Oregon lawmakers got an update on the state’s financial outlook Wednesday. State economists unveiled their latest revenue forecast at the capitol this morning. Joining to discuss the numbers was Salem reporter, Chris Lehman.
BH: So what do the latest numbers look like?
CL: In the short term, not so bad. In fact, state economist Mark McMullen predicts revenues will be about $81 million higher than his last forecast. That’s not enough of an increase to throw a celebratory parade, but neither does it mean lawmakers will have to jump into action to slash budgets.
BH: You said the short term isn’t so bad. I take it the news is different over the long term?
CL: Basically, McMullen says that while things are relatively stable right now, over the next few years the slow economic recovery will stagnate even more, thanks in large part to slow wage growth. And there’s still a weak demand for Oregon-made products overseas. So McMullen revised downward by several hundred million the amount of money he expects lawmakers will have on hand for the next budget cycle. And since the legislature will start working on that budget in about six months from now, that’s really starting to be the number that people around the capitol are focusing on.
In fact, both Democrats and Republicans pointed to that figure for the next budget cycle as reason for concern. Senate President, Democrat Peter Courtney, issued a statement saying, quote, “today’s forecast makes it clear the coming biennium will present a whole new set of challenges. Our economy and revenue are growing, but not strong enough to keep up with our commitments.”
And House Republican Co-Speaker Bruce Hanna called it “evidence of a bleak long term outlook”, saying that “Oregon remains stuck in an economic rut.”
BH: But there’s not much that lawmakers can do about that right now, is there?
CL: Not in the short term, no. One silver lining from today’s numbers is that there appears at this point that there will be enough money left over at the end of the current budget cycle to put some of it into the state’s Rainy Day fund. But at this morning’s meeting of the House and Senate Revenue Committees, several lawmakers nodded in agreement to this analysis from Portland economist Bill Conerly:
BC: “The fact of the matter is, we have voted for a tax structure that produces a highly variable revenue stream. And the challenge is, how do you live with a highly variable revenue stream and a desire for a stable service stream?”
Conerly of course is referring to Oregon’s reliance on income taxes to fund government services. Income taxes are notoriously susceptible to wild fluctuations during economic upturns and downturns. Yet the demand for government services such as education and public safety remains constant.