Oregon state Senate floor, March 1, 2024, at the Oregon state Capitol in Salem, Ore.
Kristyna Wentz-Graff / OPB
Oregon is facing potential funding cuts amid the Trump administration’s efforts to dramatically downsize federal spending. More than 31% of the state’s budget comes from the federal government.
At the same time, lawmakers are weighing an expensive transportation package — with the potential for new taxes or fees — and proposals from Gov. Tina Kotek to ramp up funds for schools, housing and behavioral health.
Taken together, some lawmakers concede the financial pressures could make it a difficult year to pass legislation that affects the state revenue.
“I’ve been very clear with legislators: Don’t bring us anything bright and shiny and new,” Rep. Tawna Sanchez, D-Portland, co-chair of the Joint Committee on Ways and Means, told OPB Tuesday.
Despite a sunny revenue forecast from the new state economist in November, lawmakers say they are taking a conservative approach and caution that they will not have a full understanding of the state’s budget until May.
But potential federal funding cuts could punch a hole in budget plans, affecting how the Legislature addresses everything from schools to veterans services to infrastructure. Sen. Kate Lieber, D-Portland, who is the co-chair of the Joint Committee on Ways and Means, called the Trump administration proposals around federal funding “really catastrophic” if they’re fully implemented.
Sen. Kate Lieber speaks at the Senate during a special session in Salem, Ore., at the Oregon state Capitol, Dec. 12, 2024. The Legislature passed a single bill, allocating $218 million in taxpayer money to cover the costs of a fire year that saw more than 1.9 million acres burn.
Kristyna Wentz-Graff / OPB
At the same time, Oregon’s elected officials are seeing bills filed that would cut into state revenue, such as those with one-time payments for projects or proposals to repeal the corporate activity tax, establish an income tax credit for volunteer firefighters and grant a higher property tax exemption to veterans with disabilities.
“Basically all these other things out there are good ideas and might actually help people,” Sen. Kim Thatcher, R-Keizer, said. “But in light of everything else, in context with the whole universe we’re dealing with, I think there’s less of a chance this time than there was last time.”
Lawmakers are strategizing how they would respond to federal cuts, including the possible need to backfill state agency budgets.
“This year in particular is even more murky at this point in session because of what the federal government is saying they may or may not do,” Lieber said.
Oregon’s most recent biennial budget included nearly $37.9 billion in federal funds. That’s compared to nearly $31.9 billion from the state’s general fund.
“Any type of loss of revenue, how do we make up the difference?” said Sen. Mark Meek, D-Gladstone. “Because every dollar we give, we’re going to be potentially taking out of health care, Department of Human Services, housing.”
In November, Oregon’s economist predicted the state will see nearly $950 million more in revenue in the current two-year budget period than previously estimated and an extra $1.3 billion in the 2025-27 budget cycle. Because of this, taxpayers are expected to receive a nearly $1.8 billion “kicker” tax rebate in early 2026.
Oregon state Sen. Mark Meek, D-Clackamas, listens on the Senate floor, March 1, 2024, at the Oregon state Capitol in Salem, Ore.
Kristyna Wentz-Graff / OPB
Meek, who is the chair of the Senate Committee on Finance and Revenue, said losing federal dollars would only make things harder at a time when inflation has ramped up costs on state priorities such as road maintenance and housing production. He said lawmakers are “very concerned” and are looking at “belt tightening.”
“We pay our federal taxes. Our Congress has dedicated these funds to these programs,” Meek said. “The executive branch should honor those, and I’m hoping that the judicial branch holds our executive branch accountable.”
Even bills with bipartisan support are facing dim prospects. For a third legislative session, Thatcher is cosponsoring a bill with Democrats to give military retirees a tax break. It aims to encourage veterans younger than 63 to live and work in Oregon while also providing relief to military retirees living on their pensions.
But Thatcher and Meek, who is also supporting the legislation, said its chances of passing this year are slimmer than its last time before lawmakers in 2024.
“I think the likelihood that we get this across the finish line again, unfortunately, is very slim, and I’m very disappointed and frustrated to have to say that,” said Meek, who made similar comments about legislation to reform Oregon’s estate tax.
Should the federal government’s cost cutting come to fruition, Democrats warned, the state could have a harder time addressing some of its major priorities. Lieber added, “We can’t just go down and be fearful of everything that may or may not happen.”
