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State forecast: Job growth spurs tax collections

by: TRIBUNE PHOTO: PETER WONG - State Economist Mark McMullen (right), with Senior Economist Josh Lehner of the Oregon Office of Economic Analysis, gave lawmakers on the House and Senate revenue committees the state's quarterly economic forecast Wednesday morning. The forecast showed a growing economy and rising revenues.
SALEM — A growing Oregon economy will yield a little more in income taxes for state services and aid to public schools, lawmakers learned Wednesday from the state's latest forecast.

The latest projection for the state general fund, which relies on personal and corporate income taxes, is for $16.1 billion. That's $169.4 million more than assumed in the current two-year budget, which started last July, and $52.5 million more than in the most recent forecast during the 2014 legislative session.

The amount, however, remains below the threshold that would trigger an automatic refund of excess taxes collected for the current two-year budget cycle. The refund is popularly known as the "kicker," which occurs when actual collections exceed budget projections by 2 percent.

Click here to read the state's June economic forecast.

Senate Majority Leader Diane Rosenbaum, D-Portland, described the forecast as "generally sunny with some chance of rain."

“While it will be over a year before we know if our revenue projections will trigger a kicker refund, today’s projections mean that our investments in our schools and taking care of our most vulnerable will be protected through the beginning of the next budget cycle,” said Rosenbaum, who also sits on the Senate revenue panel.

Housing leads the way

Oregon's job growth has reached 3 percent on an annualized basis, something that state economist Mark McMullen said has happened in previous economic recoveries — but was not expected in the current recovery.

"We're not going to see the same rates of growth we have become accustomed to following previous recessions," he said at a presentation to the House and Senate revenue committees.

Senior economist Josh Lehner said one reason for the stronger-than-expected growth was a surge in housing and related industries, such as logging, construction and real estate. The growth was at 9 percent, almost three times what was expected.

"That number is probably not sustainable in the long run," McMullen said.

Still, McMullen said, job growth has spread from the Portland area — which weathered the downturn better — to most other areas.

“All the indicators are positive. Employment growth is up. Housing is up. Oregon’s healthy recovery is continuing. Now we just need to get more jobs for our people," Senate President Peter Courtney, D-Salem, said in a statement.

But the Eugene-Springfield area, which lost manufacturing jobs in technology and recreational vehicles, is still lagging.

"We still have a lot of people who are out of work and desperate," said Rep. Phil Barnhart, D-Eugene, who leads the House Revenue Committee. "We still need a significant amount of economic growth. The fact that the economists are optimistic feels very good to me."

Barnhart said those unemployed workers could use help in the form of extended unemployment benefits. "Congress is lollygagging when it should be working on this," he said. "This is an example of something they should have acted on when they haven't."

But he said Oregon's extension of health insurance coverage, particularly under the Oregon Health Plan, has benefited the same unemployed workers. "More people are coming in with insurance and paying for the help they need," he said.

Significant gap

Oregon House leaders, in statements, offered differing perspectives on the forecast.

"While we continue to see steady job growth across the state, we need to ensure this recovery benefits all Oregonians, not just a select few. There is a significant gap between those who are doing very well and everyone else," said House Speaker Tina Kotek, D-Portland. "We must focus on ensuring this recovery provides opportunity for everyone who is struggling to stay in the middle class."

But House Republican Leader Mike McLane of Powell Butte said there were downsides to the news about increased job growth and tax collections.

"The bad news is that our unemployment rate remains higher than the national average, and the revenue increase was wiped out by Democrat leadership's increased spending in March," McLane said.

During the past 10 months, Oregon's unemployment rate has dropped from 8 percent to 6.9 percent, and the economy has added 36,200 jobs, all but 3,000 of them in the private sector. Peak unemployment was at 11.6 percent five years ago.

McMullen said Oregon's economy is on track to return to 2008 employment levels by 2015, seven years after the downturn started. That's comparable to what occurred during the recession of the 1980s.

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