May 14, 2025
What happened: Oregon’s quarterly economic and revenue forecast, released May 14, predicts slightly lower revenue collections for the 2023-25 and 2025-27 biennia than the Office of Economic Analysis anticipated during its previous forecast. Nevertheless, the state is expected to collect billions of dollars more than the Legislature expected to have when it created the current budget at the close of the 2023 session. And available resources during the coming biennium are expected to exceed resources collected during 2023-25 by a healthy 12%.
This quarter’s forecast is particularly important because legislators will rely upon its assumptions in creating the 2025-27 budget during the remaining weeks of the current session, which must end by June 29.
The forecast argues that federal policy uncertainty has led to “diminished confidence” in the Office of Economic Analysis’ ability to predict revenue accurately. Oregon is highly trade-dependent, making the effects of potential tariffs potentially significant.
Oregon’s struggles: Such speculation aside, Oregon’s economy continues to struggle, thanks in part to the state’s stagnating population and what state economist Carl Riccadonna has characterized as a manufacturing recession. Over the past four quarters of reported data, the forecast notes, Oregon’s GDP has grown more slowly than the national GDP by 1.5 percentage points. Job creation has lagged the national average as well, and the state’s population has continued to grow very slowly.
As a result, the forecast predicts that growth will be “sufficiently slow that labor conditions soften appreciably,” leading to higher unemployment. The forecast predicts individual income growth to slow and business income to decline in 2025. However, growth is expected to return to normal levels in 2026.
The Office of Economic Analysis expects the state to receive less revenue during the current and coming biennia than it predicted in its first-quarter forecast, released in March. Revenue for the 2023-35 biennium is expected to be $162.3 million below levels predicted three months ago.
Plenty of money: The close-of-session general fund forecast for the 2025-27 biennium is expected to be $37.4 billion, 12% more than the state has collected during the current biennium. This rate, the Office of Economic Analysis notes, is “the highest growth expectation for this forecast since 2015-17.” It is also 10 times higher than the state’s GDP growth between 2023 and 2024.
Business climate matters: Gov. Kotek predictably responded to the revenue forecast by criticizing the Trump administration for spreading “uncertainty in our economy.” However, the state’s own policies – including its large and growing tax burden and its suffocating regulatory environment – have contributed significantly to its current economic struggles, including stagnation in job growth that pre-dates the current federal administration. The state’s economic development agency, Business Oregon, acknowledged this in a recently released report describing successful efforts by other states to recruit Oregon businesses.
The surest way for Oregon to confront federal policy uncertainty and to shore up its economy – which produces the tax revenue upon which the state depends – is to follow the recommendations contained in OBI’s Oregon Competitiveness Agenda.