Revenue Forecast Predicts Kicker, Looming Problems
The latest quarterly revenue forecast from the Oregon Office of Economic Analysis shows both the importance of fiscal reform and some of the reasons that meaningful change has been so difficult to achieve in Oregon.
Oregon’s economy remains in high gear, and state economists now project $140.1 million more in available revenue than they did in the last quarterly forecast and $1.12 billion more than they did in the last forecast before the start of the 2017-19 biennium. However, the bulk of that money will be returned to taxpayers through Oregon’s one-of-a-kind kicker law. If current projections are correct, individual taxpayers will receive a total of $686 million, applied as a credit to April 2020 tax returns. The corporate kicker would total $208 million and that money would be designated for K-12 public school funding.
In other words, the economy is booming, Oregon is outperforming most states, and taxpayers can look forward to a rebate to be applied to future tax returns. On the surface, everything looks good. Yet, the state budget remains as stretched as ever.
And, the longer-term outlook is considerably cloudier. First, the state economists said unrepeatable factors explain a significant percentage of the projected revenue increases. A spike in estate tax collections and responses to the new federal tax law contributed to the surge in personal income tax collections. On the corporate side, repatriation of deferred foreign income required by the new federal tax law accounted for $245 million in additional revenue. Second, national economic forecasts project the risk of a recession starting about 2020, just as the kicker would be draining revenue from the state general fund. At the same time, without spending reform the percentage of the state budget dedicated to public pension costs will continue to rise.
In summary, the revenue forecast reinforces what Oregon Business & Industry (OBI) and other Oregon Business Plan partners have said in meetings across the state this year. Even with a booming economy and record tax revenues, Oregon cannot make needed investments in education and other public services. When the next recession hits, Oregon’s fiscal crisis will deepen – and forecasters now fear that a recession is on the horizon.
To read the state revenue forecast, click here.