Oregon's economists say the state will have $755 million less to spend over the two-year budget cycle because of the economic slowdown.
And the current uncertainty around federal policies means the situation could become even more dire in coming months, the state's Office of Economic Analysis told lawmakers Wednesday.
The results of Oregon's quarterly revenue forecast for May brought a wave of finger pointing from lawmakers, who disagree about who is responsible for the lower numbers.
The Democrats aligned with the state's economists point to the knock-on effects of federal cutbacks, federal layoffs and tariffs for the projected decline in revenues, while the Republicans blame regulations and tax policies implemented by the Democrats in past years.
Gov. Tina Kotek is a Democrat and the party holds majorities in the state's Senate and House.
Kotek said lawmakers should double down on programs to keep the state moving forward despite the headwinds, including efforts to create more affordable housing and reduce homelessness.
"While the Trump administration spreads uncertainty in our economy and our social safety net, I refuse to let Oregon be knocked off of our game," Kotek said. "We know the problems we need to solve here at home regardless of the chaos coming out of Washington, D.C."
Lawmakers will have $37.4 billion in general funds to spend during the fiscal 2025-27 biennium, the state's economists said, roughly 2% less than the $38.2 billion predicted in February's forecast. And, they have about six weeks left in the legislative session to adapt the budget to meet the lowered forecast.
"I am committed to working diligently with the Legislature from now through the end of the session to make hard budget choices and address our challenges head on, despite the dampening of economic growth," Kotek said.
Cuts to federal employment and programs have contributed to the expected $529 million decline in revenues from personal income taxes over the two-year period, along with a promised crackdown on immigration, Oregon's chief economist Carl Riccadonna said at a press conference.
The decline in personal income taxes added to the $250 million in increased spending in the current 2023-25 biennium brings the $755.7 million reduction in available funds.
At the start of the year, economic fundamentals were sound, according to the outlook, and the forecast was for slower growth and lowered inflation or maybe a reacceleration of growth, but that forecast has taken a sharp dive as federal policies have rolled out.
Oregon is highly vulnerable to national priorities relating to tariffs, immigration and federal expenditures, the economists said.
"Exports and manufacturing play outsized roles in the state, so trade tensions will be borne disproportionately; particularly by key industrial pillars, such as agriculture, semiconductors and sportswear/apparel," economists said.
The decline also means an $88 million drop in the kicker rebate, which provides a tax credit refund to taxpayers at the close of the two-year budget if income tax collections exceed projections by more than 2%. The kicker will return $1.64 billion to Oregonians next year.
Republicans jumped on the increased spending reported in the economic forecast to chastise the majority party for policies they claim are harming the state.
"We don't have a revenue problem, we have a spending problem," said Rep. Ed Diehl, R-Stayton.
He claims the stagnant economy is a result of Democrat policies causing a reduction in manufacturing and construction jobs.
