Revenue forecast seen as good news for drawing state funding

BY KYLE ODEGARD

Gazette-Times reporter

Fears of widespread cuts at Oregon State University were alleviated somewhat Thursday by an updated and rosier state revenue forecast.

The previous forecast, in March, predicted that revenues would be $153 million less than was estimated when the Legislature adjourned in June 2007.

The Legislature responded by withholding $126 million to pay for state employee salary increases. About $12 million in OSU funding was put in limbo.

Now there are hopes the Joint Legislative Emergency Board will release that money when it convenes in late June.

"Given the forecast and where it is, I don't see any reason why they would not release the funds," said Mark McCambridge, OSU vice president of finance and administration.

"That seemed like good news," said Brad Dennis, chief business officer of OSU's College of Liberal Arts, where departments were already tightening belts.

Jock Mills, OSU director of government relations, was more cautious. "We haven't heard a definitive word from the Legislature yet, and they still could retain a portion of the funds," which would result in budget cuts at OSU and elsewhere.

"Any funds in the salary pool that the Emergency Board holds onto can then be spent on anything it wants."

OSU officials said many promised salary increases already have been awarded. If most of the funds continued to be withheld, that could result on campus in higher tuition, program reductions, fewer classes for students and a tougher road to graduate within four years.

For the OSU Extension Service and other public service programs, there would have been layoffs and research reductions.

While the state forecast released Thursday is better than the March estimate - now with a $143 million ending balance, a stark contrast from $29 million in the earlier prediction - Oregon isn't immune from the national recession.

"We are definitely slow as an economy," said Tom Potiowsky, the state's chief economist. Growth should resume by the second half of 2009, he added, and pick up steam into 2010.

Although job growth has slowed, corporate tax revenues have dropped and unemployment has ticked upward, state revenues are holding steady, largely because of an increase in personal income tax collections. A large chunk of that is due to taxes on Phil Knight and other Nike executives making big sales of the company's stocks.

For taxpayers, the slowing economy means it will be a while before they get another income tax "kicker" check like the one they received last December.

The checks are sent out when economic revenues exceed forecasts by more than 2 percent. So far, projections have stayed within that margin. In 2007, taxpayers got more than $1 billion in kickers, reaping the growth of the previous two years.

Bright spots for the Oregon economy include exports, which Potiowsky said remain strong across most sectors. On the flip side, the state's wood products industry has been sent into a tailspin by the falloff in new construction nationwide.

Housing foreclosure rates in Oregon are still just at .5 percent, half the national average and the 43rd slowest rate in the country. Home values are still appreciating in much of the state, although they have dipped in Bend, Medford and Portland.

The Associated Press contributed to this story.