March 2021 State Budget Update


Below is a timely update on the State of Oregon budget from Hans Bernard, Associate Vice President for State Affairs


Yesterday [February 24, 2021], the Office of Economic Analysis briefed lawmakers on the March 2021 Revenue Forecast, the fourth forecast capturing the impact of COVID-19 on Oregon’s economy and the first of 2021. Notably, and similar to previous forecasts, a key assumption used in their baseline projections is another Federal Aid package.

General Fund and other major revenues are now slightly up from pre-COVID-19 levels, and we have a projected ending balance of $1,232.5 million above the 2019 close-of-session estimate.

Below are some highlights from our current budgetary outlook:

· Projected 2019-2021 Net General Fund Resources are up $743.5 million (3.1%) from the December 2020 forecast.

· Projected 2019-2021 Lottery resources are down $100.8 million (-7.4%) from the December 2020 forecast.

· Projected Combined net General Fund and Lottery revenue are up $642.7 million (2.6%) from the December 2020 forecast.

Healthy revenue collections have put Oregon’s unique kicker law into play. Following a booming first half of the biennium, Oregon’s General Fund revenue outlook was very close to the kicker threshold when the pandemic hit. After filling all of the recessionary hole, the March 2021 forecast calls for collections to exceed the threshold by $170 million (0.9%), resulting in a kicker credit of $571 million. However, this kicker credit is far from a sure thing. With one more tax season left in the biennium, much uncertainty remains.

Budgetary reserves: The State continues to be well-positioned due to significant reserves and substantial federal aid. The Oregon Rainy Day Fund (ORDF) is projected to receive $226.6 million following the 2019-2021 biennium. Additionally, the Education Stability Fund (ESF) is projected to have an ending balance of $410.8 million this biennium. Combined, the two funds will total close to $1.3 billion.

Although the additional revenue called for in the March 2021 outlook is a welcome sight, budget writers still face a challenging environment this session. While personal income taxes have continued to grow this biennium, many other revenue sources such as Lottery sales have not. It is also important to note that while revenue growth has now exceeded pre-pandemic levels the “needs” side of the ledger has grown dramatically in recent months. Recent estimates for Medicare and Medicaid caseload growth have been as high as $400 million. Human services caseload estimates are beginning to show the impact of pandemic-related job losses, and the state continues to face significant expenditure needs associated with the wildfires that occurred in September.

With both federal aid and asset booms expected to expire, revenue growth will remain modest during the 2021-23 budget period. Should this baseline outlook come to pass, state resources will have remained roughly unchanged for three consecutive budgets. This growth is not sufficient to keep up with the rising need for, and the cost of, providing public services.

What’s next? In short, the March 2021 forecast provided a positive fiscal outlook for budget writers to work with as they develop the upcoming biennial budget this session, but the kicker, relatively low long-term growth projections and the fact that federal aid will be one time resources will make budget writers hesitant to commit to significant investments without stakeholder groups, including public universities, making a compelling case.

Looking ahead – the 2021 session continues to move along, albeit slower than usual. We expect the session to begin to pick up the pace in the coming weeks as both the House and the Senate will start holding more floor sessions each week (each is currently only holding one per week), and bills will begin getting work sessions and sent to the floor for a full vote. March 19th is the first major deadline of the session as bills not in a “safe committee” must be scheduled for a work session or be considered dead for the session.

We anticipate the Tri-Chairs of the Joint Committee on Ways & Means will wait until after a federal relief package reaches the President’s desk to issue their budget framework, a document we will likely see in early April.

The legislature will receive the next quarterly revenue forecast on May 19th. This will be the baseline that is used to finalize the 21-23 biennial budget.

Thanks to Michael Van Dyke with Proxy GR for assisting in drafting this update.


How elected officials are reacting: 

Governor Kate Brown

House Speaker Tina Kotek

Senate President Peter Courtney

House Majority Leader Barbara Smith Warner

Senate Republican Caucus

Senate Majority Leader Rob Wagner

Oregon Senate Republicans