After they heard Thursday that Oregons state coffers are projected to take another $107 million downturn in the current two-year budget cycle, Gov. John Kitzhaber and legislative leaders said they are preparing additional spending cuts if the next forecast in February is down.
The latest drop, which interim State Economist Mark McMullen reported Thursday, is the second since lawmakers approved a $15 billion discretionary budget for the two years that started July 1.
The budget included a $460 million cushion, but the two drops add up to $306 million, claiming virtually all of the $310 million lawmakers withheld from agency budgets as a reserve. All that remains is a regular ending balance of $150 million.
Although Thursdays report signaled no immediate cuts, lawmakers were looking forward to February.
I am working with the bipartisan legislative leadership to jointly produce a budget framework for the upcoming short February session, Kitzhaber said in a statement. In the meantime, it is absolutely essential that we continue our efforts to get the private sector economy going, and Im employing every tool available to get Oregonians back to work.
McMullen said that although Oregons economy has added an average of 2,000 jobs per month since it hit bottom in mid-2009, thats still less than the 3,500 jobs per month generated in previous recoveries. The statewide unemployment rate for October was 9.5 percent.
Excluding government and housing-related jobs, McMullen said, other private-sector jobs are being added at a normal rate. But he also said he is not forecasting another downturn.
The weak expansion we are going through is still holding up, he said at a presentation to the House and Senate revenue committees. We are having a slow recovery but its a recovery.
Strength in collections of personal income taxes is more than making up for weakness in corporate income-tax collections and lottery transfers, he added, although the amounts are less than were projected back when lawmakers put together the budget last spring.
Rep. Vicki Berger, R-Salem, said afterward there were positive economic signs for Oregon in a negative revenue forecast for state coffers.
But we are at the mercy of the bigger economy, said Berger, co-chairwoman of the House Revenue Committee. McMullen spent a lot of time on the European (debt) situation for a reason; the economists can see where it could lead. So theres uncertainty, and it led to less good news than what we would have gotten.
Lawmakers will come back Feb. 1 for their first constitutional session in an even-numbered year, and their primary task will be to rebalance the budget. The next forecast is scheduled Feb. 8.
We cant wait until that point to act, said Senate President Peter Courtney, D-Salem. It is critical that we urgently prepare to make adjustments to the budget in February including a contingency for the worst-case scenario.
The $310 million reserve was created when the Legislatures chief budget writers held back an annual average of 3.5 percent in agency spending. If tax collections had come in at or above the May projections on which the budget was based, lawmakers had the option in the February session of releasing some or all of that money to agencies. That option appears unlikely now.
If projections drop by another $150 million, eliminating the rest of the budget cushion, Senate Majority Leader Diane Rosenbaum, D-Portland, said lawmakers will have to craft additional cuts with care.
The forecast we receive in February will make clear what we have to work with as we re-balance the state budget while fighting to protect the essential services Oregonians rely on our schools, services to the most vulnerable and the safety of our communities, she said in a statement.