SALEM, Ore. — Unexpectedly high tax rebates took a bite out of state revenue this year, eliminating the possibility for “kicker” tax rebates, economists said Wednesday, but the $40 million downtick in projected income won’t require any immediate changes to the budget.
Economists warned earlier this year that an influx of corporate income tax payments created a strong possibility for business kicker rebates, but the influx was offset by rebates in late May and June.
Under a tax law unique to Oregon, kicker rebates are triggered when collections over a two-year budget cycle exceed projections by at least 2 percent. For the budget period that ended June 30, corporate revenue was $28 million shy of the trigger and personal income-tax revenue was $107 million short.
The higher-than-expected rebates caused economists to downgrade their general fund revenue projections for the current budget cycle by $40 million. Lottery revenue projections were up about $3 million.
Lawmakers left $335 million of projected revenue unbudgeted, so the budget can absorb further downticks in revenue.
“Our budget is on the right track to secure the historic reinvestments we made in public schools and critical state services this past legislative session,” Sen. Diane Rosenbaum, the Democratic leader, said in a statement.
State Economist Mark McMullen said the state will have to contend with slower growth in revenue as the population ages and high-earning baby boomers retire. Revenue has historically grown about 15 percent every two years, McMullen said, but will likely grow only 10 percent in the future.
McMullen said the slow economic recovery is beginning to expand beyond Portland, but rural areas still face struggles. They were especially hard hit by the housing market bust and cuts in public-sector workers.
Middle-income jobs have also been slow to recover and workers unemployed longer than six months are struggling to find jobs, he said.