SALEM -- Teachers should work some days without pay this spring to avoid early school closures, Gov. Ted Kulongoski said Thursday as he laid out his plan to keep the state solvent in the teeth of one of its worst recessions.

"The only way we're going to get out of this is if everybody contributes," Kulongoski said. As for teachers: "You do it without pay."

Highlights

State reserves and federal stimulus

Kulongoski expects about $1.4 billion in direct state budget aid from the federal stimulus bill and about $800 million from two state reserve accounts. Of that $2.2 billion, he would spend $400 million immediately; $900 million in 2009-2010; and $900 million in 2010-2011.



Pay freezes or rollbacks

Step increases for state executives and managers have been canceled. Those who already got raises this year will get a 5 percent pay cut. Non-union employees will take one to four unpaid furlough days, depending on pay level. The governor also takes a cut.

The governor said he would lead by example. He pledged to work up to four days for free over the next four months and cut his $93,600 annual salary by 5 percent, for a total decrease of about $5,680, sending the difference to the state school fund. He also said that he would freeze salaries of 5,100 state agency managers and other non-union workers as of March 1 and that he would rescind step increases he approved earlier this year.

Kulongoski had one more headline announcement for lawmakers: Don't even think about dipping into state reserve accounts to balance the current budget.

"I will veto any bill that attempts to raid those funds during this legislative session," Kulongoski said.

Pay freezes aside, his main strategy for shoring up the state budget is to spend a chunk of the state's share of federal stimulus money this year.

Leaders of Oregon's teachers union did not outright reject the governor's suggestion of unpaid teaching days but said each district would have to figure out a balance between using reserves and other cost-saving measures.

"If we ask school folks to work for free, it means we are going to affect the economy even more greatly," said Gail Rasmussen, vice president of the Oregon Education Association. "These folks, too, are part of the fabric of their communities."

Kulongoski's comments came one day after legislative budget leaders went public with a list of proposed cuts, including a reduction to public schools that would force many districts to close early by an average of five days.

There's a reason for the swirl of budget announcements. This morning, the state economist releases his revenue forecast for the remainder of the current budget, which runs through June, and for the next two years.

The news is expected to be bad. Most predictions are for an $800 million hole in the current general fund budget, which had been pegged at $15.1 billion. For the 2009-11 budget period, the expectation is $1 billion to $2 billion less than the $16 billion a year that lawmakers expected.

Kulongoski said lawmakers have a little more than a week to reach an agreement on balancing the current budget. If they don't, Kulongoski said, his only choice is to start making across- the-board cuts.

The governor acknowledged the political fireworks of cutting teacher pay or school days when the state is sitting on an estimated $800 million in two state savings accounts, one specifically for schools. The budget picture is helped but complicated by the promise of more than $1 billion from President Barack Obama's economic stimulus plan.

"This is not easy for me," Kulongoski said.

He outlined a plan to use about $400 million of the stimulus money this year and a combination of stimulus cash and reserve funds over the next two years.

Although his plan doesn't make schools whole this year, Kulongoski said it positions the state to weather what is expected to be an even harsher period.

"Oregon is a family," Kulongoski said, "and we have to be smart, prudent and responsible if we're going to keep our family whole through these trying times."

Reaction was mixed. Democratic leaders applauded the governor for what they said was a responsible approach to extreme conditions.

"Shared sacrifice must be the model," said House Majority Leader Mary Nolan, D-Portland.

But Republicans and advocates for the poor said the governor fell short. House Minority Leader Bruce Hanna, R-Roseburg, complimented Kulongoski for ordering state pay freezes but said he should also require all legislators, state office holders and agency directors to contribute to their health insurance premiums. And Hanna said reserve accounts should be tapped for schools.

"Unlike the governor, we will not support cutting a single school day this year," Hanna said. "Oregon must not break its promise to our kids."

Kulongoski, too, said he thinks most school districts can avoid early closures. The governor proposes spending about $70 million more of the federal stimulus this year than the budget offered by legislative leaders Wednesday. Some of that would help offset the need to end classes early.

Kulongoski said he is budgeting conservatively to avoid a recurrence of the last recession. In 2002, the year Kulongoski was elected to his first term, the Legislature held five special sessions to cut budgets as revenues fell short by more than $2 billion.

"That was a disaster," Kulongoski said. He said things could get even worse over the coming two years. If current economic trends continue, he said, "You are looking at the state losing one-third of its general fund."

Betsy Hammond of The Oregonian contributed to this story.



- Harry Esteve; harryesteve@oregonlive.com



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