The Crisis In Oregon

The following comes from the Update from the Governor's Reset Cabinet Report of May, 2010:

At our request, state budget officials updated their projections late last year and again after the state's March 2010 revenue forecast in order to get a new fix on the decade ahead. This time, they found the picture had darkened considerably. Their primary finding was that the recessionary decline in economic activity, from corporate profits to family incomes, had carved a deep trough in the state's revenue trajectory from which it will not soon recover.

The state's general fund revenues dropped by $2.6 billion in the current budget period from the level that had been projected in 2007. This represented a 15 percent decline, the steepest since the Great Depression of the 1930s. It is this decline, rather than slower growth going forward, that poses the biggest problem for the coming decade on the revenue side of the budget.

The economy is expected to recover, but it is not expected to come roaring back as it has after past recessions. The state's most recent forecast calls for revenue growth of 6.5 percent per year through 2019 compared to 6.1 percent foreseen in the pre-recession projections. This represents a modest improvement but not the kind of accelerated growth we saw during the last recovery in 2006 and 2007. As a result, the state's general fund will not regain the revenue heights once predicted for the coming decade. State revenues are expected to trail the previously-estimated trend line by 15 percent or more in each and every budget period through 2019. As can be seen from a side-by-side comparison of estimated revenues for the next decade, comparing pre-recession forecasts in 2007 to post-recession forecasts today, state resources, like the state economy, have lost the equivalent of two or three years of growth. Revenue levels previously projected for 2011-13 are not now likely to be seen until midway through the 2013-15 biennium.

The recession created new challenges on the expenditure side of the budget as well. State officials now expect the demand for human services to rise, as more unemployed and underemployed Oregonians qualify for assistance. Currently, nearly one in every five Oregonians qualify for assistance, and one out of every seven is on the Oregon Health Plan. Their numbers are expected to grow in the next budget period. These new demands on the state budget are now expected to increase the previously-estimated costs for health and human services by a cumulative total of two billion dollars from 2011 through 2019.