A revenue windfall in Oregon shifts the focus for lawmakers

Oregon lawmakers have until March 7 to agree on a spending plan for a $789 million revenue windfall revealed Wednesday in February’s economic forecast for the 2021-23 biennium.

The state’s Office of Economic Analysis released its February economic forecast, which revealed personal and corporate income taxes, lottery sales and other sources are all outpacing projections from its December forecast.

The excess revenues are in addition to $179 million of unspent money from the last budget carried over to this session, for a total of $979 million of unanticipated funds.

“This is a pivotal moment for Oregon,” Gov. Kate Brown said. “We have a windfall of one-time resources this year, and we have the opportunity to make big investments — and to do the big and bold work to help our working families and businesses thrive.”

Tight labor markets have put considerable upward pressure on wages, which is reflected in withholdings of personal income taxes, state economists wrote. Personal income tax withholdings are growing at “roughly double the rate seen during the last expansion.”

“As the inflationary boom persists, all of Oregon’s primary state revenue instruments continue to outperform pre-pandemic expectations,” state economists wrote. “With the consensus of economic forecasts now expecting that there is more to come, the revenue outlook has been revised upward.”

Lawmakers have just a 35-day session that began Feb. 1 to make changes to the state’s $25.5 billion general fund budget approved for the 2021-23 biennium last year.

Lawmakers on both sides of the aisle made suggestions as to where the surplus should be directed.

“After two incredibly difficult years, today’s news means we can make critical investments in our schools, working families and small business,” said House Speaker Dan Rayfield, D-Corvallis. “We need to seize this opportunity to invest in our schools, particularly given the burnout many frontline workers in education are feeling.”

While Democrats including Senate Majority Leader Rob Wagner, D-Lake Oswego, suggested the additional money could go to schools, for housing and families and businesses harmed by the pandemic. Republicans want $60 million to go to state police and $50 million for forest-thinning projects to avert wildfires.

“We also need to be responsible with this money,” said Senate Republican Leader Tim Knopp, R-Bend. “We need to reserve more funds for the next downturn. We also need to look seriously at giving Oregonians a tax break. The government has buckets of money, but inflation is pinching the pockets of working Oregonians.”