[ODF_Private_Forests] Message from State Forester Marvin Brown

[WEEKS Kevin]

________________________________________
From: BROWN Marvin D
Sent: Wednesday, February 25, 2009 2:06 PM


Hi everyone.

You’ve probably seen the most recent revenue forecast by now and, no doubt, there’s been much discussion about how the Department of Forestry will respond.

Before I provide the latest information on what we are doing, I’d like to offer that, despite all of this, the best thing we can all do right now is stay focused on our responsibilities.  We have much to get done on a daily basis and, ultimately, achieving those things is what will bring us the greatest satisfaction.

I know it’s difficult not to worry and speculate.  But, I’ve been in that situation before and I know that staying constructive, positive and productive is the best way to maintain a healthy frame of mind.

Temporary Coordinator to Align Grant Development and Reduction Planning

As we try to make the best managerial decisions during these current times, we find ourselves in a fairly unique situation.

On the one hand, we have to plan for significant budget reductions.  As we describe below, our revenue outlook is serious and at this point there are no choices other than cutbacks to deal with the problem.

At the same time, we face a unique opportunity to add substantial dollars for special projects under the federal stimulus payments.

Both of these endeavors are complicated and filled with uncertainty, and there needs to be coordination between the two so that we can create the best possible outcomes for the agency and our employees.

For these reasons I’ve asked Tom Savage to take on a special full-time assignment for the next six months working under my direction at the executive level to provide this overall coordination.  Having this central focal point will allow the Division Chiefs and Area Directors to spend more time concentrating on their areas without having to spend so much time assuring good cross-communications.

Tom will be centralizing all of the grant activity under one group of folks so that we are identifying every opportunity.  He will be staying in close contact with grant sources so that we put forward the most competitive proposals.

We will be asking him to also make sure that we have adequate accountability and reporting in place.  And he will be ensuring that we are structured appropriately in the field to carry out the work and to take full advantage of potential partnerships with other agencies and entities.

At the same time, he will be working very closely with the budget reduction planning group.  I will be looking to him to bring forward very strategic recommendations as to how we can direct the granting function to serve our greatest needs.  And I will also be looking to him to advise us on how reduction planning might be better implemented to align with granting opportunities.

Obviously this work can bring tremendous value to the agency at a critical juncture and I really appreciate Tom’s willingness to take this on.

Forecast shows dimmer outlook for 2007-09, even more serious problems beyond

For the 2007-09 budget period, ending June 30, the forecast indicated a gap of $855 million – at the larger end of the range provided in last December’s forecast – in General Fund revenue (primarily income tax dollars) across state government. This amounts to about 6.2 percent of the state’s total, two-year General Fund budget of $13.8 billion, but is closer to 25 percent of the dollars actually remaining to be spent between now and June 30.

The outlook for the 2009-2011 period, beginning July 1, has grown much more serious. Predicted revenues for that period dropped an additional $1.7 billion from the December forecast. The new forecast indicates that the state will be $2.9 billion, about 17 percent, short of revenue necessary to continue current services into 2009-2011. Clearly, the Legislature faces difficult choices about allocating limited dollars across a broad range of public needs.

What it means for ODF: the 2007-09 budget

Given the short time remaining to balance the current biennium’s budget, this is the immediate focus for the Governor and Legislature. Friday’s forecast provided information that legislators can use to produce a reduction plan, and we may see this agreement within a week or two.

The Legislature’s budget leaders have already released a proposed plan which, for ODF, uses the plan we originally proposed which includes savings we have accumulated, as well as specific reductions in the Fire and Private Forests programs, as we have discussed in past messages.

Those measures in the proposed plan for now do not include layoffs. However, we can’t say with certainty yet that the Legislature’s final plan for balancing the 2007-2009 budget will not require layoffs at ODF.  But the full plan should emerge very soon, with hearings and a possible Ways and Means Committee vote this week, and we’ll continue to keep everyone updated.

The 2009-2011 outlook: likely reductions across ODF

The need to reduce resources will affect all parts of our agency – our operating programs as well as the administrative services that support them.

We won’t know exactly what our 2009-2011 budget will look like until the Legislature completes its work about mid-year. But it appears that cuts in the neighborhood of the 20 percent reduction plans we have discussed previously for Private Forests and Fire may be necessary (details on the Web at http://egov.oregon.gov/ODF/docs/2009_11_Red_Summary.pdf )

Those plans, which also consider the effect of lost matching funds, mean reductions of about 35 percent of the Private Forests budget and 10 percent of the Fire budget. It does appear, however, that we’ll have latitude to change the specifics of those plans as we work toward reduction targets with the legislature. This will give us some additional flexibility compared to where we starting with the planning for 2009-11 back in September of last year.

At the same time, the State Forests Division is planning substantial reductions in response to falling timber sale revenues (details below).

And as we’ve shared before, reductions in our three operating programs will in turn lead to corresponding and relational cuts in our administrative support programs.

Reduction planning continues in State Forests Division

Apart from the General Fund issues, we’re also seeing sharp drops, due to lack of demand for wood products, in the timber sale revenues that fund State Forests.  These declines in revenues are important for both the near term starting now and over the next twelve months, and the longer term as we have to consider the length of timber sale contracts sold at lower stumpage prices.  Also, because State Forest revenue is such a large component of the Department’s overall cash flow, we must consider the impacts of timber sale revenue declines on the ability of the agency to maintain a positive cash balance from month-to-month.

State Forests Division leaders and Area Directors met recently with budget units to begin an ongoing reduction planning effort for the 2010 fiscal year.

The first step was to develop what we are calling a base-level budget, based on the implementation plan priorities spelled out in the approved forest management plans. The division is working now to consolidate the information for a statewide review, which will occur on Thursday, February 26.

During that review, division leaders and Area Directors will work on key questions, including:

-- What further cost-savings can the division make in 2009 that will provide some additional relief now and in planning for fiscal year 2010 and beyond?

-- What level of expenditures can the division sustain for 2010, given the revenue we forecast will be available?

-- What time frames would be necessary to get us to those expenditure levels?

After Thursday’s review, there will be more specific communication with all State Forests employees about the range of reductions that we must consider for this fiscal year and fiscal year 2010.

Uncertainty and unknowns will remain, as is the case with the entire department’s budget situation. Given provisions of the Governor’s 2009-2011 Recommended Budget that transfer some timber sale revenues to other uses within the Department, the division will not be able to make final decisions until the Legislature approves an ODF budget in mid-2009.

In the meantime, planning efforts will continue to identify reductions that are needed to keep costs in line with expected revenues under various scenarios. Our planning will ensure that, when a decision is needed for the fiscal 2010 budget, it will be based on the most up-to-date information available. The planning will help narrow the range of potential budget and staffing levels for 2010, and we’ll share the results of the various scenarios once they’re available.

Bringing the pieces together through agency-wide planning

Our budget outlook is complex, with many aspects and considerable uncertainty. We must deal in a coordinated fashion with many things – including the immediate outlook for the remainder of this biennium; the 2009-2011 picture, which depends on legislative action that is not expected for several months, and the availability of federal stimulus dollars.

Here are a few things that will be happening in the near future:

-- To best manage diminishing resources, agency leaders will continue to monitor, on a weekly basis, vacancies, work needs, and specific positions in which funding is at risk.

-- A newly formed team, now headed by Tom Savage, will continue its work on federal stimulus opportunities, ensuring that we put ourselves in the best possible position to receive and use funds that are available.  Keep in mind that federal stimulus money in the forestry area is intended primarily for projects on the ground rather than to help with agency budgets, although we expect that it will sustain and guide the work of several employees.

-- A message will be coming soon with guidance to all managers in reducing administrative costs across the agency.

-- We’ll continue to update you as information becomes available.

We hope you find this information helpful, and encourage you to ask your supervisor, or any of us, if you have questions. Again, thank you for all you do for Oregonians, particularly in difficult and uncertain times such as these.

Marvin Brown
State Forester