SALEM, Ore. (AP) –Oregon will have more money to spend in its next two-year budget than previously anticipated, state economists said Thursday in an announcement likely to ease expected cuts to social safety net programs. Economists released their quarterly revenue forecast, projecting the state will take in an additional $130 million in revenue during the two-year budget cycle that begins July 1, due in large part to a boost in personal income tax collections.
Gov. John Kitzhaber and legislative leaders have agreed that additional revenue should go first to offset proposed cuts to programs for seniors, the poor and people with disabilities. Those programs are facing massive cuts after running out of federal stimulus dollars that propped up the spending over the past two years.
Despite the rosy news for the next two years, the forecast has dark spots. Lawmakers face an unexpected $40 million gap in the seven weeks remaining for the current budget.
And projected growth in the near term would come at the expense of the budget for the 2013-2015 biennium.
That's because near-term growth is fueled in part by the assumption that the George W. Bush tax cuts on wealthy Americans will expire, raising capital gains taxes. Economists believe that would encourage businesses and investors to accelerate asset sales to pay the lower capital gains tax.
"Today's revenue forecast is good news for the 2011-13 budget, but it is also further indication that Oregon's recovery will take time," Kitzhaber said in a statement.
Economists say personal income tax collections are up as more people get jobs. But revenue from corporate income taxes is slowing as business costs increase due to expansion and rising commodity prices.
The latest economic recovery is expected to happen more slowly than the previous two, which were driven by unsustainable bubbles in the technology and housing sectors, economists said. Historically, Oregon has been quicker than other states to rebound from economic lapses, but State Economist Tom Potiowski cautioned that history isn't guaranteed to repeat itself.
As the economy recovers, the state needs to ensure it is saving money to avoid cuts to essential services later, House Republican leader Kevin Cameron of Salem said in a statement.
"Though the additional revenue will help fund some programs in the next budget, we must continue to make the tough decisions to put our finances on a more sustainable path," Cameron said.