SALEM — Oregon’s tax revenue is holding steady after years of robust job growth, according to the state’s latest economic forecast. But signs of trouble — tied to concerns over manufacturing and the stock market — could be looming.

“The revenue outlook is stable, yet uncertain,” the report says.

The state’s general fund through June 2017 is expected to stay at roughly $18 billion. Discretionary revenues overall — including Oregon Lottery revenues seeing double-digit growth — will climb $56 million beyond what was predicted over the summer.

Corporate tax receipts also remain high, with a corporate kicker of $34.7 million expected in 2017 if current projections hold. That kicker money — revenues that exceed projections — would head to the state’s K-12 education fund.

On the other hand, Oregon’s Legislative Revenue Office found drops in key areas when compared to the state’s last forecast, which came out in August. Personal income tax collections dropped nearly $19 million. Corporate income taxes fell nearly $3 million in that span. Personal income overall fell $1.3 billion. And employment fell by 1,839 jobs.

“It does appear we probably peaked sometime around the end of 2014 or the beginning of 2015,” State Economist Mark McMullen told lawmakers Wednesday during a combined hearing of the House and Senate revenue committees. “We’re still quite healthy, but it looks like we’ve come off a bit from the past.”

McMullen said wages have grown more than expected, which could signal a “more healthy job market.” And he said job growth in Oregon, climbing since the recession, should finally catch up to the state’s influx of new residents sometime next year.

“This is just about as good as it gets,” McMullen said, noting that the state’s economy is “still going full throttle.”

McMullen also joked about “Sodom and Gomorrah,” noting surprising growth in “sin taxes” and other revenue sources associated with vice and traffic tickets. Beyond lottery sales — led by new video terminals that critics see as unfairly targeting problem gamblers and the poor — cigarette and alcohol sales are up.

Rep. Phil Barnhart, D-Eugene, chairman of the House revenue committee, called the lottery gains “unfortunate” even as he noted “the state depends on the revenues these gains produce” to pay for schools and housing and other services.

But other dark clouds are gathering. And that could be bad news for lawmakers and school officials still digging out of the last recession and facing massive bills for public employee pensions and health care reform costs in 2017.

Lawmakers made a substantial payment to Oregon’s rainy-day funds this year, but economists say that money would merely dampen the effects of a severe recession.

“It doesn’t look like happy days are here again,” said Sen. Brian Boquist, R-Dallas, vice chairman of the Senate’s revenue committee. “It looks pretty strained out there.”

Economists allowed that potential weakening in the stock market could hit capital gains revenues, a major but volatile source of state income. Decreasing housing affordability also could hurt the state’s workforce.

And manufacturing declines nationally and uncertainty with trading partners such as Canada, China and Japan also could rattle Oregon’s export-heavy economy.

An announcement by Esco Corp. last month that it’s shutting its 102-year-old factory in Northwest Portland, cutting 247 jobs, looms as “the first real significant layoff announcement we’ve seen,” analyst Josh Lehner said Wednesday.

“Typically, manufacturing is a canary in a coal mine,” Lehner said. “That usually is a bad sign for where the business cycle is heading.”

He said Oregon’s tech industry — also slowing, but not as steeply as it has in the past —  could help absorb some of that shock.

“It could be worse than this,” Lehner said.

House Speaker Tina Kotek, D-Portland, argued that the report lends new urgency to work already begun in the House to draft a sweeping housing bill next year.

“The Legislature must tackle the statewide housing crisis and continue supporting Oregonians who were harmed by the recession and left behind by the recovery,” she said in a prepared statement.

Gov. Kate Brown, whose office must write a state spending plan every two years, signaled caution about the need to shift gears in case of a slowdown.

“The forecast is more than a number; it directly correlates to state government’s ability to support the health of our schools, resiliency of our communities, and growth of our businesses large and small,” she said in a statement. “While the forecast is stable … I am watching carefully to make sure we are able to respond nimbly and appropriately should the landscape change.”

Legislative leaders from both parties echoed those concerns. 

“We can’t afford to take our eyes off the ball,” Senate President Peter Courtney, D-Salem, said in a statement. “We get the next forecast 10 days into the February session. We won’t have much time to react, if the need arises. We need to be ready.”

House Minority Leader Mike McLane, R-Powell Butte, said all he could muster was “a sense of cautious optimism.”

“With key economic indicators warning of potential problems ahead,” he said in a  statement, “the prospects of continued growth are anything but certain.”

— Denis C. Theriault

[email protected]

503-221-8430; @TheriaultPDX

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