State Economists Nudge Oregon’s Economic Forecast Down

Although it will take in record revenue, Oregon will have about $500 million less to spend in the 2025–2027 budget cycle than previously forecast.

The Oregon State Capitol building in Salem, circa 1960. Harvey Meston/Archive Photos/Getty Images

Oregon’s economy could be characterized by sluggish growth and higher unemployment for the coming years, according to the state’s economic and revenue forecast released on May 14.

Although the state will take in record revenue in the 2025–2027 biennium—up 12 percent from the 2023–2025 biennium—it will be significantly less than had been predicted just three months ago.

The state is still expected to have billions more to spend in the next two-year budget than it did for the current one.

The ending balance for the current biennium has been revised downward by $162.3 million, and projected general fund revenue for the 2025–2027 biennium has decreased by $337 million, according to the Office of Economic Analysis.

The 2023–2025 decrease is primarily due to decreases in personal and corporate income taxes, the report says.

“It is not a recession; let me be abundantly clear about that,” the state’s chief economist, Carl Riccadonna, told lawmakers on May 14. “Nonetheless, it is the type of slow growth that will allow the unemployment rate to drift higher.”

Oregon’s unemployment rate for April currently sits at 4.7 percent, while the national average rests at 4.2 percent.

Riccadonna put the odds of recession at 25 percent.

The report’s authors repeatedly expressed uncertainty about their findings.

“The Office of Economic Analysis has diminished confidence in the central forecast as a result of pending policy decisions which are expected to have substantial economic consequences for growth, employment, inflation and financial markets—all of which are critical variables driving the compilation of our revenue forecast,” they wrote.

Democratic lawmakers were quick to blame President Donald Trump’s policies for a possible downturn, specifically citing tariffs.

Republicans emphasized that the state will still collect record revenue and pointed to Democratic policies for any economic downturn.

“A double-digit increase in Oregon’s budget is real growth which legislators must spend wisely to fund the core functions of our state,” House Republican Leader Christine Drazan wrote in a statement.

“This increase could have been greater if it weren’t for Oregon’s highest in the nation taxes, aggressive regulatory environment, and public policy choices that harmed our economic engine.”

The Democratic Party currently controls the offices of governor, secretary of state, and attorney general and both chambers of the state Legislature. Democrats have had a trifecta—holding the governorship and majorities in both chambers of the Legislature—in the state since 1992.

Call it Chaos

“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,” Democrat Gov. Tina Kotek wrote of the forecast.

“We know the problems we need to solve here at home regardless of the chaos coming out of Washington, D.C.”

She went on to identify those problems as homelessness, a housing shortage, a dearth of medical care, underperforming schools, and cost-of-living increases in the state.

In this year’s budget request, Kotek pressed for more than $800 million to bolster housing and homelessness, $246 million for the state’s behavioral health system, and $200 million for education.

She said she is ready to “make hard budget choices and address ... challenges head on, despite the dampening of economic growth.”

Democratic Senate President Rob Wagner joined the governor in calling out the president’s policies.

“Oregon’s economy is greatly reliant on our international trading partners, and it is clear the tariffs and chaos from the federal administration is making it harder for businesses to plan and slowing economic growth,” Wagner wrote. “With this forecast, we are starting to see real impacts to businesses, workers, and state revenues.”

But the report’s authors also acknowledge that the forecast was written “in the midst of bilateral trade negotiations,” which it said “showed signs of promise.”

Attorney General Dan Rayfield said the economic forecast reinforces the need for the multi-state lawsuit against the Trump administration tariffs.

“These tariffs are not just policy missteps—they’re doing real damage to the state, Oregon families, workers, and small businesses,” Rayfield wrote.

“Tariffs were imposed without proper oversight or consideration for the long-term harm they would cause. That’s why we filed this lawsuit—to push back against federal overreach and protect the stability of Oregon’s economy.”

To date, Rayfield has participated in more than 16 lawsuits against the Trump administration.

Blaming the Trifecta

Republicans said the sky isn’t falling and that Democratic policies have hurt Oregon’s economy.

“Democrats have taxed, regulated, and micromanaged this state into decline—and now they want to point the finger at Washington,” Republican Rep. Dwayne Yunker wrote in a statement to the media. “The real problem is right here in Salem.”

A number of rankings and studies from Oregon Business and Industry have Oregon near the top in terms of taxes and regulations and the bottom in terms of business friendliness.

“If we want to see our state budgets grow, we shouldn’t raise taxes, we should cut them,” Drazan said.

The real issue isn’t revenue, added Senate Republican Leader Daniel Bonham.

“It’s the stagnant economy created by years of Democrat policies,” he wrote.

Bonham cited “Oregon’s anti-business climate, high taxes, and housing restrictions—especially over the last six years with the hidden sales tax and Portland’s layered income-based taxes,” which he said are “strangling opportunity.”

“Key industries like manufacturing and construction are shedding jobs, while government and subsidized sectors continue to grow. Business and wealth are fleeing Portland, and the damage is spreading statewide,” he wrote.

While Democrats point fingers at tariffs and federal uncertainty, he said “Oregon’s economic decline began long ago.”

Business Environment

Oregon ranked 48th out of 50 states for “Business Friendliness” in “CNBC’s Top States for Businesses 2024.”

In a study across nearly every industry in the state, the University of Oregon (UO) Institute for Policy Research and Engagement revealed that one-fourth of the 393 respondents had been approached by out-of-state recruiters.

More than two-thirds of those either expanded their presence outside of Oregon or packed up and moved. Many said that they were already considering relocation before being courted.

“Survey data indicate the state has lost thousands of potential jobs and billions of potential private investments in the past five years and is poised to lose even more in the next five years,” the report states.

A concerning number of businesses indicated they were choosing to expand outside of Oregon because of “an unfavorable business climate.”

“Oregon’s businesses have mixed perceptions about Oregon’s business environment,“ the UO report reads. ”While some view the state as a good place to do business, others cite high taxes, regulatory challenges, and social issues like homelessness and crime as significant drawbacks. This is particularly true with manufacturing and tech firms.”

Between June 2023 and June 2024, Oregon ranked 45th in manufacturing growth, according to the statewide business advocacy group Oregon Business Industry (OBI).

It also ranks among the bottom 10 states for job growth in other sectors, including construction and professional and business services.

OBI identified specific issues that state policymakers could address to improve the state’s competitiveness and increase its revenue.

“These include the scarcity of developable land, the state’s tax environment and the expense of living here,” it stated.

Strengthening Oregon’s manufacturing sector would generate big dividends, according to OBI.

“A 10 percent increase in Oregon’s manufacturing output would add $7 billion to the state’s gross domestic product, support nearly 51,000 new jobs and generate an additional $4.2 billion in personal income,” the report stated.

“This would produce more than $850 million in new state and local revenue.”