Oregon lawmakers this year could have an additional $350 million to spend as they work up a new two-year budget.
That鈥檚 the latest prediction from Oregon state economists, who unveiled their quarterly economic and revenue forecasts Wednesday morning.
Much of the forecast contains heartening news. Despite frequent chaos and confusion in the early days of President Donald Trump鈥檚 administration, the national economic picture remains stable for now, state Chief Economist Carl Riccadonna told lawmakers.
And strong wage growth in Oregon has signaled to economists that they can expect more in personal income and other taxes over the next two years.
The forecast delivered Wednesday included about $550 million more in tax revenue for the 2025-27 budget cycle than predicted just . That increase is offset somewhat by a roughly $200 million reduction in the amount of money the state is expected to have left over when the current budget ends June 30.
鈥淣ewly available tax return data is showing us that wages on tax returns are really strong,鈥� Michael Kennedy, a senior economist at the state鈥檚 Office of Economic Analysis, said in a call with reporters.
But there鈥檚 a lot of uncertainty too. Inflation isn鈥檛 cooling as fast as hoped, and Riccadonna conceded that the impact of mass federal layoffs being carried out by the Trump administration wouldn鈥檛 show up in state unemployment data until March.
He noted that tariffs being instituted or threatened by Trump might lead to a trade war that could have an outsized impact on export-heavy Oregon. Riccadonna said that a trade war that emerged in 2018, when Trump was last in office, clipped the state鈥檚 surging economic growth.
鈥淪uddenly Oregon downshifted pretty substantially,鈥� he said. 鈥淚t went from high flyer to kind of growing in line with the national trend.鈥�
Oregon lagged behind the average economic growth nationwide in 2024. Riccadonna told lawmakers Wednesday the impact of a trade war in the near future could 鈥減ush the state into stagnation.鈥�
That sentiment was picked up on by Democrats.
鈥淭he Trump administration鈥檚 trade policies, including tariffs, pose a real threat to Oregon鈥檚 economy 鈥� new tariffs could impact key industries in Oregon, creating uncertainty for businesses and workers across the state,鈥� House Speaker Julie Fahey, D-Eugene, said in a statement.
Gov. Tina Kotek said that, while the economy is stable, additional tariffs and other federal actions 鈥減resent new potential challenges.鈥� She repeated her call for lawmakers to focus their budgetary attention on core services.
鈥淲e must lean in on what we see working when it comes to housing and homelessness, mental health and addiction and education,鈥� Kotek said in a statement.
Republicans, meanwhile, signaled they were less concerned by Trump鈥檚 policies than by Oregon鈥檚 business climate. Riccadonna鈥檚 that, while Oregon has seen jobs increases in health care, education and some other sectors, it has lost workers in areas like manufacturing, finance and retail.
鈥淭he tariffs, if done properly, can bring manufacturing back to the United States,鈥� said state Rep. E. Werner Reschke, R-Malin, pointing to that Apple is planning new U.S. investment.
鈥淥regon is raking in tax dollars, but the foundation of our economy is weakening,鈥� Senate Minority Leader Daniel Bonham, R-The Dalles, said in a statement. 鈥淚f we keep losing working-age Oregonians and making it harder for businesses to thrive, this won鈥檛 be sustainable in the long run.鈥�
Christine Drazan, the top House Republican, said the data was a 鈥渨akeup call.鈥�
鈥淭axpayer dollars are funding and growing government and government-subsidized sectors, while private sector jobs in manufacturing, construction, and hospitality 鈥� the industries that grow our economy 鈥� are experiencing job loss and decline,鈥� Drazan said. 鈥淭hat鈥檚 a big problem.鈥�
Wednesday鈥檚 forecast also contained something that has been rare in recent years: a slight reduction of the anticipated 鈥渒icker鈥� refund likely to be sent to taxpayers next year.
The refund is triggered whenever actual personal income tax revenues come in 2% or more above what was predicted when lawmakers passed a two-year budget. Since economists now predict the state will take in about $90 million less than previously expected in the current budget cycle, the projected kicker refund has been reduced to $1.73 billion, down from $1.79 billion in November.
Wednesday鈥檚 forecast marked the second for Riccadonna, longtime state economist Mark McMullen in September. And it contained far less drama.
In his first forecast, delivered in November, Riccadonna announced he was rejiggering the state鈥檚 model for predicting revenues. He has said his predecessors included assumptions in their modeling that distorted results, leading to in each of the past six budget cycles.
As a result, the chief economist predicted the state would take in nearly $1 billion more in the current budget period than previously thought.
Since delivering that November forecast, Riccadonna conceded reading the economic tea leaves has become more difficult. With Trump in office, he said, there is a higher risk of 鈥渙utsized outcomes鈥� that change the state鈥檚 fortunes.
鈥淚t鈥檚 a double-edged sword,鈥� Riccadonna said. 鈥淚t could be positive if there are big tax cuts. It could be negative if there鈥檚 a really harsh escalation of trade tensions.鈥�
Wednesday鈥檚 forecast is a precursor to a much more important report. The revenue outlook Riccadonna will deliver in May is the one lawmakers will use to set the next two-year budget.
鈥淚n the face of federal uncertainty, the Legislature must make cautious budgetary decisions focused on the most pressing needs of Oregonians across the state,鈥� Senate President Rob Wagner, D-Lake Oswego, said in a statement.
