Solid Recovery with No Momentum

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.

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Three Down – Only 26 to Go

As legislators headed home Friday to gear up for a second week in Salem, it was difficult for anyone accurately to describe the activities of the first three days because things moved much faster than normal at the Capitol — especially for opening days of a legislative session.

There was a crush of business as committees posted hearings on a large number of bills that probably will go nowhere. It prompted a lot of scurrying around, as lobbyists tried to figure what had a chance of passage and what didn't.

Three major "reforms" proposed by Governor Kitzhaber — education, health care and early learning — began moving down paths toward probable approval later this month. If you were betting, you would say the governor would win, but not without push-back by some Republicans who believe change is moving too fast for anyone to accommodate.

A so-called "budget deal" announced on the second day of the session last Thursday produced a bit of buzz, plus a couple headlines, but no one was sure about the real scope or impact of the deal. It turned out to be a "budget re-balance" plan, which means it represented an attempt by Joint Ways and Means Committee leaders to solve internal problems in the budget that had emerged in the last six months since adjournment last June.

The re-balance plan didn't address the current shortfall in state tax revenue, which has been pegged at about $305 million. Nor did the plan address any new revenue shortfall, which could be announced Wednesday when the state economist releases the latest revenue forecast at a joint meeting of the House and Senate Revenue Committees. It also prompted criticism of the Ways and Means co-chairs who took some of a recent Phillip Morris tobacco tax court-ordered payment — about $56 million — and applied most of it to the general budget deficit, not, as proposed, to funding for crime victims. Such is the stuff of Ways and Means.  Money ostensibly for one purpose is swept for another purpose.

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Murky Jargon Blurs Budget Clarity

A headline in The Oregonian several weeks ago made the point that murky words get in the way of public understanding of health care reform issues. An Oregonian editorial last weekend urged Governor Kitzhaber to do a better job of sketching the details of his vision of education and health care reform. 

Murkiness also exists when it comes to general budget issues as legislators head to their first official annual session two weeks from now.

Consider these facts/perceptions about the budget:

         *  The state economist says the general fund is down by $305 million from the close of the 2011 legislative session. On a total general fund budget of more than $14 billion for a biennium, that is a rounding factor. Still, perceptions exist that cuts to K-12, higher education, cops and prisons and social services will be in the offing during the February session.

         *  One key legislator on the Joint Ways and Means Human Services Subcommittee was spending time in his office several weeks ago preparing a cut list of about $500 million. Those cuts, if enacted, would exceed the total $305 million revenue drop projected so far. 

         *  Rep. Dennis Richardson, R-Central Point, House co-chair of the Joint Ways and Means Committee, took credit earlier this fall for holding back a "reasonable ending balance of $460 million when the committee he co-chairs approved the 2011-13 budget." In his on-line newsletter, he added this noteworthy quote:  "...the good news is that having withstood the political pressure to spend every dollar and by retaining the $460 million ending balance, none of the $305 million of reduced revenue will be taken from the budgets for public safety, human services or education."

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