LOC News
State Revenue Forecast: State Revenues Steady, Local Shares Decline
On August 26, the state’s legislative revenue committees received the latest Economic and Revenue Forecast from the Oregon Office of Economic Analysis. Reported quarterly, these forecasts determine state revenue and provide insight into the health of the state’s economy.
Oregon's Q3 revenue forecast shows little change to the state's overall budget outlook. Oregon's economy appears to be catching up with national growth, even as elevated fuel prices, persistent inflation, and a sluggish labor market continue to create headwinds. Oregon's economy is now growing at roughly the national pace, while unemployment has stabilized at 5.2%. Recession odds remain relatively low at about 18%.
The forecast shows general fund revenues held steady with a 0.2% increase for the 2025-27 biennium. A projected increase in personal income tax collections driven by wage growth was largely offset by lower corporate income tax expectations. Lottery revenues were revised only slightly upward, and most other major revenue sources were largely unchanged. The forecast currently projects a biennium ending balance of roughly $400 million and no kicker refund.
While the general fund remains stable, revenues shared with local governments continue to trend downward:
- Liquor tax revenue was reduced by approximately $19.2 million, a 7.8% decrease from the previous forecast, as sales forecasts reflect ongoing consumption patterns. City liquor distributions are projected at $145.9 million (a 1.7% decrease from the previous forecast) in the 2025-27 biennium before declining to $137.9 million (a 7.8% decrease) in 2027-29, with further decreases projected in future biennia.
- Cigarette tax revenues also continue to weaken. Overall cigarette tax collections were revised downward by approximately $948,000 from the prior forecast and are now approximately $2.2 million below the close-of-session forecast. Local government cigarette tax distributions are projected at roughly $9.6 million for the 2025-27 biennium, down approximately 2% from the Q2 forecast, and $8.5 million in the 2027-29 biennium, down approximately 3.4% from the previous forecast.
- Marijuana tax revenues decreased by roughly $14 million from the prior forecast and nearly $40 million from the close-of-session forecast. Economists cited continued price declines and updated forecasting methods intended to provide more stable long-term projections. Although overall marijuana revenue expectations fell, city distributions remain unchanged because allocations are fixed in statute.
Although the state's overall revenue outlook remains largely unchanged, the forecast continues a longer-term trend of declining state-shared revenues for local governments.
As cities face growing operational costs, traditional state-shared revenue streams continue to move in the opposite direction. The LOC will publish its next State Shared Revenue Report in early 2027.
Contact: Colette Tipper, Lobbyist – ctipper@orcities.org
Last Updated 8/28/2026