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Brad Cain Associated Press Writer
Published: 28 August 2009

SALEM, Ore. (AP) -- State Economist Tom Potiowsky told lawmakers Thursday he expects the deep recession to begin easing its grip on Oregon this fall.
In his latest revenue and economic forecast, Potiowsky warned it would be a slow recovery. He said joblessness would remain high for some time and it could take until early 2013 for state employment to return to pre-recession levels.
Oregon's unemployment rate hovered at 11.9 percent in July -- tied with California for fourth-highest in the nation -- but Potiowsky said he thinks that leveling off shows the economic slide has slowed.
"The sense of free fall is over," Potiowsky said in a presentation to the House and Senate revenue commmittees. "We just don't have the sense of the floor dropping out from under us like we did before."
At the same time, he said, businesses are likely to wait a while longer before adding jobs.
In his latest revenue projection, Potiowsky said personal income tax collections are now predicted to be $139 million lower than had been forecast at the close of the 2009 legislative session in June with a $43 million drop in lottery revenues.
He said, however, that the drop isn't cause for alarm and is far less than the $600 million quarterly declines the state saw during the recession that hit Oregon earlier this decade.
The state's two-year budget has enough cushion to avoid cuts in programs or services for now, legislators said after Thursday's forecast.
Lawmakers will get two more forecasts and likely a January statewide referendum vote on a $733 million increase in corporate and personal income taxes before they meet again in February to rebalance the state budget.
If the tax hike is rejected by voters, lawmakers then would have to figure out a way to balance the budget with cuts or find other ways to keep the state in the black.
Democratic Gov. Ted Kulongoski, who supports the tax increases, said voter rejection would "create a significant hole in the state budget that would result in serious cuts to education, public safety and human services."
A key Republican, House Minority Leader Bruce Hanna, called the tax hikes "job killers" that will prolong the recession by "making Oregon even less competitive."
The tax hike debate aside, Potiowsky said Thursday that most analysts believe there is cause for optimism that the overall economy has hit bottom and is slowly coming back up.
"We are going to see signs of recovery this fall," the state economist said. "It will show up in terms of things like home sales and consumer spending."

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