State revenue forecast delivers good news but not too good

The Oregon revenue forecast is up almost $200 million from the December forecast, state economist Mark McMullen told the Senate Finance and Revenue and the House Revenue committees this week.

Oregon’s continued and sustainable growth is good news, but this uptick in revenue also carries a down side for government budgeting: The potential personal income kicker (tax rebate) would be activated if the personal income tax collections total at least 2 percent more than projections made at the beginning of the two-year budget cycle. The state would need to generate an additional $265 million over the expected revenues before July 1 to trigger the kicker.

McMullen said revenue remains in the economic “sweet spot”: growing faster than expected but not so fast as to force a kicker payback to taxpayers. Personal income is down slightly from the end of session 2015 forecast, but corporate taxes have grown enough to force an estimated $36.2 million corporate kicker for K-12 education in 2017-19.

“Oregon’s economy is strong,” said Senate President Peter Courtney. “Our revenues are up, but we still have hard work ahead. Our budget isn’t balanced. We’re going to have to make some cuts. We’re going to have to raise some revenue. Both are tough; both have to get done if we are going to meet the needs of Oregon and her people.”

All these figures could change depending on how the economy performs between now and the next revenue forecast in May. Until then, lawmakers will continue to build the biennial budget for 2017-19, including the appropriation for the State School Fund.

Legislative leaders said the revenue forecast points to the need for revenue reform.

“Unfortunately, the forecast also highlights how broken our revenue system has become,” said House Majority Leader Jennifer Williamson (D-Portland). “Despite today’s good news, we’re still $1.7 billion away from just funding our schools and basic services at their current levels.”

House Speaker Tina Kotek (D-Portland) pointed to Oregon’s ongoing budget problems.

“Without new revenue, the impacts of our current budget deficit will hit people in every corner of the state with teacher layoffs, bigger class sizes, higher tuition costs, the loss of health insurance coverage, or other harmful impacts in their everyday lives,” she said.

- Lori Sattenspiel
Interim director of legislative services
lsattenspiel@osba.org