LOC News
State Budget Remains Unbalanced, Shortfall Lessens
The Legislative Revenue Committees received the state’s fourth quarter Economic and Revenue Forecast on Wednesday morning. Because the federal government shutdown paused several key data sources, state economists had to rely on private-sector data to fill in the gaps. Even with those limitations, the forecast shows an economy that has been slowing but may finally be turning a corner. National recession concerns have eased as interest rates fall, financial conditions stabilize, and recent tax cuts help counterbalance new tariffs. Inflation remains elevated, but most forecasters still expect national growth to strengthen in 2026.
Oregon’s outlook remains mixed. The state continues to trail the national economy, with earlier job losses and unemployment hovering around 5%. However, a strong August jobs report suggests Oregon may be beginning its rebound. Manufacturing and semiconductor sectors continue to struggle, and agriculture faces low commodity prices and higher costs. At the same time, population growth is improving, which—paired with a stronger national economy next year—could help Oregon regain momentum. The forecast factors in upcoming federal rate cuts, new tax provisions, and ongoing tariff pressures, all of which leave room for both upside and downside scenarios.
On the revenue side, the state’s 2025–27 general fund forecast was revised upward, largely due to a significant bump in corporate income tax collections tied to prior-year activity. Despite this, the general fund still shows a small projected ending balance of –$63.1 million. Personal income tax revenue increased slightly, while non-general fund revenues were mixed: Oregon Lottery earnings improved, corporate activity tax revenues dipped, and marijuana tax collections continue to decline. Legislators also cautioned that although general fund revenues look relatively stable, the state still does not know the full extent of federal funding reductions. Because federal dollars make up a major share of Oregon’s budget, any gaps could ultimately need to be backfilled with state general fund resources. Overall, revenue risks mirror the economic outlook—leaning slightly negative.
Contact: Jenna Jones, Tax & Finance Lobbyist – jjones@orcities.org
Last Updated 11/21/25