Oregon’s quarterly economic forecast on November 18 showed that state revenues remain strong, buoyed by the first round of federal fiscal aid. High-income Oregon households are mostly doing well while low-income Oregonians have absorbed most negative impacts. Corporate taxes, Lottery sales, and investment income taxes have shown the strongest recoveries, but labor-related income taxes have also bounced back.
Oregon’s revenues are projected to grow by 5% during the 2021-23 biennium, much better than the spring’s dour forecast but not enough to actually keep pace with inflation. The outcomes of COVID-19 and additional federal aid remain uncertain. Our state budget is significantly impacted by rising health care costs (of which the fastest-growing portion is rising prescription drug costs).
State budget reserves remain strong. Strategic deposits during the past decade into Oregon’s Rainy Day Fund (created in 2007), Education Stability Fund (created in 2002), and the Ending Fund Balance have resulted in the largest reserve funds in Oregon history. These reserve funds will play a key role in the Legislature’s budget investment decisions for 2021-23.