The Oregon Capitol building in Salem. Photo: Chas Hundley
The Oregon Department of Administrative Services (DAS) issued this week a quarterly economic forecast predicting higher wages increasing projected tax revenue will allow the state to recover more quickly from the recession, triggered by the ongoing COVID-19 pandemic than it did from The Great Recession of the early 2000s.
Oregon’s increasing wages, up about 8 percent since March 2020, may have made up for expiring federal aid, but any gains felt by the middle class mostly have been wiped away by supply-chain bottlenecks and inflation, which surged to 6.2 percent in October 2021 -- the most upward pressure since November 1990, according to TradingEconomics.com.
Gov. Kate Brown issued a statement saying the revenue forecast, coupled with the state’s unemployment rate decreasing to 4.4 percent, confirms Oregon has the momentum to experience a strong recovery from the economic impacts of COVID-19. However, the Portland metro, a region home to about half of Oregon’s population and the most jobs in the state, is recovering from the pandemic significantly slower than the rest of the state.
“We have an opportunity to make targeted investments to close the gaps for Oregonians still in need,” Brown said. “We must continue to center equity in our recovery efforts to ensure that the communities disproportionately impacted by the pandemic due to historic disparities –– Oregon’s Black, Indigenous, Latino, Latina, Latinx, Asian, Pacific Islander, Tribal, and people of color –– benefit equitably from Oregon’s strong economic recovery.”
State revenue figures for the 2021-23 biennium are predicted to reach $20.13 billion, driven by higher wages and higher corporate tax collections, even amid the current ongoing labor shortage and rising consumer prices.
The DAS also forecasts $558 million in personal income kicker rebates will be distributed to Oregonians in 2024, and taxpayers also can expect in 2022 a $1.9 billion in kicker checks or about $420 per median taxpayer.
The Oregon House Republican Caucus issued a statement saying the DAS revenue forecast beats the odds thanks to resilient Oregonians but it says big-budget government agencies are failing.
“Oregonians are earning more income in a stronger economy so they’re paying more taxes, giving the state record collections,” House Leader Rep. Christine Drazan (R-Canby) said. “However, state economists warn there is an increased risk of the economy overheating because of inflation. Employment levels returning to pre-pandemic (levels) is exactly what families and businesses needed. Unfortunately, inflation is a warning sign that a downturn is around the corner and we must proceed cautiously with our state budget.”
Drazan stated that “many” critical state agencies continue to “fail at delivering core services and operating functionally on behalf of Oregon students, families, and businesses,” but did not provide any specific agencies or examples of government overspending. Drazan also did not return calls from the Banks Post seeking comment.
Senate President Peter Courtney (D-Springfield) released his own statement about the December economic forecast.
“Oregon continues to see robust growth,” he said. “We did not expect this. Apparently, we’ve recovered quickly from the economic downturn. Economists don’t seem to know why. I think we should continue to be vigilant and frugal about the money we have.”
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The Office of Economic Analysis report says the revenue boom is supported by a wide range of income sources, most importantly, healthy gains in labor income despite Oregon having 70,000 fewer jobs relative to pre-pandemic levels. Salaries and taxable wages also are far above pre-pandemic trends, and the persistently tight labor market is putting upward pressure on wages, leading to significant payroll growth despite the job losses.
“The return of inflation after a 30-year hiatus is also generating additional revenue across a range of tax instruments,” the report states. “With demand so strong across the economy, businesses currently have a considerable amount of pricing power, and have been able to pass most of their cost increases along to consumers. As a result, profits and other taxable business incomes are booming. In addition to the direct boost to tax collections, healthy business earnings are supporting equity markets and other forms of investment income.”
Sen. Tim Knopp (R-Bend) said inflation is devastating Oregon’s working families while padding the pockets of government, and blowout spending from federal government borrowing has given Oregon more money than it knows what to do with.
“At the same time, most working people have gotten effective pay cuts because everything is more expensive,” Knopp said. “Yet, Democrats’ vision continues to be tax, borrow, and spend. It’s time to give working Oregonians some relief in their family budget.”
Readers who have questions or wish to submit suggestions to the state should contact the Office of Economic Analysis by phone at 503-378-3405.