Solid Recovery with No Momentum

A weak housing market and job losses in non-metropolitan parts of the state have retarded Oregon's economic recovery.State revenues were up slightly, but the latest quarterly economic forecast released today in Salem shows Oregon's economy is headed upward at a frustratingly slow pace. The state economist said Oregon's recovery is on solid footing, but lacks momentum.

Increased revenues of $116 million were welcome news to nervous legislators meeting at the Capitol, but most of the increase came from a legal settlement, not economic growth. Personal income tax collections were actually down $22 million, while corporate tax receipts grew a slim $.2 million from the previous quarterly forecast. Lottery proceeds also registered a gain.

Those meager results were framed by news that the Kitzhaber administration is lopping off 190 positions in various state agencies. Many of the eliminated positions are vacant, but there will be some layoffs. In their February session, lawmakers directed the governor to identify $28 million in savings by reducing the number of managers, consultants and public relations positions.

While no one is happy with the rate of growth, the state's economy at least isn't going in reverse. Oregon's unemployment stands at 8.6 percent, higher than the national average of 8.2 percent, but a significant drop from the 9.6 percent rate a year ago. Portland's jobless rate has continued to inch down to 7.9 percent.

One bright spot in the economic forecast was the continued rise in exports from Oregon, but even that good news cast a shadow. Exports grew in 2011 by 3.5 percent, just a fraction of the 18.6 percent growth rate seen in 2010.

The not-much-changed revenue forecast probably means lawmakers are off the hook, at least for now, to make deeper spending cuts. However, legislative budget-writers are bracing for more cuts down the line as costs continue to rise while revenues remain stagnant. Rep. Dennis Richardson, R-Central Point, said the forecast is another reminder state spending needs to be reduced to fit within anticipated revenues.

Spending cuts so far haven't been as brutal as in other states. But Michael Jordan, the state's chief operating officer, said eliminating positions will affect some state agency service levels, including in prisons. Among the 190 jobs being eliminated are 24 prison lieutenants, who are considered management but who help maintain security. Their workload will be shifted downward, Jordan said, possibly resulting in more overtime for prison guards.

A total of 63 positions will be trimmed in the Department of Human Services. Most of those are vacant positions that won't be filled.

Shrinking state payrolls helps avoid a budget deficit, but adds more weight to the economic recovery.