Forecasters predict big kicker as school funding decisions loom
Wednesday, February 27, 2019
Economic forecasters set the foundation Wednesday for school funding decisions in the 2019 Legislature.
They predicted that a growing but uncertain economy would result in personal and corporate tax kickers for 2019-21. But already legislators are eyeing the possibility of those kickers being directed to schools or to pay down the state’s Public Employees Retirement System debts.
Looming in the next few days is the Joint Ways and Means Committee co-chairs’ budget framework, which is expected to fall short of what school business officials say they need to maintain services.
The March forecast for 2017-19 net combined resources increased $147.8 million from the December forecast, according to the Legislative Revenue Office.
Mark McMullen and Josh Lehner of the Office of Economic Analysis presented the March revenue forecast to a joint hearing of the House Revenue Committee and the Senate Finance and Revenue Committee on Wednesday.
With the 2017-19 biennium drawing to a close, they expect General Fund revenue to exceed 2017 forecasts by $1.1 billion, resulting in a kicker refund. The state predicts a $748.5 million personal kicker for 2019-21 and a $352.8 million corporate kicker dedicated to K-12 education.
McMullen said that one of Oregon’s economic problems has been that the state must pay out a large refund just as the economy starts to falter.
Oregon’s economy is slowing down but still chugging along, McMullen said, but a drop in personal income tax collection in the last quarter is cause for concern. He stressed that federal tax law changes have created forecasting uncertainty.
The 2019-21 forecast was revised up $68 million from December to $24 billion in combined resources.
The quarterly report will be the basis for most 2019 Legislature budget decisions. The Legislature will get another economic report May 15 that will set the bar for the 2019-21 balanced budget, including the State School Fund.
The Oregon Association of School Business Officials estimates school districts would need a $9.13 billion State School Fund to maintain current service levels.
Based on the November revenue report, Gov. Kate Brown’s balanced budget called for an $8.97 billion State School Fund with an additional $100 million for PERS side accounts to offset school districts’ rates and $170 million to partially fund the High School Success Fund (Measure 98).
Oregon’s leading education advocacy groups, including OSBA, are calling for full Measure 98 funding of $303 million and an additional $1 billion School Improvement Fund to give districts resources to make local decisions to improve student achievement.
The Joint Ways and Means Committee co-chairs are expected to release their budget framework in the next week. Without new revenue, the co-chairs’ budget is expected to fall short of OASBO’s current service level estimate.
OSBA has been advocating for revenue reform and cost containment to increase education spending. Education advocates and legislators have linked Oregon’s poor graduation rates, short school year and lagging test results to chronic underfunding of the state’s public school system.
The Legislature’s Joint Committee on Student Success has identified a need for more than $2 billion in new education spending, but it is still working on how much Oregon can do this biennium and how to pay for it.