A legislative committee's proposed budget includes half a billion dollars more for schools next biennium than the governor's proposal and $200 million in savings from reforms to the Public Employees Retirement System.
The Joint Ways and Means Committee, co-chaired by Rep. Peter Buckley, an Ashland Democrat, and Sen. Richard Devlin, a Tualatin Democrat, has proposed a $6.75 billion biennial education budget, about $500 million higher than Gov. John Kitzhaber recommended.
The proposal includes tax increases that would come from limiting deductions for the wealthy.
The education figure forwarded by Buckley and Devlin includes $200 million they say schools would save if PERS reforms are enacted. Even if the reforms — which could face court challenges — are shot down, the budget package still adds up to $6.55 billion, which is about $800 million more than the current biennium funding for schools.
Buckley said his committee proposed limiting annual cost-of-living increases for retirees. Pensioners earning higher incomes would get an annual increase of less than 2 percent. A tax benefit for those living out of state also would be eliminated.
If the proposals are approved, the PERS board would be asked to implement certain increases over a longer period of time to reduce the immediate fiscal impact. The total PERS savings for all government programs would add up to $455 million.
Buckley said parts of the budget proposal will be difficult to achieve, but he thinks the Legislature generally agrees that a $6.75 billion budget is necessary for education.
"I think there is an understanding that there is a huge challenge to get through," he said. "But everybody agrees we have to get schools back to a positive level."
Republicans have suggested more than $1.8 billion in PERS reform, an amount that would face stiff opposition from unions and could potentially be shot down in the courts, Buckley said.
Instead, the co-chairs' budget offers more modest PERS reform that stands a better chance of approval, he said. But even their proposals could face court challenges.
"If it goes to the courts and it gets thrown out, it at least resolves the issue," Buckley said.
Republicans have opposed any efforts to raise taxes, but Buckley said the co-chairs' proposal actually follows former presidential candidate Mitt Romney's playbook.
Instead of raising tax rates, Romney suggested capping deductions, Buckley said. Under the co-chairs' plan, wealthy Oregonians' tax returns would be limited to a maximum of $40,000 in deductions, which would raise about $100 million for the state's coffers.
"Their contribution would go towards the effort to fund education," Buckley said.
The PERS debate is likely to be lively, with public employee unions expected to fight cutbacks, both at the Capitol and in court.
But proponents of the cuts say PERS' $16 billion unfunded liability will gobble up chunks of school and other government agency budgets for years to come, despite better returns on investments in the last two years.
Buckley said the efforts at PERS reform will buy the state time as it works through a difficult financial period.
Rep. Dennis Richardson, R-Central Point, said his party has proposed a $7.15 billion education budget based on a bolder effort at PERS reform.
"We need to reinvest in our children's education," he said.
Richardson was formerly one of the co-chairs of the Ways and Means Committee, but lost the position when Republicans became the minority party in the House.
He said he keeps in touch with Buckley, but would have opposed the budget offered by Democrats because it doesn't make a significant enough effort at PERS reform, includes tax increases and doesn't provide enough for education.
The Republican plan offers a number of strategies to tackle PERS. If those strategies survived court challenges, education would be a big beneficiary, Richardson said.
He said the Democratic plan offers only limited solutions for PERS reform that could easily be shot down, resulting in less money for schools.
"They're only offering PERS-lite," he said.
The Buckley-Devlin budget plan relies on the extension of a tax on hospitals to pay for health coverage for some low-income patients on Medicaid and on changes in sentencing laws that would send fewer offenders to prison.
They would reduce spending on economic development and government administration. In other areas — including human services, the judicial branch and transportation — state agencies would get more money than they have now but not enough to cover higher costs to maintain the same level of service.
In addition to cutting PERS more deeply, the Republican counter-proposal would spend far less on social safety-net programs and take on less debt for construction projects.
Reach reporter Damian Mann at 541-776-4476, or email firstname.lastname@example.org. The Associated Press contributed to this story.