Economic and revenue forecast that guides state budget talks shows strong gains
Wednesday, November 14, 2018
The Oregon economy looks solid for the next biennium but causes for concern remain on the horizon, state economists told legislators Wednesday morning.
Economists with the Oregon Office of Economic Analysis presented the December Oregon Economic and Revenue Forecast to a joint meeting of House and Senate revenue committees. This quarterly report offers the basis for the governor’s budget, and it is the last forecast before the 2019 Legislature opens.
For 2019-21, the General Fund net revenue forecast of $21.3 billion would be $900 million more than the 2017-19 forecast. State Economist Mark McMullen, however, cautioned that the revenue forecast remains uncertain, even in the current biennium.
According to the report, revenue growth has been consistently stronger than the underlying economy would suggest. Temporary factors, such as federal tax law changes, have contributed to the bump. Personal income tax withholdings have grown faster than wage data would predict, the report said.
McMullen told legislators that the strong economy would probably hold up at least through the next biennium but that at some point soon growth will likely slow to a more sustainable rate. The state economists are not predicting a recession – yet. The U.S. economy is in its ninth year of expansion and is starting to show some supply side constraints, including a tight labor market, infrastructure issues and higher energy costs.
The report forecasts a $958 million increase in 2017-19 General Fund revenue over the 2017 close of session forecast, leading to a $724 million personal kicker. Oregon returns the money to taxpayers when revenue exceeds the forecast by more than 2 percent. The corporate kicker, which goes to K-12 education, is forecast at $230 million.
Dedicating the personal kicker to education is among the revenue reform ideas floated by members of the Joint Interim Committee on Student Success, education stakeholders and the business community. The Student Success Committee has been tasked with finding ways to improve and adequately fund the Oregon education system.