Oregon’s $309M revenue boost signals economic turnaround. Here’s what it means

Oregon’s revenue forecast shows an unexpected boost, even as the broader economy continues to recover unevenly.

PORTLAND, Ore. — After months of gloomy economic warnings, Oregon’s latest forecast offers a bit of good news, suggesting the state is pulling back from the cliff’s edge of recession, though it may be too soon — or too broad — for Oregonians to feel this pullback in their everyday lives, like at the grocery store and with other household necessities.

“The message to everyday Oregonians is that it is important that the overarching trend is the state avoiding a recession and the national economy avoiding a recession,” said Carl Riccadonna, state chief economist. “But that does not mean that individuals are not experiencing a more severe slowdown in the economy.”

For instance, Riccadonna says there’s slowing wage growth for lower incomes. Given grocery store prices, upper-income households may be able to tolerate these pressures, but lower-income households face a struggle at a time when wages are decelerating but prices are not.

Oregon’s revenue outlook

Oregon’s revenue forecast for the next two-year budget cycle shows an unexpected boost even as the broader economy continues to recover unevenly.

Economists now expect the state to bring in about $309 million more for the 2025-27 budget cycle compared with the September projection, providing lawmakers slightly more breathing room heading into the next session.

Most of the increase comes from stronger-than-anticipated corporate income tax collections tied to prior tax years. Of the revenue increase, $266.9 million is due to corporate income taxes, which tend to bounce around from year to year, making them tough to predict.

Personal income tax revenue also rose modestly, while several other revenue sources came in lower than previously forecast. Despite the overall uptick, the state is still projecting a small shortfall of about $63 million for the two-year budget cycle.

Anytime the state’s in a deficit, Riccadonna says, budget cuts could be on the table. But at least in this forecast, the shortfall decreased from previous estimates, indicating things are still shifting.

“The move from $373 million to $63 million is certainly consequential,” Riccadonna said. “Now, these are very big numbers […]. There’s a lot of volatility around tax revenue trends, especially when we look at things like corporate income taxes. They swing as big businesses make decisions about tax treatments and investment decisions in the state.”

Overall, corporate activity tax revenue was revised down $31.1 million — 1% over the biennium — as estimated payments weakened, and marijuana tax revenue continued to fall amid a long-running glut in supply.

Lottery revenue provided another bright spot, climbing about $9 million thanks in part to large jackpot runs.

Oregon’s job market still playing catch-up

Even as revenue improves, Oregon’s economy continues to trail national trends. Job losses persisted through the first half of 2025 before a sharp reversal in August, when the state added 6,900 jobs — the largest monthly increase in three years.

The unemployment rate has risen to slightly above the national level, reflecting a softer labor market and the impact of federal layoffs in the Trump administration, state economists said.

Economists describe Oregon’s recovery path as a “hockey stick,” with weakness early in the year expected to give way to firmer growth in 2026. But they caution that a federal government shutdown this fall interrupted key data streams, limiting visibility into real-time economic shifts.

Extra cash in the state’s budget

Oregon holds about $3.4 billion in reserves, or nearly 10% of the state’s main budget revenue. Forecasters say that level should be sufficient to withstand a mild or moderate recession — the most likely downside scenario. The state’s recession probability remains at 27%, largely unchanged from earlier forecasts.

This is based on state economists’ most pessimistic predictions in the forecast, though they add that these scenarios have gotten “somewhat less likely” but remain more probable than their most optimistic forecast.

“The economy has demonstrated some very important resilience this year,” said Riccadonna. “After the tariffs were initially announced back in April, a lot of forecasters were anticipating an outright downturn or recession. At the national level, of course that would translate directly through to the state of Oregon, particularly given the importance of trade and manufacturing in the state. That has not come to pass.”

Federal policy shifts loom over forecast

Economists say the outlook for 2026 will hinge on several major federal actions, including new tariffs on imported goods and changes to federal tax provisions. The Federal Reserve’s anticipated rate cuts beginning in mid-2026 could help stabilize demand, but higher trade costs and reduced federal employment may impact local economies.

For now, state economists say the mix of rising revenue, stabilizing national trends and August’s strong job gains suggest Oregon may be positioned for gradual improvement in the year ahead, even if risks remain elevated.

“One of the biggest economic narratives of this year, which is the trade war and tariffs, and how that is impacting trade sensitive and manufacturing-oriented states like Oregon,” Riccadonna said. “And how that plays out in terms of economic consequences and the reorientation of supply chains.”

Colten Weekley contributed reporting to this article.