To shore up Oregon’s budget, lawmakers say many state jobs must not be filled • Oregon Capital Chronicle

The legislative budget authors propose cutting more than 130 state jobs, spending less on services and utilities and moving around unsecured funds within public agencies to balance Oregon’s budget and close a major funding gap for the transportation department.

The measures are supposed to close the state’s remaining $128 million deficit over the next 18 months, and a $289 million shortfall at the Oregon Department of Transportation, preventing the agency from hundreds of layoffs. Federal tax changes passed by Congressional Republicans over the summer that affect some state income and increase costs, and the lack of action on transportation funding that continues through the 2025 long term, have led to two deficits.

“We can do this budget for a little while,” Sen. Kate Lieber, D-Beaverton and chairwoman of the budget-writing Joint Ways and Means Committee, spoke about the transportation budget at a Friday news conference.

But both the transportation sector and the treasury will need long-term adjustments for continued earnings in the coming years, he said.

“This is not a good budget,” Lieber continued about the transportation budget. “This is a very, very difficult budget, because it’s taking away services from Oregonians in a very real way.”

The changes were detailed in amendments to Senate bills 1601, 5701, 5702, 5703 and House bills 5203 and 5204 – released Sunday. A public hearing on the omnibus spending proposal will be scheduled for early next week, according to Lieber and Ways and Means co-chair Rep. Tawna Sanchez, D-Portland.

Although lawmakers just eight months ago passed a two-year budget of $39 million for the state during a long legislative session, they must restore the money in the current short term. This accounts for a large portion of the revenue loss and additional revenue expected from the federal tax and spending cuts megalaw passed by Congressional Republicans during the summer.

Oregon is one of the few states that automatically replicates changes in state tax law at the state level, rather than opting for mirror provisions. That, however, will change a little under a bill passed last week that allowed for additional cuts to the federal code, restoring a net $290 million in federal tax revenue over the next 18 months.

Lawmakers also had to create a budget solution for the transportation department, which had a $289,000 funding gap and long-term funding issues associated with rising project costs and lower gas taxes as Oregonians drive more fuel-efficient cars.

Finding a long-term solution was critical during the 2025 legislative session, but lawmakers failed to agree on a fix before the clock ran out on the six-month session. During a key session in the fall, they approved a small increase to the state’s gas tax and vehicle registration fee.

But Oregonians have never paid these high fees after the Republican No Tax Oregon campaign this winter paused and waited for the current budget until the state vote in November. Democrats are trying to move the vote to May.

A transmission hole

Covering about $289 million in spending, Lieber and Sanchez said their proposal would provide a temporary “pause” and hold back spending until lawmakers come together during the 2027 session to hammer out a solution.

It doesn’t rely on the effects of gas taxes and vehicle fees to keep the transit agency funded for the next 18 months, but if new revenue streams aren’t approved, the agency and lawmakers will be in a bad spot when they come together to draft a budget in 2027, Lieber said.

About a quarter of the hole will be covered by the cost savings from leaving more than 130 vacant lots. The agency has lost about 360 employees since July due to budget uncertainty, Lieber said, and there are 700 vacant positions within the agency as of early 2025, Interim Director Lisa Sumption recently told lawmakers, forcing employees to take on additional jobs.

“People left this organization because of what is happening. Because of all the kerfuffle that happened around it. These were real jobs lost. And we are sitting here, very difficult, telling you the math problem, but these people were helping us,” Lieber said.

The proposal also reduces the agency’s spending on renovations and repairs to its buildings and other facilities by $400 million.

Another 75% of the budget hole will be covered by a return to general spending money that the agency has for specific projects, but that has not been used or tied to emergency funds.

Lieber said nothing is being used that was already committed to another project, or taken from future fiscal years.

Many of the revisions now proposed by the Democrats were called for by the Republicans during the 2025 session, in an attempt to solve the problems of the transportation agency not by increasing the budget but by decreasing the spending.

Lieber said the difference between what he and Sanchez are saying now and what Republicans wanted in the long term, is permanent. They want to make sure that programs like Safe Routes to Schools and Connect Oregon aren’t completely phased out.

“I mean, you can do anything in the short term, but this idea that transferring this money entirely is the solution, I think, needs to be examined more closely. Because it’s harmful to our infrastructure, to the organization, and frankly, to Oregonians who use the roads,” Lieber said.

Although lawmakers have prioritized saving money on transportation programs designed to protect health and safety, Lieber said Oregonians will recognize the shortfall in workers and recoup funds from other important agency services.

“People are going to see things like long waits at the DMV, waiting for road sweeping and pothole filling and plowing,” he said. “It’s too small, right now, with this budget.”

Another top cut

To cover the $128 million state fund shortfall, other agencies will invest in savings and long-term investment accounts, leaving unfilled jobs and spending changes, particularly at the Department of Early Learning and the Department of Human Services.

Lieber was adamant that no one would lose access to tuition or child care because of the tax reform, which essentially distributes tax credits to free up unrestricted dollars. The primary education department was already operating on $45 million less than requested over the next two years after the Legislature cut funding by 3% at the last term.

Overall, the $128 million hole is down significantly from the $650 million lawmakers were eyeing at the beginning of the session, including the $277 million cost of providing new costs related to the savings plan under the Republican tax and spending bill.

The recent passage of Senate Bill 1507, which allows the state to withdraw from three of the 115 new tax credits, helped cover half of the budget deficit of the current biennium. Early February earnings estimates showing temporarily higher than expected corporate tax rates also helped.

Republicans have threatened to send a budget cut question to Oregon voters in the November election, something Lieber said would destroy the state’s budget.

If voters choose not to accept the cuts and stick completely to the federal tax code, the governor could call a special session to cut a large budget from education and human services, which are the nation’s most expensive, Lieber said. Or, the governor could implement an “apportionment,” something Lieber describes as a “draconian” approach where each agency is ordered to quickly reduce spending across the board.

“It’s not a scalpel, it’s a bludgeon at every agency,” Lieber said.

He warned that as difficult as it is to balance the current budget, the next few years will be even more difficult. An August study from Oregon’s chief financial officer found that cuts to federal programs in last summer’s megalaw and new costs shifting from state to state government will cost Oregon $15 billion over the next 10 years.

“We are facing huge budget deficits in 2027-29 and 29-31,” he said. “This budget was small compared to the budgets that have come before us.”