Oregon economic forecast adds $2.3 billion to 2025-27 school funding discussion

Published: November 20, 2024

The future is looking significantly better for school funding.

The December Oregon Economic and Revenue Forecast released Wednesday raised the revenue expectations for 2025-27 by $1.3 billion. All told, the Office of Economic Analysis economists estimate legislative budget writers will have $2.3 billion more in available resources than predicted in the last forecast three months ago.

The report predicts a "soft landing" is in progress from recent inflation with little chance of a recession. The report notes, though, that the election will have "economic repercussions," as President-elect Trump's proposals differ widely from current administration policies.

This quarterly report is the last economic temperature check before Gov. Tina Kotek releases her proposed 2025-27 budget in the next two weeks. The Legislature actually determines the state budget, but the governor's proposed budget usually sets the bars for the legislative wrangling to come.

This year, Kotek has reset some of the state calculations that go into figuring out how much schools need just to maintain current services, staff and programs. Kotek's approach, which more closely aligns with the estimates from school business officials, would rase the baseline about $515 million.

Education advocates, including OSBA, say Oregon students deserve better than the status quo, though. They are pushing for more general funding as well as investments in early literacy, summer and afterschool programs, special education, and supports to address issues such as chronic absenteeism and student mental and physical health.

School districts are also facing budget-busting calls from teachers to lower class sizes, increase staffing and raise pay, with Greater Albany Public Schools teachers on strike and other unions threatening. Many districts are also coping with a sudden surge in their Public Employees Retirement System costs, and some school districts and education service districts are already planning cuts to balance their budgets.

The Grant School District is planning to reduce staff partly because of its rising PERS costs, according to a news release.

"The factors contributing to the reduction of staffing is outside of the district's control," Superintendent Mark Witty said in the release. "I remain hopeful the governor and Legislature will increase the State School Fund to help alleviate the full impact of the PERS rate increases."

The December outlook put more money on the table for the Legislature to address Oregon's needs.

This report marks a transition. Longtime state economists Mark McMullen and Josh Lehner left the Department of Administrative Services this year. New Chief Economist Carl Riccadonna presented the report Wednesday to a joint meeting of the House and Senate revenue committees.

The latest report notes that a series of Oregon economic growth underestimations prompted a methodology review. A revised process has contributed to the more positive outlook, the report says.

The December report increased the 2023-25 revenue estimate by $947 million. That is $2.8 billion higher than the 2023 close of session general fund revenue forecast that underlaid the current biennium's budget.

When Oregon revenue overshoots the budget estimate by more than 2%, the money goes back to taxpayers in a "kicker" refund. The personal kicker for individual taxpayers in 2025 has grown to $1.8 billion. The corporate kicker, which goes into the General Fund earmarked for schools, stands at $1 billion.

Oregon has set aside considerable reserves during its recent prosperity. The Education Stability Fund is forecast to have $1 billion at the end of the 2023-25 biennium, and the Rainy Day Fund is forecast to have $1.9 billion.

Not all the news was good for schools. The corporate activity tax that supports the Student Success Act grants was revised down $5.9 million for 2023-25 and $48.1 million for 2025-27. But that still leaves $3.3 billion expected for 2025-27, although not all of that goes to schools.

The Legislature will receive the next report in February. Usually, legislators wait for those numbers before they start proposing state spending budgets.

- Jake Arnold, OSBA
[email protected]

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