Revenue Forecast: State Economists Point to Weak Economy
On Feb. 26, the Oregon Office of Economic Analysis issued the quarterly Economic and Revenue Forecast. This is an important forecast because it sets the stage for legislative budget conversations. (The budget is actually set based on the next forecast, which comes in May.)
The forecast echoes what the private sector has known for some time: Oregon’s economy has lost momentum, especially relative to the national economy. Oregon continues to lag in private-sector job creation, population growth and GDP.
As OBI has noted multiple times, the governor, legislators and other policymakers must take note and act.
State economists noted that the risk of an economy-wide recession is low, yet Oregon’s manufacturing recession persists. Year-over-year employment is down in manufacturing, leisure and hospitality and many of the other private-sector industries.
The source of what employment growth Oregon did have in 2024 is generally found in the health services/private education and government categories. Given the reliance of those sectors on tax revenue for funding, the sustainability of this growth — without corresponding growth in the bulk of private sector categories —must be questioned.
The report also notes that Oregon’s population continues to stagnate. Further, Oregon’s population is expected to grow at an anemic 0.6% through 2034.
In the last year, Oregon’s GDP growth has fallen behind the U.S. by an average of 1.5 percentage points. If this deviation continues and U.S. GDP growth grows by 2% in 2025, as expected, then Oregon GDP would grow by only 0.5%. Oregon’s chief economist, Carl Riccadonna, downplays the likelihood of such an occurrence, however.
Overall, the forecast indicates clearly that Oregon’s economy is struggling despite the continued rise in revenue collections. Such struggles echo those reported by the Portland Metro Chamber’s State of the Economy report, released Feb. 20. Given these conditions, lawmakers must be diligent about making sustainable budgeting decisions and avoiding policies that further stymie economic growth and investment. They also must get serious about making economic development a policy priority. OBI is working, through its Oregon Competitiveness Agenda, on several pro-growth policy changes that many states have already adopted to help get Oregon back on track.
You can read the full report here. Below are highlights.
2023-25 biennium (the current biennium, ending June 30):
- Revenues decreased $89 million from the last forecast due to weaker than expected collections in the fourth quarter of 2024
- The ending balance for the current biennium is projected to be $2.59 billion
- A personal kicker of $1.73 billion and a corporate kicker of $993.1 million are projected for this biennium. The individual kicker will be paid when people file taxes in 2026; the corporate kicker will be withheld to fund education.
2025-27 biennium (Legislature will budget for it this session. It will begin July 1):
- The beginning balance is down $200 million due to lower than anticipated collections and increased appropriations from the recent special session
- Projected revenues have increased $551 million overall
- Total available resources have increased $350 million
- Available resources will be 6% higher than the 2023-25 biennium overall.
Future Biennia
- During the period from 2025-33, Oregon general fund revenues are currently projected to grow by 10.7%. (From 2021-25, the growth was 15.1%.)
- The economists alluded to slower in-migration, Oregon’s aging workforce and the out-migration of high-income earners as potential reasons for slower growth ahead. The exodus of high-income earners, in fact, has lowered the anticipated growth in revenue related to capital gains and schedule E income (rental income, for example).
Healthy Reserves
- The economists project each of Oregon’s reserve accounts – the Education Stability Fund and the Rainy Day Fund – will have a total balance of $3.78 billion for the 2025-27 biennium.
OBI Opposes Expansion of Onerous Wage Law
What happened: On Feb. 24, OBI Executive Vice President and General Counsel Paloma Sparks testified before the House Committee on Labor and Workplace Standards in opposition to HB 2688, which would apply Oregon’s prevailing wage law to off-site manufacturing.
What the bill would do: Prevailing wage laws require contractors working on publicly funded projects to pay union-level wages. Such laws, as Paloma pointed out, are designed for construction projects (think roads and buildings) and cover work done on site. By requiring the payment of prevailing wages to project components built off-site, HB 2688 would apply laws designed for construction to manufacturing. In addition to increasing costs, this law would be difficult for manufacturers to comply with and for the Bureau of Labor and Industries to enforce.
Why it matters: Businesses in Oregon already struggle to comply with complex and rapidly changing regulations. Oregon is also an expensive state in which to operate a business. For these and related reasons, Oregon is in the midst of what state economist Carl Riccadonna has called a “manufacturing recession.” Between December 2023 and December 2024, Oregon lost 2,500 manufacturing jobs. HB 2688 would increase costs for taxpayers and strain an already struggling sector, leading potentially to job losses.
Learn more: Click here to watch Paloma’s testimony and here to read her written testimony.
OBI Testifies in Support of Agency Audit Bill
What happened: On Feb. 26, OBI Executive Vice President and General Counsel Paloma Sparks testified before the House Rules Committee in support of HB 2454, which would establish the Legislative Audit Officer, chosen by the Joint Legislative Audit Committee, to investigate, review or conduct evaluations of executive branch agencies.
Accountability needed: As Paloma told the committee, regulatory agencies do not always follow clear legislative intent when drafting rules to implement legislation. HB 2454 would create a mechanism for legislators to verify that agency regulations follow their intent.
Why it matters: Oregon’s regulatory agencies engage in such a large volume of rulemaking – more than 500 rulemaking notices were issued during a six-month period in 2024– that it’s hard for affected businesses to keep up with what’s expected of them and to comply. In drafting policies, meanwhile, agencies sometimes fail to follow legislative intent, creating additional confusion and compliance challenges. OBI’s Oregon Competitiveness Agenda recommends several policy changes that would increase rulemaking transparency and consistency. HB 2454 would increase accountability.
Where can I learn more: Go here to watch Paloma’s testimony. Learn more about the Oregon Competitiveness Agenda here.
Per-Student Spending: Oregon vs. Education Standouts
What happened: On Feb. 26, the Senate Committee on Education held an informational hearing about a state-commissioned school finance report that concluded Oregon needs to spend about 30% more per student to boost educational outcomes meaningfully. Such an increase would require billions of dollars in additional revenue.
Spending vs. outcomes: The presentation came only weeks after results of the 2024 National Assessment of Educational Progress were released. Oregon results for fourth- and eighth-grade math and reading remain among the nation’s lowest, and scores in three of the four tests actually declined since 2022 despite significant increases in K-12 funding.
Urban Institute study: The Urban Institute recalculates NAEP scores for each state to account for variations in student demographics, including poverty, race and native language. The exercise placed Oregon last in both fourth-grade exams, 49th in eighth-grade math and 47th in eighth-grade reading. The organization’s work amplifies the disconnect in Oregon between school finding and test outcomes.
Legislators express skepticism: Given the clear disconnect between funding and student outcomes, two legislators greeted the proposed 30% increase in per-pupil spending with particular skepticism. Here’s what they said:
- Sen. Janeen Sollman, D-Hillsboro: “It seems like a very confusing conversation here in that I feel like the conversation says we need more money, but you had more money and you didn’t get the outcomes – but you should still give more money. … I’m hoping we’re going to just narrow this down to how you feel more dollars into the system is going to deliver different results.”
- Sen. Sarah Gelser Blouin, D-Corvallis: “I get it. If we spend more, we get more. You spend more money, you maybe get better results. But I think the question that I’m hoping for is, ‘how do we better use the dollars that we have to increase outcomes for all kids?’ And I don’t think the reason that we have bad outcomes is because we have people with disabilities and kids that speak English as a second language and kids that live in poverty in our state.”
Spending in successful states: Sollman and Gelser Blouin are right to be skeptical. This bar chart shows per-pupil spending in the 10 states that fared best in the 2024 NAEP fourth-grade math exam, as calculated by the Urban Institute, compared with per-pupil spending in Oregon, which finished last. The spending numbers, reported by the National Education Association for the 2023-24 school year, have been adjusted to account for cost-of-living differences calculated by the Missouri Economic Research and Information Center. Spending in other states has been adjusted either upward or downward to reflect an Oregon baseline. On a cost-adjusted basis, Oregon already spends more per student than six of the 10 most effective states.
Webinar Recording: Behind Oregon’s Slipping Test Scores
Oregon students continue to struggle on nationwide reading and math tests despite steadily increasing funding for public education.
Sarah Pope, executive director of Stand for Children Oregon, joined OBI on Feb. 24 to discuss the test results, the reasons for Oregon’s struggles, and potential solutions. She also answered questions from webinar attendees.
Go here to watch a recording of the webinar. Go here to see the slide presentation.
Legislative and Rulemaking Updates
BOLI Budget: The Bureau of Labor and Industries is asking for a significant increase in its budget both for this biennium and into the future. The agency has been chronically underfunded given the significant workload increases the Legislature has given it – over 74 new laws in the last decade. Paloma testified Feb. 25 in support of the need for meaningful funding for BOLI. The governor’s recommended budget allocates $15 million in one-time funding from the Worker Benefit Fund (WBF). BOLI is asking for a permanent allocation from the WBF. While OBI supports meaningful funding for the agency, the WBF is intended for programs and resources to help injured workers return to the workforce. OBI is negotiating with BOLI and legislators to identify a better solution.
Unemployment for Striking Workers: Amendments were introduced last week to SB 916, which threatens to further damage Oregon’s business climate. The amendments provide that striking worders would not be eligible for unemployment insurance benefits until after one or two weeks (different amendments). The amendments also clarify the definition of a labor dispute and set the bill’s effective date as Jan. 1, 2026. The amendments were presented as if they were responding to employer requests, but OBI remains opposed to the bill and expects to see more amendments on March 4. Local governments remain opposed to the bill as well. A Willamette Week story last week reported that the bill would have cost Portland Public Schools $8.7 million for the district’s monthlong strike.
Construction Costs: OBI testified in opposition to several bills last week that would exacerbate the already high cost of construction in Oregon. SB 176 contains language that would prohibit employers from enforcing safety standards and testing people for marijuana use if they have medical marijuana cards. HB 2688 would require manufacturers to comply with prevailing wage laws for any off-site fabrication or custom work. SB 426 would make contractors and property owners liable for any unpaid wages owed to workers on a job even if they didn’t have a direct relationship with the worker. These measures would add to the burden created by the governor’s executive order requiring project labor agreements for state-funded construction projects. AGC has filed suit to challenge the legality of that executive order.
Organized Retail Theft: On March 4, the Senate Committee on Judiciary will hold a public hearing on SB 960, which would provide additional funding for Oregon’s organized retail theft grant program. The bill also would expand the acceptable uses for funding dedicated to addressing organized retail theft, an issue that risks the safety of customers and workers at retail locations throughout Oregon while costing billions of dollars of stolen merchandise and millions in lost tax revenue. Adopted during the 2023 legislative session, the organized retail theft grant program has helped local governments, retailers and law enforcement catch and prosecute retail crime rings. SB 960 would double the funding allotted to the program, allowing more local governments and law enforcement agencies to use the program.
Harmful Insurance Bill: On March 5, the Senate Committee on Judiciary will hold a public hearing on SB 174, which would unnecessarily expand Oregon’s Unlawful Trade Practices Act to punish violations of insurance regulations. The bill is unnecessary because consumers and the attorney general have many ways to hold insurers accountable for egregious behavior under current law and recent Oregon court decisions. SB 174 would increase insurance prices and lawsuits to Oregon’s already overburdened court system. OBI and a broad coalition of industry stakeholders oppose this bill and will work to ensure it does not move this session. Oregon’s cost of living has ballooned in recent years, and SB 174 would take more money out of Oregonian’s pocketbooks.
CAT Exemption: On March 3, the Senate Committee on Finance and Revenue will hold a public hearing on SB 381 and SB 490, both of which would increase the threshold of gross receipts at which a business in operating in Oregon would pay the CAT from $1 million under current law to $5 million. According to the most recent data the Legislative Revenue Office has provided, adjusting the threshold to $5 million would give immediate tax relief for over 14,000 of Oregon’s smallest businesses while maintaining over 93 percent of $1.2 billion the tax generated for schools during the 2022 tax year. This is an act other states levying similar taxes have taken to reduce the negative economic impacts that are unique to gross receipts taxes. For example, Nevada has always levied its commerce tax on gross receipts over $4 million, and Ohio recently increased the threshold at which its commercial activity tax – on which Oregon’s CAT is based – is levied from $1 million to $6 million.
Dangerous ‘Greenwashing’ Fix: Last week, the Senate Committee on Judiciary held a hearing on SB 680, which would prohibit businesses from making false or misleading marketing claims about products. It is already illegal to make false claims to get customers to buy products. Further, the bill is extremely vague and goes so far as to include logos and reputational advertising. OBI and the Oregon Liability Reform Coalition testified in opposition to the bill, arguing that it is unnecessary as the behavior it targets is already addressed by Oregon’s Unlawful Trade Practices Act. Only one bill sponsor testified in support. OBI hopes this was a “courtesy hearing” and that the bill is unlikely to move. However, OBI will continue to keep close tabs on SB 680.
ODOT Accountability Issues: Last week, ODOT leadership explained major accounting errors leading the agency to believe it had $1 billion more available in its budget than it actually had. The agency drew fire from a handful of Joint Committee on Transportation Committee members. The massive error compounds other problems at ODOT, such as project cost overages of 100% or more, the need to rebalance the amounts paid by freight vehicles and passenger cars through the weight-mile and gas taxes, and acute funding needs for maintenance, operations and new projects. Willamette Week called ODOT’s mistake a “billion dollar budget blunder.” The committee had intended to have a 2025 transportation package framework issued last month. Instead, Sen. Bruce Starr, R-Dundee, was tasked with establishing accountability measures for the agency to include in the transportation funding package. Although some Joint Transportation Committee members remain optimistic that a package remains viable, ODOT’s billion-dollar mistake diminishes the likelihood of a major transportation funding bill this session.
Nuclear Power: Although OBI does not have plans to testify, it is worth noting that several bills focused on nuclear energy are receiving attention this session. This week, the Senate Committee on Energy and Environment will hear three bills focused on nuclear waste and studying the viability of new nuclear facilities (SB 215, SB 216 and SB 635). Last week, HB 2410, which would establish a small modular reactor pilot in Umatilla County, received a hearing in the House Committee on Climate, Energy and Environment. Large nuclear facilities are currently prohibited in Oregon, but interest in nuclear power is increasing amid climate concerns.
Utility Rates: Utilities have been under pressure this session as lawmakers consider several bills targeting rate increases and which expenses utilities can recoup from ratepayers. SB 88 is scheduled for a public hearing this week. The bill would impose limitations on what ratepayers could be charged for expenses such as marketing, lobbying and brand promotion. Most of the targeted costs are not activities utilities can currently charge for, so the bill is largely moot. OBI expects much of the utilities’ testimony to focus on educating the Legislature about what utilities do and do not charge customers through rates.
Bill Decriminalizing Theft: HB 2640 aims to decriminalize theft of “basic need items” such as food, water, clothing, health and medical supplies, tarps, tents, reproductive health care items, childcare items (including but not limited to diapers and formula), and sanitation items (including but not limited to soap, disinfectant, and toilet tissue). Theft of such items would only result in a fine; failure to appear in court for not paying the fine would also only result in another fine. The bill was scheduled for a hearing last week. OBI and the Northwest Grocery Retail Association were prepared to testify in opposition, and the media was set to cover the hearing. However, during the committee, OBI was notified that the bill would be pulled and will not move forward. That’s good news.
Microfiber Filtration Bill: OBI has written before about SB 526, which would require microfiber filtration systems on washing machines sold in Oregon. Of note now: France has abandoned its program, noting its impracticability. So, if SB 526 were to pass, Oregon would be the first jurisdiction in the world to adopt it. The bill would increase the cost of washing machines sold in Oregon, which likely would push many purchases to other states. Meanwhile, the bill would do little to help the environment, as people would have to replace plastic filters and clean them, which many would do by rinsing trapped microfibers down the drain. The Senate Committee on Energy and Environment held hearings on Feb. 12 and Feb. 17.
Notable News
Contractors Sue Governor: The Oregon-Columbia Chapter of the Associated General Contractors of America, more than a dozen of its members and two other business groups filed a lawsuit Feb. 21 against Gov. Tina Kotek over an executive order the governor issued Dec. 18. That executive order requires that all large state infrastructure projects include project labor agreements, or PLAs, with trade unions who would do the work (Willamette Week).
Unemployment for Strikers: One of the most hotly debated bills in Salem this session, Senate Bill 916, would require employers to pay unemployment benefits to striking workers after one week. The Oregon School Boards Association says a one month teacher strike at Portland Public Schools, calculated using 2025 unemployment benefit rates, would have cost the district $8.7 million for licensed employees under the requirements of SB 916 (Willamette Week).
Farmworker Earnings: Some Oregon farmworkers are earning higher hourly wages but taking home less money annually than they did before the state’s agricultural overtime law passed in 2022, according to a new analysis of farm payroll data from Oregon State University agricultural economists. It’s likely the result of farms reducing some employees’ hours to avoid paying overtime (Oregon Capital Chronicle).
Oregon Exports: Oregon exports surged by more than 20% last year, topping $34 billion and coming within a whisker of an all-time high (The Oregonian).
Road Funding Imbalance: Oregon’s method of allocating costs turns on the principle that road users should pay based on use. If the payments are out of balance, the Oregon Constitution requires lawmakers to fix them. “The Legislative Assembly shall provide for a biennial review and, if necessary, adjustment of revenue sources to ensure fairness and proportionality,” the constitution says. But for the past eight years, trucks have paid more than their fair share (Willamette Week).
Motor Voter Resumption: The Oregon Driver & Motor Vehicle Services division announced Feb. 26 it will resume automatically registering Oregonians to vote when they obtain or renew a driver’s license, permit or state I.D. card (Willamette Week).
Apple Plans: Oregon is among the nine states where Apple (Nasdaq: AAPL) will spend a total of $500 billion over the next four years on “teams and facilities,” the tech giant announced on Feb. 24. Apple didn’t offer a lot of detail on its plans in Oregon beyond saying the state was one of five where it will “continue expanding data center capacity.” That almost certainly points to the Central Oregon town of Prineville, where Apple already has three data center buildings (Portland Business Journal).
Bend-Redmond Ranking: A booming job market, stable housing prices and wage growth contributed to Bend and Redmond rising in rank from No. 6 to No. 4 in the annual Milken “Best Performing Small City” list for 2025 (The Bulletin).
Hubbard Gas Tax: Hubbard residents will vote in May on a three-cent-per-gallon tax on gasoline and diesel sold at the two gas stations in town, a Shell and Chevron stations on Highway 99 E. About 16,000 cars a day drive on Highway 99E through Hubbard, which has a population of 3,385 (The Statesman Journal).
Pendleton Woolen Mills: The CEO of Pendleton Woolen Mills announced his retirement Feb. 24 from the 160-year-old apparel maker. John Bishop represents the fifth generation of family leadership of a company that traces its origins to 1863 (The Oregonian).
Bad Light Bill: Oregon lawmakers concerned about climate change had reason to feel good in 2023, when they passed what appeared to be a common sense bill: mandating that buildings swap out fluorescent lights for highly efficient, mercury-free LED bulbs. But it turns out no one bothered to ask school districts what they thought. Now some of those districts are coming to the Legislature with not-so-feel-good stories (Oregon Public Broadcasting).
Agency Head to Retire: Berri Leslie will resign in June from her job as director of the Department of Administrative Services, which handles budgeting, asset management, finance, human resources, technology and many other functions of state government. Leslie, whose salary is $322,824, submitted her resignation in late January, noting in a message to Gov. Tina Kotek’s senior staff that her husband is suffering from an incurable form of brain cancer (Willamette Week).
Jordan Cove: A new startup is seeking to revive the Jordan Cove liquefied natural gas export terminal and its 230-mile pipeline in southern Oregon (The Oregonian).
Solar Project: A Florida company wants to build a giant solar power and battery energy storage facility in central Oregon, the latest in a string of similar projects to enter the development pipeline in the state. BrightNight’s Deschutes Solar and Battery Energy Storage System Facility is targeted for 13,000 acres of private farmland about 10 miles southwest of Maupin in Wasco County (Portland Business Journal).
Nitrate Lawsuit: A federal lawsuit accusing agricultural businesses of polluting groundwater in the Lower Umatilla Basin is moving forward and changing venues. In an 80-page recommendation released Monday, U.S. Magistrate Judge Andrew Hallman referred the case from Pendleton to a U.S. District Court in Portland (Oregon Public Broadcasting).
Check Out OBI’s Member Benefits
OBI offers members a range of programs that can save money or help small businesses offer benefits normally available only to much larger companies. Benefit programs include:
- HealthChoice: Helps businesses with fewer than 100 employees offer comprehensive health-care benefits through our partnership with Regence BlueCross BlueShield of Oregon.
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