Recession could punch $600 million hole in state budget

State economist says federal stimulus money might help create 'a very, very robust recovery'

The Portland Tribune, Jan 16, 2009, Updated Oct 30, 2009 (21 Reader comments)

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A nasty national recession could blast another big hole in Oregon’s current state budget, erasing between $300 million and $600 million in revenue from state programs.

State Economist Tom Potiowsky said Friday morning in Salem that things could get even worse in the proposed 2009-11 budget, with the lingering recession possibly double the bite out of state revenue in the two-year budget cycle.

“It could exceed $600 million in this biennium,” Potiowsky told the House Revenue Committee (and invited Senate Revenue Committee members) Friday morning during an update on what to expect from a potentially gloomy economic forecast coming in March. “It is possible that the forecast for the next biennium could be down $1 billion.”

That potential drop in revenue is on top of the $165.9 million expected to be lost in the 2007-09 budget, according to the economist's December forecast.

Potiowsky’s Friday morning update wasn’t really an official forecast of the potential for lost revenue. He was giving the House committee a heads-up on what it could expect when he releases his “real” forecast in two months.

“Because conditions are so rapidly changing, at historic paces, we felt the need to come forward and give you an idea of what to expect in the March forecast,” Potiowsky told committee members.

Difficult decisions ahead

Oregon is in the grip of a recession that so far has forced Gov. Ted Kulongoski to cut state spending even before legislators convened this week in Salem. The governor’s $15.8 billion 2009-11 general fund budget proposal also calls for reductions in some programs, while protecting education and promoting spending on priorities such as health care and economic development.

In November, Oregon’s unemployment rate hit 8.1 percent (7.9 percent for the Portland area), the highest it has been in five years. The state expects more jobs to be lost to the recession this year, before a slight upturn in early 2010, with the unemployment rate projected to hit about 10 percent.

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