Don’t be fooled by Oregon’s latest budget forecast. It’s good, not great.
Lawmakers learned Tuesday that they may get $30.5 million more in this two-year budget and an additional $54.9 million in the next two-year budget.
Millions more is better than millions less, but the state budget will still be nearly $700 million short of maintaining government services for another two years. And even a balanced budget should not hide the other ways the state is unbalanced.
There are still some 160,000 Oregonians who can’t find a job. Thousands of Oregonians also struggle with a job that now pays less than it did a few years ago.
The budget forecast didn’t improve the state’s $16 billion unfunded liability for the Public Employees Retirement System, or PERS. The forecast also predicts a future gap between what the state brings in and the cost of government.
“The outlook for the 2013-15 biennium calls for some modest improvement in revenue growth,” the forecast says. “However, state revenue collections will still likely fail to keep pace with the growing cost of providing public services.”
In Oregon government, this gap used to be called the alligator’s mouth graph, the top part of the alligator’s mouth being the projected increase in state costs and the bottom being revenues. The costs of government have kept going up by 16 percent or so and revenues have been increasing by 10 percent to 12 percent, according to State Economist Mark McMullen. The gap between the two lines must be fixed every time the state budget is written. You may remember that in the last budget, a key fix was changing the way the state provides health care to people in the Oregon Health Plan.
Oregon also faces a long-term problem of being outclassed by other states because of its average per-capita income. Oregon’s is below the national average. It has lagged behind Washington and California. The federal Bureau of Economic Analysis said Oregon’s average per-capita income was $37,909 in 2011. The national average was $41,663. Oregon hasn’t managed to shrink that income gap over the last 10 years.
Unless Oregon is somehow more efficient than other states or doesn’t face the same needs for public services, Oregon must tax people at a higher rate if it wants to spend the same amount of money for government services per capita.
Gov. John Kitzhaber and State Treasurer Ted Wheeler talk about these deeper challenges. They have both suggested PERS reforms and using investments in education to slowly shift the state into a better position. Earlier this year, Kitzhaber said, “the state must continue to play a role as job accelerator and barrier buster in its partnership with the private sector.”
Kitzhaber is scheduled to release his proposed state budget on Nov. 30. We anxiously await a list of job accelerators and barrier busters to give Oregon’s economy the balance it needs.