Oregon’s humming economy might not yield enough tax revenue to avert a gap in the next two-year budget, the states’ budget analysts said in a report on Monday.

The state’s general fund and lottery revenues could total $23.6 billion from 2019 to 2021, a 5 percent increase from the current budget, yet the state could still go $623 million in the red, according to a tentative budget overview from the Legislative Fiscal Office and Department of Administrative Services.

Much of the potential deficit is due to rising costs for the state’s Medicaid program. Under the Affordable Care Act, states such as Oregon that expanded Medicaid must pick up a greater share of the cost over time. Existing taxes that fund the program are also set to wind down.

Education costs could also increase, in part due to the career and technical education spending mandate in Measure 98, which voters passed in 2016. The initiative calls for the state to increase spending on the programs by $147 million annually and although Gov. Kate Brown and lawmakers have not fully funded it, even partial funding in the next budget would result in a significant spending increase.

Analysts based their budget estimates on the cost to maintain current government service levels after factoring in inflation, rising personnel costs including from public pensions and other factors such as social service caseload projections. They also assumed lawmakers would set aside $154 million for state employee and home healthcare worker raises that could be negotiated in future contracts.

State law and Oregon’s Constitution require balanced budgets.

Brown is scheduled to release her proposal for the next state budget on Wednesday morning. Unlike the budget estimate issued Monday, Brown’s plan will likely include revenue increases from a combination of tax and fee increases and might also include spending cuts.

The budgets ultimately approved by the Legislature often differ significantly from a governor’s proposal. Senate President Peter Courtney has said the Legislature should consider a multibillion dollar tax increase in 2019 to boost K-12 education spending.

– Hillary Borrud | hborrud@oregonian.com |503-294-4034 | @hborrud