SALEM – More than 150,000 Oregonians remain out of work due to the coronavirus pandemic, but income tax collections that support state services and public schools are likely to exceed pre-pandemic forecasts.
State economists told lawmakers on Wednesday February 24 that this is good news for the current two-year state budget – but not so good for the next two budget cycles, including the spending plan that lawmakers are currently developing.
State economist Mark McMullen compared it to what happened in 1990, when Oregon experienced a relatively moderate economic downturn, but growth in tax collections slowed for a few years thereafter.
“We have a few years with stable growth … without any revenue gain, which is good for a recession, but bad for keeping up with the spending side,” McMullen said in a quarterly presentation to the revenue committees of the House and the Senate.
He and senior economist Josh Lehner had projected a $ 2 billion drop in tax collections just after the pandemic began in the spring of 2020. But in their latest forecast, they said lawmakers would have around 800 millions more for the current budget period and the next one, which begins July 1. Even though lawmakers tapped it on December 21, 2020, the final balance and two state reserves will have around $ 3.1 billion at the start of the new budget period.
Largely due to billions in federal assistance to individuals and businesses, McMullen said, Oregon’s overall income levels rose 5%, not decline, despite the largest drop in a month in Oregon’s unemployment rate, from a record high of 3.3% in March 2020. to 14.2% in April 2020. The rate for December 2020 was 6.4%.
“You see employment down about 6% in Oregon over the past year, which is the same as the worst year of the Great Recession, when our tax revenues fell 20%. Here you see a lot less, ”said McMullen. “If you extend that for our preliminary numbers for 2021, revenues will return to where they were last year.”
Lehner said Oregon received $ 12 billion in taxable unemployment benefits, $ 11 billion in corporate paycheck protection program grant loans that are deductible and $ 8 billion in federal discounts. (One round paid individuals $ 1,200, and a second round paid $ 600; Congress is considering a third plan for $ 1,400.)
“This keeps income, this deep into recession, which we haven’t seen before in decades – that level of income support coming from the federal government,” Lehner said. If we took away all direct aid… that underlying income would get us all the way back before the pandemic. The economy has proven to be more resilient than we initially feared. “
Predictably, Democratic legislative leaders hailed the news and Republicans spoke about the inconvenience of so many still unemployed or underemployed.
Democratic Governor Kate Brown said the cheers were premature.
“Even with this good news, it is important to move forward with caution, as the road ahead remains unpredictable,” she said in a statement. “We also know that many Oregonians are still struggling with job losses, underemployment and making ends meet.”
Lawmakers will base their decisions on Brown’s $ 25.6 billion budget, drawn from the tax-financed general fund and lottery revenues, after the next economic and revenue forecast now slated for May 19. Lawmakers and Brown herself admit that it does not allow certain state services and aid to be maintained for public schools.
But the US Congress is working on President Joe Biden’s $ 1.9 trillion pandemic stimulus package, which offers more aid to Oregon and other states.
“If passed, this bill would provide another round of much-needed aid to states and direct benefits to Oregonians in the form of essential services such as unemployment assistance, nutritional assistance, housing assistance.” and tax credits for families and workers, ”said Brown.