1 of 8
Rick Bowmer, Associated Press
Majority Leader Diane Rosenbaum, D-Portland, speaks to reporters during a news conference Tuesday, Jan. 24, 2012, in Salem, Ore. Oregon Gov. John Kitzhaber and legislative leaders spoke on Tuesday to editors of Oregon newspapers that are members of The Associated Press.

SALEM, Ore. — Some jails and other local government work could be regionalized to help rural counties struggling with the expiration of federal timber payments, Gov. John Kitzhaber said Tuesday.

Finding new ways to help timber-dependent counties will be one of the key issues confronting state lawmakers during a one-month legislative session that begins Feb. 1, Kitzhaber and legislative leaders told Oregon newspaper editors in a meeting at the Capitol organized by The Associated Press.

"There's an opportunity here to revisit the relationship between the state and the counties," Kitzhaber said. "Maybe there are certain functions of local government that could be done on a more regional basis."

The federal government has paid millions of dollars to prop up local governments in counties hurt badly by the long decline in revenue from logging on federal land. The stopgap funds expired last year, and efforts to revive them have so far been unsuccessful.

The loss of federal funds has left some counties struggling to pay for the most basic services like jails and sheriff's deputies. Curry County on the South Coast is in the most dire straits, officials said, and could be insolvent by June. Kitzhaber said he wasn't optimistic that a politically polarized Congress would send more federal money.

Legislative leaders created a special committee specifically to look at the financial situation in timber-dependent counties. Officials have suggested giving desperate counties more flexibility to move around dollars that are earmarked for specific purposes like roads. Some have also said the counties, which have some of the state's lowest tax rates, will have to pay more.

Democratic co-Speaker Arnie Roblan of Coos Bay said some counties could go insolvent, and the state will have to figure out how to help.

"This is a serious issue, and it's going to continue to be a serious issue," Roblan said.

Some counties will probably have to raise their taxes, but a long-term solution requires that more trees be harvested from federal forestland, said Republican Co-Speaker Bruce Hanna of Roseburg.

February's session will be the first in an even-numbered year since a 2010 ballot measure that requires the Legislature to meet annually. The Constitution limits even-year sessions to 35 days, although legislative leaders have said they hope to wrap up in the 29 days of February.

Lawmakers said they expect budget discussions to dominate much of the session, along with education and health care proposals from Kitzhaber.

The latest projections indicate the state will take in $300 million less than lawmakers assumed when they built the budget, forcing tough budget cuts particularly in social services and the prisons.

Budget discussions have break down along ideological lines between legislators who want to shrink spending with significant cuts to state services and others who want to spend money from state savings accounts to protect services until the economy recuperates, said Sen. Ted Ferrioli, R-John Day, the minority leader.

"The challenge for all of us is to find the balance point," Ferrioli said.

Some Republicans have pushed for limits in medical malpractice awards to help lower the cost of health care. Kitzhaber said he's open to the idea and will hold a meeting at the governor's mansion with lawyers, doctors and others with an interest in the issue to try and reach a consensus. It would be too difficult to work out the details in the one-month lawmakers have, he said.