Right on Cue: Oregon Economic Outlook Grim

Jeff Alworth

That didn't take long.  In my post below about receiving my kicker over the weekend, I mentioned the danger of refunding $1.1 billion right at the moment the economy looks dodgy.  Well:

Economists from the University of Oregon have issued a gloomy forecast for the state's economic health. They say that indications point to a potential recession.

The researchers survey eight indicators, from interest rates to payrolls.  Oregon initial unemployment claims rose in October to the highest level since November 2006.  Residential building permits issued in the state dropped to the lowest level since September 2000.

Economists cautioned that there's no guarantee that a recession is coming. But they say similar statistics were present before the state spiraled into recession in 2001.

This is neither new nor surprising.  Just a couple of months ago, the Register-Guard was warning that the circumstances for a kicker-recession one-two punch were already aligning:

The $1 billion-plus excess in the 2005-07 biennium is by far the biggest ever, and adding it to the totals causes the long-term excesses to exceed the shortfalls by $800 million. Yet it's possible, even likely, that a shortfall soon will bring the numbers closer to balance. The record excess being refunded now is still smaller than the $1.25 billion shortfall of 2001-03.

Yes, it's nice to see a check in December from the state.  But recall 2003, if you will: cops were laid off, criminals kicked out of jail, schools shut down early, and social services were cut to the elderly and sick.  It ain't that nice.

Comments

  • (Show?)

    Yet 68% of Oregonians think the economy's in good shape (as posted here late last week).

    There's something for the Christmas stocking.

    Ho ho ho!

  • Steve (unverified)
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    Why is this solely a problem of people cahing kicker checks?

    I see Ted K going thru the 20% revenue surplus and doing nothing to curtail spending on non-essential things which will lead us right in the the same mess as 5 years back. I mean we had the big tobacco settlement and that has all vanished into the general fund without any special program for health care, much less cancer victims.

    I hope he realizes he has a responsibility both to the people he hires and the taxpayers to be somewhat frugal with the funds he is entrusted with.

  • (Show?)

    I see Ted K going thru the 20% revenue surplus and doing nothing to curtail spending on non-essential things...

    That's pure crap--and very convenient crap at that. There is no "revenue surplus"--there was revenue in excess of the state economist's prediction over a year ago.

    We go through absolute grinding poverty as a state for five years, becoming the laughing-stock of Garry Trudeau, and finally--oh hosanna!--when we have a chance to actually give people a COLA, righties claim it's profligate waste. It is much in the manner that they argue that if the economy is good, it's a great time to cut taxes. And if an economy is bad--it's a great time to cut taxes!

  • Steve (unverified)
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    "The Legislature also finished with landmark spending -- $15.1 billion for schools and state services over the next two years -- a 21 percent increase over the current two-year budget period, which ends Saturday. "

    http://www.oregonlive.com/elections/oregonian/index.ssf?/base/news/118308754691220.xml&coll=7&thispage=2

    Alright then, they had 20% more money to spend over the previous budget. This is with the kicker included. Since Oregon can't engage in deficit spending (thank god), then one would assume they collected 20% more revenue - yet we still don't have enough. I was very disappointed at what happened with the tobacco settlement.

    Ted must realize he may not have the luxury of a 20% upside next time around, so what is he doing to economize?

    My point again, is with 20% more over the past two years I don't really notice any increase in services or any attempt to save it, besides the corporate kicker going to a rainy-day fund.

  • (Show?)

    I was very disappointed at what happened with the tobacco settlement.

    Before we let you harden that assertion into received wisdom, care to share a source on what exactly happened to the tobacco settlement?

  • Alligator tears (unverified)
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    Grinding poverty for five years? Oregon is in the top ten in spending per capita. The only poverty is of the taxpayers.

    Funny how you say that when a downturn is imminent it is a bad time to send the kicker out. That is the BEST time!

    It really is all about government for you folks, isn't it?

  • DanS (unverified)
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    Part of the problem with this post and the liberal comments that support Jeff's siren call are the conflicts that BO people have.

    If I remember correctly, Jeff earns a paycheck from PSU (Gov't money). Kari, for all practical purposes, earns a Gov't paycheck as everyone that advertises on his BO site appears to be political in nature (more Gov't money).

    BO people love taxes because it pays them.

    I've no problem with BO people supporting the system that support them. I'd probably do the same thing in your position. Just don't act so Holier Than Thou about it.

  • LiberalIncarnate (unverified)
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    I get really tired of anti-tax, morally corrupt idiots posting on here. You want to cut taxes until bridges fall down, believe that everyone must pull themselves up by their "bootstraps", but the irony is you ARROGANTLY refuse to realize that this country and all of its social benefits and taxes has allowed you the opportunity to be successful.

    If you wish a nation that serves only the corporate interest, MOVE to MEXICO! Or, take your guns, move to a cabin in the woods and have the Feds shoot you. F*&^ Freaks!

  • LiberalIncarnate (unverified)
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    Mosts Liberals and Progressives have already read this:

    http://home.comcast.net/~theyellowdog/joerepublican.htm

  • Bert Lowry (unverified)
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    I can't remember any of the details, but I recall that the Republican House borrowed against the tobacco settlement to overcome a short-term budget deficit. Does that ring any bells for anyone? I remember thinking at the time that it was a dumb move.

  • Tom Civiletti (unverified)
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    Ah, yes, another appearance of the clearly not endangered species, Pogo oregoni, thought to be a cross of the kangaroo and the ostrich. It spends its time jumping up and down wildly when not hiding its head in the sand.

  • (Show?)
    Posted by: Alligator tears | Dec 10, 2007 10:36:24 PM Funny how you say that when a downturn is imminent it is a bad time to send the kicker out. That is the BEST time!

    Wow, a total moron. So when revune goes down because the economy is taking, unemployement goes up and hence more demands on public services, that is the time to give back money?

    So if you lose your job because your have emdical emergancy and are getting unemployment (i.e. you are getting less than a full paycheck and have higher bills) you refuse part of your unemployment check because that will help your situation?

    Good "thinking" there sparky.

    BTW, the reason Oregon's economy hasn't really tanked yet because the housing bubble hasn't fully burst here yet because of the sub-prime meltdown, as it has in other regions and states.

  • (Show?)

    Guh.

    "...because the economy is taking..."

    Shoudl read:

    "...because the economy is tanking,..."
  • Miles (unverified)
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    Oregon is in the top ten in spending per capita. The only poverty is of the taxpayers.

    Source, please?

    Not wanting to let this stand unchallenged, here are links to the Tax Foundation (certainly not a bastion of liberalism) and the Census Bureau. The Tax Foundation says that Oregon's tax burden puts us in 37th place, and the Census data show that our per capita taxes put us in 40th place. There is no "poverty of the taxpayers" in Oregon; we are a low-tax state, as anyone who has lived elsewhere can tell you.

    My point again, is with 20% more over the past two years I don't really notice any increase in services

    Steve, isn't it possible that the 20% was just enough (or maybe not even enough) to stabilize funding for the programs that have been cut over the last five years? We added new state troopers (instead of cutting them). We stabilized class sizes (instead of increasing them). We added a few people back to OHP (a far cry from the almost 100,000 that Gov. K cut from the program since he took office). It's easy to forget just how deep some of the cuts were, but they were real. Once you factor in the cuts plus inflation in the intervening years, that 20% increase doesn't get you very far.

  • Tom Civiletti (unverified)
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    Anti-taxers belie their own rhetoric on efficient use of government funds. The yoyoing of state budgets cause serious inefficiency in programs, as planning often goes for naught, infrastructure sits idle, and workers are occupied with adjusting to change instead of delivering services.

    And if anti-taxers want the state government to respond to economic downturn by providing stimulus, they should circulate an initiative for the constitutional change necessary to authorize the state to carry over budget deficits. I'll sign.

  • Gordie (unverified)
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    Miles, don't forget that comparisons of spending and taxing is apples and oranges. There are fees, lottery income, tobacco settlement money, etc.

  • dddave (unverified)
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    Where do we start? "We go through absolute grinding poverty as a state for five years"

    Grinding poverty does not pay PERS 100%+ pensions. Or do you mean taxpayers grinding poverty with a $48 BILLION biennial tax load?

    "I get really tired of anti-tax, morally corrupt idiots posting on here. You want to cut taxes until bridges fall down, believe that everyone must pull themselves up by their "bootstraps", but the irony is you ARROGANTLY refuse to realize that this country and all of its social benefits and taxes has allowed you the opportunity to be successful."

    My success is not derived from the US Govt, however, the US Govt success IS derived from my paycheck.

    "BTW, the reason Oregon's economy hasn't really tanked yet because the housing bubble hasn't fully burst here yet because of the sub-prime meltdown, as it has in other regions and states."

    You mean the 4% house pricing slide in OTHER states and that we have "enjoyed" and 85% increase in real estate valuation (and tax hike) since 2000 per the Oregonian?

    "Steve, isn't it possible that the 20% was just enough (or maybe not even enough) to stabilize funding for the programs that have been cut over the last five years?"

    You mean "stable" like a tobacco tax would have given to those poor children (up to age 27 and $60k family income)? Please post the state budgets for the last 20 years and piont us to the "unstable" part, would ya?

    "ti-taxers belie their own rhetoric on efficient use of government funds. The yoyoing of state budgets cause serious inefficiency in programs, as planning often goes for naught, infrastructure sits idle, and workers are occupied with adjusting to change instead of delivering services."

    Please, Teddy just hired what, 1700 state workers with no more justification than "we had the money". Again, please post the state budget for the last 20 years and show us this yoyo effect. And if your workers are adjusting to change rather than working, you must be in the public sector, we just get fired for not working in the private sector.

    Good gems there guys, you all sending your "overcollected txes" checks back to Ted, right?

  • Tom Civiletti (unverified)
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    dddave,

    It's easy to find the state budget totals going back just about as far as you like. It takes some smarts to adjust for inflation in what government pays for, increase in the populations served, the expense of dealing with new problems caused by economic activity, and changes in support levels for programs paid from revenue collected at the federal and local levels. I have NEVER noticed any anti-taxer commenting on Blue Oregon who has demonstrated the intelligence needed to do any of that, so posting state budgets would be a waste of time.

    And if you do not realize how your economic fortunes are enhanced by government action, then you do not demonstrate much intelligence either.

  • Miles (unverified)
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    Grinding poverty does not pay PERS 100%+ pensions.

    No, but legal contractual obligations do. You can criticize those who created the system (I certainly have), but you cannot criticize public employees who worked for 30 years under a contract for demanding what they were promised.

    Besides, the total compensation package of a public employee, including retirement, is still lower than comparable private sector pay. But I guess your idea of "good government" is one that pays so little that no one is willing to work there. That's the only logical conclusion of your argument.

  • (Show?)
    Posted by: dddave | Dec 11, 2007 2:59:02 PM My success is not derived from the US Govt...

    Really?

    So you use zero public infrastucture either directly or indirectly for your success?

  • Dan (unverified)
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    Well...let's just see how many "progressives" turn in those kicker checks. It's all about leadership by example, right? Well, put up or shut up.

    My bet is that folks who curse the kicker and all that it stands for will still cash that check and spend it...or save it...or invest it...or do whatever they think is personally best for them. It's still their money, whether or not you agree with the policy. Let's just see how Oregonians (a majority of them Democrats, right?) REALLY feel about that kicker check.

    (And yes, isn't it completely insidious and evil for those checks to go out to taxpayers when Christmas is around the corner and utility bills are highest! That's so schemeing and conniving to give back tax refunds when people NEED it the most! The unmitigated gall!!)

  • Steve (unverified)
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    I was very disappointed at what happened with the tobacco settlement.

    Before we let you harden that assertion into received wisdom, care to share a source on what exactly happened to the tobacco settlement?

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    I was very disappointed - You have to take my word for it.

    what happened with the tobacco settlement. - "Oregon's spending on tobacco prevention amounts to 2.4% of the $348.5 million . . . Oregon's tobacco settlement payments are folded into the state's general fund"

    http://tobaccofreekids.org/reports/settlements/state.php?StateID=OR

    My basic point is that anything like dedicated funds goes straight to the general fund, just like the rainy-day fund will.

    Before you hyperventilate, I never said CUT taxes! My main point is Teddy K is the CEO of this state and he/the legislature have no fiscal mgmt skills whatsoever.

    ONe day a recession will happen and Teddy will have over-staffed when flush with cash like the 20% increase over last biennium and then scramble to find way to pay all the benefits. This usually means cutting schools and road repair and police unless he is putting that upside in a reserve account like normal people do.

    Blame whoever you want, but he is the governor. If he wants new taxes/funding, show some credibility, intelligence and capability as a leader one time.

  • (Show?)

    Ok the damange has been done. What do we do to address the short falls we are going to have to face?

    Fred

  • (Show?)

    Steve, you seem to be making a common "thoughtful conservative" mistake when dealing with government budgets: you fail to account for population growth and inflation.

    I once did a basic calculation accounting for the per-capita State spending from 1990 through 2002. The upshot? Adjusting for significant increases in population and moderate inflation, government budgets should have risen by about 60% to keep up. Instead, they'd risen by slightly less than 40%. And that was before the 2002 recession, which caused nearly no increase for several years, even though neither inflation nor population increase stopped.

    The bottom line is that the 20% increase in budget you're harping on raises us up to less than 80% of the per capita government spending we were doing just two decades ago. Productivity gains in delivering government services (such as using computers rather than clerical workers) can make up some of that, but many services simply don't compress well. It's nice that the same number of DMV workers can process twice the number of people they used to, but the only way to do that with teachers is to double class sizes, which research has proven doesn't actually work to educate children.

    If conservative ideology was correct and there was indeed massive amounts of waste in government, Republicans would be heroes now for being able to both keep our roads working and cutting taxes. Instead, all they really do is borrow against our future by either: 1] directly borrowing and shoveling cash their cronies, 2] letting critical business infrastructure collapse, and 3]"saving" money in public service wages by offering larger than average pensions as compensation for smaller than average salaries (and then whining piteously when the bill comes due). Among other things, all this really does is damage the State's credit rating, which is one point of actual government waste (as is paying the cost of sending out a bunch of checks for the kicker instead of merely rebating it on people's tax returns).

    I suggest you go to a town hall that Ben Westlund is doing in his run for State Treasurer. He was also a thoughtful Republican who initially ran for office in the belief that he could squeeze "waste" out of government, only to discover when he examined the budget, that there really wasn't any. I'm sure that he can help you studying the budget, and with a couple of months of that, you'll find that Governor Kulongoski is nowhere near as dumb as you think he is.

  • Garlynn -- undergroundscience.blogspot.com (unverified)
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    Can anybody remind me why the Democratically-controlled state House, State Senate and Governor couldn't come up with a plan to get rid of this kicker tax nonsense during the past legislative session?

  • (Show?)

    The kicker, which was originally a moderate statute created by Democrats, was turned into the bizarre monster that it is today by a initiative referendum that put it in the State Constitution.

    Additionally, there is another initiative referendum that makes it so that you need to have a 3/5ths (60%) vote to increase taxes and fees. This makes it so that if Republicans manage to get some sweetheart tax loophole to one of their cronies by a bare majority, it takes a 3/5th majority to remove it.

    The prohibition even prevents the legislature from even referring a tax increase as a statute to the people. Constitutional amendments are unaffected. This is why measure 50 was referred to the people as a Constitutional change rather than as a mere statute.

    Any more questions?

  • Steve (unverified)
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    "I once did a basic calculation accounting for the per-capita State spending from 1990 through 2002."

    In '87 the biennial budget was about $12B, this year is about $48B or a 4x increase in 20 years. I am hard pressed to believe inflation (maxed at about 3%/yr at worst) and population equal a 4x increase. Oregon's pop in '87 was about 2.5M ($4800/person), this year, I think we are about 3.8M ($12600/person) this means inflation would have to push 200% over 20 years. I am not convinced.

    My issue is in any company cost control is a 24/7 job. In the state we settle for Westlund taking a whack at it and giving up and then Teddy giving a half-hearted swing at it.

    I am only asking Ted makes it a priority to cut unnecessary spending, otherwise kids/public safety/health and roads get hit first in any cut.

    For everyone griping a the kciker check, I can tell you (albeit anecdotally) for every kicker check blown on gifts, there are about 15 checks used to pay bills. People are getting maxed out on tax!

  • (Show?)

    You're only looking at the State budget, Steve, not the combined State and Local budgets. Thanks to Measure 5, which gutted property tax revenues for local governments, the State has had to take over many of their functions, including schools. For example, twenty years ago local governments paid over 2/3rds of the costs of schools, with the State picking up the rest. Now those numbers are reversed, with the local portion falling ever further behind. Our local governments are shells of what they once were, the costs are now shifted to the state.

    Also, don't forget when calculating yearly inflation and population increase over a longer period, to compound. 5% yearly inflation over a 20 year period isn't a (5 * 20 =) 100% increase; it's a (1.05 ^ 20 = 2.65) 165% increase.

    In addition to all of this, we've also had a massive tax shift from corporations to households in the misbegotten belief that this would bring a disproportionate share of businesses to the area (it hasn't). Twenty years ago, households and corporations paid taxes equally; now households pay 2 billion dollars more. So now New Yorkers who own shares in out of state timber companies get a special tax incentives for doing nothing, while we pay ever increasing taxes to help with firefighting costs. This shift makes things feel especially bad for State taxpayers - yes you are indeed paying more tax than you were - but this is all due to the GOP.

    Finally (well not finally - the truth is that Republican shenanigans go on for a lot longer than I can type), there is the issue of overwhelming government waste by underpricing resources. The market value of trees on private land runs anywhere from twice to thousands of times the value that timber companies are charged for the exact same product on forest land. However because pricing resources at Fair Market Value is considered a "Fee Increase", because of idiotic changes made to the State Constitution, Republicans are easily able block all efforts to raise this giveaway to their core contributors. And State taxpayers suffer; really, we'd be better off financially if we merely offered 15 cent a gallon subsidized gasoline to a select few of the Republicans' campaign contributors than what we're doing now.

    Again, Steve, I laud you for your interest in this. Self education about budgeting and economics is the first step towards a real conversation about public management. To skip to the end of that path, let me say mildly that it is no accident that the national economy does better when Democrats are in charge. (This is neutral verifiable fact that has been true for the past 50 years.)

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