The revenue forecast released today shows that General Fund revenues in the upcoming biennium will be $1.1 billion lower than what was expected in January, when the Governor proposed his budget and the Legislature convened. This adds to the approximately $2.1 billion shortfall for continuing programs approved by the 2001 Legislative Assembly.
The state economist estimates that Oregon’s tax revenues will not recover enough to provide the 1999-01 biennium funding level until after the 2007-09 budget period. Put another way, adjusting for inflation and population, Oregon’s General Fund revenues will remain below the 1999-01 level until after the 2007-09 budget cycle (Table 1 and Figure 1, attached). Adjusting only for inflation, General Fund revenue will remain below the 1999-01 level until the 2007-09 budget period.
“The forecast makes clear that Oregon will be stuck in Doonesbury for many years to come unless the Oregon Legislature bites the bullet and raises revenues,” said Jeff Thompson, an economist and policy analyst with the Oregon Center for Public Policy.
“The Legislature has almost no control over inflation or over the number of Oregonians who need or request services,” said Thompson. Population increases and inflation raise the cost to the state of conducting the business of government from year to year. Population growth leads to increased demands for services, from more children in schools and more seniors in failing health to increased demands for police, agricultural extension services, and small business development assistance.
“Inflation means that state government needs more money to provide the same level of services, just as individuals and businesses need more money to stay even from year to year. Costs associated with virtually everything Oregon undertakes rise each year, with some costs, such as health care, consistently rising faster than the general rate of inflation,” said Thompson.
“If Oregon returned its tax burden to the level that existed in the 1999-01 biennium, it would raise $1.9 billion additional dollars in the 2003-05 biennium. These funds would restore most but not all of the cuts outlined in the Governor’s Revised Budget proposal,” said Thompson.
“Oregon’s revenue shortfall will not be resolved through anticipated economic growth. And tax cut proposals the Legislature has considered will only make matters worse,” said Thompson.
“Oregonians deserve the same level of services from government that they enjoyed at the peak of the business cycle. Whether its primary or secondary education, health care for low income working families, or aid to the disabled, Oregonians’ needs for quality government services did not stall like the economy,” noted Thompson.
Thompson pointed out that government spending often brings federal dollars into Oregon. “That’s guaranteed money into our economy – and its real money, not pipe dream money from expected tourism or potential business investments,” he added.
“In fact, during these tough economic times, government plays an even more important role in Oregon’s economy. If legislators care about the economy, they will maintain reliable, Oregon based, government spending,” said Thompson. Thompson noted that some revenue raised from wealthy households would come out of savings, not spending. “The least damaging thing the legislature can do today is to raise revenues from those most able to pay,” he said. “Cuts to spending will wreak further havoc on Oregon’s economy.”
The Oregon Center for Public Policy is a Silverton, Oregon-based non-profit research institute that uses research and analysis to advance policies and practices that improve the economic and social prospects of low- and moderate-income Oregonians, the majority of Oregonians.