State Fiscal Briefs

September 2020

Oregon’s budget basics

According to the National Association of State Budget Officers (NASBO), Oregon’s total expenditures in fiscal year (FY) 2019 were $42.6 billion, including general funds, other state funds, bonds, and federal funds. NASBO reported that total expenditures across all states in FY 2019 were $2.1 trillion, ranging from $4.5 billion in South Dakota to $311.3 billion in California.

Each state allocates spending and taxes differently among different levels of governments, and local governments often administer programs with state funds, so combined state and local government data show a more complete picture of individual benefits and contributions when comparing states.

Per the US Census Bureau, Oregon’s combined state and local direct general expenditures were $44.8 billion in FY 2017 (the most recent year census data were available), or $10,807 per capita. (Census data exclude “business-like” activities such as utilities and transfers between state and local governments.) National per capita direct general expenditures were $9,446.

Oregon’s largest spending areas per capita were public welfare ($2,531) and elementary and secondary education ($1,828). The Census Bureau includes most Medicaid spending in public welfare but also allocates some of it to public hospitals. Per capita spending is useful for state comparisons but is an incomplete metric because it doesn’t provide any information about a state’s demographics, policy decisions, administrative procedures, or residents’ choices.

Oregon’s combined state and local general revenues were $43.6 billion in FY 2017, or $10,520 per capita. National per capita general revenues were $9,592. Oregon does not levy a general sales tax. After federal transfers, Oregon’s largest sources of per capita revenue were charges ($2,284), such as state university tuition and highway tolls, and individual income taxes ($2,021).

Oregon’s politics

Governor Kate Brown, a Democrat, was elected in 2018 with 50 percent of the vote. The next gubernatorial election is in 2022.

Democrats control both the House of Representatives (38 Democrats to 22 Republicans) and Senate (18 Democrats to 12 Republicans), with veto-proof majorities in both houses. Control of the governor’s mansion and each house of the legislature gives Democrats a trifecta in Oregon. All Oregon House seats are on the ballot in 2020 because representatives serve two-year terms. Senators serve four-year terms; roughly half the senatorial seats are on the ballot in 2020, and the other half will be up for election in 2022.

Oregon’s budget institutions, rules, and constraints

Oregon uses a biennial budget. The legislature must pass a balanced budget, but it can carry a deficit over into the following year. Oregon further limits both spending and revenue growth with a budget rule based on personal income growth. The rules are binding and require a legislative supermajority or vote of the people to override them. The state also requires a three-fifths supermajority to pass bills that increase tax rates. The state does not have any limits on debt service or authorized debt.

Oregon also uses a unique budget rule known in the state as “the kicker.” When the state’s actual revenue collections are 2 percent or more above the official revenue forecast for the two-year budget cycle, the excess revenue is returned to Oregon taxpayers as a tax credit on resident’s state income tax (thus, the size of the rebate depends on the filer’s income). There are separate kickers for individual income tax revenue and corporate income tax revenue. Oregon voters approved the kicker in a 1980 ballot initiative.

For example, in 2019 the state’s tax collections unexpectedly soared and ended up $1.6 billion above the 2 percent kicker line. As a result, the median Oregon taxpayer will get a tax credit worth $346 on their tax year 2019 state income tax. Higher earners will get tax rebates worth thousands of dollars when they file next year.

(Note: Some states have informal budget institutions that constrain overall spending growth or a specific expenditure’s growth.)

Oregon’s recent fiscal debates

  • During the 2019 legislative session, Governor Brown signed a paid family and medical leave bill that advocates championed as the most progressive in the country. In 2023, eligible Oregon workers will have access to 12 weeks of paid leave for having an illness, assisting a sick family member, or caring for a new child. The program will be funded with a payroll tax. The state has not set a tax rate, but it cannot exceed 1 percent. Employees will pay 60 percent of the tax, and employers will pay 40 percent.
  • Oregon also approved a 0.57 gross receipts tax in 2019. The new gross receipts tax, called the corporate activity tax, will be levied on businesses with sales greater than $1 million (businesses can subtract some input and labor costs). The legislation also reduced three of Oregon’s four individual income tax rates from 5 percent, 7 percent, and 9 percent to 4.75 percent, 6.75 percent, and 8.75 percent, respectively. Oregon’s top rate (9.9 percent) was not changed. The new tax was enacted to fund $1 billion in new annual education spending.
  • In November 2020, Oregon voters will weigh in on a tobacco tax increase. The state enacted legislation in 2019 that, if approved by voters, would increase the state’s per pack cigarette tax from $1.33 to $3.33 and make e-cigarettes subject to the state’s wholesale tax on other tobacco products. The state estimates that when enacted, the cigarette tax increase would raise roughly $320 million and the new e-cigarette tax $25 million, both over the next two years. Most of the revenue would go to funding the state’s Medicaid expansion.

Oregon’s current budget

Governor Kate Brown released her proposed FY 2020–21 budget in November 2018. The governor recommended several significant increases in education spending, including nearly $1 billion in proposals for expanding preschool access, lengthening the school year, shrinking class sizes, and adding more career and technical education programs. Governor Brown’s budget and state of the state address also focused on her proposals to spend hundreds of millions dollars on new affordable housing initiatives and programs aimed at reducing homelessness.

The legislature passed its budget in June 2019. The enacted budget included hundreds of millions for education and housing and largely followed the governor’s recommendations.

However, the budget was signed only after Senate Republicans fled the state for over a week in protest of a carbon cap-and-trade bill. If enacted, the legislation would have required utility, transportation, and industrial companies to purchase annual carbon emission allowances. The allowances would have increased in price as the state reduced its carbon emission levels. With Republicans gone, the Senate did not have the quorum required to vote on any legislation. Only after Democrats agreed to drop the cap-and-trade legislation did Republicans return and vote on the budget.

For more on Oregon’s budget, see