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State revenue forecast: Kicker on the way

UPDATE: University presidents want more money for schools


State economists are projecting both a $473 million rebate to taxpayers next year and up to $264 million more for the state budget in the next two years.

“There is a substantial improvement in the Oregon economy,” said Josh Lehner, senior economist with the Oregon Office of Economic Analysis.

He and state economist Mark McMullen presented Thursday what McMullen called “an aggressive forecast” to lawmakers on the House and Senate revenue committees.

The additional $264 million is likely to fuel spending on schools and state services.

Although Democratic majorities pushed through a state school fund of $7.3 billion in April, Republican minorities and school advocates say the fund should be at least $7.5 billion.

When lawmakers passed that budget, they also committed at least 40 percent of any additional money from the forecast to schools. That amounts to $105 million, not counting anything else lawmakers may do.

As soon as McMullen started explaining the kicker projection, a group of students started chanting, “No kicker, no cuts, no ifs, ands or buts.” Oregon State Police escorted them out of the hearing room, and eight of them were arrested later as they continued chanting in a hallway and declined to disperse.

Projected kicker

The rebate to individual taxpayers, known as the “kicker,” is a result of actual tax collections exceeding 2013 projections by 2 percent or more. The projected amount is $473 million, up from $349 million in the Feb. 19 forecast. The actual amount will be determined in the next quarterly forecast in September.

Taxpayers will get a rebate in the form of credits against tax returns they will file by April 2016. Lawmakers reverted to the credit in 2011 and ended the practice of mailing checks.

According to state economists, Oregonians with median adjusted gross incomes of between $30,000 and $35,000 – half the taxpayers earning more, and half less – would get a projected credit of $144.

For an average taxpayer with adjusted gross income of $53,900, the credit is projected at $284.

The kicker is estimated at under 7 percent of tax liability.

The most recent kicker was for $1.1 billion in fall 2007. That represented 18.6 percent of tax liability.

More for spending

Meanwhile, the economists project $19.2 billion available in resources – tax collections and lottery proceeds – for the next two-year budget cycle starting July 1.

“But it can sour overnight,” McMullen. “So far, we haven’t had a dollar in the door for 2015-17.”

Not all of that amount is available for spending. Lawmakers must build into the next budget a carryover amount for the 2017-19 budget cycle, and put some money into a state reserve fund.

The budget framework drawn up by the Legislature’s chief budget writers back on Jan. 14 envisioned $18.5 billion in spending. That’s about $100 million less than proposed in the budget submitted by then-Gov. John Kitzhaber back on Dec. 1.

But they also complied an add-back list totaling $150 million, excluding what lawmakers already earmarked for the state school fund.

McMullen said that between two state reserve funds and a projected ending balance, the state budget will have $900 million unspent in various accounts by the end of the next cycle in mid-2017.

Lawmakers will now wrap up spending decisions, which typically take about 30 days after the forecast. Their target date for adjournment of the 2015 session is June 26; the legal deadline is July 11.

Gov. Kate Brown issued this statement after the release of the forecast:

“I am pleased that strong economic growth will enable us to invest an additional $100 million in our public schools as well as fund early childhood, career technical, and STEM programs that support student success and reduce the opportunity gap. According to the U.S. Department of Education, Oregon’s 2013 graduation rate was the worst in the country. We simply must do better, and we will.

“Additionally, Oregon’s positive economic outlook allows us to reinvest in other priorities for middle-class Oregonians such as access to health care, ensuring public safety, and promoting rural economic development while also building our savings. It’s important to have funds in reserve for future needs.”

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Reactions from Gov. Kate Brown and others about Thursday’s quarterly economic and revenue forecast:

Gov. Kate Brown:

“I am pleased that strong economic growth will enable us to invest an additional $100 million in our public schools as well as fund early childhood, career technical, and STEM programs that support student success and reduce the opportunity gap. According to the U.S. Department of Education, Oregon’s 2013 graduation rate was the worst in the country. We simply must do better, and we will.

“Additionally, Oregon’s positive economic outlook allows us to reinvest in other priorities for middle-class Oregonians such as access to health care, ensuring public safety, and promoting rural economic development while also building our savings. It’s important to have funds in reserve for future needs.”

Senate President Peter Courtney, D-Salem:

“This forecast will automatically mean $105 million more for our schools. It will allow us to balance the budget, give money back to taxpayers and get out on time.”

Senate Republican Leader Ted Ferrioli of John Day:

“A $478 million kicker is the best economic stimulus package that Oregonians could hope for. The kicker must be returned to taxpayers at all possible dispatch so they can invest, spend or save as they choose. With nearly $1.75 billion in new revenue this budget cycle, we can fully fund education and provide for all the needs of Oregonians without new taxes.”

House Speaker Tina Kotek, D-Portland:

“Today’s forecast puts us in a solid place to pass bipartisan budgets that will expand prosperity in all corners of our state while building toward a secure future.

“Because the Legislature guaranteed that additional revenue from this forecast would go directly to our schools, Oregon’s K-12 schools will see a boost of over $100 million for the next two years, on top of the $7.255 billion already approved. We will further prioritize education by strengthening support for early childhood education and expanding financial assistance for college students.

“This strong forecast will allow us to fill the current budget holes in public safety, human services, and natural resources in order to meet the needs of communities throughout Oregon – all while maintaining responsible reserves to protect our state from future downturns.”

House Republican Leader Mike McLane of Powell Butte:

“Despite nearly $1.75 billion in additional revenue available for this budget, legislative Democrats have somehow managed to underfund our schools while also jeopardizing our roads, bridges and public safety. The Legislature doesn’t have a revenue problem, it has a leadership and priorities problem. The recent calls from legislative Democrats to overturn or suspend the voter-approved kicker law are predictable and disappointing. Oregon taxpayers know how to spend their money better than we do.”

Senate Majority Leader Diane Rosenbaum, D-Portland:

“The revenue forecast today confirms what many of us see around the state – Oregon’s economy is steadily growing and picking up steam. Additional resources projected in today’s forecast will allow us to make targeted investments in critical state services, bolster our education budget, and set aside a prudent funding base for the future.”

“Senate Democrats are especially happy that at least forty percent of today’s additional resources will be dedicated to the K-12 budget. This means that we will have over $105 million more for Oregon schools. That brings the total school budget to an historic $7.361 billion.”

“We must not lose sight on our obligation to make sure all Oregonians share in this economic recovery. In the remaining months of session, Senate Democrats are focused on building an economy that works for everyone — especially those Oregon families that are still struggling to get by. To that end, legislation enacting paid sick leave and retirement security will help families who are still struggling and will remain my focus between now and sine die.”

Statement by the presidents of the seven state universities:

“With today’s revenue projections, Gov. Brown and legislative leaders have the information they need to begin finalizing the budget for the 2015-17 biennium. We urge our leaders to make post-secondary education a priority with the increased revenue now available.

“Since 2007, state funding for Oregon’s universities has been cut by more than 38 percent. While other sectors of the budget have had funding restored, higher education has not. The result has been higher tuition, reduced student services, and a more expensive and uncertain path to a post-secondary degree. This trend cannot continue.

“Never before has the public been so supportive of making higher education a priority for public dollars. It’s time to restore funding to higher education. It’s time to return to investment levels that will help control tuition, expand access, enhance graduation rates, and position Oregonians for a lifetime of opportunity and practical skills that will support a strong middle class.

“Students in every rural town and urban city need public higher education. Universities and community colleges provide students with the skills and training needed to get a job. Investing now in higher education will help ensure Oregon's recovering economy continues to grow.

“Oregon lawmakers must restore funding for higher education to pre-recession levels, just as they did for K-12. Given the importance of higher education to Oregon’s economic future, we simply cannot afford to continue at investment levels of the past – and with this revenue forecast the opportunity is now."

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