Oregon economists continued to deliver optimistic news about the state’s budget picture on Wednesday, announcing they expect more than $700 million more in tax revenue than they projected only a few months ago.
“The revenue boom continues unabated,” state economist Mark McMullen told members of the House and Senate revenue committees.
The revenue the state is now projecting is so vigorous, economists are planning for another $558 million “kicker” — Oregon’s unique tax refund that kicks in when actual revenues exceed what was predicted by 2% or more — in 2024.
A lot could change between now and 2024, but the news continues a pattern of the state’s tax revenues outpacing what economists expected. In August, economists revealed stunning news that Oregon is expected to see a kicker refund close to $2 billion next year.
One of the biggest drivers: both personal and corporate tax collections are setting records and continuing to outpace economist expectations.
Corporate income taxes doubled over the past two budget cycles. Oregon’s corporate tax kicker, which goes to K-12 education funding rather than back to taxpayers, is projected to land around $250 million for 2023-25.
Economists also directed some attention at the city of Portland, noting that what happens in and around Oregon’s largest city affects the entire state.
“One thing that stands out is there is a big difference between public perception — issues regarding social challenges, social ills and things we are struggling with in terms of homelessness and housing affordability ... and violence and protests and all that stuff — versus the underlying economic performance,” said Josh Lehner, a state economic analyst. “And we’re not here to address those social challenges.”
When it comes to the Portland region, Lehner said, what is impacting the large metro area is the lack of in-person activities — a problem many metro areas nationwide are experiencing.
“Portland actually has an above-average income growth for large metropolitan areas ... Multnomah county specifically is above average,” Lehner said.
Although the news of the state’s financial health seems positive once again, the state economists noted that the increased income tax growth is connected to rising inflation. A downturn could lead to revenue losses exceeding the income losses, they warned.
“We are running so hot right now, things might go south in a hurry,” McMullen said.
Despite the rosy outlook, Republicans in the Senate pointed out that inflation is already hitting some Oregonians hard.
“Inflation is devastating for working families, but pads the pockets of government,” Senate Republican Leader Tim Knopp, R-Bend, said in a statement. “Blowout spending from federal government borrowing has given us more money than we know what to do with at the same time most working people have gotten effective pay cuts because everything is more expensive.”
Gov. Kate Brown also warned that the economic boom hasn’t been equal and that many Oregonians are struggling, especially people seeking affordable housing.
The governor said she is continuing conversations with legislative leaders to help alleviate the state’s housing crisis.
“Because lack of stable housing is often the biggest barrier to getting or keeping a job, I am also continuing my conversations with legislative leaders about policy solutions to help people access and retain stable housing,” the governor said in a statement.