As Oregon prepares for its upcoming legislative session, policymakers are confronting a complicated economic landscape marked by inconsistent data, uneven sector performance, and uncertain revenue projections. With the two-year budget under review, lawmakers must navigate transportation funding debates, declining federal data availability due to earlier government shutdowns and agency cutbacks, and a mixed economic forecast that shows resilience in some areas but weakness in others.
According to the November 19 Oregon Economic Forecast, while net job creation stalled in the first half of the year, overall income generation remained stable—evidenced by steady personal and corporate tax collections. This suggests the state is not currently in recession. However, the report attributes part of this stability to persistent inflation, which inflates nominal economic activity and, consequently, tax receipts.
State coffers are projected to gain $309.5 million in revenue, with $266.9 million coming from corporate income taxes. Despite this boost, the forecast predicts a deficit of $63.1 million by June 30, 2027. Meanwhile, sectors like cannabis, once a fast-growing industry post-legalization, have begun to contract.
Unemployment stood at 5% as of August—the eighth-highest rate among U.S. states and D.C.—with job losses concentrated in federal, construction, and manufacturing sectors. Although state government hiring offset some federal cuts, construction employment declined despite ongoing tech and residential development.
Nationally, economic growth has been heavily driven by investments in artificial intelligence, led by the so-called “magnificent seven” tech giants: Alphabet, Amazon, Apple, Tesla, Meta Platforms, Microsoft, and NVIDIA. Oregon benefits indirectly through its role in hosting data centers crucial to AI development, particularly in eastern regions like Boardman and Hillsboro, where abundant renewable energy and favorable policies support hyperscale infrastructure.
Yet, the economic benefits remain limited. Most job creation has been temporary construction work, and long-term employment at these facilities is expected to be minimal. Moreover, rising electricity costs and water quality concerns linked to data center operations pose new challenges that could require additional state intervention and spending.
Adding to the complexity, transportation funding remains a volatile issue, potentially reshaped by a proposed ballot measure. Economist John Tapogna observed that existing state systems—from education to land use—are ill-suited for current realities, noting that “the future has never looked less like the past than it does right now.”
With conflicting trends and unpredictable variables, legislators face a daunting task in crafting effective policy during the short session ahead.
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Commentary: Oregon lawmakers to grapple with economic confusion
In coming weeks, Oregon legislators will begin to consider what adjustments should be made to the state’s two-year budget and revenue picture. Much of the attention has gone to transportation funding, and the likely ballot issue which may alter it. But the economic and funding issues lurking in the coming year are broader. n nLegislators will not find coping with the full range of what comes next an easy task. n nThe condition of Oregon’s economy right now isn’t easy even to describe, much less predict. Some of the usual sources of information aren’t as reliably available as usual. Much federal economic data was halted earlier this year due to some agency cutbacks and the recent government shutdown. (Some resumptions of data flow are expected soon.) n nThe Oregon Economic Forecast released Nov. 19 offers a heavily nuanced but partially optimistic take, suggesting the state of the economy isn’t as bad as it might have been. n n“Despite a stall in net job creation in the first half of the year, aggregate income generation has proven resilient, which is reflected in both personal and corporate income tax collections,” the report reads. “This is an important real-time signal suggesting the economy is not in recession at present. It is also a reflection of persistent and elevated inflation, which lifts nominal activity and in turn tax revenues.” n nThe report specifically says that the general fund has registered an increase in projected revenue of $309.5 million, the bulk of which ($266.9 million) is projected to come from corporate income taxes. n nDespite that, the report also said, “The projected ending balance as of June 30, 2027 is a negative $63.1 million.” Many areas are stable or “softening,” including the cannabis sales which had expanded rapidly for several years after legalization but more recently has weakened. n nThat lopsided corporate contribution also means income for almost everyone else has been stagnant or down. n nThe most recent unemployment statistics, from August (another example of the data gap at work), put the Oregon jobless rate at 5%, eighth-highest among the states and District of Columbia. n nThe D.C. jobless rate was the highest in the nation, accounted for in large part by federal government job cuts. In Oregon too, federal job cuts were among the largest areas of job reductions, even while state government job additions roughly offset that. n nBut the Oregon Employment Department also said that construction and manufacturing saw job losses in the last year even larger than those for the federal government — this at a time of relatively large construction in tech industry and residential projects. n nThe American economy has been described often this year as split between the artificial intelligence (AI) sector, and businesses servicing it, and everything else. Nearly all of the increase this year in the national stock market, and most of the national economic growth, has resulted from the massive trillion-dollar-level investment and spending related to AI. The “magnificent seven” megacorporations — Alphabet, Amazon, Apple, Tesla, Meta Platforms, Microsoft, and NVIDIA — which account for the bulk of stock market advances are heavily involved in AI. n nOregon, through its strong position in housing the data centers on which AI development relies, logically would be a beneficiary of some of this economic growth. To a limited degree it seems to be. n nA data center industry report from May noted that “eastern Oregon has emerged as a strategic haven for hyperscale development. From its abundant green power and favorable climate to political support and low costs, this under-the-radar region is shaping up to be the next great hyperscale frontier.” n nBut the story is mixed. Massive data center growth in places such as Boardman and Hillsboro so far mainly has resulted in one-and-out construction work, with eventual employment likely to be small-scale. (Construction, remember, has been shedding jobs in Oregon despite all the data center construction.) Tax dollars (in line with the new state economics report) are likely to see some gains, but the centers are unlikely to transform local economies. n nAnd the data centers also have generated some problems — boosts in electric power costs and water quality issues among them — which have negative economic effects. Some of those negative effects could create state issues which may lead to calls for state program work and state spending. n nAnd, of course, all this doesn’t even factor in the already-hot issue of transportation funding, which seems likely to be upended by a new proposed ballot issue. n nUnpredictability isn’t something often measured by economists. But economics watcher John Tapogna recently had this to say about the coming environment: “Many of Oregon’s systems—our schools, regulations, land use rules and permitting processes — were built for a different time, to solve yesterday’s problems,” he said. “But the future has never looked less like the past than it does right now.” n nManaging these many new and conflicting economic pieces will represent a huge challenge for the short legislative session upcoming. n nRandy Stapilus has researched and written about Northwest politics and issues since 1976 for a long list of newspapers and other publications. A former newspaper reporter and editor, and more recently an author and book publisher, he lives in Carlton.