“2020 has been, I think, a little bit rough on Oregon’s image,” State Economist Mark McMullen said this week.
“If you’re 3,000 miles away, and you’re seeing one day it says Portland has the worst air quality in the world. The next day you say, ‘If I go to Portland, an anarchist is going to throw a can of soup at me. And they don’t even have college football and don’t rake their leaves.’”
McMullen’s point as he talked with legislators via videoconference was that wildfires are only one aspect of the existential threat to Oregon’s long-term reputation and thus its economy.
He noted that Portland and Oregon have been badmouthed before, including when President George H.W. Bush’s staff called Portland “Little Beirut” at a time of tumultuous protests during his presidency.
But this time seems different, McMullen said. Will these events combine to take the shine off Oregon’s traditional attractiveness to outsiders?
“Our primary comparative advantage is our ability to attract migrants from other states — skilled working-age households and the like,” McMullen told the Oregon House and Senate tax committees on Wednesday.
One positive side is that Oregon ranks second nationally as far as people working from home. That can be done anywhere in the state — if the area has dependable high-speed internet — and more urban office workers might move to rural regions, diversifying the local economies.
“In the near term, working from home is all about who can, right? If you’re a truck driver, you can’t work from home. If you’re an accountant, maybe you can,” McMullen said. “In the longer term, it’s all about quality of life.”
Portland and the rest of Oregon remain inextricably linked, as outsiders’ perception color their interest in moving here, perhaps even doing business here.
A good outlook in a bad time
McMullen and Senior Economist Josh Lehner delivered surprising revenue and economic forecasts. Most folks, including yours truly, had expected the quarterly forecasts to show that COVID-19 restrictions had pushed the state budget off a cliff. After all, the Legislature held two special sessions this summer, in part to trim the 2019-2021 budget, and Gov. Kate Brown again tangled with the Legislature and vetoed some of those budget adjustments.
The economists said the federal CARES Act poured $14 billion into the Oregon economy, including short-term aid for some businesses. The state Employment Department has distributed $3.5 billion in jobless benefits, with more to come. Meanwhile, well-to-do Oregonians had a good 2019 and paid more in income taxes than projected. In contrast, low-wage workers — the people suffering the most from Brown’s business restrictions — have less effect on state revenues.
As a result, the state budget is almost back to its pre-COVID revenues. “We looked under all the couch cushions and found as much revenue as we could to fill the hole,” McMullen said.
Even the wildfire devastation will boost revenues. Rebuilding, repairing and remodeling are expected to cost more than $1 billion, so companies doing that and related work are projected to pay an additional $18 million in the corporate activity tax.
The budget numbers do not reflect the loss of human lives, environmental connections and memories. In addition, the state’s cost for fighting the fires won’t be known for weeks. Officials have said Oregon might file a wildfire insurance claim with Lloyd’s of London.
When is a success not a success
Some members of the tax committees didn’t buy the idea that a surprisingly healthy state budget counted as a success.
Sen. Lynn Findley, R-Vale, whose district covers more than one-third of Oregon’s land mass, said: “When you travel through Central and Eastern Oregon and talk to businesses, they expect 60% of the restaurants and bars to not make it through this and close. Fifty percent of small businesses are struggling and will close. They’re burning through their savings. I don’t think this is a success. I think we have damaged rural Oregon to a degree that I don’t know they will come back in the next three to five years.”
Rep. Nancy Nathanson, D-Eugene, who chairs the House tax committee, said: “I’m concerned that the picture that we’re hearing is that everyone is fine right now and doing remarkably well, and that’s not the case with many of those in our communities. I think the point is that incomes recorded for a previous time period looked pretty good.”
This week’s revenue and economic predictions depend on Congress passing another federal aid package, though smaller than the CARES Act. Those talks have stalled among the U.S. House of Representatives, Senate and White House. Sen. Ginny Burdick, D-Portland, wondered what would happen if Congress fails to act.
“If that does not occur, Sen. Burdick, I think that there is a concern about a cliff that would come in the next few months as households run through what savings they have left,” McMullen said.
The current good economic news obscures the pandemic’s long-term effects. What happens, McMullen asked, “as we go forward and all this deferred rent comes due, and the federal aid goes away, and we’re still not having sales because people are afraid to go out?”
He answered himself: “We have things worsening going forward.” Look for a major restructuring of some industries. Oregon’s unemployment rate, which no longer exceeds that of the Great Recession, could soar again next spring and remain high as more businesses close.
Rep. Alissa Keny-Guyer, D-Portland, told constituents during a town hall meeting later Wednesday that the better-than-expected budget predictions would help her sleep better.
Still, she and other legislators — Democrats and Republicans alike — spoke of the increasing income inequality throughout Oregon as low-income households are affected disproportionately by the pandemic and by the wildfires.
Though firefighters are making progress against the mega-fires, “The news right now is not looking good on the COVID front, I have to say,” Sen. Michael Dembrow, D-Portland, said during the town hall.
Speaking of vetoes: Legislators have questioned the constitutionality of some Brown’s vetoes, but she stood by them when I asked her this week. Brown reiterated that she expects to call a special legislative session for after the Nov. 3 general election.
Wildfire coverage: In last week’s Capital Chatter, I mentioned the news media’s frustration with not being allowed to adequately cover the wildfires. One example was journalists being excluded from Brown’s visit to the Santiam Canyon, much of which was devastated by the Beachie Creek Fire.
This week marked a partial turnaround. Brown allowed a few media representatives to join her tour of fire damage in Southern Oregon.
Speaking of raking leaves: Democrats said this week that they intend to introduce a bill in the 2021 Legislature to ban leaf blowers. They also want to sever Oregon’s connections to some federal tax laws, which would result in some Oregonians paying higher taxes, and to revise the state’s forest taxes.
Not so fast: In response to the revenue forecast, Senate Republican Leader Fred Girod, R-Lyons, issued this statement: “Thanks to federal action, Oregon has $1.7 billion in its ending balance, and there is absolutely no reason to raise taxes. The corporate and personal income taxes set new tax collection records.
“Governor Kate Brown’s government overreach during the COVID-19 event has deepened the income inequality in the state and lower-income Oregonians have been hit hardest. Hard-working Oregonians have also been impacted by the wildfires. Cities and counties across the state that rely on tourism for income have been decimated and are not recovering quickly, and the perpetual violent riots in Portland have damaged Oregon’s national image for anyone who thought about relocating here.”
The last word: On her radio show, Sen. Betsy Johnson, D-Scappoose, said the wildfires were of apocalyptic scale: “We have had plague, now conflagration. I’m waiting for rivers of blood and frogs falling out of the sky.”