From the Statesman Journal
Written by
Peter Wong
For Oregonians, the state's latest economic and revenue forecast is likely to mean no more cuts in state services and aid to public schools for the rest of the two-year budget ending June 30.But that same forecast, which lawmakers heard Tuesday, also projects $100 million less than previously for the next two-year cycle, which starts July 1. It will complicate lawmakers' task of dealing with Gov. John Kitzhaber's budget of $14.8 billion, which left $200 million unspent but also cuts aid to schools and health care for low-income Oregonians.
"Nothing in this forecast changes the rising cost of health care or corrections, and no improvement in state revenue will be adequate to pay for our current system of education," Kitzhaber said in a statement. "Now is the right time to integrate and streamline state services like health care and education to deliver better outcomes and reduce costs."
State Economist Tom Potiowsky said Oregon's economy is continuing to emerge from a deep downturn, bringing tax collections along with it. "We know it's coming back," he said at a joint meeting of the House and Senate revenue committees. "But it's going to come back slowly."
Potiowsky said housing, which has led the way out of previous Oregon recessions, is unlikely to do so this time. He said the more likely sectors for job growth are professional and business services, health care, computers and electronic products, and retail sales.
Lawmakers have another forecast May 12. But they plan to use Tuesday's forecast as a basis to start working on the 2011-13 budget. "If the revenue picture improves in the May forecast the way some economists think it might, we can make adjustments based on the priorities of Oregonians," said Senate President Peter Courtney, D-Salem.
Courtney has said he wants the three co-leaders of the Legislature's joint budget committee to come up with a framework for the next budget by the end of March. Then committee members will conduct several public meetings throughout the state in April, as they have done for the past several sessions.
Courtney was among several Democrats, including Rep. Phil Barnhart of Eugene, who said there are optimistic economic signs.
"Economists always guess too high when the economy is going down and too low when the economy is going up," said Barnhart, a co-chairman of the House Revenue Committee. "I think we're going to have more jobs developing in the future than they expect, and we're going to do a slightly better job of paying for schools, health care and public safety than we thought possible a few months ago."
But Potiowsky said the rebound this time is unlikely to be as robust as in previous recoveries.
The current-budget forecast for the general fund, which consists largely of personal and corporate income taxes, and state lottery proceeds essentially was unchanged from the previous forecast Nov. 19. That earlier forecast broke a pattern of nine consecutive forecasts with declining tax collections.
The projected amount from those sources for the next two years is slightly less than $15 billion, which is more than the current budget of $13.6 billion. But it is far short of meeting current obligations, and lawmakers are not counting on any renewal of $1.3 billion in federal aid that helped cushion potential cuts in the past two years.
"Today's news is a reminder of the difficult budget decisions facing the Legislature," said co-House Speakers Bruce Hanna, R-Roseburg, and Arnie Roblan, D-Coos Bay. "While we must focus on balancing the budget, we cannot lose sight of the need for economic growth. While the forecast demonstrates that we are in the beginning stages of recovery, more needs to be done to create jobs and stimulate the economy."
Lawmakers still have to make adjustments to the current budget, which has to be balanced by June 30. They are looking to make those adjustments by March 1 based on the numbers in Tuesday's forecast. The adjustments were prompted by previous forecasts that dropped by $1 billion below the original 2009-11 budget adopted in June 2009.
"In this cycle, good news means we are not going down," said Rep. Vicki Berger, R-Salem, a co-chairwoman of the House Revenue Committee. "Disaster could still happen, but it gets less and less likely." The forecasted drop for the 2011-13 budget results from a pending reconnection of Oregon tax law with the federal tax code. Oregon generally follows federal definitions of income.
Lawmakers could choose not to connect, as they did in 2009, but this time they would have to do so by 60 percent majorities because a disconnection would be considered a revenue-raising measure. Their 2009 vote required only simple majorities because lawmakers acted before Congress enacted federal tax breaks in the economic-stimulus program.
Lawmakers are considering a separate bill to allow Oregonians to take advantage of some 2010 federal tax breaks.
Peter Courtney
Senate President Peter Courtney said Tuesday that positive signs in seven key economic indicators in Oregon have bolstered his belief that lawmakers should break with tradition and begin to build the 2011-13 biennial budget on the state revenue forecast presented today.
"There are signs that our economy is on the rebound. We still have work to do, but after receiving today's forecast and talking to economists it looks like we're really on our way back," Courtney said, "This forecast gives us the last piece of the puzzle we need to complete the rebalance for the current biennium. It will also provide the target for building the 2011-13 co-chairs budget."
Courtney said he has already asked Joint Ways and Means Committee Co-Chair Richard Devlin, the Senate's chief budget writer, to use the February forecast to create a co-chairs' budget before the end of March. Tuesday's forecast and data released in the University of Oregon Economic Index earlier this month convinced the president that he and other legislative leaders are on the right track.
Traditionally, the co-chairs' budget is not released until later in the session. For example, during the 2009 session, the co-chairs' budget was released May 18.
"The co-chairs' budget is never the final budget, but it's the first public document that shows where the legislature is headed in the appropriations process," Courtney said. "Creating a co-chairs' budget in March will enhance the public process we go through during Ways and Means hearings we will hold across the state in April."
Courtney said he talked 11 days ago with University of Oregon Economics Professor Dr. Tim Duy, author of the UO Economic Index. Duy told the Senate president that all seven economic factors included in the index showed improvement in December.
According to the index:
— The number of residential building permits issued in Oregon increased;
— Initial unemployment claims dropped to their lowest level since April 2008;
— Temporary hiring, which indicates a possible expansion of the workforce, increased;
— Consumer confidence rose nationally;
— Orders for capital goods increased in the U.S.;
— Oregon's weight-distance tax collections increased, indicating an up-tick in trucking traffic in the state;
— And the spread between long-term and short-term interest rates increased.
"I'm not an economist, but it doesn't take a PhD to know — after what our economy has been through — that having all seven indicators show improvement in the same month is a pretty good sign," Courtney said.
The president also pointed out that Oregon has seen four straight months of job growth in the private sector.
With the passage of Measure 71 in November, Oregon lawmakers are under Constitutional time limits to complete their work for the first time in state history. Getting a jump on the budgeting process could be crucial to meeting the new deadlines, Courtney said.
"If the revenue picture improves in the May forecast the way some economists think it might, we can make adjustments based on the priorities of Oregonians," Courtney said.
"There are signs that our economy is on the rebound. We still have work to do, but after receiving today's forecast and talking to economists it looks like we're really on our way back," Courtney said, "This forecast gives us the last piece of the puzzle we need to complete the rebalance for the current biennium. It will also provide the target for building the 2011-13 co-chairs budget."
Courtney said he has already asked Joint Ways and Means Committee Co-Chair Richard Devlin, the Senate's chief budget writer, to use the February forecast to create a co-chairs' budget before the end of March. Tuesday's forecast and data released in the University of Oregon Economic Index earlier this month convinced the president that he and other legislative leaders are on the right track.
Traditionally, the co-chairs' budget is not released until later in the session. For example, during the 2009 session, the co-chairs' budget was released May 18.
"The co-chairs' budget is never the final budget, but it's the first public document that shows where the legislature is headed in the appropriations process," Courtney said. "Creating a co-chairs' budget in March will enhance the public process we go through during Ways and Means hearings we will hold across the state in April."
Courtney said he talked 11 days ago with University of Oregon Economics Professor Dr. Tim Duy, author of the UO Economic Index. Duy told the Senate president that all seven economic factors included in the index showed improvement in December.
According to the index:
— The number of residential building permits issued in Oregon increased;
— Initial unemployment claims dropped to their lowest level since April 2008;
— Temporary hiring, which indicates a possible expansion of the workforce, increased;
— Consumer confidence rose nationally;
— Orders for capital goods increased in the U.S.;
— Oregon's weight-distance tax collections increased, indicating an up-tick in trucking traffic in the state;
— And the spread between long-term and short-term interest rates increased.
"I'm not an economist, but it doesn't take a PhD to know — after what our economy has been through — that having all seven indicators show improvement in the same month is a pretty good sign," Courtney said.
The president also pointed out that Oregon has seen four straight months of job growth in the private sector.
With the passage of Measure 71 in November, Oregon lawmakers are under Constitutional time limits to complete their work for the first time in state history. Getting a jump on the budgeting process could be crucial to meeting the new deadlines, Courtney said.
"If the revenue picture improves in the May forecast the way some economists think it might, we can make adjustments based on the priorities of Oregonians," Courtney said.
House Democrats
Release by House Democratic office on Tuesday's economic/revenue forecast:Oregon House Democrats said today's quarterly revenue forecast showed an improving Oregon economy with a 2011-13 revenue forecast that is down only due to extension of a federal tax break costing the state some $110 million next biennium.
The good news, according to House Democratic Leader Dave Hunt, is the $3.3 million increase this biennium (2009-11), allowing legislative budget writers to conclude this two-year budget cycle without having to borrow money and with meeting the obligation to schools agreed to last fall.
"Unlike 2003, when the Legislature unwisely borrowed money to get us to the end of the budget cycle, our fiscally conservative approach has both protected us from borrowing and allowed us to continue providing critical services like education, health care and aid to struggling families. That responsible approach has gotten us through two of the most difficult budget years in the history of Oregon," said Hunt, D-Gladstone. "Now our challenge is to balance a significantly reduced 2011-13 budget."
Revenue Co-Chair Phil Barnhart, D-Eugene, agreed that the forecast shows slow but steady growth for the 2011-13 biennium: "Corporate profits in Oregon continue to be strong and Oregonians are getting back to work. We need to continue the efforts to help create jobs and continue making wise investments in our future that both create short-term growth and improve the long-term health of Oregon."
Barnhart pointed to the 2009 passage of the Jobs and Transportation Act and the Healthy Kids initiative as two programs that provided short and long term growth opportunities for Oregon.
Revenue Committee Member Sara Gelser, D-Corvallis, said the balance necessary to protect schools and vulnerable Oregonians through the 2011-13 budget is going to be difficult at a time when corporate profits are strong but schools are squeezed.
"We've got over 100 tax expenditure bills already introduced this session. Every dollar in tax credits means a dollar we don't have for schools, health care and vulnerable Oregonians," said Gelser, co-chair of the House Education Committee. "We've got to pay as we go, and that means setting strong budget priorities."
Rep. Jules Bailey said the federal tax change that allows businesses to speed up depreciation of capital equipment disguise the growing strength of Oregon's economy.
"We've got tremendous challenges ahead of us, but our economy is finally starting to grow, people are getting back to work and we're going to make it through the 09-11 biennium without having to borrow," said Bailey, D-Portland. "We've weathered the worst of this global recession and we've got to continue on a steady course that protects vulnerable Oregonians and continues to spur economic recovery."
House Republicans
"Oregon's economic and revenue forecast shows weak job growth and declining business tax revenue. Despite all the optimism inside the Capitol, Oregonians aren't satisfied with a jobless recovery. It's the Legislature's responsibility to find new policies to strengthen our private sector and help create jobs."The House Republicans' 2011 Jobs and Reform Agenda offers our ideas to promote job growth and a better business environment. Our proposals provide small businesses new incentives to hire unemployed Oregonians, as well as to make Oregon more competitive in a global economy.
"Contrary to the previous forecast, state economists are no longer expecting a corporate kicker. This is a reminder that we shouldn't rely on the kicker to replenish Oregon's rainy-day fund. The state's constitutional kicker law didn't create Oregon's budget crisis, and repealing or weakening unforeseen kicker refunds won't deliver long-term stability. To rebuild the Rainy Day Fund, the Legislature must set money aside and reform the budgeting process to make state spending more sustainable."
Gov. Kitzhaber
Statement of Gov. John Kitzhaber on Tuesday's economic/revenue forecast:
"Today's revenue forecast is consistent with the analysis we used in creating my budget. The worst is over, but Oregon's recovery will take time."Nothing in this forecast changes the rising cost of health care or corrections, and no improvement in state revenue will be adequate to pay for our current system of education. Now is the right time to integrate and streamline state services like health care and education to deliver better outcomes and reduce costs.
"I once again call for the Ways and Means co-chairs to budget to this forecast and release their budget as soon as possible. I look forward to working with the Legislature to ensure we budget to deliver the services Oregonians need and deserve in the most efficient, effective way possible."
Co-speakers
"Today's forecast provides more certainty around the funds available to complete the 2009-11 biennium. The Legislature can now finalize a reconciliation of the 2009-11 budget in order to keep programs and services whole for the remainder of the biennium, a process we plan to have completed by the end of February."Following that, we are eager to move forward with crafting a responsible, reasonable and adequate budget for the 2011-13 biennium. We knew heading into it that this session would largely focus on establishing a budget; understanding what resources we will have is an important first step. Both of us are committed to managing a process that gets this difficult task done, and gets it done within our new constitutional time limits.
"Today's news is a reminder of the difficult budget decisions facing the Legislature. While we must focus on balancing the budget, we cannot lose sight of the need for economic growth. While the forecast demonstrates that we are in the beginning stages of recovery, more needs to be done to create jobs and stimulate the economy."
pwong@StatesmanJournal.com or (503) 399-6745 or follow at twitter.com/capitolwong
Oregon Economic Forecast Summary - March 2011
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