Oregon lawmakers have more money to spend as they debate how best to jump-start housing, expand addiction treatment and prop up homeless shelters around the state.
In a forecast with a major say in what spending proposals have a chance in the ongoing 35-day session, economists said Wednesday morning that anticipated corporate and personal income taxes were up around $130 million from the last forecast in November.
Much of that change is from corporate taxes that have consistently outstripped expectations in recent years. The boost is partly offset by taxes on liquor sales now looking less strong than expected.
Combined with a number of fund transfers that economists described as “closing the books” on the previous budget’s unspent money, the Legislature has an additional $559 million on hand. Legislative budget writers had already accounted for much of that money, and cautioned that the number did not represent a sudden windfall. In total, the projection suggests the state has as much as $1.7 billion that isn’t currently spoken for in the current two-year budget.
Lawmakers watched the revenue forecast closely and are now likely to start jockeying for available cash.
There is no shortage of ideas.
Gov. Tina Kotek has proposed a $500 million package to spur housing development and another $100 million that would go toward homeless services — including ensuring shelters can remain open as pandemic-era spending dries up. That’s a major spending proposal for a “short” session that is typically reserved for relatively minor budget adjustments. Kotek has also suggested the state could forgo a regular 1% payment into budget reserves — currently set at $318 million — in order to pay for her priorities.
“It’s harder than ever for Oregonians to afford to live here, which is why we must take bold action on affordable housing,” Kotek said in a statement after the forecast was released. “I look forward to working with legislators this session to make progress for Oregonians.”
A special committee looking at the state’s addiction crisis is also expected to propose funding to quickly stand up additional treatment services around the state, though the exact request is unclear. State Sen. Elizabeth Steiner, one of the state’s top budget writers who is also running for treasurer, has said Oregon must spend at least $78 million more to prop up a fund that helps families pay for child care.
Lawmakers suggested their top priorities this year — housing and addiction — weren’t meaningfully changed by the new numbers.
“Republicans and Democrats are united in our commitment to increase housing supply and homelessness supports, helping families and individuals struggling with addiction, and investing in Oregon’s future,” House Speaker Dan Rayfield, D-Corvallis, said in a statement. “This stable forecast coupled with a decade of good budgeting gives us the certainty and resources we need to invest in the priorities Oregonians care about most.”
“Urgent challenges are holding Oregon back,” Senate Majority Leader Kate Lieber, D-Portland, said in a statement. “We must take action in the short session to solve them.”
The forecast, despite the revenue boost, is among the least dramatic lawmakers have seen in recent years, where the state has grown accustomed to forecasts that indicate revenues coming in in numbers that have shocked state economists. Those unexpected surges have led to a series of ever-higher “kicker” payments — the refunds doled out to personal income tax payers when revenues come in 2% or more above expectations.
Economists do not expect the personal income tax kicker to be triggered, less than a year into the state’s two year budget cycle. If that holds, it would be the first time in more than a decade that the law didn’t send money back to taxpayers.
Corporate income taxes, meanwhile, are expected to come in at more than 2% above expectations, triggering Oregon’s other kicker. That would send more than $533 million to Oregon schools in the next budget.
Mark McMullen, the state economist, told lawmakers that part of the relative calm of the forecast derived from the “soft landing” that the Federal Reserve appears increasingly likely to achieve, avoiding a recession despite ratcheting up interest rates to fight inflation.
But economists warned that continued stalled or sluggish population growth in Oregon will hamper the state’s economy and could impact future budgets.
“The main change in the economic outlook has been a little bit of a revision downward in terms of population and job gains, which feeds into some downward pressure on personal income tax receipts as we go forward into the future,” McMullen said.
Republicans promptly used the somewhat dampened economic outlook to lambast Democratic policies.
“Flat population is a warning sign for the future of our state and is reflected by poor policy decisions that continue to hurt businesses and families,” Senate Republican Leader Tim Knopp, R-Bend, said in a statement. “It is critically important that we leave behind status-quo policies and pursue pro-job policies that will make Oregon an attractive place to live, work, and raise a family.”