State economists illustrate a stable economy with slightly increased revenues

Oregon state economists Josh Lehner and Mark McMullen told lawmakers for the thirteenth consecutive time that state revenues are up from the previous forecast (given last May). The August 30 economic outlook and revenue forecast is the first of the new biennium.

Economic outlook

During the last forecast, McMullen and Lehner focused the economic outlook presentation on how full labor force participation plus a slowdown in population growth will impact Oregon’s economy.

August’s economic outlook discussed some of the same themes while underscoring on a newfound economic stability. Uncertainty is still widespread in terms of economic factors, but economists across the country, including at the Federal Reserve, have coalesced around a “soft landing” scenario. Inflation has cooled to get closer to the target 2%, and unemployment still hovers at a record low 3%. Both of these components paint an optimistic future.

Revenue forecast

In comparison to the past few years of forecasts, this quarter has tracked relatively close to previous reports. This is partially due to adjustments to modeling that the Office of Economic Analysis (OEA) made, starting with the last forecast.

The very bottom line for the General Fund is an added $437 million for the 2023-25 biennium. In addition, the reserves are likely to hit their statutory caps in the next biennium, which is all but guaranteed to tee up many conversations in the Legislature about how these dollars should be allocated.

The bottom line:

  • Net General Fund for the 2023-25 biennium is up $437 million from the close of session
  • Lottery resources for the 2023-25 biennium is up $9.5 million (0.5%) from the previous forecast
  • Personal income tax revenue is up $44 million (0.2%) from the close of session estimate
  • Personal kicker projection is not anticipated at this time for 2025
  • Corporate tax revenue is up $321 million (14%) from the close of session estimate, which will be part of a 2025 kicker, dedicated to K-12 education spending

Signatures & vetoes

Gov. Kotek signed over 600 bills into law earlier this month, and also vetoed a few bills and budget items after a thorough public engagement process.

The vetoes consisted of five line-item vetoes (striking an emergency clause for a policy bill, four budget items) and two policy bills in their entirety (one which would have created a task force to study the creation of a state bank, the other was to conduct a study that Gov. Kotek believes could be done without the legislation).

The Oregonian had this helpful article outlining the vetoes. Additionally, Gov. Kotek outlined explanations and context for her decisions in bill letters to the Legislature.

Legislature – Walkout politics continue

After the Republican-led walkout in the Senate ended, one of the biggest questions was about how the newly passed Ballot Measure 113 would impact upcoming elections. Ten members exceeded the ten unexcused absences threshold during the walkout. Of those ten, at least two have announced their plans to run for reelection (although the official filing doesn’t open up until September 14). These legislators requested a ruling from newly appointed Oregon Secretary of State LaVonne Griffin-Valade to clarify the measure’s language about when the ban would apply (i.e. banned from running for reelection, or for the term after).

In her first press release since taking office, Griffin-Valade issued her opinion this week, stating the lawmakers won’t be allowed to run for reelection. OPB summarizes the issue at hand best: “the wording being disputed by Republicans was included in the ballot measure to clarify that lawmakers who accrue more than 10 unexcused absences ‘may complete their current term, even though the election occurs before it is over.'”

As expected, Senate Republican Leader Tim Knopp (R-Bend) issued a press release declaring the caucus’ intention to challenge the Secretary of State’s rule in court.

Congress will return to DC over the next two weeks, to face a packed fall agenda.

Congress’ month-long August recess is over, with the Senate set to return to DC on today, Wednesday September 6 and the House on Tuesday September 12.

The most immediate issue that Congress will face will be funding the Federal government for FY 2024 (Oct. 1, 2023 – Sept. 30, 2024.)  See below for more information about a potential Continuing Resolution (CR) or Federal government shutdown.  Other health-related priorities include renewing mandatory funding for CHCs, the National Health Service Corps (NHSC) and Teaching Health centers GME, all of which expire on September 30.  Several hospital-related issues – involving payment, mergers, and price transparency – are also in play, as is PBM reform and 340B.  Several groups expect a general “health care package” to move later this fall, after the Federal budget has been dealt with.

As the end of the fiscal year looms, Congressional leaders push for a CR, but hard-line Republicans could force a shutdown.

This fall’s debate over funding the Federal government could be one of the most challenging in recent years.  Prior to leaving for August recess, the House had passed only one of the 13 bills needed to fund the Federal government, and the Senate had passed none, so both chambers still have much of their own work to do.  Also, the House set tighter spending limits on its bills than the Senate, which will further complicate negotiations when the two chambers merge their bills in Conference Committee.

Given the challenges of agreeing on funding for the full fiscal year, both House Speaker Keven McCarthy (R-CA) and Senate Majority Leader Chuck Schumer (D-NY) have expressed support for passing a Continuing Resolution (CR.)  A CR would avoid a federal government shutdown on October 1, by funding the government for a short period while Congress continues work on the longer-term bill.  However, a handful of hard-line House Republicans are brushing off — or even embracing — the possibility of a shutdown, arguing that “bringing the government to a screeching halt is more acceptable than allowing the country to continue on its current spending trajectory.”  While these Freedom Caucus members represent a small percentage of all House Republicans, they have an out-sized influence given the narrow majority that Republicans hold in the House, and their opposition alone could be enough to scuttle a CR and force a shutdown.

Here is information about how a Federal shutdown would impact CHCs and PCAs.