Oregonians are likely to get more money back on their 2026 state tax returns as tax revenues continue to exceed forecasters’ expectations.

The latest quarterly economic forecastreleased Wednesday, projects a $987 million income tax “kick.” Oregon’s unique kicker law requires that the additional revenue be returned to taxpayers if income tax payments are at least 2% higher than budgeted.

Meanwhile, lawmakers are expected to have $676 million more in the 2025-2027 budget than the March forecast, although forecasters warn that the state’s future revenues are uncertain.

“Although revenues have exceeded expectations so far, they appear low compared to reported liabilities,” said state economist Josh Lehner. “It seems a little more uncertain than in past years.”

Governor Tina Kotek is already considering the possibility that revenues could be lower than expected. In April She told the agency directors to limit spending increases for planned programs and services paid for through the general fund to 1 to 2 percent, depending on the agency. On Wednesday, Kotek and the Democrats who control the state legislature announced the “stable” economic forecast while urging a focus on core tasks.

“A stable state budget will help us continue the important investments we’ve made in Oregon, like high-quality schools, affordable housing and accessible health care,” said House Speaker Julie Fahey (D-Eugene). “But we must also continue to be prudent with taxpayer dollars and focus on passing a transportation package next year that will keep our economy moving.”

Republicans, who are in the minority in the House and Senate, stressed that economists were uncertain about their call for no increase in spending.

“Now is not the time to become complacent,” said Sen. Lynn Findley, a Republican from Vale who sits on the Senate Finance and Revenue Committee. “We must focus on sustainable fiscal practices that protect Oregonians from the uncertainty of the future. Our priority should be to ensure we have the resources to meet critical needs without overburdening taxpayers.”

House Republican Leader Jeff Helfrich (R-Hood River) said lawmakers should refrain from asking for new taxes in the 2025 session. Talks about taxes are expected as lawmakers work out a transportation funding plan to address the strain on the state’s road system now that historic funding sources like the gasoline tax are not covering as much as they once did.

“This forecast shows that government and government-related bureaucracies are expanding while the private sector is struggling to keep up,” Helfrich said. “Meanwhile, inflation remains higher than the national average. Many in the current majority will call for new taxes next session, which will make these problems even worse. Lawmakers should resist the push for new taxes to both ease the cost burden on families and unleash Oregon’s private sector potential.”

Threatening layoffs

Unemployment and layoffs remain low statewide, but economists are raising concerns about layoffs in some of the state’s key industries. Nike announced plans to cut 740 jobs in Oregon this spring, and Intel plans about 3,000 layoffs in Oregon by the end of the year.

“They’re happening in some of Oregon’s key industries, some of the areas that make our economy more diverse and unique, I would say more productive overall than a typical state,” Lehner said. “We’re talking about high tech, we’re talking about footwear and apparel, and we’re talking about wood products as well. We’ve seen big announcements about layoffs in the semiconductor and apparel industries, and then there’s been a handful of smaller announcements when it comes to closing or curtailing various factories across the state.”

Oregon’s semiconductor industry deserves special mention. The state employs about 15% of the nation’s semiconductor workforce. Last year, lawmakers approved more than $500 million in grants, loans and tax breaks to help the industry grow and compete with other states for a share of national funding.

Outside of Portland, the lumber industry remains a major player. While the closure of a sawmill might have little impact statewide, in the rest of the state the industry accounts for 3% of all jobs, and lumber industry wages in those counties are about 17% higher than the average private sector wage.