Here’s an item from Salem that you might have missed last week: The state’s economists are predicting that legislators will have a record amount of revenue with which to work as they craft a spending plan for the 2019-21 two-year budget cycle.
The latest quarterly revenue estimate came last week from the Oregon Office of Economic Analysis (perhaps the only agency of state government that prepares PowerPoint slides featuring a tiny image of Bigfoot in the lower left corner, a touch that we find admirable). This is the revenue estimate that legislators on the powerful Ways and Means Committee will use as they work to produce their first draft of the 2019-21 budget.
There is good news for state taxpayers in the most recent revenue estimates: The numbers likely mean that taxpayers will receive somewhat larger rebates from the state’s oddball “kicker” system when they file their taxes in 2020. You’ll recall that the kicker rebate is triggered when tax revenues for a two-year budget cycle come in at more than 2 percent above the economists’ forecast made at the start of the cycle. (The median kicker, the economists estimated, for a taxpayer earning about $35,000 will be around $180, but remember that the state pays that now in the form of tax credits instead of a check.)
For legislators, the increased revenue amounts are good news as well, to a point: The final result is that they should have about $67.7 million more to work with than anticipated in previous estimates. The total amount in the general fund (think of this fund as the state’s checking account) for 2019-21 should be around $22.5 billion.
That’s a lot of money. The problem, of course, is that it’s not enough to cover all the increased expenses anticipated in the state’s budget, in particular a pair of familiar budget-busters: The increased premiums associated with the state’s underfunded public pension system and the growing costs of the state’s expanded Oregon Health Plan, the state’s version of Medicaid.
Part of that Oregon Health Plan gap was filled last week when the Senate approved House Bill 2010, a $380 million package of taxes on hospitals and health insurers that will remain in place for six years. The measure already has passed the House of Representatives, and Gov. Kate Brown is expected to sign it. The bill expands and extends the funding pieces approved by voters in January 2018’s Measure 101, and it increases a 1.5 percent tax on health insurance providers to 2 percent. (Every mid-valley legislator, with the exception of Scio Republican Sherrie Sprenger, voted for the bill.)
The state still faces a gap of $542 million or so to fund the Oregon Health Plan, and Brown’s two proposals to plug that (a $2-per-pack additional cigarette tax and a tax on employers whose workers are on the Oregon Health Plan) face, shall we say, a somewhat dubious Legislature.
One other point from last week’s forecast is worth keeping in mind.
The state’s economists are joining a national chorus of economists who are increasingly certain that the national economy will be significantly slowing down by next year. If that turns out to be the case, and considering Oregon’s vulnerability to economic slowdowns, it would behoove legislators to do what they can to bolster the state’s rainy day fund and its education stability fund, which have about $1.9 billion combined. That seems like a hefty amount, about 9 percent of the general fund. But, the economists warned, “such reserves would barely be sufficient to withstand a typical recession’s impact on state revenues, let alone account for the increase in public services and programs during downturns.”
Bottom line: It’s not rainy quite yet. But it will be soon. Let’s be sure we’re ready for the rain.