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Oregon sees huge windfall in tax revenue

As Oregon continues to rake in historic amounts of revenue, state economists warned Wednesday that budgeters should plan wisely as a recession could be over the horizon.

Posted: May 15, 2019 12:15 PM

By SARAH ZIMMERMAN Associated Press

SALEM, Ore. (AP) — As Oregon continues to rake in historic amounts of revenue, state economists warned Wednesday that budgeters should plan wisely as a recession could be over the horizon.

The state will take in nearly $870 million more than what was initially forecasted just three months ago, according to May revenue forecast. That gives lawmakers over $22 billion for the next two-year budget cycle.

Mark McMullen, a state economist with the Office of Economic Analysis, called the extra revenue a "truly seismic event."

Tax changes on the federal level, said McMullen, spurred extra revenue in states across the country, which led to more tax revenue for states and smaller refunds for individual taxpayers.

But he stressed lawmakers shouldn't expect to rely on this historic amount of growth in the future.

"The tax filing season was really remarkable," said McMullen. "The puzzle becomes how much of this will become permanent. We know it all isn't sustainable."

The unexpected revenue, which has been a "global phenomenon" according to McMullen, will only be temporary. Personal income has actually gone down by 1 percent, and experts suggest the economy will continue to slow as Baby Boomers continue to age out of the workforce.

Gov. Kate Brown appeared cautiously optimistic with the forecast, suggesting saving some of the funds while spreading the rest across some of the Democrats' biggest priorities this session including housing, higher education, foster care and paying down the state's $25 billion pension debt.

"Today's revenue forecast shows a windfall that presents a unique opportunity to protect Oregon's future," said Brown in a statement.

Legislative leaders were more hesitant, suggesting most of the money be invested in the state's rainy day fund to prepare for an economic downturn. They've already suggested a tight budget, calling for 5% cuts across nearly all state programs.

"We need to approach these unexpected resources prudently," said House Speaker Tina Kotek. "Any use of one-time funds should be focused on areas of significant need, such as housing and pension debts."

Some of that revenue will have to be returned to the taxpayers, thanks to the state's unique "two percent kicker" law, which refunds excess revenue when the state's coffers are more than 2 percent higher than forecasted.

This year's kicker is expected to be the largest in state history at $1.4 billion, though $108 million of that will be redirected to pay for education thanks to a law recently signed by the governor.

State economists suggest the median taxpayer rebate to be around $330, which comes in the form of a tax credit. The top 1% of income earners will receive a $14,000 tax credit.

While the kicker dampens some of the state's growth, economists said Oregon's still in good shape and has enough reserve funds to provide a comfortable cushion should a recession hit.

Oregon Coronavirus Cases

Data is updated nightly.

Cases: 387485

Reported Deaths: 5116
CountyCasesDeaths
Multnomah59768836
Washington41571393
Marion39592504
Clackamas32426376
Lane29856354
Jackson24672350
Deschutes23182185
Umatilla15087180
Linn14488178
Douglas13236286
Josephine10057240
Yamhill9665142
Klamath8979145
Polk813698
Benton605137
Malheur591586
Coos5573106
Columbia423855
Jefferson416865
Lincoln357252
Union336854
Crook330156
Wasco314846
Clatsop258335
Baker217531
Tillamook214345
Hood River211337
Morrow197025
Curry190136
Harney119332
Grant108314
Lake104016
Wallowa74713
Sherman1903
Gilliam1844
Wheeler1141
Unassigned00

California Coronavirus Cases

Data is updated nightly.

Cases: 5061240

Reported Deaths: 74159
CountyCasesDeaths
Los Angeles152548627128
San Diego4047084319
Riverside3849455306
San Bernardino3718825944
Orange3329505675
Sacramento1674002423
Kern1565171781
Fresno1558992246
Santa Clara1511691922
Alameda1246581504
San Joaquin1070001833
Ventura1036461188
Contra Costa1032921045
Stanislaus912991413
Tulare856141082
San Francisco56614669
San Mateo56058629
Monterey52340625
Solano47422356
Santa Barbara47035548
Merced44807664
Sonoma42912412
Placer41881468
Imperial38128769
Kings35038358
San Luis Obispo31294358
Madera26005311
Shasta25917440
Butte25295309
Santa Cruz22028222
Yolo21451257
Marin18342248
El Dorado18166161
Sutter14494181
Napa13372104
Yuba1070088
Tehama10230129
Humboldt10043117
Nevada9914103
Mendocino848894
Lassen792355
San Benito775977
Tuolumne767790
Lake6990110
Amador573766
Siskiyou470954
Glenn455136
Calaveras435685
Del Norte371242
Colusa323519
Inyo254345
Plumas19127
Mono18294
Mariposa156718
Trinity98817
Modoc7475
Unassigned2430
Sierra2170
Alpine1060
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