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November Forecast Boosts Current Biennial Revenue by Nearly $1B

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By Oregon Business & Industry

The Oregon Office of Economic Analysis [6] on Nov. 20 released the state’s quarterly economic and revenue forecast. The report provides information used for budgeting purposes by legislators and other state leaders. It also informs taxpayers about the likelihood and size of an income tax “kicker.”

The economic outlook: The health of Oregon’s economy is “moderate,” according to the report. Oregon jobs and income are in the middle of the pack across all states, though slightly below the median. The overall economic forecast is “stable” with an expected modest rebound in migration leading to slow population gains and continued full (or nearly full) employment.

The revenue picture: The November forecast – the first in many years without former state economists Mark McMullen and Josh Lehner [7] – predicts that the state will have nearly $1 billion more to spend during the 2023-25 biennium than anticipated by the previous revenue forecast. In total, the state is expected to collect more than $2.8 billion more during current biennium than expected when the Legislature adopted the biennial budget at the close of the 2023 legislative session.

By the numbers:

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Two Additional Takeaways from the Revenue Forecast

Media coverage of Oregon’s quarterly economic and revenue forecast focused largely on a few basic items: projected revenue, the size of the kicker and, to a lesser degree, newly arrived Chief Economist Carl Riccadonna’s efforts to predict revenue more accurately and, therefore, minimize kicker payouts.

There’s nothing wrong with this focus – the basics are the basics for a reason. However, two additional topics should be noted.

First, Oregon’s lopsided employment picture. Over the past year, Oregon has gained 22,700 jobs, but Riccadonna characterized the distribution of job gains as a “weak spot,” noting that the breadth of job creation “has been very narrow.” The slide here [11] illustrates his point: Lots of new jobs in government and the service sector (private education and health care). And everywhere else? Job losses.

Second, the downside risk of squeezing the kicker. The kicker occurs when actual income tax collections exceed projected collections by at least 2%. When that happens, unanticipated personal income tax revenue goes back to taxpayers (the state keeps unanticipated corporate income tax revenue). Oregon has seen significant kicker rebates in recent years.

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