In testimony Monday morning before a joint session of the House and Senate Revenue Committees, state economist Tom Potiowsky proclaimed that the state’s recession was over, but predicted a jobless recovery through 2010. Potiowsky even warned of the prospects of a “double dip” recession if the federal government discontinued stimulus spending.
Oregon 4th quarter 2009 employment levels dipped again for the seventh consecutive quarter. The annualized rate of job decline was 3.7 percent. Average monthly job losses in late 2009 was 2,300 lost jobs per month, which was an improvement over the 9,800 average lost jobs per month in the first half of 2009. But employment prospects in Oregon are shaky at best. In the week after Oregon voters approved tax increases on business and individuals, Oregon led the nation in new jobless claims, with 4,336 new Oregonians seeking unemployment benefits.
But the worst news of all for legislators on Monday was Potiowsky’s revenue forecast which showed state revenues plunging once again – this time dropping by another $183 million. Nearly all of the decrease was attributed to lower expectations for personal income taxes. In his report, Mr. Potiowsky specifically singled out the effects of the tax increases in Measures 66 and 67, which will make income tax collections more volatile because tax collections will now depend on the behavioral changes of a small, highly-taxed group of high-income taxpayers.
The bottom line for Oregon’s budget is that Monday’s forecast is manageable. The $183 million drop in expected revenues now leaves the state with an ending balance deficit of $106 million. Between scaling back the Business Energy Tax Credit and the use of a rapidly diminishing state savings account, legislative leaders expect to be able to cover the deficit. However, if the state’s economy doesn’t stabilize, existing savings may not cover future deficits.