SALEM — Gov. Ted Kulongoski released his proposed state budget  today for the next two years. It's a budget he says will protect education from cuts despite the recession, but require deep cuts in some social service spending.

Kulongoski, saying that the economic meltdown requires hard choices, called for reducing the amount of money for programs to help seniors and the disabled as well as cuts in state child care subsidies.

At the same time, the Democratic governor said his two-year budget will avoid cuts in the K-12 budget and for higher education on grounds that the state will need a well-educated work force for when economic recovery does come to the state.

He says his budget will bring health care coverage to 95 percent of all Oregon children within three years.

His $16 billion budget also includes funding for a transportation package intended to create thousands of jobs immediately and expand the business energy tax credit to bring new green industries to the state.

“We don’t have the money to do everything that needs to be done in the next two years,” he said. “But today I propose a budget that invests in the future by investing in children, working families, businesses and economic opportunity during these challenging times.”

Kulongoski’s budget contains various tax increases that could generate a lot of debate when the 2009 Legislature convenes Jan. 12.

To help pay for an expansion of health care coverage, Kulongoski is proposing an increase in the cigarette tax of 60 cents per pack. Voters shot down a larger cigarette tax hike in November 2007 for children’s health insurance.

This time, Kulongoski wants to tax hospitals to the tune of $700 million over the next two years to pay for expanded coverage for children and low-income adults who currently aren’t covered.

Further, the governor is proposing a 2-cent-a-gallon gasoline tax hike and sharp increases in vehicle fees to help pay for his transportation package.

He’s also proposing an increase in Oregon’s corporate minimum tax to increase the amount of money available for a program that provides cash grants to college students.