|No reason to celebrate a $200-million-higher forecast|
by Kent Hunsaker, Executive Director
You would think that if you just returned from a quarterly report on the state’s revenue forecast that projected a positive change of $199 million in General Fund (GF) Revenue and another $39.6 million in lottery revenue, it would be cause for great celebration. Well, I just returned at lunchtime today. And I’m not celebrating.
Here’s why. Oregon’s tax policy requires general fund revenues to be returned to taxpayers if the revenues exceed 2 percent of the projection for the biennium (a policy commonly known as the “2 percent kicker”). What that means today is that the additional $199 million in general fund revenue will be returned to both corporate and personal income tax payers, rather than used to provide greater stability for state government, for example. The total estimated rebate to these taxpayers after this forecast now stands at a whopping $1.28 billion – with a capital “B!!”
Some $1.043 billion will be returned to personal income tax payers resulting in a median refund of $263 and an average refund of $605. It represents a reduction of 20.6 percent of the personal income tax liability in 2006. The corporate kicker credit is projected to be $238 million and represents a reduction of 61.3 percent of the 2007 corporate tax liability.
While this money is being returned to taxpayers, Oregon has still not figured how to adopt tax policy that would protect government services from the next downturn in the economy, which may be just around the corner, according to the economists who gave the economic forecast report. Much of today’s additional state revenue can be attributed to the housing and construction industries in Oregon. The economists predict a cooling of this section of the economy due to the high price of housing and the increase in interest rates.
The forecast for the 2007-09 biennium is also up by $154 million from the June 2006 forecast ($99.2 million in the general fund and $54.7 million from the lottery). This brings the total revenue increase for 2007-09 to only 6.5 percent above the 05-07 biennium due to the kicker rebate, which will be distributed in December 2007. (View the September 2006 Economic Forecast.)
The economists provided the following list of risk factors as we look forward to future revenue forecasts:
If you have questions or comments about the forecast, please don’t hesitate to submit them below.
|This page was last updated on Thursday, August 31, 2006 .|