Revenue Forecast Shows No Major Changes

Legislators received mixed news this morning about the state's economy. An uptick in jobs and personal income means the the state's revenue over the next two years should be higher than it is now. But state economists predicted the current budget cycle will close down slightly on June 30.

For 2009-11, the "total combined resources" budget, including general funds and lottery money, is down $40.2 million from the previous forecast in March. That deficit may be manageable without cutting budgets by absorbing it in the agency "ending balances."



For 2011-13, economists said "total combined resources" are up $128.8 million from the last forecast. The increased revenue will allow for some allocations back to budgets currently being developed by the Ways and Means Committee. Legislative leaders and the Governor have said any extra money will go, in order, to human services and juvenile corrections, two budget areas likely to take huge cuts.

Economists said Oregon's recovery will be slower than other recent bounce-backs. The slower pace will mean a more stable economy, but economists warned the risks of returning to recession are higher.

Economists said data from the first quarter of this year led them to increase the level of downside risk to the recovering economy. The Japanese earthquake and tsunami and conflict in the Middle East will affect supply chains and commodity prices in America for several months.

Small businesses and banks are still struggling, commodity prices are on the rise, and governments, which lag the private sector in economic downturns, are just now correcting course.

The state economist warned the legislators on the Senate and House Revenue Committees that if state revenue grows much faster than its current pace, it could trigger the kicker. Chief Economist Tom Potiowsky said the state economists must write an honest revenue forecast and can't fudge the numbers to prevent triggering the kicker. He told committee members the legislature has the most control over whether the kicker kicks. it's not clear whether the legislature will succeed in reforming the kicker this session.

What is clear is the relatively mild changes in the revenue forecast signals the start of the dash to finish line for this session, which will be, if legislative leaders have their way, no later than June 30.