Portland State Magazine Spring 2008

Agriculture, including hops production (left), is a major industry in Oregon, with more than 80 percent of all products grown in Oregon exported, as seen here from a grain silo on the Columbia River. A: The hou; ing sector is correcting, and housing permits are dramatically down. Bur we're in much better shape than many other parts of the United States. Although our foreclosure rate as ofJanu– ary was in the middle of the state ratings, we had one of the lowest foreclosure rares in the nation throughout 2007. We are seeing a drop in house prices in Oregon, but it is likely char it will not be as dramatic or last as long as in other areas of the country. Q: Lenders have tightened their standards in response co the problems created by years of doling out easy money, including subprime loans. Will chat affect more than housing? A: Possibly. The danger is char the subprime mess will spread co ocher financial areas, making it difficult co gee car loans, small business loans, and lines of credit. If chis happens, then Oregon will feel the downturn just as badly as any other state. Q: As an economist, do you find yourselflooking at something like the subprime meltdown and thinking, "The weakness here has been evident for a while, why are people surprised?" A: Well, yeah. But often it only becomes obvious in hindsight. When things ace booming-like the real estate marker of the last decade-people get caught up in the euphoria. They hear stories about people making money by buying homes, fixing them up, and flipping them back on the marker, and they want co jump in. Everybody loves the idea of getting rich quick. It's the same thing we saw with the stock market in the 1990s. During the high times, you tend co tune out srories about the money people lost in the stock market, or lost in real estate. Q: What is your role in the state kicker tax rebate process, and could you explain that process? A: Every other year at the close of the legislative session, my office forecasts the tax revenues for the next biennium. If actual revenues over the biennium come in 2 percent or higher than our forecast, the excess is refunded co households and credited co corporations. In 2007, the state paid out more than $1 billion co individual Oregon taxpayers in the form of a kicker. 10 PORTLAND STATE MAGAZINE SPRING 2008 Q: Wouldn't it make everyone's life easier co forecast high and avoid the kicker? A: Actually that would make life harder. If my office predicts more tax revenue than the state actually brings in, the govern– ment is spending more than what it has available, and you have co have special sessions of the legislature co fix it, such as in 2001. A forecast chat's on the money (sorry for the bad pun) allows the governor and legislators co work out the budget details us– ing the forecast as a planning cool. The situation is better today with some budgetary buffers in the form of the Educational Stability Fund and the Oregon Rainy Day Fund. Statistically speaking and especially over a two-year period with a tax revenue source as volatile as ours, making a 100 per– cent accurate prediction is a near impossibility. If you're within 5 percent you're actually doing very well. Q: What's PSU's economic role as rhe state's urban research university? A: Pordand State provides a much broader economic impact then just providing jobs and buying local resources. The scare needs co have a well-educated workforce and its citizens need co be able co obtain that education, hopefully, at an affordable price, close co home. PSU fills that educational role, as well as being a resource for the community. For example, PSU's College of Urban and Public Affairs has been a guiding force in the region's land-use planning process, and in chat way has helped anchor Pordand's reputation for sustainability. There is a good working relationship that goes back and forth between the city and the university. As the profile of Portland goes up so goes up the profile of Portland State. Q: So, after you're done with the state economist job, ace you coming back co PSU co teach again? A: My ultimate goal is ro come back co PSU. I can't say enough about the place. They've been so good co allow me a leave of absence, and so I'll do anything I can for PSU. Whenever they call, I jump. ■ Dan McMillan is a Portlandfreelance writer.