Oregon Must Proceed with Caution When Planning its Budget, Warns Governor Tina Kotek

Oregon must be cautious about its economic forecast, which shows that the state will have $350 million more to spend than previously estimated because it follows in the wake of a $2 trillion spending cut voted for by congressional Republicans earlier this week.

Proceed with caution was the message from Governor Tina Kotek and legislative budget writers after the announcement by chief economist Carl Riccadonna that Oregon can expect to have $38.2 billion available for its biennial budget.

The governor’s warning follows on the heels of Trump administration announcements about substantial spending cuts and laying off thousands of federal employees.

Oregon Must Prepare Itself for Economic Headwinds

Oregon has yet to feel the impact of President Donald Trump’s executive orders but House Speaker Julie Fahey, D-Eugene, advises that the state should ‘budget responsibly.’ Fahey said Oregon should prepare itself for economic headwinds created by the federal government’s actions and cuts to programs on which the state relies for funding.

Echoing those words of caution, Riccadonna reminds us that Oregon, more than most states, relies heavily on manufacturing and trade with Asia and could be seriously impacted by trade tariffs announced by the President.

Riccadonna said during Trump’s previous term of office, the Jobs Act and Tax Cuts stimulated the economy, blunting the impact of a trade war.

The chief economist said that scenario could repeat itself this year with the expectation that the federal government will be cutting taxes, including corporate tax. Tax cuts will offset the negativity of a trade war, said Riccadonna.

Economic Impact of Federal Government Decisions Have Not Yet Filtered Through

However, the economic impact of some of the federal government’s decisions has not yet filtered through.

Data on unemployment claims by the thousands of federal workers who have lost their jobs have not yet filtered through and Riccadonna said the full economic picture will only become clear during the first two weeks of March.

Explaining why Oregon is $350 million richer than expected, Riccadonna said tax revenues are forecast to generate $550 million more than expected because of higher wage levels over the next two years. From that amount, the state has deducted $200 million lost to additional wildfire costs in December and late tax refunds.

Record-Breaking Kick Paybacks

Last year, Oregonians received a record-breaking kicker amounting to $5.6 billion. The kicker paybacks are generated when tax revenues collected by the state exceed forecast amounts.

One of Riccadonna’s main tasks since his appointment as chief economist last year is to reduce the large kicker paybacks by creating more accurate economic forecasts.

Nevertheless, Oregonians can expect another large kicker payback in 2026 with the latest forecast pegged at $1.726 billion.

The biennial budget will be tabled by lawmakers in April.