Oregon Wins Blue Ribbon for Unfounded Optimism; Everything "Weaker than Expected"

I have been wondering how long it would take for a state to proclaim everything is weaker than expected. Today the state of Oregon has the dubious honor of being first.

OregonLive reports With projected revenues dropping by as much as $1 billion, Oregon leaders debate what to do

Oregon's state budget picture is bleaker than previously thought, with revenues down by as much as $1 billion since the Legislature wrote the current, $14 billion two-year spending plan.

On Tuesday, Gov. Ted Kulongoski advised legislative leaders, school superintendents and agency directors that state economists expect tax collections to be down significantly more than the $577 million shortfall projected in May.

Because the Oregon Constitution prevents state government from running a deficit, the governor ordered agencies to cut spending by 9 percent to fill the $577 million hole in the 2009-2011 budget.

Now state economists believe revenues will shrivel by an additional $200 million to $500 million, prompting Kulongoski to send a flurry of letters and notices warning of more cuts to schools and state services.



"Many indicators, including housing starts, consumer spending, bank lending, job growth and others have been weaker than expected," Potiowsky wrote on Aug. 11. "Likewise for Oregon, the indication is that the recovery is weaker than our assessment in the last quarterly forecast."

Overoptimism Oregon Style

In July of 2009 state revenue projections were $222.8 million to the plus side. Now just one year later, smack in the midst of a "recovery", a $577.2 million June 2010 deficit is too optimistic by as much as another $500 million.

Congratulations of sorts go to Oregon for winning the blue ribbon for unfounded optimism.

Oregon has already cut state spending by 9%. Another 9% may be on the way.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List