Oregon taxpayer rebate expected as revenues beat expectations

Oregon's revenues continued to beat expectations, with the state's economists forecasting lawmakers will have nearly $696 million more to spend than anticipated, and about $3.9 billion going back to taxpayers through the kicker rebate.

The state has a trigger mechanism that returns money to taxpayers every two years through a so-called kicker rebate if personal income taxes come in at least 2% higher than initial forecasts.

Though economists, and Gov. Tina Kotek, a Democrat, cautioned Oregon lawmakers to remain prudent, fears of a recession are being diminished as the state's tax revenue continues to exceed expectations.

"This revenue forecast shows that we can anticipate having more predictability and stability for the coming budget cycle," Kotek said in a statement. "While this is encouraging news, the legislature still has some tough choices to make. We will have to keep focused and stay the course in order to make much-needed investments in Oregonians' most urgent shared priorities: housing and homelessness, behavioral health, and education."

Oregon Governor's Office

Oregonians were already anticipating $5,200 back on their taxes from the kicker, based on economists' December forecast. Corporations will receive a $1.5 billion kicker rebate.

The state's latest quarterly economic forecast estimates that lawmakers will have nearly $696 million more to spend than originally anticipated, with nearly $31.5 billion available for the next two-year budget period that begins in July.

Economists issued a dual forecast in September with both a rosy and pessimistic outlook, and revenues have exceeded the rosier outlook that anticipated revenues would exceed the forecast by $600 million and $3.46 billion would be available for the individual taxpayer kicker.

State economist Mark McMullen urged lawmakers on the House and Senate revenue committees to remain cautious during a hearing as wide swings have occurred in forecasts over the past few years as the pandemic, influxes of federal money and the ongoing war in Ukraine altered the state and national economy.

There have been some paradigm shifts in economic activity, McMullen told lawmakers. "Hopefully we'll get into a more stable budgeting situation where the forecasts can be more accurate like they are once every 10 years."

State coffers are also heavily reliant on income taxes, which creates volatility that makes revenues harder to predict. Lawmakers have created more consumption-based taxes that have somewhat smoothed the peaks and valleys. Those include a corporate activity tax on gross business receipts and taxes on vehicles and marijuana sales.

Kotek's budget proposal would redirect $765 million that would have automatically been saved in the state's reserve funds to programs intended to improve education, homelessness and mental health.

That would leave $1.34 billion in the rainy-day fund as opposed to $1.85 billion for the 2023-25 fiscal years; and reduce the Education Stability Fund to $2.05 billion from the anticipated $2.8 billion.

Kotek would need buy-in from the Republican minority to pursue this course.

In a statement, House Republican Leader Vikki Breese-Iverson, R-Prineville, said, "The state of Oregon experienced a historic infusion of federal funding, but Oregonians and the Legislature must face the reality that these funds have ended. For the remainder of the 2023 Legislative Session, we must pursue fiscal responsibility which includes leaving our Education Stability Fund and rainy-day funds alone."

She also supported returning the kicker to taxpayers, citing inflationary pressures.