By State Representative Rob Nosse
Approximately four times a year, the two Revenue and Finance and Tax committees of the Oregon Legislature meet to get an update on the state of our state’s economy and a status report on the flow of tax revenue. It is a pretty important check in. It lets us know if we have the tax revenue we planned for to operate our state’s budget and fund programs and services, including the schools and health care that we need.
The most important of these updates occurs in the odd numbered years in May. The information that is shared becomes the basis for the state’s biennial budget and then becomes the basis from which we monitor how we are doing going forward.
For the first time in my 10 years as a legislator, the May forecast came in lower than the February forecast. We are down $755.7 million due to increasing expenditures and declining revenues in this biennium. In addition, the amount we are projected to collect for the coming biennium is also down. Once we account for maintaining current service levels (what schools, health care and state agencies need to keep operating without any changes or improvements) we’re left with only about $200 million “extra.” That’s $756 million less than we thought we’d have just a few months ago.
So, what happened? Our state’s economists were pretty direct: the turbulence in DC, especially around tariffs and trade and threats of cuts to social services are contributing to a jittery national and global economy. Consumer confidence is shaky. And markets are behaving like they’ve lost their compass.
One of the state economists put it even more bluntly: “I can’t remember more tumultuous circumstances going into a forecast. I mean, we’ve had a pandemic and a Great Recession, but those happened within a biennium—not at the point when you’re trying to forecast two years ahead.” The data backs that up in just the first quarter of 2025.
When Congress plays chicken with the debt ceiling or lurches toward government shutdown, it affects our ability to plan and deliver services in Oregon. When tariff wars disrupt global trade, it hits our economy directly. And when the federal government talks about cutting Medicaid, SNAP or housing dollars, that leaves states like ours scrambling to pick up the slack.
They also share that the economic outlook has been “softening” since late 2024. Unemployment is ticking up slightly. Oregon’s GDP growth is now trailing the national average. Our labor market is holding on for now, but if national trends continue, job growth could stall or even reverse. Meanwhile, our state’s aging population and declining school enrollment are reshaping the demands on our budget in ways that are not yet fully understood.
So, what does this mean? Less money and more demand, very little cushion and a budget process in Salem that’s going to feel more like triage than planning. The demands on the state (especially from counties, cities, school districts and service providers) are higher than ever. Everyone’s asking for help. But that volatility means we’re going to be a lot more conservative in our budgeting, even as local governments and school districts were hoping the state could step in and help cover their own shortfalls. Unfortunately, that’s probably not going to happen.
I’ve spent a lot of time talking about how important it is to “Trump-proof” Oregon’s laws, especially when it comes to reproductive rights, LGBTQ+ protections and immigration policy. But this forecast was a stark reminder that we also need to budget with Trump-era uncertainty in mind. Unfortunately, that is not easy to do. We live in the US and our state’s success is dependent on a good national economy and good economies in nearby states.
I don’t want to be all doom and gloom. Oregon is in better shape than a lot of other states. We are still taking in more revenue to cover expenses when compared to this time two years ago. Just not as much as we thought we might have back in February and not enough to cover the expenses we have given inflation and changes in programs and costs for goods and services.
Oregon has strong reserves (for now), and our “rainy-day” fund offers some buffer if things get worse. But tapping those funds too early (or for ongoing expenses) could leave us vulnerable later, so we will see.
Meanwhile I’ll keep pushing for what matters most: a health care system that works, a state that invests in schools and housing and protects our natural resources, not to mention doing something about the homelessness and addiction crisis that is still playing out in our streets and funding the arts too. But I also want to be real with you: we’re heading into a rough patch and doing all this just got harder.
The whole month of June will be spent trying to figure out the budget in light of the changes in the forecast. Hopefully enough will transpire and we finish before the end of the month so that I can make a proper report in July’s column of how things went. We still have a transportation package to land, and I am watching very closely what Congress does with the “big, beautiful bill” that President Trump is seeking. Stay tuned. Hurry up and wait.
