Revenue forecast optimistic

To see the complete quarterly economic and revenue forecast of the Oregon Office of Economic Analysis, please see this story at


Statesman Journal

For the first time in more than two years, Oregon’s state coffers are projected to collect more in personal and corporate income taxes than previously forecast.

But hold the champagne, state officials said Wednesday.

Because the overall increase is only $75 million for a state general fund of almost $11 billion.

The projection would leave state government with a balance of $136 million at the end of the current two-year budget in mid-2005. That’s more of a cushion than the $66 million left by the 2003 Legislature, but hundreds of millions less than experts would recommend.

State revenue economist Michael Kennedy said the gains in personal and corporate income taxes are modest, and the actual tallies of income taxes for 2003 and 2004 have yet to occur.

“We still have a number of critical points to pass,” he said.

Still, the revenue forecast is the first significant uptick in the nine quarters going back to September 2001, when Oregon’s slumping economy began to result in shrinking income tax collections. Nearly all of Oregon’s general-fund budget, which supports public schools and most state services other than transportation, relies on income taxes.

“The projection is similar to that of a patient who is flat on his back and has managed to lift his right wrist for the first time in a year,” said State Economist Tom Potiowsky. “The prognosis for the patient is positive, but there is still a long way to go for full recovery.”

Senate President Peter Courtney, D-Salem, said the amount is far short of filling any potential budget gap.

“But at least it’s positive, not negative,” said Courtney, who as a result of the previous forecasts had to endure five special sessions in 2002 and emergency action in the 2003 session to rebalance the budget.

Rep. Lane Shetterly, R-Dallas, alluded to Potiowsky’s description. “It’s good to see that wrist movement after all these years,” said Shetterly, who heads the House Revenue Committee. “But it doesn’t change anything in terms of the need for our tax measure.”

He referred to the 2003 Legislature’s plan to balance the budget by $800 million, largely through higher personal income taxes for three years and higher corporate income taxes.

The revenue forecast is based on current law and does not take into account what would happen if the increases contained in House Bill 2152 are referred to the ballot and defeated in an election. The next forecast is March 1.

Opponents have submitted 147,340 signatures in an attempt to force a statewide election on those increases Feb. 3. State and county elections officials are working to verify 50,420 signatures and certify a ballot title by Dec. 9.

“Oregonians don’t want more taxes,” said Russ Walker of Keizer, executive director of Oregon Citizens for a Sound Economy and president of the Taxpayer Defense Fund. “They want a more efficient government and they want a government that listens to what people are saying. Most important is that they want a job.”

Failure of the tax measure would trigger at least $544 million in already- approved spending cuts, and require action by the governor – and probably a special session of the Legislature – to make up the rest.

“I’m looking for one more season of peace and joy,” Courtney said. “But I doubt it’s going to be this year.”

Gov. Ted Kulongoski said it’s the attempted referral of the tax plan that is causing economic instability.

“When our schools are unable to provide our children with the education they need to compete in the global marketplace, Oregon businesses suffer from a lack of skilled workers,” he said. “When businesses have to pay increased health insurance costs because the Oregon Health Plan can no longer provide health insurance for our seniors, our economy suffers.”

Peter Wong can be reached at (503) 399-6745 or pwong@