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Economic and Revenue Forecast: February 8, 2012

February 08, 2012

Salem—In its March revenue forecast and economic report, the Oregon Office of Economic Analysis said state revenues from income taxes, lottery and other sources are $35.1 million less than anticipated in the December 2011 forecast.

State Senate President Peter Courtney is guardedly optimistic in the wake of the forecast. “Revenue is down a little, but it will fit within the co-chairs’ budget proposal,” he said in a news release. “That means we can move forward with a budget rebalance that will keep our schools open and criminals behind bars. It means we will take care of our seniors and provide services for people with disabilities and our children.”

Since the “close-of-session” forecast at the adjournment of the 2011 legislature, state revenues are $341 million less than anticipated. Higher than expected overpayments by late-filing taxpayers last year resulted in more refunded revenue, the state economist said. Otherwise, fiscal year 2012 has started off well, with most sources of state revenue tracking above the previous forecast. Even so, Oregon’s dependence on highly volatile personal income tax payments for the bulk of state revenues creates uncertainty until the April tax season, according to the report.

The state economist expects income tax collections to increase by roughly $600 million over fiscal years 2012-13, matching the growth experienced in fiscal year 2011. If the national economy slips back into recession, however, it will likely drag Oregon’s economy down with it, with a negative effect on state tax revenues

Despite encouraging signs in the recent performance by Oregon’s economy, the pace of job growth remains “glacial.” In the aftermath of the housing crisis, households are spending cautiously. Likewise, banks and business continue to show caution in lending and investing.

The state economist expects that Oregon will not recover all its lost jobs until the close of 2014, a full seven years after the start of the “Great Recession.”

For more information, contact Morgan Allen at mallen@osba.org.