Oregon’s latest economic forecast shows declining revenue

SALEM, Ore. — Oregon’s latest quarterly economic and revenue forecast, released Wednesday, projects a roughly $500 million decrease in revenue from the previous estimate, split across the current two-year budget cycle and the next one, which begins in July.

The ending balance for the current biennium has been revised downward by $162.3 million, and projected General Fund revenue for the 2025-27 biennium has decreased by $337 million, according to the May report from the state Office of Economic Analysis. The 2023-25 decrease is primarily due to decreases in personal and corporate income taxes.

The decrease for 2025-27 all but cancels out a $350 million increase for the biennium that had been predicted in the previous forecast in February, although that $350 million was on top of an even larger increase that had been predicted in the November 2024 report.

Economic policy changes under the Trump administration have created a much more uncertain national economic outlook, according to the new report, with the impact of new tariffs unlikely to show up in economic data for another couple months. That in turn creates “potentially massive risks” for Oregon’s own economic outlook.

“Not only is it too soon to understand how the economy is responding to actions already taken,” the report states, “but, more broadly, the ultimate scope of critical policy decisions remains unknown.”

The forecast’s projection for national economic growth in 2025 has been substantially reduced, from 2% in March to 0.8% in the current forecast, with an outlook “now characterized as sluggish growth, a significant slowing in economic growth that results in a rising unemployment rate,” according to a news release from the state Department of Administrative Services.

The news release cautioned that sluggish growth is not the same thing as a recession, which would be an actual decline in economic activity. The forecast puts the odds of an actual recession at 25%.

The forecast continues to predict a personal kicker next year, although with a slightly smaller surplus than in the February report; $1.64 billion, down from $1.73 billion. The corporate tax surplus is predicted to be $915.8 million, which is too little to trigger a corporate kicker.

The report comes with a little over six weeks left in Oregon’s 2025 legislative session, which is constitutionally required to adjourn on or before June 29. Bills have begun emerging from the session at a rapid clip, but many of the bigger legislative priorities are still in the works, including a transportation package and the overall 2025-27 budget.

Gov. Tina Kotek issued a statement Wednesday blaming the increased economic uncertainty in part on the Trump administration, but calling for state lawmakers to focus on addressing Oregon’s own problems like homelessness, housing shortages and education shortfalls.

“Oregonians will come together and take care of each other. I am committed to working diligently with the Legislature from now through the end of the session to make hard budget choices and address our challenges head on, despite the dampening of economic growth,” she said in part.

Other Democratic officials echoed the blame on federal economic policy as a driver of local uncertainty.

“Oregon’s economy is greatly reliant on our international trading partners, and it is clear the tariffs and chaos from the federal administration is making it harder for businesses to plan and slowing economic growth,” Senate President Rob Wagner said in a statement. “With this forecast, we are starting to see real impacts to businesses, workers, and state revenues. Legislators must continue with a cautious and prudent approach to balancing the state’s two-year budget, knowing tough choices lie ahead.”

Republicans pointed the finger at Democrats, arguing that the years of Democratic control of the state government has led to a “stagnant economy” and a decline that began before any federal policy changes this year.

“Oregon’s anti-business climate, high taxes, and housing restrictions — especially over the last six years with the hidden sales tax and Portland’s layered income-based taxes — are strangling opportunity. It’s time to stop blaming D.C. and start fixing what Democrats broke here at home,” Senate Republican Leader Daniel Bonham said in part. “Oregon’s problem isn’t a lack of money. It’s a lack of leadership. Families are learning to live within their means. It’s time state government did the same.”