State Update: Revenue Forecast & Governor Brown Calls for a Special Session

June 19, 2020 12:40 pm

Governor Kate Brown announced she will call the Oregon Legislature into a special session on Wednesday, June 24. Expected topics for the session will likely be limited to addressing impacts of COVID-19 on workers, employers, the economy, and families, as well as police accountability measures in response to the killing of George Floyd and numerous other Black Americans by police officers.

At this time, it is expected that the Legislature will not re-balance the state’s budget in the wake of the pandemic. Instead, lawmakers will wait for a potential fourth federal stimulus package and convene later this summer to make necessary budgetary decisions. Please stay tuned to UO Advocates social media pages because we will need your advocacy to make sure higher education is protected from deep cuts that could have a negative impact on students for generations to come.

The June 2020 Forecast: The Oregon Office of Economic Analysis released the June 2020 revenue forecast and economic outlook. The forecast represents the most probable outcome given available information to economists and helps policymakers craft necessary changes to the budget.

The economy: The halt of economic activity due to the outbreak of COVID-19 made clear that Oregon is in recession and that recovery will take years. Economists do expect a bounce back in the second half of the year, so long as public health indicators related to the virus continue to allow for the easing of physical distancing measures and the re-opening of businesses. Really, full recovery won’t occur until there is a vaccine, there is a mutation in the virus that makes it less infectious, or herd immunity is achieved. Some good news: while this recession is extremely severe, it is expected to be shorter in duration than the Great Recession.

What about the state’s revenue? Oregon has a more volatile revenue system than other states because it depends so much on personal and corporate income taxes. During economic downturns, income taxes might not fare as well in comparison to other revenue instruments. Taxes on lodging, gasoline, vehicle purchases, video lottery and marijuana sales are all much more substantial than they were during the last recession. While some taxes will fare better than others, all major revenue sources will face considerable downward pressure given the severity of the recession.

General Fund and other major revenues have been reduced relative to the March forecast by $2.7 billion in the current biennium and $4.4 billion in the 2021-23 budget period. Fortunately, Oregon is better positioned than ever before to weather a revenue downturn. Automatic deposits into the Rainy Day Fund and Education Stability Fund have added up over the decade-long economic expansion, and stood at $1.6 billion in April. In addition to dedicated reserve funds, the General Fund had over one billion dollars in projected balances before the recession hit.