By State Representative Rob Nosse
Those of you that get my weekly email newsletter or follow me on social media know that I just got back from a much-needed vacation. While I did not take meetings while I was away, I did keep up with the news and some of my email, in case something happened. And things did happen, like the stay on the National Guard’s deployment from the ninth circuit, the end of the federal government shut down (though many of us think the resolution was a bit lackluster) and of course the release of most of the Epstein files (though I think that by the time you read this, Congress will have ordered that all files be released).
If you read this column regularly, you know that last month I shared a lot about my mood, saying I was a C- in light of everything going on in the US right now. I was pretty honest and pretty negative. One of my constituents who also reads The Southeast Examiner reached out expressing their concern that I was too honest and should have shared more optimism or provided some more hopeful observations to temper my concerns. That is probably fair. I think leaders need to keep it “real,” but I also believe leaders need to inspire. Though frankly, right now, I am not always inspired. Some things are just bad. For example, I am old enough to remember when the Republican Party talked about being the party of family values. It was a bit of an anti-gay slur. What is the “family value” when it comes to breaking up the families of immigrants who are here without a legal status by removing parents from their children? Please think about that.
I went right back to work when I returned from vacation, with legislative days in Salem the week before Thanksgiving. Luckily, I was encouraged by the quarterly revenue forecast the legislature received. Oregon’s chief economist shares an overall outlook of Oregon’s economy, and the revenue implications that it has for state government. Our state collects more revenue when the economy is doing well, and less revenue when there are economic downturns. The November revenue forecast showed that there was an unexpected uptick in anticipated corporate tax payments. The immediate benefit is that our expected budget deficit of $370 million has shrunk down to just a deficit of just $63 million. While still not great as we still have a deficit, it is better and I will happily take that.
The Speaker of the House, Julie Fahey, put a fine point on how to explain the new numbers: “Thanks to a combination of Oregon leaders’ prudent budgeting in 2025 and the unexpected bump in corporate income tax revenue announced today, our short-term outlook is somewhat less acute than anticipated.” Right on! It means the budget cutting exercise that I am about to engage in during the February “short session” to get our state budget in balance might be less painful.
Now, the state economist warned that last month’s good news does not necessarily mean tomorrow’s good fortune. For starters, the corporate tax revenue is a one-time thing. That’s because corporations collectively engaged in accounting where they restated their earnings, which is why the state economist called this “found money.” Apparently, auditors and accountants routinely do this.
Next, absent federal data it is hard to discern how stable things are in our state and nation’s economy. The federal government has not put out its October jobs report. Broader economic growth is stalling. The economy grew at 2.5 percent last year, but reports are only showing 1.6 percent growth this year. If the economy slows to one percent growth, that means we are in a recession.
Tariffs are another “wildcard.” Our state’s economy is heavily dependent on trade, which means that tariffs can have an outsized impact on the cost of things here in our state. That in turn impacts the state budget. That is why Oregon is one of the lead states in the lawsuit to overturn President Trump’s tariffs.
But really, as I have been saying since the summer, the biggest thing on the horizon is H.R. 1, also known as the One Big Beautiful Bill Act (OBBB or OB3). As you may remember, OB3 was passed by the Republican-controlled Congress and signed into law by President Trump on July 4. The bill cuts taxes, with most of those benefits going to the wealthiest Americans. To pay for the tax cuts, the president and Congress are slashing all kinds of social benefits, from Medicaid to the supplemental nutrition assistance program (SNAP), also known as food stamps.
For this state budget cycle, H.R. 1 is estimated to cost our state a staggering $890 million in tax revenue. Wow. But remember we are just getting started. In total, the budget cuts associated with H.R. 1 are expected to cost Oregon $15 billion over the next six years.
So yes, last month’s news that our budget deficit is not nearly as dire as it was in August is welcome news. It lifted the spirits of a lot of legislators, including yours truly. Maybe I should be a C+ ? But then the broader reality of our state’s finances comes back to mind considering H.R. 1 I am probably still a C- ?
For my January column I’ll do a preview of the short session.
