SILVERTONAPPEAL.COM ❚ WEDNESDAY, MAY 27, 2020 ❚ 3A
State economists may see $2B shortfall
COVID pandemic,
economic slowdown
wreak havoc on Oregon
revenue figures
Connor Radnovich
Salem Statesman Journal
USA TODAY NETWORK
The state’s projected general fund
revenue dropped by $1.9 billion for this
biennium due to the coronavirus pan-
demic and corresponding economic
slowdown, according to the latest reve-
nue forecast released Wednesday.
Including declines in lottery funds
and the new corporate activity tax, Ore-
gon’s revenue for the 2019-2021 bienni-
um is projected to be down by nearly
$2.7 billion compared to the March eco-
nomic forecast.
Estimates for the next two bienni-
ums show declines of $4.38 billion in
2021-2023 and $3.38 billion in 2023-
2025.
“With this particular recession, it
was unique in that it became clear over-
night that not only were we in a reces-
sion, but that it was going to be a severe
one,” said state economist Mark
McMullen.
Less revenue means
the state has less money
to spend on a variety of
core state functions,
such as funding public
schools and the state po-
lice. Unlike the federal
McMullen
government, Oregon can-
not run a deficit.
State
agencies
have
already
examined how they could reduce their
expenses to conform to budget cuts.
By law, the state has until the end of
the biennium — July 1, 2021 — to balance
the budget. But cuts are harder the clos-
er the state gets to that deadline as mon-
ey is spent at previously budgeted levels
in the interim.
It is anticipated that lawmakers will
convene a special session of the Legisla-
ture sometime this summer to re-bal-
ance the budgets.
“The latest forecast for state revenue
makes it clear that we have tough
choices ahead,” Gov. Kate Brown said in
a statement. “We will need to tighten
our belts. I am working with legislative
leaders to preserve critical state ser-
vices, find efficiencies, and prepare for
potential budget cuts.”
Brown added that additional action
from the federal government will be
needed to bridge Oregon’s budget gap.
“Oregon families are hurting and
have been forced to make significant
budget cuts,” House Republican Leader
Christine Drazan, R-Canby, said in a
statement. “Now the state must take
reasonable actions to bring the budget
in line with declining revenues.”
Oregon’s regions affected
differently
The state’s various regions and busi-
ness sectors are seeing different im-
pacts from this recession and have a va-
riety of recovery outlooks.
State economists indicated that the
North Coast, Southwestern and Central
regions were among the hardest hit.
Those areas, along with the Rogue Val-
ley, could also anticipate stronger head-
winds as they work toward recovery.
The Portland region fared the best by
their estimation, with less impact and
expected tailwinds toward recovery.
The Willamette Valley region was some-
where in the middle, having been im-
pacted less than other regions but with
more expected challenges in recovery.
“We knew the forecast was going to
be down, really down.” Senate President
Peter Courtney, D-Salem, said in a
statement. “We have the nerve, the
The Oregon State Capitol on Nov. 13, 2018, in Salem. STATESMAN JOURNAL FILE
moxie, to get through this. It will take
coming together and working together
as never before.”
Economic impact could last years
Looking ahead to 2027, state econo-
mists estimated that industries will ex-
perience structural changes and perma-
nent damage at different rates.
Those relatively unaffected with less
than a 1% decline in employment fore-
casted include professional and busi-
ness services, leisure and hospitality
and wholesale.
Retail employment seven years from
now is projected 7% below the previous
forecast, making it the hardest-hit sec-
tor. Manufacturing and natural re-
sources were next, with declines around
4.5%.
“These are sectors that never come
out of a recession intact,” said state
economist Josh Lehner. “We think there
will be some lasting damage here. You
can’t turn the lights off on some of these
manufacturing sectors ... and then flip
the switch back on and expect every-
thing to be O.K.”
It was a dire picture of Oregon’s fu-
ture fiscal health painted by state econ-
omists, but not without some good
news.
Oregon has $1.6 billion squirreled
away in two reserve funds, the Educa-
tion Stability Fund and the Rainy Day
Fund. Those dollars can be used by law-
makers to counteract some of the loss in
revenue.
The stock market has already recov-
ered around half of what it lost during
its steep decline in February and March.
Economists predict the duration and
depth of stock market contraction will
be less than half as long and deep as
during the Great Recession in 2007.
The tax season is also still ongoing
after the state and federal government
extended the tax filing deadline to July
15. McMullen said they estimate tax
payments to come in above forecast.
“All good news in terms of the still-in-
complete tax season,” McMullen said.
“Of course, this, again, is overwhelmed
by the economic outlook.”
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Better days are ahead
As far as recovery outlook, McMullen
said the economic recovery is tied di-
rectly to the public health concerns. If
Oregon can reopen steadily in phases as
proposed by the governor’s office and
not see a spike in cases, economic re-
covery will also begin.
State economists estimate there will
be a 38% rebound in employment with-
in the first year after the recession, but
slower growth afterward. They estimate
it will take nearly five years for the state
will return to prerecession peak em-
ployment.
Spending has also been revised low-
er, with pent-up demand providing a
short-term “V-shape” recovery, but it
leveling out with persistent damage in
the range of 10% below the previous
forecast two years out.
Income is also expected to steadily
decline to 10% below the previous fore-
cast.
Oregon’s coronavirus-related job los-
es are near 400,000 and the unemploy-
ment rate is 14.2%.
“The state must focus on how it can
support business in the monumental
task of bringing those lost jobs back, so
Oregonians can start earning incomes
again – which in turn will generate tax
revenue for important public services,
like education, our social safety net and
health care,” said Sandra McDonough,
president and CEO of Oregon Business
and Industry.
Contact reporter Connor Radnovich
at cradnovich@statesmanjournal.com
or 503-399-6864, or follow him on Twit-
ter at @CDRadnovich