Kitzhaber looks to close the deal on budget

SALEM — Ten months after Gov. John Kitzhaber published a budget that called for cuts in public employee benefits, he may be about to get his wish.

Lawmakers return to Salem today for a special session Kitzhaber called after his on-again off-again negotiations with legislative leaders finally bore fruit.

On the agenda is a hodge-podge of issues that the governor hopes will be the magic formula to get enough votes from legislators. It includes the pension cuts, along with a variety of tax changes.

And, surprising many, an agricultural bill to sweeten the pot for Republicans.

The governor and his allies have promised relief for long-struggling schools — more cash in the short term, and lower pension costs in the long term. But the plan has a line of politically connected critics urging lawmakers to vote no, and its success is not a foregone conclusion.

"This is really an imperative of our economy," Kitzhaber told a panel of lawmakers on Friday. Oregon can't boost high school and college graduation with the large classrooms and shortened school years that have become more common in many of the state's school districts, he said.

Nearly a year ago, Kitzhaber, a Democrat, proposed a state budget that relied on savings from scaling back pension benefits for government workers.

Democrats in the House and Senate, without Republican support, approved pension cuts that provided roughly half the savings Kitzhaber sought. The move angered public-employee unions, which are the biggest financial supporters for Democratic candidates.

Kitzhaber — backed by business groups, education advocates, local governments and Republican lawmakers — said he'd keep fighting for more. Tense negotiations went nowhere, one last-ditch effort died in the Senate and lawmakers adjourned in July without making any additional cuts to the Public Employees Retirement System.

The governor took his case around the state, hoping to apply pressure to Republican senators he thought he might persuade. He eventually changed tactics, calling legislative leaders to the governor's mansion for marathon negotiations that resulted in a compromise.

Their plan would reduce the annual inflation increases in pension checks for retired government workers. It would increase taxes on some businesses and individuals, a victory for Democrats. But it would also decrease taxes for other businesses, a victory for Republicans.

In a last-minute addition to gain support from Republicans, who are reluctant to back measures that increase taxes, it would prohibit cities and counties from regulating seeds and seed products — a bid to stop a growing movement by environmental groups to ban genetically modified crops.

A ballot measure already planned for a vote in Jackson County in May 2014 would be allowed to stand if voters approve.

Business and agricultural groups are enthusiastic. Although some businesses will end up paying more in taxes, they say, the pension savings and lower tax rate for small businesses make the package desirable on the whole.

"The small business tax cut is a very significant pro-growth tax policy for our small companies, and something that's hard to appreciate if you're not in business," said J.L. Wilson, a lobbyist for Associated Oregon Industries.

Labor unions and environmental groups are critical.

Unions say the plan would illegally take away retirement benefits promised to workers, and they point out that much of the additional revenue from tax increases will be eventually be overtaken by tax cuts for small businesses.

Environmental groups said environmental regulations have no place in an agreement that was supposed to be about pensions and taxes.

Kitzhaber appealed to Oregonians' desire to go against the grain and to do things a little bit better than everyone else.

"At this moment in time, people across the United States of America are desperate," Kitzhaber said. "They desperately need some sign, some indication, some reason to believe that their public institutions can reach beyond partisanship and gridlock and polarization and ideology and act in the larger public interest."

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