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Gloomy outlook for state economy

Adrop of almost $200 million in Oregon tax revenues could be a sign of troubles ahead for the state budget.

"I believe that the worst is yet to come," warned Rep. Dennis Richardson, the Central Point Republican who co-chaired the Legislature's Joint Ways and Means Committee. "I don't think we've bottomed out."

The decline in revenues, announced Friday, marks the ninth time out of the last 12 quarters that revenues came in less than the state economist's revenue projections, he said. The state Office of Economic Analysis noted the difference has been statistically small but has caused problems for state budget makers.

Richardson said the Joint Ways and Means Committee pushed through an ending fund balance of $460 million that was designed to offset any drop in revenues, so there will be no cuts in the state's budget at this point.

"I'm grateful the co-chairs agreed to a $460 million ending balance that we reserved in case the forecast didn't hold," he said.

Richardson predicted the state will likely see further reductions in revenues in December and February that could gobble up the remainder of the ending fund balance, forcing potential cuts in schools, health care and other state services.

He has long been a critic of the state forecasts, which typically predict more revenues that actually are generated.

Tina Kotek, House Democratic leader, said in a prepared statement that the downturn is the result of factors beyond the control of the state, including fallout from ongoing congressional debate over the deficit and the economic crisis facing Europe.

The state has remained fiscally prudent, she said, citing the ending fund balance that will help the state weather some of the revenue declines.

Despite the rough economy, Kotek said, the state continues to show signs of private-sector job growth.

Joshua Lehner, an economist with the state Office of Economic Analysis, said the state economist is predicting that the Oregon economy will continue its sluggish growth, but that sluggishness shouldn't result in significant erosions of the fund balance.

He said previous economic projections haven't hit the mark every time. While this causes problems for policy makers, the projections haven't been statistically far off, he said.

Since the beginning of the year, he said, the difference between forecasts and actual revenues has amounted to only 1.2 percent from December 2010 to September.

"It's not like the number has changed drastically in the last year," he said.

He said the difference between forecasts and revenues for the past nine month amounts to $178 million dollars. The current state budget is $13.6 billion.

The state economist said the state economy is still expanding, though slowly.

Global economic problems and other factors have the potential to slow the economy further in Oregon, Lehner warned.

Reach reporter Damian Mann at 541-776-4476, or email dmann@mailtribune.com.