Smith sees state tax hike near

State Rep. Greg Smith said the passage of a 1 percent state income hike is in the works, with or without rural Oregon's support, but opposition could hurt Eastern Oregon. "What should I do," he asked in Enterprise Saturday.

With the pending closure of the Boise Cascade mill in La Grande as a backdrop, state Rep. Greg Smith said "Oregon's economy is in the tank" and still on the way down.

"You'll all probably hate me when I'm finished," said the state legislator at the beginning of a crash course in the complexities of the Oregon state budget to about 30 Wallowa County residents at the Community Connection center in Enterprise Saturday morning.

He said the only way to balance the state budget will be to make a deep cut of 20 percent of the general fund or - as now seems to be inevitable, approve a two-year hike of 1 percent to Oregon income taxes.

The elimination of Eastern Oregon University and deep cuts in the Extension Service, payments to rural critical care hospitals and other programs important to rural Oregon are the alternatives, Smith said during a visit to Enterprise Saturday morning, May 2.

Smith gave about 30 Wallowa County residents a crash course in the complexity of the state budget at the Community Connection Center. "I'll try my best not to be partisan, and just present the facts," he said. "One fact is that we can't touch a large pot of state money because it is very dedicated."

Using a series of pie charts in a hour-plus long power point presentation, the representative drove home that three-fourths of the state budget is pretty much off-limits to legislative cuts, because they consist of federal money funneled through the state, funds financed by fees for target purposes (for example, roads funded by the gas tax) and lottery money.

Of the $48.4 billion in the current two-year general fund budget, which ends at the end of June, only $14 billion in the general fund are subject to the legislative budget axe.

Because of the recession and the growing unemployment rate in Oregon, a state heavily dependent on income tax, it has been determined that there will be a shortfall of at least $3 billion, and more than likely at least $4 billion.

Smith said a combination of sources, including federal stimulus money and hikes in some fees, are expected to bring the deficit down to about $1.7 billion. "That's huge, that's huge."

One by one, Smith went through the difficulties of cutting the budget enough to fill the huge gap in the areas in which the legislature has the ability to cut and some of the way it is handcuffed.For example, the state became every county's school board when mostly urban county voters approved Measure 5, severely limiting local districts ability to fund their own schools. Mandatory sentencing has increased the prison population and the need for more prisons.

The solution to the budget shortfall that Smith is certain will be approved is a 1 percent two-year income tax increase for all Oregonians.

"While they don't need me, they want my support," Smith said of his dilemma, as a conservative Republican legislator in a rural district of Oregon. He is also the ranking member of the state Ways and Means Committee. "The political fall out is huge. They (the Democratic majority) don't have to have our support, but if they don't get it they won't support us."

When asked if he feels the state tax increase is needed, Smith said, "I know this budget, and the state is broke. We have to cut expenses by 20 percent or have new revenue."

He said the state must have its biennial budget balanced by June 30, and feels that while there will be a lot of political debate about the budget crisis before that time, in the end the two-year income hike will be approved.

"When I vote, I'm doing it with Wallowa County and rural Oregon in mind," he said. "I want to be sure I'm doing what you want."

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