PORTLAND - Behind the forecast of a state treasury flush with revenue the next few years is a change in sentiment among economists about the fortunes of Oregon's fortunate:

Times are better than previously thought for those whose incomes derive from stock trades and business profits.

The forecast given Wednesday to state legislators and expected to be reflected in Gov. Ted Kulongoski's budget proposal shows state economists changing assumptions about corporate income tax collections and business-related components of personal income tax collections.

Personal tax collections rose nearly 13 percent a year since 2004, well above the historic average of 7 percent, said the forecast by the state Office of Economic Analysis.

“In prior forecasts, a good fraction of this growth was assumed due to temporary factors, such as the recent surge in residential construction and real estate prices,” the forecast said.

Under that assumption, it said, slowdowns in the real estate market and in the building business would mean corresponding slowdowns in tax collections. But the assumption has changed.

“While the exact nature of the surge in tax collections is still uncertain, indications are that such temporary factors, and the real estate market in particular, are less important than previously assumed,” it said.

Dae Baek, acting chief state economist, said the new forecast reflects evidence that capital gains from stock market trading and profits from small businesses are strong and will remain so.

He noted that about two-thirds of the state's personal income is in wages, up about 6.4 percent, year over year, in 2005.

But corresponding figures were notably higher among taxpayers who report personal income from capital gains - up 40 percent - and businesses such as limited liability corporations, partnerships and the like - up 37 percent.

Similarly, the forecast said, previous projections anticipated slowdowns in corporate tax collections once cyclical factors such as “weak wage growth” played out.

But, it said, “As record corporate profit levels have persisted, more of the recent increase is assumed to be a permanent level shift in long-run average tax liabilities.”

Baek said state and national forecasters now believe that corporate profits will remain strong despite the impact of tighter labor markets and rising medical benefits costs, which have pressured budgets in both the private and public sectors. He said the rise in health care costs, while still running well above the general rate of inflation, has abated.

“The growth rate may decline, but we continue to see high levels of profit,” he said.

Baek said revenue assumptions are tested against a group of 14 specialists, from business and government, that meets quarterly.

The state office has the final responsibility for the forecasts, though, as well as the uncertainty. Expectations about capital gains tax collections, for example, have gone badly wrong as recently as the bursting of the speculative bubble in Internet stocks.

State economists are confident about the projections and mindful of the past, Baek said: “We've been burned before, and memory is fresh.”