Carl Riccadonna, state chief economist at the Department of Administrative Services (DAS) and head of the Office of Economic Analysis (OEA), presented the latest revenue forecast to a joint meeting of the Oregon Legislative Revenue Committees. The quarterly revenue forecasts serve to open the revenue forecasting process to public review and is the basis for much of the Oregon state government budgeting process.

The Office of Economic Analysis provides quarterly forecasts for the State of Oregon’s major revenue sources, including all sources contributing to the General Fund (Personal and Corporate Income Tax, etc.), Lottery and the Corporate Activity Tax. In May of odd years, OEA’s revenue forecast establishes the resource levels for the next biennium’s adopted budget.

What is different about this forecast?

The revenue forecast presented in today’s committee begins with a modified analytical approach. Carl Riccadonna and his team reviewed the methodology and outcomes of the revenue forecast over several recent biennia to identify potential sources of error. The past forecasts ultimately deviated significantly from actual tax collections, as shown in the Close of Session Forecast Errors chart.

The Nov. 20 forecast reflects methodological adjustments that result in immediate increases to the forecast. The reason for these methodology changes is because the historic forecast errors have increased in magnitude and shown a persistent bias since 2009. OEA’s adjustments are expected to address these issues.

The Office of Economic Analysis has made two main adjustments:

1. Reconstruction of the Personal Income Tax model to reflect true tax liability and collections. As part of this change, modeling of the kicker impact was more intrinsically incorporated into the model. This will eliminate a false signal of weakness in current tax year collections
2. Tighter alignment between the Oregon revenue forecast assumptions and the larger, national economic trends.

The intent of these changes is to reduce future forecast error and align income tax forecasts with economic assumptions.

The results

The December revenue forecast projects the 2023-25 General Fund ending balance to be $2.79 billion, with revenues increasing by $945 million since the September forecast.

In the 2025-27 biennium, General Fund available resources are forecast to increase by $2.27 billion, and revenues increasing by $1.3 billion from the September forecast. This results in a total of $37.8 billion projected available resources.

About the Office of Economic Analysis

The state chief economist oversees the Office of Economic Analysis within the Department of Administrative Services and provides objective forecasts of the state’s economy, revenue, populations, corrections population and Youth Authority population. These forecasts are used across state government, and by the public for a variety of reasons, notably to inform the state budgeting process. For more information about the Office of Economic Analysis and recent forecasts visit https://www.oregon.gov/das/oea/pages/index.aspx.

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