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Government Finance: State Government

2011-2013 Legislatively Adopted Budgeted Expenditures

 

2011-2013 Legislatively Adopted Budgeted Expenditures

Source: Department of Administrative Services, Budget and Management Division

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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 2011–13 biennium was $58.8 billion. This is 2.4 percent more than the 2009–11 total actual expenditures of $57.5 billion. The General and Lottery Funds portions of the 2011–13 budget amounted to $14.8 billion, which is $1.3 billion more than actual expenditures in 2009–11.

 

General Fund
The 2011–13 Legislatively Approved Budget included approximately $13.7 billion in the General Fund for a 23.3 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 percent of projected revenue for 2011–13 as of the June 2012 quarterly revenue forecast. Corporate income taxes are about 6 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 money 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.


2011-13 General Fund and Lottery Funds

Budgeted Expenditures

 

2011-13 General Fund and Lottery Funds  Budgeted Expenditures

 

Source: Department of Administrative Services, Budget and Management Division

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 2011–13 Legislatively Approved Budget had $7.4 billion, or 50 percent, of the General and Lottery Funds being spent on education.


General Fund revenues for the 2011–13 biennium are expected to total $14 billion. There was no balance carried over from the prior biennium. As of June 2012, the revenue forecast was $200 million below the “Close of Session” forecast, bringing total resources to $13.8 billion. The updated projected ending balance for 2011–13 is $95 million.

 

Lottery Fund
The Lottery Fund derives from the sale of lottery game tickets and from 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 2011–13 Legislatively Approved Budget included $1.1 billion of expenditures from the Lottery Fund, which is about 1.8 percent of the total budget. Dedicated spending accounted for about 38 percent of that amount, and debt service accounted for another 24 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 2011–13 Legislatively Approved Budget included $29.1 billion in Other Funds for a 49.5 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 state’s constitution or by another law (for example, the Highway Fund). Other Funds may not be moved from one major program to another. Consequently, competition for these monies is limited.

 

2011-2013 General Fund and Lottery Funds Expenditure

 

2011-2013 General Fund and Lottery Funds Expenditure

 

Source: Department of Administrative Services, Budget and Management Division

 

Federal Funds
The 2011–13 Legislatively Approved Budget included $14.9 billion in Federal Funds for a 25.4 percent share of the total budget. Federal Funds are monies received from the federal government. Federal Funds increased substantially in 2009–11 due to infusions of American Recovery and Reinvestment Act stimulus funds. As expected, these one-time funds decreased by $1.1 billion in the 2011–13 biennium. The Legislative Assembly may authorize receipt of Federal Funds for specific purposes. Federal Funds may be used to match General Fund dollars, used for specific programs, or passed through to local governments.


State Budget Process
Oregon state agencies develop biennial budgets according to instructions provided by the Department of Administrative Services, Budget and Management Division. 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 Budget and Management Division 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 2011–13 budget requests, agencies began in March 2010 and submitted their completed requests by September 2010. 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 Budget and Management Division, 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 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 Budget and Management Division 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 full 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.”


2011-2013 General Fund Revenue Forecast - By Source

 

2011-2013 General Fund Revenue Forecast - By Source

 

Source: Department of Administrative Services, Budget and Management Division

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 requires that this excess be retained in the General Fund to provide additional funding for public education, 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 plus a three-fifths vote of the members of both houses. Given the economic conditions in 2009 and 2010, the fund needed to be used. The fund balance is expected to be $61.7 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 2012 revenue forecast, the fund is projected to have a balance of $10.5 million at the end of the 2011–13 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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