LOC News
State Releases Latest Economic and Revenue Forecast
The state’s latest economic and revenue forecast was presented this week to the House Revenue Committee and Senate Finance and Revenue Committee members.
This forecast saw continued economic growth in Oregon, with high-income tax returns, and no longer predicts a recession this year. The previous forecast in December built a 2023 recession into its baseline, and while economists no longer see a recession in store this year, they warned the risk remains and a later recession is still probable. The growth in inflation has started to come down slightly, but it is still twice as high as the Federal Reserve’s target number. There remains a fair amount of uncertainty since the U.S. is likely to see a recession at some point, but experts are not sure when and where it will occur.
Important for cities, the forecast had an 11% reduction, $25 million, in marijuana revenues for the 2021-2023 biennium. A high number of producers and retailers has led to record low prices of marijuana, reducing revenues. The economists noted this is not likely to change soon.
The economists also noted that growth in population continues to decline. They expected to see a rebound this year after the pandemic-related recession, but that has not happened. There is a slowing in population growth all across the state, even in the areas that had previously seen the most growth, like the greater Bend area. Work from home has also changed population dynamics, as metro areas all over the country have seen a decline in city population.
Interestingly, there have been large regional boosts in Oregon’s economy from Social Security cost of living adjustments (COLA) increasing significantly due to inflation. This is most impactful in communities with a lot of retirees, such as the coast and southern Oregon.
The forecast sets the stage for budgeting as lawmakers use revenue predictions to inform spending decisions to fund state agencies, programs and other spending from the state’s general fund. Under state law, both state and local governments are required to have a balanced budget.
The forecast also sets the stage for the kicker, a unique feature of Oregon’s revenue system that “kicks” back revenues from personal income tax if collections are more than 2% higher than the forecast that was predicted at the end of the previous legislative session. The projected personal kicker is $3.9 billion.
If you would like to learn more:
- Economic and Revenue Forecast Presentation
- Economic and Revenue Forecast Summary
- Full Economic and Revenue Forecast
Contact: Lindsay Tenes, Lobbyist – ltenes@orcities.org
Last Updated 2/24/23