Multnomah County faces a $21 million general fund shortfall as it prepares for the FY 2026 budget cycle, according to updated projections from Multnomah County’s Budget Office. Unless significant changes are made, the budget deficit could grow to $52.4 million by Fiscal Year 2029-30.
The Budget Office presented its updated financial forecast to the Board of County Commissioners on Tuesday, Nov. 19, outlining significant risks, slower property tax increases, and escalating costs in light of inflation that are expected to strain the County’s resources in the coming years.
“To (balance the budget), we have to figure out how to solve the $21 million problem,” said Jeff Renfro, the County’s economist. “We’ll get there one way or another. That’ll change the trajectory going forward.”
The updated forecast, spanning FY 2026 to FY 2030, reflects changing economic conditions driven by the COVID-19 pandemic. Renfro attributed the projected shortfall to a combination of factors, most notably the significant slowing in property tax revenue growth-–the primary source of discretionary funding for the County.
The County’s $760 million general fund represents only part of the County’s $4 billion budget. Other sources—including the Metro Supportive Housing Services and Preschool for All taxes, as well as federal and state pass-through funding—fund specific County services and programs.
“We are entering a new time in our budget and financial outlook,” Chair Jessica Vega Pederson said. “The work to prioritize our most pressing needs is going to continue as we move into the new budget cycle and bring in new commissioners.”
Declining commercial real estate values, rising personnel costs dim financial outlook
Portland’s commercial real estate market — like many nationwide — has struggled since the COVID-19 pandemic. As businesses adjust to shifts in remote work patterns, many properties are no longer worth as much as they were before the pandemic. While residential property values have remained relatively stable, the broader slowdown in the local commercial real estate market has reduced expected property tax returns for the County.
Renfro reported that the real market value of the top 20 downtown commercial properties has fallen by 42% to 74% in recent years, and this trend is expected to continue at least one more year. The real market value is the estimated price a property would fetch on the open market, which is used to calculate the amount of property taxes owed.
Another major factor driving the updated forecast is rising personnel costs, which represent two-thirds of the County’s overall expenditures. Personnel expenses are heavily influenced by annual cost-of-living adjustments (COLAs). Those adjustments, often built into labor contracts, are tied to inflation, which has begun to flatten but remains at a high level. Every percentage point increase in base pay represents $4.1 million in expenditures.
The County’s obligations to the Oregon Public Employees Retirement System (PERS) are also increasing. Each percentage point of PERS rate increases represents $2.9 million in expenses for the County. These rising costs, combined with the slowdown in property tax growth, are contributing to a widening structural deficit.
In addition to the general fund shortfall, the County is also facing the end of federal COVID-19 relief funds from the American Rescue Plan. These funds, which were essential in supporting various County programs during the pandemic, are no longer available.
Chair Vega Pederson noted the County has planned for this reduction and should be able to manage without a major impact on operations. “We knew when we were making investments using ARP dollars and other surpluses in the past that many of these investments would not be able to be made for the longer-term,” she said.
The negative financial outlook is somewhat tempered by some positive economic news. Renfro said the Federal Reserve has successfully started to reduce interest rates without, it appears, triggering a feared recession during the process of taming inflation. National economic indicators are also signaling more growth.
The County’s financial forecast also points to a number of potential risks on the horizon, including the possibility of continued economic uncertainty at the national level. Renfro noted that changes in federal policy — such as the potential for new tariffs or changes in federal funding — could affect the County's budget.
At the local level, development is expected to continue to be low for the foreseeable future. Portland is also experiencing weak employment growth but strong income growth. Local domestic travel is recovering, in terms of passengers coming through Portland International Airport, though it remains below pre-pandemic levels.
Commissioner Julia Brim-Edwards said the County’s negative financial forecast is a cautionary tale. “If the City and the County don’t take strong steps to address homelessness, behavioral health issues, and the compromised public safety in our neighborhoods, businesses and residents with resources will leave the county,” she said. “That, in the end, leaves us with fewer resources.”
Future Board will face challenging economic conditions
Starting in January, the County will have three new commissioners. The incoming commissioners — Meghan Moyer, Shannon Singleton (starting next month), and Vince Jones-Dixon — will play a critical role in shaping the County’s budget amid rising costs and declining revenue.
Renfro explained the structural deficit — where personnel costs driven by inflation and other factors grow faster than property tax revenue, which is capped by state law — is a long-term issue that will require careful planning to address. In the short-term, the County will need to focus on making difficult choices about where to allocate its limited resources.
As the County begins its budget process in December, with final approval set for June 2025, County leaders will be looking for ways to manage the budget shortfall while preserving critical services. Work sessions and public hearings will be advertised on the budget website.
“We definitely have some hard times ahead of us,” Commissioner Lori Stegmann said. “I don’t envy the future board for having to grapple with the economics of what we are going to be faced with.”
