Another kicker is afoot and other highlights from today's economic forecast

February 9, 2022By Daniel Hauser

Today, state economists gave their latest take on Oregon’s economy and revenue collections. Their presentation to Oregon lawmakers contained mostly good news. Yet, included in their analysis was the projection that Oregon will see another “kicker” in the coming budget period, routing away nearly $1 billion from important investments in our communities.

Oregon's economy continues to grow and generate additional resources for the legislature to invest in helping our communities thrive. Since the December 2021 forecast, Oregon is expected to bring in about $800 million more in the current budget period, and about $1.4 billion more over the next two budget periods. This is largely driven by personal and corporate income tax growth. For our current budget period, the ending fund balance is up nearly $2.5 billion from the close-of-session forecast issued less than a year ago. Furthermore, our reserves continue to grow and the state is expected to end the current budget period with nearly $1.3 billion in the Rainy Day Fund and $700 million in the Education Stability Fund.

However, part of what's driving this is inflation — the rising cost of living. Prices have risen as a result of the pandemic, disrupting the supply chain. As inflation goes up, revenues tend to follow along. For workers, inflation means that paychecks don’t stretch as far. Even as wages increase, inflation can cancel out part of that increase. In the case of the state, inflation can translate into the cost of public services growing faster than revenues. The state’s dollars don’t stretch as far as before, either.

It's also important to highlight that many Oregonians are really struggling as the pandemic continues. Parents can't afford childcare. Farmworkers who work long hours performing physically demanding work aren't paid overtime. People living on our streets are not getting the housing or services they need. And for families, the minimum wage is not nearly enough to afford housing and the other essentials of life. For decades, economic growth has not been equally distributed.

Finally, let’s talk about the foolishness that is the kicker. State economists are already predicting a kicker for the next budget period of nearly $1 billion. Don't confuse that with the kicker going out right now, which totals a record-breaking $1.9 billion.

The current kicker is a massive tax cut for the rich. The richest 1 percent of Oregonians will get kicker rebates averaging nearly $17,000. But if you are a typical Oregonian, you’ll get just $420. And if you are among the lowest paid Oregonians — if you are among those who could most use some extra cash — the kicker gives you crumbs. The lowest earning fifth of Oregonians will get an average kicker of just $30.

So, yes, the latest economic and revenue forecast offers reassurance that some things are improving. Yet, our flawed kicker policy and inadequate investment in our communities remain threats to our collective well-being. That is where we need to focus.

Posted in Budget, Economy, jobs & workers, Taxes.

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