Oregon Public Broadcasting

Oregon lawmakers got more bad news today. State economists issued their quarterly revenue forecast. In it, the numbers crunchers predicted that state revenues would fall by another $377 million. Joining us now to talk about what this means is our Salem reporter, Chris Lehman.

Beth Hyams: Hi, Chris.

Chris Lehman: Hi, Beth.

Beth Hyams: Let's go over the numbers. How much of a shortfall are we talking about here?

Chris Lehman: The newest figures out today have state economists predicting an additional decline of $377 million. I say "additional" because you might remember it was just three months ago that those same economists dropped a bombshell when they announced a half-billion dollar hole.

When you factor in small quarterly drops over the past year, it means the state is predicted to come up nearly $1.2 billion short of what lawmakers expected to have when they put together the current two-year budget just over a year ago.

Beth Hyams: So does that mean Oregon is looking at a $1 billion budget deficit right now?

Chris Lehman:  No, and the main reason why that's the case is because Governor Ted Kulongoski ordered across-the-board cuts earlier this summer. Those were designed to bring the budget back in balance, which it did, though at the expense of over $500 million in state agency spending.

Schools, for instance, took a major hit as K-12 education represents one of the largest parts of the state general fund budget. So technically the budget deficit is simply the amount of the shortfall announced today. Of course, that means that lawmakers and the governor will have to come up with a new plan to balance things out, which by Oregon's constitution has to be done by the end of the budget cycle next June.

Beth Hyams: And what are those plans? Have we heard any specifics yet in terms of how they'll make up for this new $377 million shortfall?

Chris Lehman: Lawmakers got a hint of this new shortage last week when state economist Tom Potiowsky told the governor that he should expect another drop of anywhere from $200 to $500 million. The exact amount turned about to be almost right in the middle of that range. So with some advance notice, majority Democrats including Governor Kulongoski had some time to think things through. So, a couple of things are apparently going to happen. 

First, to actually balance the spending plan the governor will order another round of across-the-board cuts. And remember, those are the only kinds of cuts the governor can make.

But House Speaker Dave Hunt and Senate President Peter Courtney say lawmakers will offset the cuts to some state programs using a combination of recently allotted federal money as well as a portion of the cash the state has in reserve. They say at this point, school districts won't face additional cuts beyond, of course, the quarter-billion dollar hit they took a few months ago. Hunt and Courtney say even with the additional budget shortfall they'll be able to avoid closing prisons, which is something the Department of Corrections says it will have to do to comply with the across-the-board cuts.

Lawmakers also plan to tap into a hodgepodge of other sources including greater than expected money from the recent tax amnesty program, as well as possibly using money they didn't need to spend this year on fighting wildfires, thanks to a relatively tame fire season.

Beth Hyams: What are Republicans saying about these ideas?

Chris Lehman:  Some Republicans, especially in the Senate, are continuing to call for a special session. But majority Democrats say they don't need a special session to head off the worst of the cuts. They say they can act through the something called the Emergency Board, which is set to meet late next month. And they say some actions can wait until lawmakers meet in regular session early next year.

Beth Hyams: And in the midst of all this, there's still a chance that corporations will get a tax rebate in the form of a kicker check?

Chris Lehman: Yes, that's one of the quirks in all of this. State economists say corporate revenue is especially volatile and hard to predict. And despite the gloomy state of affairs for personal income taxes, which make up the majority of the state's revenue stream, it turns out that corporate taxes have been coming in stronger than anticipated. So unless that swings back downward in the next nine months, the state will have to refund more than $42 million to corporations next year.

Beth Hyams: Thanks Chris. Chris Lehman is our statehouse reporter in Salem. You can read more about today's revenue forecast at his statehouse blog, capitolcurrents.com