State worker layoffs, budget cuts follow Ore. economic forecast

Governor Ted Kulongoski »Play Video
AP File Photo of Oregon Governor Ted Kulongoski, courtesy of Don Ryan.

SALEM, Ore. – Oregon state is half a billion dollars in the hole, a new Economic and Revenue Forecast shows. State Economist Tom Potiowsky made the presentation to legislators Tuesday in the State Capitol's Hearing Room A.

Potiowsky said state general fund revenues for 2009 to 2011 are down $511 million from the March forecast. He cites lower-than-expected personal income tax collections during the current tax season. Without a fix, by 2011 the state would have a $526.6-million shortfall.

KATU Reporter Melica Johnson reports Governor Ted Kulongoski will exercise his "allotment authority" to reduce state agency spending by $560 million. He's responding by calling for major across-the-board cuts: every state agency's budget will be cut by 9 percent.

The budget for the Oregon Department of Human Services reportedly will be cut by $154 million. These cuts come as DHS is parceling out its health-related programs to a new sister agency, known as the Oregon Health Authority. (See where OHA fits in at "Ore. hospitals score well as feds prep infection-treatment changes.")

State police funds will be cut by $10 million. The Oregon state Department of Corrections also will get $50 million less.

Additionally, t
he budget for the Department of Education is being sliced by $252 million. The announcement of this cut comes in the same week as Oregon Department of Education's reports that only 53 percent of Portland's high school Class of 2009 graduated within four years. (See "Report: Ore. graduation rates for minorities at about 50 percent.")

tate workers also will be laid off, though we don't yet know from where. Meanwhile, the state's pay freeze is being extended through June 30, 2011.

The state-worker cuts come one day after the Employment Department released its statewide employment data. From April 2009 to April 2010, Oregon added 300 state government jobs and 100 state jobs for education. Those jobs contributed to an employment outlook that was the "first positive quarterly job growth since the first quarter," Potiowsky wrote in the executive summary of the forecast. "...Given this is an initial estimate of jobs and a seasonally adjusted measurement, we believe this latest quarter is further evidence of a bottoming out of the recession as it relates to the job market."

A news release distributed from the State of Oregon said the state economists message was "that Oregon's recession is likely over, but current job growth is too weak to overcome losses for the year."

"The unemployment rate in Oregon for April is still above 10 percent and has been there for the last six months," the report states. "This is not unusual as unemployment tends to be a lagging indicator of economic activity. Average weekly hours in manufacturing have risen but are still well below levels associated with an expanding economy. Housing permits are considerably higher than a year ago but the level is still reminiscent of recession periods. Housing prices continue to fall albeit at much lower rates.  And although the job numbers were positive in this first quarter of 2010, there is still considerable weakness in a several labor sectors."

Lottery earnings, however, are up more than $5 million from the previous forecast, reaching a total of more than $1 billion.