By David Gomberg
State agencies have been working on their 2023-25 budget requests. Those requests will be adjusted by whoever becomes Oregon’s next Governor. But just over the horizon, there is tremendous uncertainty about the economic outlook and resulting state revenues – far more uncertainty than usual, according to State Economist Mark McMullen.
McMullen and fellow economist Josh Lehner told lawmakers that Oregon’s economic outlook is unusually difficult to predict and that will make it particularly challenging to accurately budget for state government in the coming years. They report Oregon’s economy will sag as consumer spending and employment growth sour. Just when and how severe that downturn might be remains a matter of debate.
In the most simple terms, if we approve budgets and then revenues fall short, the legislature will have to come back and cut programs or services. In Oregon we don’t spend more than we receive.
In the short run, Oregon’s tax and lottery revenues continue to far outpace economists’ predictions, with the state now expected to take in $600 million more than forecasters predicted just three months ago.
In Oregon, increased revenues in one year are not used to offset losses in other years. A unique constitutional requirement called the “kicker” requires that income exceeding projections be returned to taxpayers.
Booming tax revenues from capital gains and businesses could push the state’s “kicker” tax rebate up by another $500 million. That would bring the total “kicker” rebate to $3.5 billion, which taxpayers would receive as a credit or refund on their 2023 taxes when they file in 2024.
Inflation is far and away our top concern new polling finds, as Oregonians remain acutely concerned about their own finances.
A quarter of likely Oregon voters in a new poll by DHM Research listed cost of living as the biggest consideration in their choice for governor. That ranked far above other hot-button issues, among them homelessness (13%), crime (11%), abortion and climate change (10% apiece).
The state’s tools for addressing rising prices are limited. The main economic forces driving inflation — snarled global supply chains, the national labor shortage, Russia’s war in Ukraine, and COVID-19 shutdowns in China – are beyond what Oregon’s elected leaders can control.
There are signs inflation is easing — gas prices have dropped substantially — but still, 44% of voters say Oregon’s economy is getting worse and just 16% say it’s getting better. On the upside, two-thirds of voters say it’s a good or very good time to be looking for work. That makes sense, because Oregon job vacancies far outnumber unemployed workers.
McMullen said that although roughly half of Americans believe the country is already in a recession, “the data doesn’t support that.” Americans’ actions so far contradict what they are telling pollsters, McMullen said, and so far both businesses and individuals continue to spend freely on goods and services.
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