SALEM — 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.

“Unfortunately, it now appears that the ongoing effects of this recession will continue to undermine our budget,” the governor wrote in a letter to his fellow Democratic leaders, Senate President Peter Courtney and House Speaker Dave Hunt.

The warning comes nine days before state economist Tom Potiowsky is scheduled to deliver an updated economic forecast to lawmakers. But Potiowsky offered a disturbing preview of that talk in a memo to the governor obtained Tuesday by The Oregonian through a public records request.

“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.”

Potiowsky and other economists are still crunching the numbers and say next week’s official forecast could show revenues down $200 million to $500 million. There’s also a chance the final number could be lower or higher.

Continue Reading…