Oregon economic report much better than fears in the spring
Wednesday, November 18, 2020
Oregon’s economic outlook has improved, according to a report released Wednesday, setting up the debate over the next State School Fund.
State economists predict a 5% revenue growth for 2021-23, although that isn’t enough to maintain current service levels for all state agencies, the Oregon Economic and Revenue Forecast said.
The forecast is predicated, though, on a vaccine or medical treatment for COVID-19 by fall to allow more economic activity and another federal aid package to buoy the state.
Personal income taxes are down, reflecting job losses, but corporate taxes are up so that net Oregon revenue resources are up $571 million from the 2019 close-of-session estimate, according to the Legislative Revenue Office The forecast indicates a $193.5 million corporate kicker possible for K-12 education but no personal kicker.
The projected 2019-21 ending balance is up $1.3 billion from the 2019 close-of-session estimate. Wednesday’s report also raised the estimate for 2021-23 net General Fund and lottery resources to $25.4 billion, a $400 million growth from this biennium.
The forecast is the opening move in determining the 2021-23 State School Fund.
The forecast presented to legislators Wednesday is the last report before Gov. Kate Brown issues her recommended budget, likely in the first week of December. The next economic report comes out in February.
In 2019, school funding hit a highwater mark, with a $9 billion State School Fund that roughly matched current service level expectations and passage of the Student Success Act. The act’s new corporate activity tax was expected to generate about $1 billion a year for early learning and K-12 public education.
The forecast showed projected CAT gross revenues of $1.23 billion for 2019-21 and $2.24 billion in 2021-23.
School advocates are concerned the Legislature may try to use the Student Success Act money to backfill the State School Fund, even though the act was intended as additional resources.
The governor’s budget lays down the first markers for the biennial tussle over the State School Fund, the biggest spending item in the state budget. The Legislature determines the final numbers, usually late in the spring.
Typically, the Oregon Department of Administrative Services, using some state mandated figures and averages, calculates a lower cost to maintain current service levels than advocated by the Oregon Association of School Business Officials, using actual expenses of districts. But this year’s debate will take on spending issues never raised before.
COVID-19 has radically altered how schools operate. The hybrid model most schools are trying to have, with students attending class part of the week, is the most expensive to operate. Additional expenses include cleaning, transportation, personal protective equipment, new ventilation systems and extra staff time to manage the protocols when students are present.
Even schools that are in distance learning only must maintain buildings and pay staff, every district’s largest expense.
School leaders say budget plans should account for the learning loss during distance learning as well. Schools are looking at needing to offer up to five years of credit recovery classes, academic interventions and additional social and emotional support for students.
“There are greater needs among the students with distance learning, and we need to support these students,” said OSBA Legislative Services Director Lori Sattenspiel. “We’re still feeding people. We’re still doing things to support families. We hope there is enough revenue coming in that we can continue to invest in students.”
The forecast report noted that schools’ distance learning is affecting the state’s available workforce, as parents, especially women, stay home to help their children. The report also noted that resuming in-person learning would add jobs at schools, giving the economy a bump.