The outstanding economic times continue, economists told legislators Wednesday, Feb. 9.
The country is seeing the strongest economic growth since the 1980s, State Economist Mark McMullen said, but inflation is heating up and becoming a longer-term concern. He said inflation tends to lead to boom and bust cycles.
“Inflationary booms traditionally don’t end well,” he said.
The latest projections estimate net General Fund and Lottery revenue will be $2.7 billion above the budget forecast at the end the 2021 session. When revenue exceeds budget predictions by more than 2%, the state returns the excess. Wednesday’s report predicts a $964 million personal kicker refund and a $634 million corporate kicker, which goes to support K-12 public schools.
The kicker presents a dagger hanging over budgeting, sometimes requiring the state to pay out significant funds just as state income takes a downturn. Unlike in past years, though, the Legislature has maintained healthy reserves. The latest forecast projected the biennium ending balance for the Education Stability Fund at $696 million and the Rainy Day Fund at $1.3 billion.
Education advocates are watching the corporate activity tax, the funding engine for the Student Success Act. The act was passed with a goal of generating $1 billion a year for public education, with about half going directly to school districts. Inflation is driving greater CAT collections. Wednesday’s forecast predicted $2.4 billion for this biennium and $2.7 billion for 2023-25.
The short session was originally envisioned as an opportunity to adjust budget issues between regular sessions. Legislators have since used it to propose more ambitious measures. Democratic proposals this session could run upward of $2 billion, including a $200 million workforce development program that includes community colleges and $120 million to relocate Portland’s Harriet Tubman Middle School.
OSBA’s legislative priorities this session do not depend heavily on the economic forecast, but education advocates would like to see promised additional funding support for school districts heavily affected by the 2020 wildfires. The state’s sound financial standing also makes it easier to pay the Common School Fund the full value for turning the Elliott State Forest into a research forest.