FY 2022 General Fund Forecast Updates:
November 2020 CGF Five-Year Forecast Summary
YouTube link to November 2020 FY 2020 General Fund Forecast (Presentation begins at the 12 min 30 second mark)
On November 5th, 2020, the Central Budget Office presented an updated five-year General Fund forecast to the Board of County Commissioners. The COVID-19 pandemic and ensuing recession are still having a profound impact on both the County’s revenues and demand for services. The forecast is defined by uncertainty stemming from the spread of COVID-19 and the lack of clear plans on Federal Government support for the pandemic response.
The economy has recovered faster from the initial COVID-19 impacts than most economists expected. While the quick decrease in the unemployment rate is good news, it hides the inequitable nature of the economic recovery. The job losses following the outbreak were heavily concentrated in industries that tend to pay lower wages, and firms that are unable to easily adapt operations to be compatible with public health restrictions continue to struggle. These variations across the economy mean that some County revenues have continued at pre-pandemic levels (property taxes and recording fees), while other revenues are severely impacted (Business Income Tax (BIT) and Motor Vehicle Rental Taxes (MVRT)).
In the near-term, the Budget Office forecasts a $9.1 million deficit in FY 2022. The FY 2021 Adopted Budget used $19 million in OTO resources to offset revenue shortfalls caused by the pandemic with the hope that revenues would recover by FY 2022. While revenues have started to recover, it is not expected to be enough to offset the ongoing shortfall. Both BIT and MVRT revenues are expected to remain at levels significantly below the pre-pandemic forecast. On the expense side, personnel cost increases are expected to be lower than in the last several years, due to a low COLA and the impacts of the State Legislature’s PERS reforms.
In the out years of the forecast, the recovery of BIT revenues (at the higher rate passed by the Board in early 2020) and Motor Vehicle Rental tax revenues, along with a significant increase in ongoing property tax revenues due to the dissolution of several large local Urban Renewal Areas (URA’s) under the City of Portland, leads to increasing forecasted surpluses. In FY 2026, the additional assessed value that is returned to the tax rolls from the URA’s will result in $30.3 million of new ongoing property tax revenue resulting in a surplus of $47.4 million (see Table 1 for a summary).