Oregon Revenues Are Up, But Questions Remain

Feb 22, 2017

Oregon's budget gap is a bit smaller than previously anticipated. State economists updated their revenue projections Wednesday for the upcoming two-year spending plan.

The information is critical to lawmakers putting together the budget for the 2017-2019 biennium, which starts in July. While Oregon is collecting more from personal and corporate income taxes than ever before, the cost of providing services is also escalating.

Lawmakers came into this year's legislative session looking for ways to bridge a $1.8 billion budget gap. That gap has narrowed a little now. State economists now predict lawmakers will have an additional $200 million to spend in the budget cycle that starts in July.

State Economist Mark McMullen of the Oregon Office of Economic Analysis briefed lawmakers during a joint meeting of the House and Senate Revenue Committees.

"We're ahead of the curve in the U.S. in terms of where we are in our recovery/expansion, and we're starting to see the fruit of that," McMullen said.

He told lawmakers that strong job gains are boosting income tax revenues.

"There's not a big army of unemployed folks out there looking for jobs that employers can choose from. So as a result, they're bidding up wages,” McMullen said. “So we're seeing a lot faster wage growth here than in the U.S."

McMullen said questions remain about how new federal policy shifts will affect Oregon's economy. And legislative leaders cautioned the uptick in revenues won't head off the need to make program cuts in order to bring the state's budget into balance.

"We’re going to have to make some cuts. We’re going to have to raise some revenue," said Senate President Peter Courtney, a Salem Democrat. "Both are tough. Both have to get done if we are going to meet the needs of Oregon and her people.”

Discussions are ongoing at the capitol over whether -- and how -- to increase state revenues, possibly by restructuring taxes on Oregon's businesses. Republicans used Wednesday's revenue forecast to suggest that a corporate tax hike is unnecessary.

"The sky is not falling. Today's released revenue forecast is one of the greatest forecasts in recent memory," said Senate Republican leader Ted Ferrioli of John Day.

Lawmakers have until early July to come up with a spending plan. The finishing touches likely won't occur until after the next revenue forecast, which is scheduled for May 16.