Tuesday, June 7, 2016

Oregon's economy going 'full-throttle'.

Oregon's economy, buoyed by across-the-board increases in jobs and wages, is going "full-throttle," a panel of legislators learned Friday in Salem.

And while concerns remain about how the state's lack of affordable housing might affect the economy, the bottom-line financial figures give Oregon one of the strongest state economies in the country, according to a new economic and revenue forecast.

"It's all good news from an economic perspective," said Josh Lehner, an Office of Economic Analysis economist. "The economy is doing really well in Oregon today."

Lehner, along with fellow state economist Mark McMullen, walked legislators through the new forecast, which looks at particulars such as employment trends and long-term growth projections.

Current gains in some sectors are so robust, Lehner and McMullen said, that they aren't considered sustainable.

Over the past two years, for instance, Oregon has added about 5,000 new jobs per month. That's far more than the 2,000 jobs needed to keep pace with population growth.

"That means we are growing by an unsustainably fast rate," McMullen said. "At some point, once that slacks gets taken out, we will transition into more sustainable long-term growth."

Revenue forecasts are issued four times a year and are intended to give legislators, employers and the public an idea of what to expect in terms of economic indicators.

Friday's forecast was delivered to a joint meeting of the Senate Interim Committee on Finance and Revenue and the House Interim Committee on Revenue.

Not surprisingly, Republicans and Democrats had very different reactions to the report.

Republicans took particular aim at the forecast's projection that the ending fund balance for the state's 2015-17 budget is expected to fall short of earlier projections. That shift came after budget adjustments in the 2016 session, several approved with bipartisan votes.

"With today's revenue forecast we learned that Oregon's economy is not keeping up with current spending levels," read a statement from House Republican Leader Mike McLane, R-Powell Butte, and Senate Republican Leader Ted Ferrioli, R-John Day. "Even with record revenues, our ending fund balance is expected to be $57.1 million below previous projections, largely due to overspending by Democrats during the 2016 session."

Senate Majority Leader Ginny Burdick, D-Portland, didn't agree.
"The economy is doing really well in Oregon today" -- state economist Josh Lehner.


"Today's economic and revenue forecast speaks for itself," she said in a statement. "Jobs growth is going strong, with 5,000 jobs added to the economy every month. State revenue projections continue to grow."

Friday's forecast comes just as the 2015 tax-filing season has concluded. As of May 1, overall collections were down 30 percent over what had been expected, McMullen said. But a sudden rush of filings, sometimes totaling as much as $13 million per day, put overall collections on track to meet expectations.

The minimum-wage increase passed by the 2016 Legislature also came under scrutiny, with the forecast predicting that 40,000 jobs will not be created between now and 2025 as employers adjust and adapt to the mandated increase.

"There will be a near-term wage boost for workers, but over time, employers will respond to that," Lehner said. He added that the bulk of the economic sectors affected by slowing job growth among minimum-wage workers will include food processing, leisure and temp agencies.

In response to a question from Rep. Phil Barnhart, D-Eugene, Lehner acknowledged that 40,000 jobs over 10 years represents just a fraction of the state's total workforce.

General fund revenues for the 2015-17 biennium are expected to reach $18.02 billion. That represents an increase of 0.1 percent, or $17 million, from the state's previous forecast, and an increase of $1.9 billion relative to the 2013-15 budget year.

A note of concern focused on the lack of not only affordable housing, but also total housing supply, both in Portland and across the state.

"We have 1 million more people in Oregon now than we did during the 1980s," McMullen said, "but we are building the same number of new houses per year now than we were 25 years ago."

He added that housing affordability — one of Oregon's big draws compared to other West Coast states — quickly erodes if an insufficient supply of new housing isn't being added.

"The problem today that makes it a crisis," he said, "is that we're not building anything."

— Dana Tims