State budget shortfall will impact PSU

Due to a dismal state budget forecast, Portland State could face a $5 million reduction in its budget allocation from the state General Fund over the next year.

Governor Ted Kulongoski announced Tuesday that Oregon’s most recent revenue forecast for the 2009–11 biennium is down by $560 million from the March forecast, largely due to lower-than-expected personal income tax collections.

Yesterday, however, state officials announced that revenue from cigarette taxes was overstated in the forecast by $14.5 million. With that taken into account, the total budget shortfall for the two-year budget period, which will end in mid-2011, amounts to $577.1 million.

PSU President Wim Wiewel said the governor has asked universities to brace for an approximately 9 percent decrease in their General Fund budget allocation between now and June 30, 2011.

“For PSU, the financial impact over that time period will be approximately $5 million,” Wiewel said in an e-mail sent to all of PSU on Tuesday.

When contacted for comment on the potential impacts of the budget shortfall, PSU’s Financial Controller Dee Wendler said the administration doesn’t know anything more about the potential impact to PSU at this time.

Lindsay Desrochers , vice president of Finance and Administration, could not be reached for comment.

According to Wiewel’s e-mail, the Department of Administrative Services—a state agency—would issue detailed instructions this week providing more specifics about the budget reduction plans.

In an open letter on Tuesday, Kulongoski said that layoffs and reductions in services in general fund programs will be unavoidable. He will be directing all agencies where layoffs are likely to explore options—such as additional furlough days or reduced workweeks—to try to minimize such layoffs.

He goes on to say that the current freeze on step pay increases for management, executive service and unrepresented employees will remain in effect.

“Further, I will ask our labor organizations to follow suit,” he said. “By so doing, we can help to save jobs and preserve services.”

Weiwel points out that, in the governor’s letter, he does not specify how these steps will impact OUS institutions.

“I am as distressed as I know all of you are by this unfortunate news,” Wiewel said in the e-mail. “The last two years have been very challenging and it is clear that we are not yet out of the woods.”

The budget forecasts are conducted tri-yearly in March, June and December.

The June forecast for General Fund revenues for 2009–11 is $12,683.9 million, which represents a decrease of $511 million from the March 2010 forecast, according to the revenue forecast report. These figures do not take into account the $14.5 million over-estimation of cigarette tax revenue.

Nearly all of the decrease for the June forecast is attributed to lower-than-expected personal income tax collections during the current tax season and a small decrease for the 2011 fiscal year.

Kulongoski said that more and more Oregonians are unemployed or underemployed and are thus continuing to turn to the state for assistance, though there will now be less money to meet their needs.

The unemployment rate in Oregon as of April was above 10 percent where it has been for the last fifteen months, according to the forecast summery. According to the report, such figures are not unusual in an economic climate like the present one because unemployment tends to be a lagging indicator of economic activity.

According to the revenue forecast, the Office of Economic Analysis predicts a total increase of 1.5 percent in employment for the second quarter of 2010 and positive job growth through the rest of the year.

However, the forecast also states “the growth is too weak to overcome the yearly average decline.”

Despite the shortfall and weak employment figures, the revenue forecast says, “The good news is consensus that the recession in the U.S. and Oregon is over. The cloudy news is the strength of this recovery and the prospects of the job market.”