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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: 207106

Reported Deaths: 2757
CountyCasesDeaths
Multnomah40396614
Washington26812249
Marion23444323
Clackamas18953235
Lane13924164
Jackson11549146
Deschutes1002782
Umatilla860987
Linn562281
Yamhill478679
Klamath477878
Polk400556
Douglas389583
Malheur362063
Josephine361772
Benton326922
Jefferson237139
Coos216737
Columbia192329
Union150124
Wasco144530
Lincoln143421
Crook129223
Hood River121733
Morrow115516
Clatsop10609
Baker102315
Curry72011
Tillamook6604
Grant5517
Lake4688
Harney4339
Wallowa1945
Gilliam811
Sherman701
Wheeler351
Unassigned00

California Coronavirus Cases

Data is updated nightly.

Cases: 3810808

Reported Deaths: 63373
CountyCasesDeaths
Los Angeles124790924459
Riverside3017994627
San Bernardino2993204850
San Diego2818863771
Orange2731055113
Santa Clara1201922190
Kern1107991404
Sacramento1078721737
Fresno1029711724
Alameda897561277
Ventura816611031
San Joaquin748081440
Contra Costa70770813
Stanislaus635351070
Tulare49802849
Monterey43842432
San Mateo42685581
San Francisco37275556
Santa Barbara34621455
Solano33762266
Merced32315479
Sonoma30957317
Imperial28855741
Placer23604300
Kings23202247
San Luis Obispo21448261
Madera16647245
Santa Cruz16246208
Marin14208230
Yolo14165212
Butte12668195
Shasta12630233
El Dorado10401116
Napa1002880
Sutter9666113
Yuba651251
San Benito610963
Lassen579925
Tehama573563
Nevada493175
Humboldt450849
Mendocino434050
Tuolumne421671
Amador374247
Lake356345
Glenn243327
Siskiyou239837
Colusa228818
Calaveras220856
Del Norte14588
Inyo143438
Mono12984
Plumas7376
Modoc5635
Mariposa4657
Trinity4236
Sierra1170
Alpine890
Unassigned320
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