Mixed Reaction to Latest Revenue Projection

Oregon's revenue projection slipped again by another $106 million, sparking mixed reactions by key legislators and adding suspense to the upcoming February 2012 legislative session.Members of the Joint House and Senate Revenue Committee sat around at the Capitol last week listening to what has been a customary quarterly episode — hearing projections that state general funds and lottery dollars are dropping as Oregon continues to tumble along near the bottom of a recession.

Acting State Economist Mark McMullen told legislators revenue had dropped another $106 million. That puts the total projected revenue loss since the end of the 2011 legislative session at about $300 million.

Reaction to the latest revenue forecast was mixed. Here is a sampler:

House Co-Speaker Arnie Roblan, D-Coos Bay:  The budget choices in February 2012 are even more difficult after today’s forecast, but our priority must be protecting the middle class while being mindful that further job losses will only cause additional economic harm. We must be creative, compassionate and smart to achieve outcomes that protect services Oregonians depend on in this tough budget environment.

Rep. Kevin Cameron, R-Salem, House Republican Leader: The economic forecast and October’s unemployment report shows that Oregon’s job growth remains weak. Private sector job creation is our only long-term solution for generating the tax revenues we need to sustain essential services. That’s why House Republicans will return to the legislature in February with proposals that will help generate new private sector jobs and put Oregonians back to work.

Senate President Peter Courtney, D-Keizer: Today’s forecast is disappointing, but not unexpected. The forecast was down in August and we expected this one to be down again. The key forecast for us will be the one we receive early in the February session, but we can’t wait until that point to act. It is critical that we urgently prepare to make adjustments to the budget in February — including a contingency for the worst-case scenario.

Perhaps the most interesting comment came from Rep. Dennis Richardson, R-Central Point, the House co-chair of the Joint Ways and Means Committee. In his newsletter, Richardson took credit for "holding back a reasonable ending balance" of $460 million, which, he contended, would be a hedge against needing to cut further in the February legislative session.

In words that caught the attention of legislators and lobbyists alike, Richardson said 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."

Another key Ways and Means leader, in a private conversation last week, was not so quick to pledge insulation for the general fund programs. He said the $460 ending balance represented the intent of the Ways and Means Committee more than it constituted a pot of money that could be used to avoid further cuts. He said he worried that some agencies have not followed the Ways and Means spending instructions and now may have to be told to take specific action to create the ending balance.

As the week ended, things were a bit murky on the budget front in Salem. For his part, Governor Kitzhaber instructed state agencies to keep positions vacant and hold back on "non-essential" spending as a prelude to what may be cuts in the range of about 3.5 per cent in February. That is far less than the 10+ per cent that some legislators, agencies and lobbyists had been expecting.

Richardson, known for his conservative instincts, put the uncertainty well when he included this sentence in his newsletter: So far, the $460 million ending balance has been sufficient to absorb the $305 million reduction in 2011-13’s first two revenue forecasts, but we are less than one-quarter the way through the 24-month biennium.

Beyond the revenue forecast, McMullen's report dealt with general economic conditions in Oregon. Using interesting words, he said corporate tax receipts had come to a "screeching halt," that the economic recovery has been on the "anemic side," and that there is about a 40 per cent chance of another recession in the state — all sobering realities for the governor and legislators as they walk the budget tightrope.


The author, CFM partner Dave Fiskum, has watched and participated in state budget deliberations for more than 30 years in Salem.  During that time, recessions have come and gone, but none has had the staying power of the current one.