Oregon’s budget picture continued its impressive comeback Wednesday, with a new revenue forecast suggesting the state will take in hundreds of millions of dollars more in the current budget cycle than expected months ago.
The revenue the state now anticipates is so robust, in fact, that economists are planning for the possibility of a $570.5 million “kicker,” the unique payment under Oregon law that returns some personal income tax collections back to residents if the state’s revenue comes in more than 2% above initial projections. If triggered, the state would issue those refunds in 2022, halfway through the upcoming two year budget.
“Revenue is up and it’s up sharply,” state economist Mark McMullen told lawmakers Wednesday. “We’re now going to be a little bit above where we were prior to the pandemic.”
The improved budget outlook — unthinkable at the time the COVID-19 pandemic set in nearly a year ago — is the last revenue forecast lawmakers will see before they offer a first-draft framework for the state’s next two-year budget in early March. The financial update comes as many Oregonians are still suffering from lost income and some businesses are struggling to survive. Economists in recent months have said those difficulties are more than offset by large businesses’ profits and affluent people doing better during the pandemic, along with stability brought by federal aid.
But the improved forecast isn’t a guarantee against budget cuts. While the state now anticipates having more money than expected left over from the current budget, that may not be enough to avoid some cuts as demands for public services increase and costs rise.
“Although the additional revenue called for in the March 2021 outlook is a welcome sight, budget writers still face a challenging environment this session,” the state’s Office of Economic Analysis wrote. “Although personal income taxes have continued to grow this biennium, many other revenue sources such as Lottery sales have not.”
An increasingly likely federal aid package featuring as much as $350 billion for state and local governments could further improve Oregon’s standing, potentially resulting in billions of dollars for state coffers.
The new forecast predicts Oregon’s combined general fund and lottery revenues will come in $642.7 million higher than anticipated in November. That increase is largely driven by higher than expected personal income taxes, along with corporate taxes.
The revenue outlook suggests taxes will largely offset roughly $800 million that lawmakers sent to the state’s emergency fund in December, during a special session to address the ongoing crises from COVID-19 and historic wildfires.
Oregon’s future budgets look more positive for personal income taxes, too. The Office of Economic Analysis now expects general fund…
Go to the news source: Oregon could see a ‘kicker’ despite pandemic’s toll