Legislators have a little more cash in the bank as the short 2014 session nears its mid-point, but maybe not enough to avert some spending cuts. Local school revenue derived from property taxes showed a healthy jump.
Oregon State Economist Mark McMullen delivered today the March economic forecast, which predicts another $14.8 million revenue. The forecast show revenues largely flat for this biennium and into future years, but is more optimistic on job growth than previous forecasts. In the near term, however, stronger job growth projections are offset by disappointing revenue collections.
The Office of Economic Analysis is optimistic about the future. Profitable businesses have been sitting on cash, waiting and building confidence to invest and expand. The state is beginning to see industries get close to production capacity. When combined with lower energy costs, brought on by expanded US oil and gas production, businesses are poised to begin expansion efforts. Labor force expansion follows business expansion creating opportunities for workers who are sitting on sidelines of the economy.
No personal income or corporate kicker is currently predicted for 2015, but the state is edging ever closer to hitting the target. McMullen reported the state is just $100 million away from a personal income kicker. April’s tax returns should give a better indication of the size of capital gains, providing a clearer picture as to whether the kicker will actually kick.
The outlook remains stable and there is evidence that economic recovery is spreading across regions in Oregon. The net changes over time suggest the growth trend will continue at a steady pace around 10 precent.
As lawmakers begin to push to close the short session, they will have a few more resources to dole out to agencies and pay for the costs associated with the passage of new policy bills. The amount is just enough to give budget writers some breathing room without giving other lawmakers a false sense of plenty — thus creating a rush of funding requests that cannot be met.
Even with new resources, the state will struggle to maintain a substantial ending fund balance as the costs associated with budget rebalances, devastating fire seasons and unexpected emergencies create risk for the remainder of the biennium. Lawmakers also face potentially large budget gaps in corrections and human services that will be major challenges in 2015.
A separate forecast showed a $98 million increase in revenue available to Oregon K-12 school districts. While most of the increase is the result of larger property tax collections statewide, the amount also reflects a temporary extension of federal timber payments and proceeds from state lands.