Oregon’s revenue starts to increase

A two-year slide in state revenues — which has forced $1 billion in funding cuts for everything from law enforcement to education — appears to have bottomed out. But experts say that it’s too early to celebrate.

“Right now we’re still treading water. But for once we’re saying we see no deficit developing,” said Michael Kennedy, an economist in the state Office of Economic Analysis.

Key data show the first significant upswing in tax collections since mid-2001.

General fund revenue for the first three months of the fiscal year that began in July is up by 6.3 percent compared with the same period of 2002, according to the Office of Economic Analysis.

Revenue in September surged 12.5 percent during the same month last year, according to the office’s monthly income tracking reports.

Income tax collections — close to 90 percent of the budget — were up by 6 percent in the last quarter over the same period a year ago.

The office’s next official revenue forecast is due Dec. 1.

Good signs for Oregon’s economy include that manufacturing goods and exports are picking up, Kennedy said.

Tax receipts rose even though Oregon last month once again had the nation’s highest jobless rate — 8 percent. One reason, Kennedy said, could be that employees are working more hours and earning more pay.

State Rep. Lane Shetterly, chairman of the House Revenue Committee, said the new figures plus a recent jump in national economic indicators are reasons for optimism.

“But it’s not time to break out champagne,” said the Dallas Republican. “It will take a few quarters to tell if this is a fundamental increase that will be sustained.”

John Mitchell, an economist for US Bank, said Oregon might be pulling out of what he sees as a three-year slump, because employment last peaked in September 2000.

The improved state revenue data are “consistent with strong national numbers,” Mitchell said. “I expect Oregon still to have a down year this year from the employment standpoint, but I see positive growth from here on out.”

The improved revenues will provide ammunition for opponents of a tax increase passed in August by the Legislature as part of its two years of battles against persisting holes in the budget.

The tax-increase foes — who have been gathering signatures to force an election on the matter on Feb. 3 — say they will cite the sunnier revenue outlook as even less reason to raise taxes.

The tax increases would yield $800 million to balance the 2003-05 budget, mostly from a temporary income tax surcharge.

A tax hike “would knock a few rungs off of Oregon’s economic recovery ladder,” argued state Republican Party Chairman Kevin Mannix, one leader in the effort to defeat the tax boost.

Russ Walker, a sponsor of the referendum petition, also said higher taxes could bog down a recovery.

“The last thing we’d want to do is slow the economy down,” said Walker, Oregon director of the national Citizens for a Sound Economy, which is managing and funding much of the petition drive. Backers have until Nov. 25 to collect 50,000 signatures to send the issue to the ballot.

Shetterly, however, said the $800 million tax increase is needed even with an improved budget picture. There’s little chance revenue would jump by enough to plug a gap of that size if the tax boost is rejected.

The 6 percent rise in income tax revenue in the last quarter, for example, amounts to around $60 million.

The two-year general fund budget totals $10.5 billion.

Still, Shetterly said the revenue increase raises hopes that the third year of the three-year income tax surcharge could be dropped.

The tax measure says that will happen if revenue increases by a given amount, saving taxpayers about $260 million.

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