SALEM, Ore. -- The Great Recession is technically over in Oregon but the state's top economist said not to expect to see signs things are getting any better anytime soon.
To add it all up, the outlook report released Tuesday showed the state is facing a $562 million shortfall for the current biennium which runs through next year.
READ: Economic forecast
Gov. Ted Kulongoski ordered across-the-board cuts in state spending to make up for a jolt of bad budget news for Oregon.
Kulongoski said Tuesday that state spending would be trimmed 9 percent for the rest of the current budget period.
Last week a task force called the Reset Cabinet appointed by Kulongoski released a report saying the state will confront a decade of multibillion dollar deficits unless lawmakers control state spending.
"We are hesitant to conclude that this (sign of job growth) is the turning point we have all been waiting for ... we believe this latest quarter is further evidence of a bottoming out of the recession as it relates to the job market," State Economist Tom Potiowsky wrote.
"The unemployment rate in Oregon for April is still above 10 percent and has been there for the last six months," the report stated. "This is not unusual as unemployment tends to be a lagging indicator of economic activity ... 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, were up more than $5 million from the previous forecast, reaching a total of more than $1 billion, according to Potiowsky.
Kulongoski directed agency heads to avoid layoffs if possible, but froze salaries for management and non-public employee union workers.
“On one hand it is surprising, while on the other hand, I have consistently cautioned that we could see continuing declines in state revenues even as the economy begins to recover – and that we should be better prepared to deal with such declines. Today, unfortunately, the reasons for my cautions were confirmed.”
He also requested the unions to meet with the state to discuss extending the salary freeze to all union employees, which would deliver a total savings of $12 million in general fund.
The governor said he would ask the Public Employees Benefits Board (PEBB) to explore benefit changes to keep cost increases to 5 percent for the next plan year, as opposed to the nearly 10 percent increase currently projected. That would save taxpayers about $30 million in the next year.
Potiowsky spoke to a meeting of legislative leaders Tuesday morning and said he does think the recession is technically over in Oregon, but it would be a milder recovery than we're used to seeing in the state.
Another issue was a drop in tax payments, down 16 percent year from last year. And refunds were also higher than expected, a difference from most other states. All of that contributed to the worst year on record for tax payments and refunds.
“Oregon’s significant budget deficit is a product of the Democrats’ massive overspending and the $1.6 billion in new taxes and fees they’ve passed since 2009," House Republican Leader Bruce Hanna said in a statement.
“Despite record unemployment, the current Legislature increased new government spending by over $8 billion while doing nothing to address the state’s escalating pension and benefits costs. We have a staggering shortfall today because the Legislature has consistently ignored reality outside the State Capitol."
The report last week by the Reset Cabinet analyzed spending growth and economic activity in Oregon for the next decade. It says even an economic turnaround won't substantially brighten the dark outlook.
The governor said the magnitude of the budget problem must be understood by the public and decision-makers alike, and there isn't just one solution.
KGW Reporter Anne Yeager contributed to this report.
