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  • State revenue

Oregon tax collections boom, creating historic kicker and possible PERS relief

Wednesday, May 15, 2019

Tax collections surged in the first quarter, creating an unprecedented quarterly spike for Oregon and a record kicker.

“This is a historic windfall,” said Sen. Mark Hass, chair of the Senate Finance and Revenue Committee. “I’ve never seen anything like it.”

The increase helped push the 2019-21 forecast up $771 million from the previous forecast, giving legislators more budget money.

The House has already passed a bill with a $9 billion State School Fund, and education advocates think that number is unlikely to change. Legislative leadership, however, could use some of the extra money to pay down the Public Employees Retirement System debt, lowering school districts’ rates.

“Any use of one-time funds should be focused on areas of significant need, such as housing and pension debts,” House Speaker Tina Kotek said in a news release.

Gov. Kate Brown also said she expected the money to be put toward PERS, as well as other state needs, including college affordability.

Hass encouraged his fellow revenue committee members to look for ways to sock away some of the one-time money or apply it to PERS.

State Economist Mark McMullen and Senior Economist Josh Lehner presented the May 2019 Economic and Revenue Outlook on Wednesday to a joint meeting of the House Revenue Committee and the Senate Finance and Revenue Committee. Projected 2017-19 net resources climbed $901 million from the March forecast, according to the Legislative Revenue Office.

McMullen said the tax filing season was remarkable across the United States. He attributed much of the spike to federal tax law changes and a federal spending package, both of which are temporary stimuluses.

Oregon net General Fund and lottery resources are up 11.2% from the 2017 close of session forecast. Unlike other states, though, Oregon will not keep that extra income because of the kicker law that requires the state to return money when tax collections exceed forecasts by 2%.

The Legislative Revenue Office predicts a $616 million corporate kicker, which is dedicated to K-12 education, and a $1.41 billion personal kicker. The median taxpayer refund would be $338.

Oregon’s reserves also grew, to $3.5 billion, providing a cushion for the inevitable downturn.

“It was truly a seismic event,” McMullen said.

McMullen said it is harder to predict how long this economic expansion will continue, with some signs that Oregon is nearing the end of the upward business cycle.

“We’re still growing, but at a slower and slower rate,” he said.

- Jake Arnold, OSBA
jarnold@osba.org

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