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Forecast: Tax surplus, Kicker

May 28, 2018

Revenue Forecast Predicts Kickers, Growing Reserves
by Mark Hester
Oregon Business and Industry

State economists presented a strong revenue forecast Wednesday, May 23, to a joint meeting of the House and Senate Revenue committees. Highlights of the report included:

The Office of Economic Analysis now predicts that the state will take in about $750 million more in revenue during the 2017-19 biennium than previously estimated.

If the anticipated surge in revenue occurs, both the personal and corporate income tax “kickers” will be triggered.

The surge during the current biennium is expected to be partially offset by a dip in revenues during the 2019-21 biennium, in part because of the kickers and in part because of delayed effects of new tax laws.

The economic expansion, coupled with policy changes, will leave the state’s effective reserves from two reserve accounts and unallocated general fund balance at a projected $1.8 billion at the end of the biennium, according to the forecast – much better shape than they were in when Oregon entered the last recession in 2008.

Despite all this positive news, state economists Mark McMullen and Josh Lehner continued to warn that the current economic expansion already is at a record length and growth is slowing down.

To see the slides from the forecast presentation, click here.

To see the entire forecast report, click here.

The inevitability of an eventual economic downturn should motivate the Legislature to deal with issues such as Oregon’s unstable fiscal structure and housing affordability before a recession makes those challenges even more difficult to solve.

The forecast once again illustrates the path forward for Oregon. A strong, healthy economy produces increased revenues – as are projected for the next biennium. But, without fiscal reform, much of that revenue will be consumed by the rising cost of the Public Employees Retirement System (PERS), leaving little for other public services. The time to act is now, in preparation for the 2019 Session.

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