Revenue Forecast (11/20/19)

 

Today the Office of Economic Analysis presented its second economic and revenue forecasts of the 2019-2021 biennium.  The general outlook is that there has not been any significant changes since the previous forecast for the State of Oregon but at the US level there is still a fear of recession.  A recent poll indicates of economists across the nation showed that the fear of recession has declined from 35% to 30% in the last few months but most agree that the US will enter a recession next year.  The upside is that consumers appear to be still willing to spend which is currently propping up the US economy.  In Oregon there has been a sharp slowdown in employment growth.  This slowdown has reached every corner of the state.  The causes are largely due to slower sales growth, rising business costs, uncertainty at the federal and state level, a tight labor market and one notable mass layoff at a food processing plant in the Mid-Willamette Valley.

 

The one big upside to the tight labor market has been an appreciable increase in Oregon’s medium income.  The tight market has resulted in up-ward pressure on incomes and as a result Oregon’s medium income is above the national average for the first time since 1980. 

 

Bottom line, Oregon’s revenue outlook remains stable but also remains susceptible to an expected recession.  The key will be how deep and how long that recession lasts.  So now to the numbers:

 

Third Quarter personal income tax collections were up $13.1 million (0.5%) from the September forecast and personal income is up $3.7 billion (1.7%) from the September forecast.   Third Quarter corporate income tax collections were up $9.2 million (4.2 %) from the September forecast and is up $135 million (11.3%) from the 2017 COS estimate.  General Fund (GF) gross revenue is up $148.6 million (0.7%) from the 2019 COS estimate and Net GF and Lottery resources are up $490.8 million (2.0%) from the 2019 COS estimate.  

 

As a result, Oregon’s PERSONAL Kicker is NOT expected to kick for 2021.  However, the corporate kicker is currently  estimated to kick to the tune of $135.1 million for the 2021-2023 biennium.

 

Projected 2019-2021 projected combined net General Fund and Lottery resources are up $166.8 million (0.7%) from the September Forecast.  Currently the state has healthy levels of money in the Educational Stability Fund and Rainy Day Funds that will temper any substantial reductions in revenues to the state in the event of a recession.

 

One thing that I mentioned in the previous forecast was that the 2021-2023 biennium was expected to see a 3.5% reduction in available General Fund and Lottery Resources.  This forecast shows that $207.8 million will be added to the budget which should slightly temper the predicted reduction.


 

Legislative Summary

 

The 2019 SDAO Legislative Report is now ready for download.


 

Revenue Forecast (8/28/19)


Today,
the Office of Economic Analysis presented its first economic and revenue forecasts of the 2019-2021 biennium.  Not much fanfare to report except that Oregon’s economy continues to chug along with higher wages, and continued economic expansion despite some cracks that are emerging in the economy.

 

Second quarter personal income tax collections were up $260 million (8.1%) from the June forecast and personal income is up $1.3 billion (0.6%) from the June forecast.    Second quarter corporate income tax collections were down $25.8 million (-6.2 %) from the June forecast and is up $675 (62.7%) from the 2017 COS estimate.  General Fund (GF) gross revenue is up $2.245 million (11.5%) from the 2017 COS estimate and Net GF and Lottery resources are up $2.062 million (12.2%) from the 2017 COS estimate.  

 

As a result, Oregon’s PERSONAL Kicker will kick to the projected tune of $1.57 million (the 3rd largest kicker in the state’s history)  and the CORPORATE Kicker will kick to the tune of $675.6 million which will be dedicated to K-12 education spending during this biennium.

 

Projected 2019-2021 combined net General Fund and Lottery resources are up $324 million (1.3%) from the June Forecast.  Currently, the state has healthy levels of money in the Educational Stability Fund and Rainy Day Funds that will temper any substantial reductions in revenues to the state.

 

One thing to keep an eye on is that the economists are predicting a reduction of 3.5% in available General Fund and Lottery Resources in the 2021-2023 biennium. 

 

Generally speaking, the American economy is beginning to show cracks, particularly in the bond markets, manufacturing and trade policy.  There is a 33% to 50% chance of the economy going into a recession in the next year.  What is really helping the country stay out of a recession at the moment is consumer spending which remains strong.  However, if American consumers stop spending and having a positive outlook, the likelihood of a recession will increase.  Oregon is experiencing slower growth but there is still job growth and wage growth has really helped Oregon over the last three or four years.


 

Close of Session Revenue Forecast (5/15/19)

 

Today, the Office of Economic Analysis presented its eighth and final economic and revenue forecasts of the 2017-2019 biennium.  This is a critical moment for several reasons; chiefly because this forecast sets the stage for building the next biennium's budget and also shows the predicted windfall of new funding expected as the result of passage of HB 3427, the new corporate tax bill that is awaiting the Governor’s signature.  It also sets the marker for the next potential personal and corporate kickers.

 

First quarter personal income tax collections were up $241.8 million (13.1%) from the March forecast but personal income is down $0.6 billion (-0.3%) from the March forecast.  Personal income tax revenue is up $1.44 billion (8.4%) from the Close of Session Forecast (COS).  First quarter corporate income tax collections were up $61.4 million (149.0%) from the March forecast and is up $615.9 million (57.2%) from the 2015 COS estimate.  General Fund (GF) gross revenue is up $2.02 billion (10.4%) from the 2017 COS estimate and net GF and Lottery resources are up $2.388 billion (11.2%) from the 2015 COS estimate.  

 

As a result, it is predicted that the personal kicker will kick to the tune of as much as $1.41 billion that will be credited to taxpayers tax liability and the corporate kicker will kick to the tune of $615.9 million and be dedicated to the K-12 education spending for the upcoming biennium.  

 

Projected 2017-2019 projected combined net General Fund and Lottery resources are up $875.5 million (4.3%) from the March Forecast.  The projected ending balance is up $869.7 million from the March forecast resulting in a projected $199.4 million transfer to the state's Rainy Day Fund.

 

Importantly, next biennium's projected Net Combined Resources (GF & Lottery) is expected to be nearly $24.77 billion, or nearly $770 million more than that previous forecast.

Revenue Forecast
Revenue Summary