The Oregon state economist last week cut his general fund revenue forecast for the 2007-2009 biennium by 1% because of slower growth in personal income tax collections.
The general fund is forecast to collect $12.9 billion in the current two-year budget cycle, a decrease of $119 million from the June 2008 forecast, according to the Oregon Office of Economic Analysis. That reduces the forecast for the state’s ending balance to $23.8 million from $143 million.
Still, total reserves are projected to rise to $736.9 million on June 30, 2009, from $622.4 million at the end of fiscal 2008, due to budgeted contributions to the education stability fund. The reserve total also includes $319 million the state deposited in a newly created rainy-day fund last year.
Oregon has suffered smaller declines in home prices than the nation as a whole and much smaller drops than hard-hit Western states like Nevada and California. It has also benefited from strong export growth due to declines in the value of the U.S. dollar and has continued to gain population.
But Oregon lost jobs for the first time in five years in the second quarter.
“The combined softening impacts of housing, financial, and energy markets are causing widespread slowing in job markets,” state economist Tom Potiowsky wrote in a report. Under the forecast, “the Oregon economy does not recover until the latter part of 2009.”
Potiowsky predicted job losses of less than 1% of payrolls in the third and fourth quarters, followed by “anemic” growth in the first half of next year.
The state economist forecast a 20% increase in revenue to $15.5 billion in the upcoming 2009-2011 biennium, but that’s $241.4 million less than he forecast just three months ago.
“This quarter’s revenue forecast is a reminder that we are not insulated from national economic trends,” Democratic Gov. Ted Kulongoski said in a statement. “Oregon is still faring better than many states in the nation, but we must proceed with prudence and prepare ourselves for tough choices in the next budget cycle.”