STATE
MyEagleNews.com
Wednesday, April 22, 2020
A13
Oregon faces steep drop in income taxes, seeks federal aid
By Peter Wong
Oregon Capital Bureau
Even as a legislative panel
prepares this week to draw
from the state’s emergency
fund, Oregon faces a steep
drop in income taxes that
the state government relies
on to aid schools and to pay
for services, and the state
may need federal help.
Estimates of tax losses
are still being developed.
But Oregon and all other
states are likely to require
billions in federal aid that
may dwarf the amounts
given during the Great
Recession a decade ago
— and far more than Con-
gress has approved so far to
counter the economic down-
turn prompted by the coro-
navirus pandemic.
While Oregon Sen. Ron
Wyden and the Democratic
majority in the U.S. House
have made aid to states a pri-
ority, Treasury Secretary Ste-
ven Mnuchin says it’s more
likely such aid will take a
backseat to replenishing
federal help for small busi-
nesses, which already have
exhausted the $350 billion
Congress made available for
them.
Wyden was more optimis-
tic: “We are trying to work
out an agreement to address
all of these issues.”
But one expert said Con-
gress will have to do more
for states.
“States face massive bud-
get shortfalls that will be
more severe than they saw
during the Great Recession,”
said Michael Leachman,
senior director for state fis-
cal research for the Center on
Budget and Policy Priorities,
a progressive-leaning think
tank.
“Those cuts will make an
already-weak economy even
weaker and will hurt families
and communities when we
are already vulnerable,” said
Leachman, who once worked
for the Oregon Center for
Public Policy.
More than 90% of Ore-
gon’s general fund, which
represents its most flexible
state spending, comes from
just two sources: personal
and corporate income taxes.
The state’s next quarterly
economic and revenue fore-
cast is scheduled May 20.
“We are being impacted
by a loss of revenue because
there are fewer people work-
ing,” Gov. Kate Brown said
last week. “The needs are
great in terms of our pub-
lic health capacity and for
our safety net. Of course,
unlike the federal government,
the state has to balance our
budget.”
In addition to almost
300,000 Oregonians filing
unemployment claims in the
past few weeks as a result of
business shutdowns and cur-
tailments linked to the COVID-
19 pandemic, demands have
increased for public health,
state-supported health insur-
ance under the Oregon Health
Plan and other services during
the downturn.
Slowdown accelerates
State Economist Mark
McMullen warned in several
recent forecasts that Oregon’s
economy was likely to slow,
despite continued growth in
jobs and tax collections, as the
national economic expansion
passed a record 10-year mark.
The 2019 Legislature set
a total of $23.7 billion for the
current two-year budget from
general taxes and lottery pro-
ceeds, with an ending balance
of about $600 million. Total
state spending for 2019-21 is
$85.8 billion, but more than
70% consists of federal grants
or other restricted funds, such
as fuel taxes and vehicle fees
earmarked for highway and
bridge work.
While there are no official
projections yet of how much
less state tax collections will
fall short, Sen. Betsy Johnson,
D-Scappoose, said some of the
early numbers are scary: losses
between $2 billion and $3 bil-
lion during the rest of the cur-
rent two-year cycle ending in
mid-2021, and between $1 bil-
lion and $5 billion in the next
cycle.
“We have been told by
the state economist it is
awful,” said Johnson, a Sen-
ate co-chairwoman of the Leg-
islature’s joint budget-writing
committee. “Other than obser-
vations at 100,000 feet, I do not
know what to tell you.”
The Legislative Emergency
Board, whose members make
budget decisions between ses-
sions, was preparing this week
to tap the state emergency fund
that is now down to around
$50 million. But only the full
Legislature, not the board, can
spend other funds or move
money from already approved
agency budgets.
Oregon does have two big
reserve funds with a total of $3
billion, almost 14% of the gen-
eral-fund budget, which puts
the state in a better position
than during the last downturn.
A lottery-based reserve can
go to education, and a second
reserve can be tapped for other
purposes. But only the full
Legislature can approve those
transfers — and the laws cre-
ating the funds bar lawmakers
from spending all of the money
in a single budget cycle.
The governor does have
authority to cut most agency
budgets by 2% without leg-
islative approval. Brown said
she has instituted a partial hir-
ing freeze — there are exemp-
tions, such as the Employ-
ment Department adding staff
to process a record number of
claims — and barred nones-
sential travel.
Johnson said lawmakers
agree with Gov. Brown that
any special session should
await the next economic/rev-
enue forecast and an updated
analysis of how Oregon bene-
fits from the myriad programs
that Congress approved in the
$2 trillion CARES Act. Federal
agencies are still writing rules
for how the money is spent.
“We’re still waiting to
understand what the federal
(CARES) bill means for Ore-
gon so that we do not do any-
thing that makes it harder to
use the federal money,” John-
son said. “That will give all the
certifiably smart people in Ore-
gon a chance to digest all the
different streams coming from
the federal government.”
Aid proposals
One expert says the key to
how much aid states will need
is the length of the economic
downturn that will persist once
business activity resumes after
the worst of the coronavirus
pandemic.
“The length is not indepen-
dent of the (pandemic) event,”
said Susan Wachter, codirector
of the Penn Institute for Urban
Research, who spoke on a con-
ference call sponsored by the
Volcker Alliance. “The lon-
ger this persists, the deeper it
will be for state and local gov-
ernments. State and local cuts,
which are beginning and are
planned to go deeper, will con-
tribute to the downturn.”
During the Great Recession
a decade ago, Oregon and other
states got aid in several forms,
some money as general assis-
tance and some as increased
federal shares of Medicaid, the
joint program of health insur-
ance for low-income people.
It’s known in Oregon as the
Oregon Health Plan, although
Medicaid goes to some nurs-
ing-home care.
“By letting states reduce
their own contributions to
Medicaid, we have seen this
step provide flexible funding
they can use to address their
own budget gaps,” said Aviva
Aron-Dine, vice president for
health policy at the Center on
Budget and Policy Priorities.
But she said Congress will
have to raise the federal share
by far more than it did a decade
ago, when the increase was
about 12 percentage points.
One of the recent congres-
sional aid packages did raise
the federal Medicaid share, but
only until the current public
health emergency is declared
over by the Health and Human
Services Department.
Aron-Dine said a good
starting point is a proposal by
the Democratic majority in the
U.S. House to raise the federal
Medicaid share by 5 points for
every 1 percentage point that a
state exceeds its historic unem-
ployment rate. Based on that
proposal, she said, the pro-
jected state budget shortfalls
would drop by about two-
thirds — and Congress could
do something else to offset the
rest.
States — and local govern-
ments with more than 500,000
people, such as Multnomah
and Washington counties —
also got a separate source of
aid in the congressional pack-
age. Other urban counties do
not qualify. For Oregon, the
total is about $2.4 billion,
about $1.6 billion of it for state
government.
“But we cannot use that to
backfill the revenue we have
lost,” Brown said last week.
“That is a frustration shared by
governors around the country.”
Led by Maryland Republi-
can Larry Hogan and New York
Democrat Andrew Cuomo, the
National Governors Associ-
ation called on Congress and
President Donald Trump to
approve up to $500 billion in
aid to states.
“The challenge that all the
governors are having is the
strings that were put on ear-
lier federal resources,” Brown
said. “Whether we are Repub-
lican or Democrat, red or blue
states, we would all like to see
much greater flexibility to sup-
port the financial needs in our
states.”
Sen. Wyden seeks infrastructure money in next stimulus package
By Peter Wong
Oregon Capital Bureau
U.S. Sen. Ron Wyden says
he is for adding federal money
for public works projects to
stimulate a national economy in
free fall as a result of the coro-
navirus pandemic.
But the Oregon Democrat
said the greatest political lever-
age on a Republican president
and Republican majority in the
Senate will have to come from
the Democratic majority in
the House and Speaker Nancy
Pelosi.
“I am all in, and I hope
Nancy Pelosi will jump-start
this,” Wyden said Wednes-
day, April 15, during a con-
ference call with the Westside
Economic Alliance, a busi-
ness-advocacy group serving
primarily Washington County.
“The president at one point said
he wanted to do it. But we hav-
en’t heard much back.”
Wyden’s reference was to
a general overture on infra-
structure financing by Presi-
dent Donald Trump, who has
said publicly he would like to
resume some semblance of pub-
lic life and business activity by
May 1. Trump said he will talk
Thursday with state governors,
many of whom say they will set
their own timetables for emerg-
ing from the pandemic.
Wyden is the top Demo-
crat on the tax-writing Senate
Finance Committee.
Infrastructure
financing
plans have been offered by
Oregon Reps. Earl Blume-
nauer of Portland, a member
of the tax-writing House Ways
and Means Committee, and
Peter DeFazio of Springfield,
chairman of the House Trans-
portation and Infrastructure
Committee.
Some economists say the
United States is heading into
a recession anyway, with con-
sumer demand down in many
sectors.
Eagle file photo
U.S. Sen. Ron Wyden, D-Oregon, answers questions from Grant
County community members during a town hall Oct. 7 at Prairie
City School.
The Trump administration
has asked Congress for $250
billion more for the Small Busi-
ness Administration to offer aid
to businesses of fewer than 500
workers. Republicans sought
a no-strings-attached plan, but
Democrats rejected that on a
Senate vote April 9. Demo-
crats are seeking to add aid to
hospitals and state and local
governments.
Wyden said, even if the
small-business aid is eventu-
ally approved without add-ons,
there will be another opportu-
nity to add spending to the $2
trillion plan Congress approved
at the end of March.
Wyden responded to a ques-
tion during the conference call
by Stephen Roberts, director of
the Washington County Land
Use and Transportation Depart-
ment, who said the money could
advance public works projects
ready for construction.
Wyden had a hand in the
$787 billion economic aid
plan Congress approved in
2009 during the Great Reces-
sion. His Build America
Bonds raised a total of more
than $181 billion in bonds —
about $1 billion issued in Ore-
gon — for public works proj-
ects between February 2009
and December 2010. The
program paid part of interest
costs, resulting in $20 billion
in savings for state and local
governments, and offered tax
credits that bondholders could
use to reduce taxes owed.
Some said the 2009 plan
should have proposed more in
direct federal spending for pub-
lic works projects, given the
depth of that recession.
In an interview last week,
Wyden said Trump would have
found bipartisan support if the
newly elected president had
advanced public works financ-
ing, rather than tax cuts, as
Trump’s top priority in 2017.
He said he and Orrin Hatch, the
Utah Republican who then led
the Finance Committee, told
Trump the votes were there
to spend part of the “repatri-
ated” money that corporations
returned to the United States
after Congress cut corporate
tax rates. The tax cuts passed
both chambers without a single
Democrat in favor.
“Democrats have long been
in favor of infrastructure spend-
ing,” Wyden said. “I thought it
was malpractice by the Trump
administration not to make
infrastructure its first bill of
2017.”
Record number of Oregonians lose jobs during pandemic but pace slowing
Record numbers of Oregonians
have lost their jobs during the corona-
virus pandemic, but the pace is slow-
ing, the state Employment Department
reported Thursday.
About 53,800 people initially filed
for unemployment last week, com-
pared with a total of 243,000 during
the previous three weeks. The biggest
proportion of claims is from people
who were employed in the leisure and
hospitality sector, including hotels and
restaurants.
“But all sectors are seeing record
numbers right now,” Anna Johnson,
senior economic analyst, said in a
department video posted Thursday.
Large-scale public health mea-
sures aimed at slowing the spread of
COVID-19 began during the week of
March 15. From then through April 4,
58% of unemployment claims were
filed by workers with a high school
education or less.
“This is likely a reflection of the
industries that have been hardest hit,
such as leisure and hospitality, con-
struction, retail and manufacturing,”
regional economist Damon Runberg
wrote on Thursday.
He added that workers ages 25 to 34
were particularly hard hit, accounting
for 30% of the jobless claims during
that period despite making up only
23% of the workforce. About 23% of
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35- to 44-year-olds filed claims.
Lincoln and Clatsop counties
both lost more than 10% of the local
workforce to layoffs during those
three weeks. Other significant work-
force losses included roughly 8% in
Deschutes County; about 7% in Union,
Coos, Crook and Tillamook counties;
and around 6% in Multnomah, Lane,
Jackson and Douglas counties.
The state paid out $97 million in
unemployment benefits last week.
However, many people have not been
able to receive payments due to the
agency’s lack of staff and outdated
technology.
Despite quadrupling the claims-han-
dling staff, the department answered
only 801 of the 2,206 calls received on
Wednesday, and the average wait time
was about two hours.
Communications Manager Gail
Krumenauer said additional staff are
still being hired. With record unem-
ployment up through early March,
the agency had a small staff handling
claims. It has gone from 106 personnel
then to 450 now, with a goal of 800.
“It’s hard to overstate what an
incredible change this has been in
almost no time for Oregonians and for
the department,” she said.
Computer systems are being repro-
grammed to handle the federal Pan-
demic Unemployment Assistance
program, which will allow many
self-employed, contract or gig work-
ers to receive unemployment ben-
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efits for the first time.
But she said it will take 4,000 hours
to reprogram computers to eliminate
the one-week wait before people are
eligible for benefits. Because the repro-
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existing work, the department is focus-
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the most people.
“The agency has prioritized doing
what we can to get the most benefits
to the most affected workers, the fast-
est,” she said in a department video.
“We’ve already seen the total bene-
fits paid went from $25 million in one
week to about $100 million in the next.
That’s real money right now in peo-
ple’s pockets, so that’s been our first
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