SALEM — Oregon’s economy is humming along in fine shape, but there are some likely bumps ahead, state economists said Wednesday.
The December Economic & Revenue Outlook was presented to a joint legislative committee at a morning informational hearing held at the Capitol.
It’s one of the quarterly reports given to lawmakers as an update on how much money the state is bringing in and what economic factors might portend for the future. The December forecast will also be used by Gov. Kate Brown to fine-tune her budget proposal, due next month.
Overall, the outlook showed the state’s economy should continue to grow through 2020. After that, it’s a question mark.
“There’s quite a bit of headwind in the outlook,” said Mark McMullen, the state economist.
But in the meantime, Oregon is doing very well.
“Things are awesome, but maybe a recession is coming?” Rep. Rob Nosse, D-Portland asked.
“I think that would be fair,” McMullen replied.
Whether it is a boom cycle followed by a sudden bust or a gradual slowing is still to be determined, McMullen said.
But for now the numbers are record-breaking good: Unemployment is at an all-time low 3.8 percent.
Oregon median household incomes are just above $60,000 — matching the U.S. average for the first time since 1979.
“That’s impressive because that hasn’t been the case since all the mills closed in the ’70s and early ’80s in Oregon,” McMullen said.
All indicators have improved — including the number of full-time jobs, hours worked and number of households with wage income.
For now, the job market is inducing people to continue to move to Oregon.
“Since the time of Lewis and Clark, any time we have jobs here, people want to come to Oregon,” McMullen deadpanned.
Employment gains in Oregon are expected through 2021, then fall off. McMullen said many of the factors are outside of Oregon’s control, such as international trade policy.
Along with a generally better-than-expected economy, there were additional upturns in key revenue areas.
Despite marijuana prices dropping by up to 50 percent, the economists said a surge in recreational marijuana demand has increased state tax funds by $20.3 million.
Funds from the Oregon Lottery were up $12.4 million, with economists saying recent exceptionally large jackpots and new video lottery games had likely spurred demand.
The state has also been able to salt away $2.5 billion in its Rainy Day Fund, to help cushion any economic downturn. It’s the largest amount the state has ever set aside for the future.
Despite the largely sunny revenue numbers, political storm clouds are gathering over how to handle costs.
The 2019 Legislature could be faced with a projected budget deficit of more than $1 billion, largely due to a funding shortfall for the Oregon Health Plan.
Some Democrats have suggested the need for a gross receipts tax to increase revenue. Most Republicans prefer reductions in state program costs.
Brown, House Speaker Tina Kotek, D-Portland, and Senate President Peter Courtney, D-Salem, did not issue statements on the forecast.
Republicans said the forecast numbers were a warning not to consider taxes during the next session of the Legislature.
“The state economy is good, and tax receipts are way up,” said House Minority Leader Mike McLane, R-Powell Butte. “Yet, Speaker Kotek and Gov. Brown have made clear they plan to raise taxes on Oregonians yet again. They will bear the responsibility for the impact such taxes wreak on our economy.”
Senate Minority Leader Jackie Winters, R-Salem, agreed.
“The biggest takeaway here is that increased revenues diminish the need to increase taxes on hardworking Oregonians,” she said.
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