Oregon's Revenue Outlook: “Dim and Dimmer” Federal and State Revenues Won't Meet Needs Next Biennium and Beyond

News Release
May 21, 2001

Federal aid to Oregon state and local government under the Bush Administration's proposed budget will fall short of meeting current spending needs according to a new study released today. The news comes on the heels of a report by state economists released last week that shows state generated revenues will not meet needs in the next biennium and beyond.

Federal discretionary spending on grants-in-aid to state and local governments in Oregon will fall

7.2 percent, nearly $102 million, by federal fiscal year 2002 and 11.8 percent by FFY 2011. The figures come from an analysis by the Washington, D.C.-based Economic Policy Institute and are cited in a new report, Dim and Dimmer, released today by the Oregon Center for Public Policy.

The Oregon Center for Public Policy calculated that state General Fund revenue is projected to be down by 2.7 percent in the 2001-03 biennium. Total dollar amounts will be up for both federal and state spending, but the increases fall below projected inflation and population growth, resulting in real reductions.

“The reduced federal dollars coming into Oregon will affect all Oregonians, young and old, urban and rural,” said Charles Sheketoff, Executive Director of the OCPP. “Some of the programs on the chopping-block include Head Start, WIC, programs to reduce class size and repair schools, and programs for dislocated workers and agriculture.”

“The cuts in Federal funding for Oregon are a direct result of the President's desire to deliver a huge tax cut to America's most economically comfortable,” said Sheketoff. If the large tax cut were scaled back, these spending cuts could be avoided.

With general fund and lottery revenues projected to bring in nearly $600 million less than what is required to fund current levels of service, news that federal dollars coming into Oregon will not meet current needs “should send an alarm to state legislators,” said Sheketoff. “Legislators should think twice before enacting large tax cuts or back-loading cuts for future years.”

Sheketoff noted that when the Oregon legislature enacts tax cuts, some of the “savings” end up going to the federal government in increased taxes from Oregonians who itemize. “Tax cuts like the kicker and last November's Measure 88 end up sending more tax dollars to the federal government,” said Sheketoff. “It makes little sense to do that while Washington, D.C. is sending us less in return.”

Reducing the tax cut resulting from the “kicker” would go a long way toward softening the blow to state programs. “There are a range of feasible and fiscally responsible ways for legislators to avoid this tax cut, which gives just $106 dollars to the typical Oregonian and over $4,400 to the most well-off,” said Sheketoff.

The Oregon Center for Public Policy is a non-profit research organization that analyzes budget, tax, and program issues important to low- and moderate-income Oregonians, the majority of Oregonians. The Economic Policy Institute is a nonprofit, non-partisan economic think tank based in Washington, D.C. Founded in 1986, EPI seeks to widen the debate about policies to achieve healthy economic growth, prosperity and opportunity in the United States.