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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Bits and Pieces from the Policy Trail

Here are some worthy tidbits — from a prediction of a recessionary echo to a call for merit-based appointments of judges, with thoughts about international trade, the Greek debt crisis and Occupy Portland thrown in for good measure.

• Tim Duy on Oregon's Economy: The Oregonian cites Duy's report on a small improvement in Oregon's economy in September, but not enough to allay fears of an echo recession. The way Duy, from the University of Oregon, put it: "...I become very cautious that, in fact, a recession is brewing beneath the surface." He said the European financial crisis could push Oregon and the United States over the recessionary cliff.
  
  That's not good news for legislators as they head to Salem for "legislative committee days" later this month, including a report to the Joint House and Senate Revenuye Committee on the next state revenue forecast. Duy's comments portend more bad news and that could mean cuts in K-12 education, higher education, cops and prisons and human services, including health care. The further downturn also could put a dent in Governor Kitzhaber's plans for health care and education reform, both of which will be up for consideration in the February 2012 legislative session and both of which rest, at least in part, on decisions about the state budget.

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