It’s Economic & Revenue Forecast Week!

What is a Revenue Forecast?

Tyler: “In Oregon, the Oregon Office of Economic Analysis, often referred to as the State Economist, produces a quarterly analysis called the Economic and Revenue Forecast. They review broad economic trends and attempt to estimate how much revenue will come into the state through different taxes, charges and fees, and other sources. It allows policymakers to plan for how they will invest in things Oregonians rely on like schools, health care, wildfire prevention, and more.”

Why do we have a Revenue Forecast?

Tyler: “State budgets are complex. There are many different ways the state brings in money to fund essential services, and many different ways those funds are distributed to pay for the things Oregonians need. 

Lawmakers who are tasked with writing the state budget every two years might come into office as a physician with expertise in health policy, or as a former teacher wanting to make deeper investments in schools, but rarely does someone get elected to office because they have a deep understanding of the state budget. The Revenue Forecast gives lawmakers the information they need to create budgets in ways that align with the outcomes they are hoping to achieve through policymaking.”

Why is the May 14th forecast significant?

Tyler: “Oregon operates on biennial budgets, meaning we create a new state budget every two years. Legislative sessions that happen in the odd numbered year of a biennium, like 2025, are what we call ‘long sessions.’ These are the years when lawmakers are tasked with creating the state budget for the upcoming two-year cycle. 

The May Revenue Forecast is significant because it is the last Revenue Forecast lawmakers receive before they have to finalize the next state budget. In short, the May forecast is the best guess at how much money lawmakers will have to spend over the next two years, so it is a cornerstone of the budget making process.

This year the May forecast is significant because in addition to the revenue projections, it will be the first time state economists are attempting to account for impacts of certain federal actions on Oregon’s economy, like tariffs issued by the Trump Administration which will raise costs for Oregonians. And, this forecast will determine whether Oregon will issue a state kicker next year, and how large it will be. Based on earlier forecasts, the kicker seems likely, so we will learn how much the state will be losing to the kicker that it could invest in things Oregonians need, like housing, child care, and more.”

What’s next? 

Tyler: “The budget making process is already underway, so following the forecast, lawmakers will start finalizing the state budget for the upcoming biennium through the Ways and Means committees. Given the forecasts up to this point and the impacts federal actions could have on our economic outlook, this is likely to be a difficult budget process, and there will be many investments that advocates want to see that will go underfunded or unfunded altogether. Hopefully this can be a moment where we see more Oregonians calling on lawmakers to find ways to raise revenues to invest more in things like housing, child care, nutrition programs, and other essentials.”

What is the “Kicker”?

Tyler: “The kicker is a tax rebate triggered when revenue collections come in 2 percent or more above what state economists predicted two years earlier. When that occurs, the entire unanticipated amount — not just the amount above the 2 percent threshold — goes back in the form of a tax rebate. As the state economist explains, the kicker ‘does not mean Oregonians overpaid their taxes, it means our office underestimated revenues.’

The kicker makes it incredibly difficult to invest in the things Oregonians rely on. Instead of investing more to make child care more affordable for families, or ensuring all Oregonians have access to food, we send unanticipated revenues back to Oregonians, disproportionately to the rich. That’s all because state economists are given the impossible task of predicting the future within a 2 percent margin of error. 

The largest kicker on record came during the 2023-25 biennium. It amounted to $5.6 billion. The richest 100 Oregonians were estimated to have received kickers of more than $800,000 on average. The bottom 20 percent of Oregonians, those struggling most to get by, received kickers of less than $60 on average. So it’s no surprise that our analysis of the kicker has shown that it continues Oregon’s decade’s long trend of worsening income inequality. We have also found that it deepens racial inequities in our economy, and disproportionately benefits urban communities at the expense of rural Oregonians.”

How does the “Kicker” work?

Tyler: “The kicker is a tax rebate triggered when revenue collections come in 2 percent or more above what state economists predicted two years earlier. When that occurs, the entire unanticipated amount — not just the amount above the 2 percent threshold — goes back in the form of a tax rebate. 

It essentially tasks state economists with looking at all sources of revenue that come into the state and predicting how much money will come in two years from now within a 2 percent margin of error. It is an impossible task on its own, not to mention how impossible it is to predict how world events might impact Oregon’s economy. No state economist could have predicted the COVID-19 pandemic and the impacts it would have on Oregon.

So when the kicker ‘kicks,’ as it often does, the state sends rebates in the form of a tax credit back to Oregonians based on their prior year’s taxes. Instead of investing that money into building more housing, making child care more affordable for families, or investing in our schools, the state returns the ‘unanticipated’ revenue, disproportionately to the rich.”