SALEM – Oregon’s December state revenue forecast, released this morning, is up by $69.7 million for the current biennium, but down by $266.8 million for the 2011-13 biennium, compared to the September forecast.  The biggest reason for the change is an adjustment to state income tax withholding practices, which has the effect of increasing revenue for 2009-11 and decreasing revenue for 2011-13.

This “mixed bag” result means that schools are not likely to experience further reductions in revenue this year.  But it also means that the governor and legislature will have about $270 million less than expected in general fund and lottery revenues as they build the state budget for 2011-13.  Two additional forecasts – in March and in May – are yet to come this year.  For 2011-13, the legislature will use the May forecast in finalizing the budget.  With this latest forecast, the state’s 2009-11 reserves have grown to $174.6 million, which provides some protection for the remainder of this biennium.

State Economist Tom Pitiowsky told a joint meeting of the House and Senate Revenue Committees that there are reasons – such as 2010 increases in Oregon job growth, exports and income growth – for optimism going forward, “but we’re not off to the races yet.”

Sen. Diane Rosenbaum expressed “cautious optimism,” but pointed out some of the challenges – such as loss of federal dollars – facing the legislature in developing the 2011-13 state budget.  Simply put, it appears that $1.4 billion of anticipated growth in state revenue for 2011-13 will be offset by the expected loss of about the same amount in federal dollars.