Oregon Public Broadcasting

State economists delivered some sobering news to Oregon lawmakers Friday.  They’ll enter the next fiscal year about $3 billion in the hole.  Joining us to talk about what this means is Salem correspondent Chris Lehman.

Q:  Chris, this is a much-anticipated figure.  What does it tell us?

Chris Lehman: To give you a little idea of how big this was, normally the revenue forecast is delivered in a small hearing room to a handful of lawmakers.  This forecast was so highly anticipated that the venue was shifted to the House chambers, and all 90 state legislators were invited to attend.  Basically they were told what many have suspected for months:  The state is facing a huge budget deficit -- just over $3 billion.

Q:  What is that going to mean for state services over the next two years?

Chris Lehman: It’s unclear at the moment.  Legislative leaders acknowledge that cuts are inevitable.  Whether than means larger class sizes in Oregon schools, or reduced hours at the DMV, or fewer troopers on the road, no one knows at this point.  Leaders in the House and Senate today also brought up the possibility of raising taxes.  These are mainly proposals that have been floating around for months, like a gas tax hike and a higher tax on hospitals.  But they said there could be more than that by the time the Legislature is done its work in June.

Q: How long will it be before things are expected to turn around for the state?

Chris Lehman: That depends in large part on how fast the Federal stimulus plan works, if at all.  But state economist Tom Potiowsky says it could be more than a year before things start looking up.

Tom Potiowsky:  “The scenario is for the economy to bottom out around mid this-year, with no real growth until the second half of 2010.  We’re falling basically into a pit.  We hit the bottom of the pit sometime mid this-year.  In the second half of the year, we don’t see ourselves falling any further, but we gotta realize we’re still in the bottom of a pit.  It’s not going to feel very good.”

Q:  So far we’ve been talking about the gap in the next budget cycle.  But lawmakers are still working to fill a widening hole in this year’s budget.  Was there any news on that front?

Chris Lehman: Lawmakers have been working on the assumption that they’d have to come up with $800 million in cuts for the current fiscal year that ends in June. 

With today’s forecast that number bumps up to $855 million.  So it’s not a huge increase, but it does make it even more likely that the school year will be shorter for many Oregon students this year.

The cuts to this year’s budget could be up for a vote as soon as next week.