The outlines of Oregon’s 2025-27 state budget were drawn Wednesday. It’s a bigger picture than economists saw in November, good news for education advocates looking for greater investments.
The available resources for the next biennium increased $350 million since the last report in November, according to the latest Oregon Economic and Revenue Forecast.
Oregon’s economy is stable and moderately healthy but will be sensitive to national policies on tariffs, immigration and federal spending, according to the report.
“The outlook is surprisingly unchanged,” Chief Economist Carl Riccadonna told a joint meeting Wednesday of the House and Senate finance committees.
Economic growth, employment and inflation are nearly unchanged but the risks around those numbers have increased, Riccadonna said, and the federal government cuts haven’t shown up in the data yet.
The March forecast, which was released Wednesday, offers the basis for the Legislature’s budget discussions. Typically, the co-chairs of the Joint Ways and Means Committee will release a budget framework in the weeks after the March report that includes a State School Fund number.
The Legislature will receive another quarterly report in May, called the June report, that offers the final revenue numbers. Unless there is a drastic shift, the June report offers little more than room for some tweaks to the final budgets and possibly some extra small investments, often hung on an end-of-session bill known as the Christmas tree bill.
Gov. Tina Kotek’s recommended budget, released after the December report (published in November), proposed an $11.36 billion State School Fund for 2025-27. The March report estimated that expected revenues have increased since then.
The December forecast marked a turning point for the economic and revenue report. Riccadonna, who took over the chief economist role last year, instituted changes in the revenue estimate calculations, which had significantly underestimated the state’s revenue potential the past few cycles. Those underestimates resulted in huge “kicker” refunds, money the state returns to taxpayers when collections are more than 2% higher than the expected revenue.
The new formula led to big increases in expected revenue for this biennium and next, giving legislators more dollars to put into their budget plans for 2025-27.
The March forecast revised the state’s general fund and lottery expectations for this biennium down $109 million, which will clip the kicker slightly. General Fund and lottery resources still are expected to exceed the 2023 close of legislative session budget by $3.3 billion. The latest estimate is for a $1.7 billion personal kicker and for the corporate kicker, which goes toward education, to drop just below $1 billion.
The Corporate Activity Tax, which funds the Student Success Act, was revised down $31.6 million for this biennium and down $9.5 million for 2025-27. The CAT was designed to generate roughly $1 billion for education, but part of the Student Success Act agreement set aside some of the money to offset a tax reduction. The amount of the CAT going to offset the tax reduction is going up, reducing amounts for the Student Investment Account, the Statewide Education Initiative Account and the Early Learning Account. The CAT is expected to generate nearly $2.4 billion in 2025-27 for the three Student Success Act investment accounts.
Oregon’s reserve funds remain healthy. The report estimates this biennium will close with the Rainy Day Fund at $1.9 billion and the Education Stability Fund at $1 billion, plus an ending balance of $2.6 billion. According to the report, Oregon’s reserves are nearly 12% of general fund revenues and enough to weather a mild to moderate recession.
– Jake Arnold, OSBA
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