SALEM — In the 2007 Legislature, Democrats used their new control over the House and Senate to create the state’s first rainy day fund, provide record levels of state aid to schools and establish some of the most generous wind and solar energy incentives in the nation.

Democrats further solidified their control of the Legislature in this month’s election, but the situation facing lawmakers this time is far from promising as the 2009 legislative session approaches.

With Oregon’s economy continuing to tank, Senate President Peter Courtney, for one, has a hard time concealing a sense of dread as he contemplates a session that’s likely to focus more on budget cutting than on enacting bold initiatives.

“There’s no doubt it’s really bad,” the Salem lawmaker says.

That point will be underscored in the coming week with the release of two state reports.

Today, Oregon’s latest unemployment figures will be released — and will reflect the growing number of Oregon companies shedding jobs as the nation’s economic woes deepen.

“It’s pretty safe to assume that Oregon is going to experience a jump in the unemployment rate,” said Tom Fuller, spokesman for the Oregon Employment Department.

Then on Wednesday, the state’s latest revenue forecast will be issued — and lawmakers are bracing for the worst.

The previous projection in September put state government about $500 million short of maintaining current services through 2011 — and that report came before the Wall Street meltdown.

“I heard one analyst use the word ’horrific’ to describe it,” Courtney said of the expected drop in available revenue to fund state programs and services.

Even before that figure is issued, lawmakers already are bracing for cuts in spending on schools, human services and other programs early next year and are asking state agencies to prepare lists of places they could make those cuts.

As bleak as the financial picture is, Rep. Mary Nolan — who recently was chosen by her colleagues to be the next House majority leader — says the session also will present opportunities as well for lawmakers.

She said the historic election of Barack Obama — who promised to go to work immediately on patching up the economy — shows that voters in Oregon and around the nation believe government can play a positive role in helping working families and businesses through these tough times.

“The economy is pretty chilling right now, but there will be a recovery,” the Portland Democrat said. “We want to make sure that Oregon workers, businesses and communities are well positioned for when the recovery starts.”

She said Democrats, including Gov. Ted Kulongoski, are committed to extending health care to the more than 100,000 Oregon children who currently are uninsured. A cigarette tax increase is one of the ways that could be accomplished.

“It benefits every business when every worker is healthy, and their children are healthy as well,” she said.

A citizen task force is studying revisions to Oregon’s tax system — which might include some tax increases — and Nolan says it’s possible House Democrats could embrace some to protect vital state services or promote economic development.

Last week, Kulongoski issued a transportation package that calls for a 2-cent-a-gallon gasoline tax hike and increases in motor vehicle fees to improve roads and bridges and to create thousands of construction-related jobs.

The leader of the Senate Republicans, Sen. Ted Ferrioli of John Day, notes that Democrats now have supermajorities in both the House and Senate and can pass tax increases without any Republican votes.

Still, Ferrioli warned that Democrats might be shooting themselves in the foot, politically, by pursuing tax increases at a time when many people are struggling financially.

“Trust me, Oregonians are in no mood to see a bunch of new taxes,” the GOP senator said.

Courtney, meanwhile, said his main concern is that all sides will be able to come together to protect basic services like education and public safety in the event that the state revenue picture continues to worsen.

“I think we can hold it together,” the Salem Democrat said. “But it’s clear that the downturn in the economy is creating the perfect storm for all of us.”