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Tim Fought Associated Press Writer
Published: 19 July 2010

PORTLAND, Ore. (AP) -- Behind the state's budget crisis this summer lies a brutal economic truth: Relative to the rest of America, Oregon is getting poorer.
Oregon has been getting poorer, in relative terms, for decades, and the Great Recession has brought the state to a low point.
Oregon now ranks 32nd among the states in per capita personal income, and Oregonians earn slightly more than 90 percent of the national average of the same measurement.
These are the lowest figures for Oregon since the federal government started keeping the measurement -- about the same time the stock market crashed in 1929. It's not that Oregonians haven't been able to raise incomes over the years.
Adjusted for inflation, Oregon's per-capita income is higher today: $35,000 in 2009, compared with, for example, $21,000 four decades earlier.
But the rest of the country has done better, raising incomes faster on average. So, Oregon is falling behind.
That makes the painful cuts in schools and government expected in coming months just the public symbol of how Oregonians at large are adjusting to a long-term slide relative to other Americans in income.
``That stubborn number is the root of all problems,'' said Ryan Deckert, a former legislator who leads the Oregon Business Association. ``We're poorer, our families are poorer, our people are poorer, our public institutions are poorer.''
Economists say the relative measure is significant because as Oregonians' income drops in relation to that of the rest of the country, it falls behind other states in its ability to pay for consumer goods and government services. That's especially true with expenses that rise rapidly, such as health care.
``If you can't generate income to keep up with those prices, clearly you have a challenge,'' said economist Tim Duy of the University of Oregon.
Per capita personal income doesn't get so much public attention as economic numbers such as the rates of unemployment or interest. It's a broad measure, tracking wages, salaries, transfer payments such as Social Security and business related sources such as dividends, interest and rental payments. It doesn't include corporate income.
People who track the state over the long term watch the figure closely and, in recent years, with increasing worry.
Before it was abolished in a round of budget cutting last year, the Oregon Progress Board called it the top economic ``area of concern'' among dozens of benchmarks it tracked.
This summer, a panel of close advisers to Gov. Ted Kulongoski said the figure was fundamental to its conclusions: Oregonians could no longer afford their state government, there was little prospect that economic growth would allow them to regain their purchasing power, and a wrenching ``reset'' would be required, slashing government expense well beyond the 9 percent in cuts the governor called for last month.
In a sense, this slide is an old story in Oregon.
In 2009, according to the U.S. Bureau of Economic Analysis, per capita personal income was slightly more than 90 percent of the national average.
Decades before that, in 1943, when Oregon was churning out lumber, ships and crops to fight World War II, Oregonians had income of 124 percent of the national average, the high point, according to a report prepared by state Department of Employment economist Charles Johnson in 2009 and titled ``Oregonians are Losing Ground to the Average American.''
Even though the state's standing relative to the rest of the nation declined, good jobs in the forests and mills sustained a sense of well-being in Oregon, ``but that all changed in 1980,'' said John Tapogna, the president of the prominent Oregon economic consulting firm ECONorthwest.
That's about the time the Federal Reserve under Paul Volcker choked off inflation by squeezing the money supply, initiating a hard recession that was extra hard on Oregon. That's also the last time per capita personal income in the state was equal to the national average.
Since then, the growth of the silicon forest, led by giants such as Intel and Tektronix, gave the state a flush of high-tech income. The state's relative ranking in incomes rose. But the flush has faded, and the slide in income relative to the nation's has resumed.
Tapogna cited a symbolic turning point came in 1999, when Washington County in the suburbs of Portland had gone through a long period of growth, and chipmaker Intel won tax credits for an expansion -- but only with the stipulation that it limit the accompanying new jobs that would create new demand for schools, roads and public services.
In the last decade, with two recessions including the most recent Great Recession, the state's income ranking has headed back downhill.
``Once that tech boom went away, we didn't have much coming in behind it,'' said Duy.
What's ``most disturbing,'' said State Economist Tom Potiowsky, ``is the 2000s, where the growth period between the two recessions did not generate a gain in Oregon's per capita income compared to the U.S.''
Some economists see the statistic as an indication that Oregon has yet to come fully to terms with the passage of its time as the nation's leading producer of lumber and the wealth that timber spread broadly through the state.
Duy said many have put their hopes in the idea that Oregon's ``livability,'' mountains, seacoast, outdoor recreation and so forth, would attract enough brainpower to generate the economic activity that will raise incomes.
``They've been too enamored of the 'Oregon is different story' ... with the story that Portland is the media darling,'' he said.
Oregon State University economist Patrick Emerson said the wealth of natural resources can be a curse for some economies that don't put enough money back into the economy in education and other sources of future wealth.
``I don't want to push this too far, for there are lots of factors,'' he said in an e-mail exchange, ``but easy money from resources can often make societies complacent.''
``Those states and countries that initially had resource wealth and are now wealthy for other reasons usually did a very good job transforming that wealth into investments in human capital, physical capital and infrastructure.'' he said. ``Oregon did this fairly well, but not as well as perhaps it should have.''

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