Oregon economists said Wednesday that state revenues grew far more rapidly than expected over the past three months, which means taxpayers could be in line for a record kicker. The forecast also showed lawmakers will likely have hundreds of millions of additional dollars to spend in future budget cycles.
The explosive growth of revenues this year has been “nothing short of shocking,” state economist Mark McMullen told Oregon lawmakers.
“We’re going to do our best to explain how we could possibly be this stupid to make this kind of forecast error,” he told the joint meeting of the House and Senate Revenue Committees.
The miscalculation means billions more money coming in the door than previously thought. But it could also trigger a $3 billion rebate known as the kicker, which would offset much of the gains. The kicker rebate sends money back to taxpayers if revenues exceed projections by more than 2%.
The kicker won’t be finalized until next year, and McMullen said the current boom cycle could very easily be over by then.
The topsy-turvy nature of world events made economists’ job even harder than usual, said. Rep. Nancy Nathanson, D-Eugene.
“It’s a really tough order to try to meet this 2% target,” she said. “It’s just very difficult.”
That sentiment was echoed by Rep. Greg Smith, R-Heppner.
“I can’t even imagine how challenging it must have been with everything that’s come before this state, before this nation, and before the world,” he said.
Oregon’s political leaders urged caution, given the turbulent nature of the economy.
“Even with revenue growth, it is still important that we proceed with caution and plan for the future,” said Gov. Kate Brown in a press release.
“As of now, we have extra money, but our economists are predicting an economic downturn soon,” said Sen. Tim Knopp, R-Bend, who leads the Senate Republican caucus. “We must budget wisely for the future.”
State economists noted that due to inflation, increased income tax revenues don’t necessarily mean Oregonians are better off.
“In the last 12 months, inflation-adjusted wages in Oregon are down three percent,” said Josh Lehner. “People are getting raises, but the average Oregonian’s purchasing power is lower today than it was a year ago.”
House Speaker Dan Rayfield, a Corvallis Democrat, was one of several legislators who noted that.
“Thanks to years of prudent budget management, Oregon has historic reserves and is in a great position to maintain services in future budget cycles,” said Rayfield. “And while many of our highest earners continue to do well, I recognize the continued challenges many Oregonians face because of ongoing inflation and believe we need to address the growing wealth divide.”