SALEM, Ore. -- Gov. Ted Kulongoski and Democratic legislative leaders said Thursday they'll be able to handle the latest state budget shortfall without cutting school aid, releasing prisoners or cutting what they term critical services.

New estimates Thursday showed expected revenues down $377 million. State revenue is off by about a tenth since the Legislature wrote the current budget in the spring of 2009.

House Speaker Dave Hunt and Senate President Peter Courtney say there will be budget cuts as a result of the newest shortfall but didn't have specifics.

But they say that a recent package of federal aid and using some state reserves will allow the governor and legislators to patch the budget so that school districts, colleges, state trooper ranks and in-home services for disabled and elderly people aren't cut.

In all, revenues are down by about 10 percent since the Legislature wrote the state budget in 2009 - almost $1.3 billion in all.

State economist Tom Potiowsky says the Oregon recovery from the Great Recession has been anemic at best, and forecasts have been more pessimistic in the last three months.

Potiowsky says the latest figures suggest the recovery is stalling out. His last forecast, in May, showed revenues were down $577 million.

But the latest load of bad budget news for Oregon state government held a shiny nugget for businesses - the prospect of a $40 million "kicker" tax rebate.

Companies slashed payrolls and overhead through the recession and are holding back spending in the anemic recovery. As a result, many are making good profits.

That's showing up in Oregon state revenue. Corporate tax collections are ahead of projections made last year.

The kicker law grants rebates when state revenues are well ahead of expectations. Personal income, though, is down too far to qualify now.

Josh Harwood, a state economist, says corporate rebates would kick in next year if current trends continue. Businesses would be allowed to apply the rebates to future tax bills.

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Revenues are lower and recovery is slow, State Economist says

Recession may be over, but pain remains for jobless, Tom Potiowsky says

Salem—State Economist Tom Potiowsky told legislators today that the current economic recovery is one of the “slowest on record,” and projected a decrease of $377.5 million in state revenues since the June 2010 forecast.

In his presentation of the September economic and revenue forecast to the legislature’s revenue committees, Potiowsky said the overall forecast for the 2009-11 biennium is now $1.3 billion below the forecast issued at the close of the last legislative session. “The prolonged plunge in personal income taxes more than accounts for the decrease associated with this forecast,” Potiowsky told legislators.

Last June’s forecast triggered a transfer of money from the state’s Rainy Day Fund, which brings the total available resources to $12.5 billion. Projected lottery earnings will reach $1.1 billion, an increase of $4.6 million from the previous forecast, Potiowsky said in his report. Lottery revenues have generally stabilized with growth returning after nearly 18 months of decreases.

The unemployment rate for Oregon sits at 10.6 percent for July, essentially unchanged for the past nine months. Potiowsky pointed out that the unemployment rate tends to be one of the last measurements to improve as the economy enters recovery.

Manufacturing jobs were flat, while increases occurred in wood product jobs and other durable goods. Losses occurred in other sectors, however. The service sector showed disappointing job losses in professional and business services, health services, financial activities and retail trade. Some gains did occur in other service-sector jobs.

“Depending on the outcome of further spending packages from the US Congress, we may see further large job cuts at the state and local government levels,” Potiowsky reported. “The expected slowdown in US economic growth due to slowing stimulus spending and winding down of manufacturing inventory cycle is similarly impacting the Oregon economy. Given the rather lackluster employment picture, saying the recession is over gives little solace to those still looking for work.”

Note: The full text of the September Economic and Revenue Forecast is available at: http://www.oregon.gov/DAS/OEA/index.shtml.

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Governor, Senate President and Speaker Outline Process to Address September Revenue Shortfall

Assurance provided to school districts that current funding levels are protected

Salem – Today Governor Ted Kulongoski, Senate President Peter Courtney and House Speaker Dave Hunt outlined a process to rebalance the state budget after the State Economist reported a $377.5 million dollar shortfall in the September revenue forecast for the current 2009-11 biennium.

With the recent federal assistance, the Governor, Senate President and Speaker assured school districts that additional cuts to K-12 as a result of the forecast will not be necessary and pledged to maintain funding at the June level of $5.756 billion for K-12 education.

“With school about to start, we want to assure Oregon families and their school districts that even with this revenue shortfall, there will be stability for school budgets, while also maintaining a responsible level of reserves for the last three quarters of this budget period,” said Governor Ted Kulongoski.

In addition to the $118 million in federal assistance recently approved by Congress, the Governor, Senate President and Speaker agreed that in order to protect schools, approximately $34 million of the state reserve funds will be committed to K-12 when the legislature convenes in February 2011.

After this commitment to schools, approximately two-thirds of the State Education Stability Fund and Rainy Day Fund will remain in savings to address the uncertainty of the last three revenue forecasts of the 2009-11 biennium.

“It’s raining. It’s clearly the right time to use the rainy day funds we’ve set aside to protect kids, services for seniors and vulnerable Oregonians to help them through this global recession,” said Speaker Hunt (D-Clackamas County). “We are continuing to provide services for more Oregonians with less resources.”

"We're putting the priorities of Oregon families at the front of the line. Our plan keeps the doors of our schools open and the gates of our prisons closed. It maintains care for our senior citizens, assistance for people with disabilities and healthcare for our most vulnerable," said Courtney (D-Salem/Gervais/Woodburn). “We have taken a deliberate and cautious approach and achieved these priorities without the need for a special session.”

In addition to protecting education, the Governor, Senate President and Speaker outlined the following next steps to bring the budget into balance:

· The Governor will utilize his statutory allotment authority as provided under ORS 291.261 to make additional across the board cuts.

· The Governor will ask state agencies to begin developing plans to implement the cuts needed to rebalance the budget for the remainder of this biennium, which amounts to 8% reductions with 9 months remaining in the 2009-11 biennium.

· Through the bipartisan Legislative Emergency Board and the 2011 session, funding will be restored to maintain K-12 schools at their current funding level; maintain critical services for our seniors and vulnerable Oregonians; protect public safety and prevent prison closures for the remainder of the current biennium.

“This plan is fiscally responsible, provides stability and certainty for Oregonians and does not require a special session,” Governor Kulongoski said.

Information about cuts to specific agencies, the cost of the services the E-board will restore and the exact sequence of events will be determined prior to the E-Board meeting on September 23.

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Senate Republican Office

Lawmakers Must Address Revenue Shortfall

Salem, OR – Thursday lawmakers received news the state’s expected revenues are down another $377.5 million. This brings the total decline since the end of the 2009 Legislative Session to $1.268 billion. Still, the halls of the State Capitol in Salem remain largely empty. Senator Chris Telfer (R-Bend) wants to change that and renewed Republican calls for an emergency session of the Oregon Legislature.

“It is long past time for members of the Legislature to return to Salem and do the job for which we were elected,” said Telfer, who serves on the Senate Finance and Revenue Committee that received the revenue forecast. “Allowing another round of across-the-board reductions to all agencies is just plain wrong.”

The Governor has the ability to deal with budget shortfalls by reducing all budgets equally, regardless of priority to Oregonians. After the last revenue forecast agency heads were directed to cut 9% from their budgets. At the Department of Human Services, which has a total budget of more than $15 billion, the reductions included ending programs like Oregon Project Independence which helps keep seniors in their homes and out of more expensive nursing homes. The total cost of this vital program was just $7.6 million out of a $15 billion budget for the department.

“We have seen too many cases where state agencies look to punish Oregonians for revenue shortfalls by cutting the most vital programs first,” said Senator Bruce Starr (R-Hillsboro). “It is long past time for legislative leadership to step up and do the work Oregonians expect.”

Should the Legislature come into emergency session, one option for budget reductions include removing just the general fund money from the Department of Land Conservation and Development (DLCD). The savings this biennium would be about $7 million and could be used to fund a more important program like Oregon Project Independence. Any functions DLCD is no longer able to afford would fall to counties which have a vested interest in the local economy.

“We must make sure anything we fund from this point forward helps create jobs,” said Telfer. “We will not fix our budget problems until we get Oregon families back to work.”

Republicans in the Legislature are in the process of putting together plan to help balance the state budget without the need for across the board cuts.

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HOUSE REPUBLICAN LEADER HANNA COMMENTS ON SEPTEMBER REVENUE FORECAST

SALEM—House Republican Leader Bruce Hanna (R-Roseburg) had the following to say regarding the September 2010 revenue forecast released today:

“The Legislature can no longer avoid making tough decisions on state finances. Since the previous forecast, Republicans repeatedly called for a special session to re-prioritize spending and make targeted restorations. The state’s political leadership dismissed our calls and allowed the Governor to implement across-the-board cuts. Democrats also waited for yet another federal bailout that has failed to rescue them from their mismanagement of the state budget.

“The bottom line is that Oregon’s budget can’t sustain its level of spending today, tomorrow or into the future. Despite a historic recession and consecutive quarters of declining tax revenues, the Legislature continued to increase spending with the help of job-killing taxes and one-time federal funds. The state can’t just ‘get through’ the current forecast and expect to have healthy finances in a few months. We need to fix the current budget, and next Legislature should be prepared to work with a new governor to reform our budgeting process and bring our state spending under control.

“We’ll never be able to balance the budget without a strong economy and more employed Oregonians. Under the state’s current leadership, we’ve seen higher unemployment, increased foreclosures and restrained business activity. Any effort to address the state budget must include an effective plan to fix our state’s sputtering economy.”

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Statement from Senate Majority Leader Richard Devlin on

September 2010 Revenue Forecast:

“Today’s forecast confirms what we all know; Oregon families continue to struggle as the economy is slow to recover. Knowing this, Democratic leadership and the Governor today released a prioritized plan that addresses the shortfall. This plan maintains our commitment to protect schools, our most vulnerable, and public safety.”

“Unfortunately, Senate Republicans continue to cause distractions when it comes to protecting Oregonians, repeatedly calling for a special session without any coherent plan for balancing the budget.”

“We will not use this budget crisis as a political opportunity. It’s just plain wrong. The stakes are too high for everyday Oregonians.”

“We do not need a special session to protect the services that matter most to Oregonians. Leadership is focused on moving ahead cautiously and deliberately as we use the Emergency Board and other tools to provide vital services while managing this crisis.”

“Democratic leadership has made been making hard choices to protect the most vulnerable. We will continue to make the difficult, but necessary, decisions that reflect our priorities of protecting the middle class, our schools, and those struggling to get ahead.”

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Chris Dudley Statement on State Revenue Forecast

Lake Oswego – Chris Dudley today released the following statement in response to the September revenue forecast:

“The news that projected state revenue is down an additional $377 million should come as no surprise to anyone familiar with Oregon’s economy right now. Unfortunately, our current economic problems didn’t begin two years ago with a national recession; our problems began years ago under John Kitzhaber. He drove our unemployment rate above the national average where it’s remained ever since – 14 straight years. Under Kitzhaber, job losses went up 65%, state spending went up 57%, while personal incomes went down 6% below the national average. We are living with the consequences of his failure to adequately prepare Oregon for our economic future and now face a decade of deficits. The solution to the budget problems underscored with today’s report, is to slow the growth of state spending, hold the line on taxes and restore private sector job creation – and I’ve outlined ideas to do all three. I’m confident that our challenges are neither insurmountable, nor ungovernable. We can save our quality of life with new ideas and new leadership.”

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Kitzhaber Statement on State Revenue Forecast

(Portland, Oregon) – John Kitzhaber today issued the statement below following the release of the state’s quarterly revenue forecast. “It is great to see the Governor and legislators come together to keep our schools open and protect the most vulnerable Oregonians. It is a critical time for many Oregonians as we are at the low point in resources and at the high point of need.

“However, this only underscores the need for the next governor to be able to bring all stakeholders to the table to fundamentally reform how the state delivers and pays for the services most important to Oregon families.”

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State Schools Supt. Susan Castillo Statement regarding August Revenue Forecast

SALEM – “Today our state received more bad budget news. Oregon’s most recent budget forecast shows a $377.5 million budget shortfall for our state. The Governor, Senate President and Speaker have announced that additional cuts to K-12 will not be necessary and have pledged to maintain funding at the June level of $5.756 billion for K-12 education. To maintain this level, they propose using the $118 million federal Education Jobs assistance and approximately $34 million of the state reserve funds. As soon as we are able, my staff will provide school districts and education service districts with updated estimates.

While this is welcome news, it is a short-term fix for a long-term funding problem for K-12. I look forward to working with state leadership to address this persistent K-12 funding challenge.

“I want to commend our school districts for all the hard choices they are making for their students this biennium. They have had to leave staff positions unfilled, ask their teachers to take pay cuts, slash professional development, turn their thermostats down, cut their sports programs, and make many other challenging decisions to minimize cuts to our classrooms and provide as much instructional time for our students as possible. Our districts are to be commended for their dedication, perseverance, and sacrifices.

“Oregon educators are working hard to implement the increased high school graduation requirements adopted by the Oregon State Board of Education in 2007. One thing is crystal clear: our state needs skilled graduates. As we continue to navigate this uncertain and rocky economic landscape we must continue to look to education as our way out of this, and future recessions.”