Lawmakers in Oregon will have approximately

$755 million less

to spend in the next two years than they previously expected.

That’s the major update coming out of the

May revenue forecast

On Wednesday, Oregon’s leading economists presented their findings. According to them, lawmakers must restrict their expenditures based on the projected amounts—meaning they can allocate up to $37.4 billion in general funds, as stated by Michael Kennedy, a senior economist from the state’s Department of Administrative Services.

That’s approximately 2% lower than the $38.2 billion that economists forecasted in February that legislators would allocate for the upcoming two-year period starting in July.

According to Kennedy, the reduction in anticipated funds is primarily attributed to a decrease of almost $500 million in forecasted individual income tax revenues towards the close of this fiscal period and during the initial half-year of the following term. He mentioned that lower employment levels among Oregonians, reduced wage increases, and decreased capital gains will all play contributing roles. Additionally, lawmakers will face approximately $250 million less for future spending as those funds were utilized in the current legislative session, Kennedy explained.

The writing has been on the wall. Democratic House Speaker Julie Fahey predicted on Monday that the revenue briefing would “not be good news” based on turbulent economic waters in the first three months of Donald Trump’s presidency.

If we manage to keep the budget under control this year, I believe that would be considered a significant achievement,” Fahey stated. “And if we can sustain our current service levels for the people of Oregon.

Even the reduced spending prediction would still signify an

increase from

The state’s present budget allocates almost $32 billion in general fund expenditures for the fiscal years 2023 through 2025.

The uncertainty stemming from President Trump’s fluctuating promises and implementations regarding tariffs is the primary reason for the anticipated decrease in Oregon’s projected revenues and the unpredictability surrounding the severity of this downturn, according to state economists. Additionally, reductions in federal staffing levels and significant decreases in various federal program funds, coupled with stricter immigration policies as announced by the administration, have played contributing roles, explained Oregon’s chief economist, Carl Riccadonna.

“All of these elements serve as drivers pushing the growth projection in that direction,” Riccadonna informed journalists on Tuesday.

Oregon, heavily reliant on exports, is highly susceptible to significant trade policy changes, as these can impact both personal income tax revenues and state employment patterns, according to economists. Conversely, forecasted earnings from more stable sources like corporate excise taxes and lottery sales align closely with previous projections, Kennedy noted.

Riccadonna stated that the projection for state revenues is particularly unsure compared to usual circumstances, and unforeseeable national policies such as significant tax reforms or increased import duties might reshape this outlook.

“Obviously, this could shift with a single tweet or within moments,” Riccadonna stated to the legislators during Wednesday’s presentation of the forecast.

Riccadonna described the present economic climate as experiencing “tepid expansion,” rather than a full-blown downturn. He mentioned that there is approximately a 25% chance of a nationwide recession within the coming year, up from the typical rate of around 15% or lower during ordinary years.

Economists predict that Oregon’s kicker rebate, which returns money to taxpayers after the close of two year budgets in which income tax collections exceed projections by more than 2%, will return $1.64 billion to Oregonians next year in the form of tax credits. That’s an $88 million decline from the most recent forecast in February.

Lawmakers have indicated for months that they would not have enough revenue to expand many state services or fund sizable new programs. And as the president and Congress have moved to cut funding for major programs, including reducing Medicaid by billions of dollars, Oregon’s top budget writers have reiterated that the state’s budget is not intended to, or fully equipped to, plug holes left by federal cuts.

Legislators now have about six weeks to figure out how to balance their spending priorities with the diminished budget forecast. It’s unclear which priorities will survive. Even before the new budget revision,

The key legislative budget planners from Salem

suggested they would lack sufficient funds to cover heightened expenditures on homelessness, education, and mental health initiatives that Governor Tina Kotek proposed in her plan.

proposed budget

last December.

On Wednesday, Kotek restated her commitment to constructing additional housing units, providing shelter for more homeless individuals in Oregon, and enhancing educational achievements.

I won’t allow Oregon’s progress to be derailed,” she stated regarding the revenue forecast. “I remain dedicated to collaborating closely with the Legislature throughout this session to tackle tough budget decisions and confront our issues directly, even as economic expansion slows down.

The revised forecast also puts more pressure on lawmakers scrambling to find more dollars to prepare for and fight wildfires. A workgroup has proposed increasing wildfire funding by nearly $300 million, though most of their ideas for how to do that would divert money from the state general fund, savings or lottery dollars, leaving less money for other existing programs. Ideas to raise new revenue include taxing bottles and cans, which has proven contentious, or keeping the state’s kicker revenue instead of giving it back to taxpayers. Approving that plan would take a two-thirds majority in both chambers.

The revenue projection for Wednesday offered minimal clarity regarding the prospects of Oregon’s transportation funding, which is among the key challenges facing legislators during this session. This lack of clear direction stems from the fact that a significant portion of the funds used to upkeep roads or develop transportation infrastructure originates from Oregon’s gasoline tax, Department of Motor Vehicles charges, and levies imposed on heavy-duty trucks.

Although Oregon’s economists anticipate slower growth in the state’s incomes, leading to reduced personal income tax revenues, key Democratic legislators have stated their intention to boost taxes and fees on motorists to address the funding requirements for Oregon’s transportation sector.

Democratic lawmakers criticized Trump’s trade strategies and their effect on Oregon following the projection released on Wednesday.

“Careless governmental moves come with repercussions, and we’re witnessing the damage manifesting in Oregon’s economy,” stated Senator Kayse Jama, a Portland Democrat and Majority Leader, in an official comment.

Republican legislators attributed the reduced economic outlook of Oregon to policies enacted by Oregon Democrats rather than federal trade measures. They argued that the state’s elevated tax rates and corporate regulations are “choking off opportunities” for Oregon residents.

“It’s time to stop blaming D.C. and start fixing what Democrats broke here at home,” Senate Republican Leader Daniel Bonham of The Dalles said in a statement. “Oregon’s problem isn’t a lack of money. It’s a lack of leadership.”

Protect Oregon Now, a coalition of Oregon unions and groups advocating for children, the environment and various communities of color, praised Oregon leaders on Wednesday for building reserves that have left the state “better positioned than others” to weather economic uncertainty.

The group urged lawmakers to reject tax breaks for high-income Oregonians this session and instead fund child care, mental health and housing. It took specific aim at House Bill 2301, which would move Oregon’s estate tax threshold from $1 million to $7 million, arguing that bill would cost the state nearly $200 million in revenue this biennium.

“Economists agree: the best way to get through a downturn is to maintain support for our communities so families have every opportunity to thrive,” Alejandro Queral, executive director of the Oregon Center for Public Policy, said in a statement. “Billionaires and the wealthy will glide through a recession, but working families here in Oregon are counting on state leadership to fund the services we need to get through difficult times.”


Sami Edge covers higher education and politics for The Oregonian. You can reach her at



sedge@oregonian.com



or (503) 260-3430.


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