(Update: More details on revenues, 'kicker' projections)
SALEM, Ore. (AP) - As Oregon continues to rake in historic amounts of revenue, state economists warned Wednesday that budgeters should plan wisely as a recession could be over the horizon.
The state's May economic forecast released Wednesday predicts Oregon will take in nearly $870 million more than what was predicted just three months ago. Some of that revenue will have to be returned to the taxpayers under the "kicker" law unique to Oregon.
That gives lawmakers over $22 billion for the next two-year budget cycle.
Mark McMullen, a state economist with the Office of Economic Analysis, called the extra revenue a “truly seismic event.”
Tax changes on the federal level, said McMullen, spurred extra revenue in states across the country, which led to more tax revenue for states and smaller refunds for individual taxpayers.
But he stressed lawmakers shouldn’t expect to rely on this historic amount of growth in the future.
“The tax filing season was really remarkable,” said McMullen. “The puzzle becomes how much of this will become permanent. We know it all isn’t sustainable.”
The unexpected revenue, which has been a “global phenomenon” according to McMullen, will only be temporary. Personal income has actually gone down by 1 percent, and experts suggest the economy will continue to slow as Baby Boomers continue to age out of the workforce.
Gov. Kate Brown appeared cautiously optimistic with the forecast, suggesting saving some of the funds while spreading the rest across some of the Democrats’ biggest priorities this session including housing, higher education, foster care and paying down the state’s $25 billion pension debt.
“Today’s revenue forecast shows a windfall that presents a unique opportunity to protect Oregon’s future,” said Brown in a statement.
Legislative leaders were more hesitant, suggesting most of the money be invested in the state’s rainy day fund to prepare for an economic downturn. They’ve already suggested a tight budget, calling for 5% cuts across nearly all state programs.
“We need to approach these unexpected resources prudently,” said House Speaker Tina Kotek. “Any use of one-time funds should be focused on areas of significant need, such as housing and pension debts.”
Some of that revenue will have to be returned to the taxpayers, thanks to the state’s unique kicker law, which refunds excess revenue when the state’s coffers are more than 2 percent higher than forecasted.
This year’s kicker is expected to be the largest in state history at $1.4 billion, though $108 million of that will be redirected to pay for education thanks to a law recently signed by the governor.
State economists suggest the median taxpayer rebate to be around $330, which comes in the form of a tax credit. The top 1% of income earners will receive a $14,000 tax credit.
While the kicker dampens some of the state’s growth, economists said Oregon’s still in good shape and has enough reserve funds to provide a comfortable cushion should a recession hit.
News release from Gov. Kate Brown's office:
Governor Kate Brown's Statement on the May 2019 Revenue Forecast
(Salem, OR) — Governor Kate Brown released the following statement regarding the May 2019 Revenue Forecast:
“Our state has seen record growth and prosperity, and our economy is humming. Today’s revenue forecast shows a windfall that presents a unique opportunity to protect Oregon’s future. We can do that by making targeted investments that will ensure that when the next downturn comes, Oregonians will have stability in the services they rely on. I expect a substantial portion of these funds to be directed towards paying down our PERS unfunded liability, and further investments to be made in housing, foster care, our state police force, and towards college affordability so that our state’s prosperity is spread across every corner of the state.”
News release from Oregon House Republicans:
Record Revenue and Kicker thanks to Trump Tax Cut
After passing $2.8 billion hidden sales tax, Democrat Supermajority scheming to deprive Oregonians of historic kicker
SALEM, Oregon – Today the State of Oregon announced it has a record amount of tax revenue and the kicker has reached a historic level of $1.4 billion, thanks to the Tax Cuts and Jobs Act signed into law by President Trump in December of 2017.
“Today’s revenue forecast sends a crystal-clear message to the Democrat supermajority: when Oregon’s workers are allowed to keep more of their hard-earned money, wages rise, small businesses hire, people are lifted out of poverty, and families have an easier time making ends meet,” said House Republican Leader Carl Wilson (R-Grants Pass). “Let me make something else clear to the supermajority: every penny of the kicker belongs to the people, not to you. This constitutionally mandated check on excessive taxation must be honored and not raided for pet projects or to grow the bureaucracy in Salem. Every Oregonian deserves their fair share of the economic growth they helped create through their own hard work, and the kicker is part of that. Any attempt by Democrats to take their hard-earned kicker away from working Oregonians and squander it all on growing government or rewarding their campaign donors will be met with strong opposition by House Republicans.”
News release from Oregon House Democrats:
News release from Oregon Senate Democrats:
Statement by Senate Majority Leader Ginny Burdick on June 2019 Economic and Revenue Forecast
SALEM – Oregon Senate Majority Leader Ginny Burdick (D-Portland) released the following statement this morning regarding the June 2019 Revenue Forecast:
“The economy continues to grow across the state. Today’s forecast is great news regarding the budget situation, but history shows us that the spike will not last. That is why it is so important that we passed the groundbreaking Student Success Act. The Student Success Act will ensure that education has a stable and dedicated funding source, regardless of fluctuations in the economy. We must continue preparing our state to weather an inevitable economic downturn, and we need to be doing that while times are good.”
Statement by House Speaker Tina Kotek on the Quarterly Economic and Revenue Forecast
“Today’s economic and revenue forecast is good news for Oregonians. However, we need to approach these unexpected resources prudently. Any use of one-time funds should be focused on areas of significant need, such as housing and pension debts.”