Comparing recessions.

Byline: The Register-Guard

Compared to the recession that reached its depths in 1982, Oregon's current economic downturn is mild - except in one important respect. The two recessions are comparable only in terms of their effects on state revenues, where the current declines are as steep as they were 20 years ago and the effects are even more widespread.

Oregon's recession of the 1980s came when high interest rates brought about the near-collapse of the wood products industry, then the mainstay of the state's economy. The state's most timber-dependent areas, including Lane County, were particularly hard-hit. Economic diversification became the top priority of local and state governments alike. Some parts of the state have never fully recovered from the trauma.

The current recession is less painful, partly because many parts of Oregon, Lane County among them, have diversified their economies. As reporter David Steves noted in a Register-Guard article published Sunday, unemployment is higher than in most other states, but remains well below the 11.5 percent rate recorded in 1982. In the 1980s, Oregon lost four times as many jobs as have been lost in the current downturn. Unlike in the 1980s, population growth has continued, and personal income has grown at a rate exceeding the rate of inflation.

Yet projections to be released Wednesday are expected to show that the state government's income will decline by an additional $200 million to $300 million, bringing the total shortfall in the current biennium close to 20 percent. That's equal to the shortfall of the early 1980s.

The state depends primarily on the income tax for its general-fund revenue. The income tax has always been a volatile revenue source, and it has become even more so in recent years. Revenue from capital gains taxes, for instance, which in the late 1990s made up 10 percent of the state's income tax receipts, has withered with the decline in stock values. Taxable bonuses and profits from the exercise of stock options have also declined. While most Oregonians continue to earn and pay taxes on ordinary wages and salaries, the froth of the 1990s boom is gone - and the tax revenue it generated has vanished as well.

A 20 percent drop in state revenues has wider effects now than 20 years ago. In the 1980s, public schools depended primarily on local property taxes - a relatively stable, predictable source of revenue - for financial support. Measure 5, approved by voters in 1990, shifted financial responsibility for education to the state, which is mainly dependent on income tax revenue. With Measure 5, school districts traded a stable source of support for a volatile one.

School districts suffered in the early 1980s, just as their communities did. But they did not compete for state funding to the extent that they do today. Legislators have gone to great lengths to avoid cutting school funding. The effects of a 20 percent state shortfall on some state services are amplified by the effort to protect education. In some areas of state government, the current recession is worse than the one 20 years ago.

The 1980s taught Oregon the importance of a diverse economy. One lesson of the current recession is the importance of stable revenue sources. The volatility of the income tax needs to be countered through the creation of reserve accounts, spending controls, diversification of revenue sources or all three. A relatively mild downturn is inflicting a 1980s-style shock to public services, revealing the inadequacies of Oregon's system of public finance.