Record revenue projected, but record need lies in wait

Oregon’s December revenue forecast — which the Legislature will be using as a budgeting guide during the long odd-year session set to convene 11 days hence — promises to support a $39.3 billion general fund budget and $137.7 billion all-funds budget for the 2025-27 biennium.

That represents a surge not seen since the tech takeoff of the heady 1990s. But several cautionary notes are rightfully tempering expectations for Gov. Tina Kotek, even though her party just secured supermajorities in both chambers, including:

* This year’s revenue forecasts are the first to come from the state’s new chief economist, Carl Riccadonna, who is committed to eliminating overly conservative underestimates generating outsized kicker givebacks. The risk there is projecting revenue that ultimately fails to materialize, which serves to shift the need for caution to the Legislature.

* Thanks to a growing complement of hybrid and all-electric cars, the state’s gas tax is falling woefully short of keeping up with highway needs. The only workable long-term answer is a new funding system serving to equalize the burden, but backfilling will probably be necessary in the interim. We oppose a gas tax hike serving only to increase the inequity, and are confident the electorate agrees with us on that.

* Climate change is fueling the frequency and intensity of wildland fires, thus the cost of trying to prevent them, suppress them and address the damage they leave in their wake. Kotek is proposing allocation of $150 million from the state’s Rainy Day Fund as a stopgap, but that’s not a long-term solution, and we’re going to need one.

* Kotek is proposing virtually no new initiatives of note in the public schools, but still facing an outsize fiscal need there, thanks in large part to an unsustainably over-generous Public Employee Retirement System. We see little prospect for PERS reform at the hands of the majority Democrats, as their campaigns are funded in great measure by public employee unions. But the inaction is eating up a lot of revenue that could and should rightly be going elsewhere.

* The governor’s core targets are homelessness and housing, and rightly so. But addressing them in a meaningful way is very expensive. She is seeking almost $700 million to get homeless Oregonians off the streets and into either interim or permanent shelter, and almost $1 billion to increase Oregon’s housing stock, thus increasing its availability and affordability.

* Donald Trump’s return to the presidency could very well threaten $40 billion in annual federal funding that Oregon could otherwise expect. It’s impossible to meaningfully quantify in advance, but sounds just one more note for caution. If reduced federal funding materializes, some degree of backfilling will become virtually essential.

What’s fueling such an impressive surge in state revenue is an equally impressive surge in worker wages and salaries in a state disproportionately reliant on the income tax. Unfortunately, the state joins its workers in finding the cost of necessary goods and services rising as rapidly as discretionary income.

As a result, what comes in one pocket is rapidly going out another pocket, with precious little to show for the passage. And while we have been steadily driving down inflation, it remains a slow, uncertain process.

The reality of the situation is leading to the usual handwringing on both ends of the political spectrum.

On one end, advocates of increased government outreach are distressed that the revenue bounty is promising so little in the way of bold new initiatives. On the other, advocates of reduced government outreach are distressed that it is promising so much in the way of keeping present programs in place.

Maybe that’s not such a bad thing. Maybe that’s the best we can hope for as our 90 legislators begin converging on Salem for the new session.