimates that required excess funds to be “kicked back” to taxpayers if actual revenues exceeded estimated revenues by 2 percent or more.

 

For revenues from corporate income and excise taxes, the provision had required that the excess be returned to taxpayers who paid corporate income and excise taxes. However, this provision was amended in November 2012 by the citizen initiative process. Ballot Measure 85 required that this excess be retained in the General Fund to provide additional funding for public education of kindergarten through twelfth grade. This measure is applicable to biennial estimates on or after July 1, 2013.

 

For General Fund revenues from all other sources where the actual revenues exceed the estimated revenues by 2 percent or more, the excess is “kicked back” to taxpayers who paid personal income tax. Ballot Measure 85 did not affect this provision. These taxpayers receive the refund by December 1 of the year the biennium ends, which is an odd-numbered year. The refund is an identical proportion of each taxpayer’s personal income tax liability for the prior year.

 

During 2007–09, $1.1 billion was refunded to personal income tax payers; however, the Legislature required that $319.3 million be placed in the Oregon Rainy Day Fund, rather than refunding that excess to corporate income and excise tax payers.


Rainy Day Fund and Education Stability Fund
Established in 2007, the Oregon Rainy Day Fund is, essentially, a savings account for state government. Withdrawals can be made only if at least one of three requirements is met: a decline in statewide employment, a projected budgetary shortfall, or declaration of a state of emergency. In addition, at least three-fifths of the Senate and the House must approve the withdrawal. Given the economic conditions in 2009 and 2010, the fund needed to be used. The fund balance is expected to be $210.7 million at the end of the current biennium.

 

The Education Stability Fund (ESF) was created through a constitutional amendment approved by voters in 2002. The ESF receives 18 percent of lottery earnings deposited on a quarterly basis. The ESF has similar triggers as the Rainy Day Fund. Just as the Rainy Day Fund had been drawn down during the last economic downturn, the ESF was used to balance budgets in the 2009–11 and 2011–13 biennia. Based on the June 2014 revenue forecast, the fund is projected to have a balance of $177.7 million at the end of the 2013–15 biennium.


State Spending Limit
The state spending limit was first enacted by the 1979 Legislative Assembly. It limited the growth of General Fund appropriations to the growth of personal income in Oregon. The 2001 Legislative Assembly replaced this spending limit with one tying appropriations for a biennium to personal income for that biennium. The appropriations subject to this limit may not exceed 8 percent of projected personal income for the same biennium. The 2003–05 Legislatively Adopted Budget authorized an expenditure limit of 7.6 percent of projected personal income for the biennium based on the May 2003 revenue forecast. The limit may be exceeded if the governor declares an emergency and three-fifths of the members of both houses vote to exceed it.

 

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