State budget rebalance maintains critical services despite federal cuts
SALEM, Ore. (KTVZ) -- Oregon lawmakers on Monday released a 2025-2027 budget rebalance designed to preserve essential state services despite a multi-year budget crisis triggered by federal funding cuts from the Trump administration.
“The federal budget cuts have caused both short-term and long-term crises for Oregon's budget,” said Sen. Kate Lieber, D-SW Portland and Beaverton, co-chair of the Joint Committee on Ways and Means. “This rebalance preserves essential state programs for the next 18 months to give us time to solve the larger challenges the federal budget cuts will have for Oregon.”
The Legislature is constitutionally required to keep a balanced budget. Last summer’s federal cuts created a $900 million shortfall, threatening core programs including education, public safety and health care.
Lawmakers closed much of the gap through one-time corporate tax enforcement, savings from unspent funds in the previous biennium, and an improved revenue forecast. Gov. Tina Kotek’s September directive to state agencies to halt nonessential out-of-state travel and hold vacant positions open also reduced costs.
The co-chairs of the budget-writing committee identified $128 million in state-level reductions, largely through vacancy savings, fund swaps, program delays and trimmed administrative budgets. Passage of Senate Bill 1507 preserved an additional $311 million in state revenue, preventing deeper cuts.
Targeted investments in the rebalance include funds to combat the Japanese beetle, support immigrant and refugee services, and assist Southern Oregon University.
Still, state leaders warned that Oregon’s fiscal challenges are not over. The reallocation of costs for Medicaid and SNAP to the states is expected to pose further strain in the next two budget cycles.
“Our priority continues to be maintaining the essential services that Oregonians rely on, like education, health care and public safety,” said Rep. Tawna Sanchez, D-Portland, co-chair of the Joint Committee on Ways and Means. “While this budget rebalance was relatively benign, we know there will be difficult decisions in the years ahead due to the disastrous policies of the federal administration.”
The plan also includes adjustments to the Oregon Department of Transportation’s (ODOT) budget following uncertainty around the state’s gas tax referendum. ODOT, which relies on the State Highway Fund and user fees, operates separately from the state’s general fund.
Persistent funding challenges at ODOT have led to hundreds of staff departures, which produced vacancy savings that allowed leaders to rebalance the agency’s $288.7 million reduction without layoffs. The budget modifies spending by keeping positions unfilled, swapping state for federal funds where possible, and temporarily redirecting revenue from programs such as Connect Oregon, Community Paths, Safe Routes to School and bridge seismic upgrades.
“These were not easy decisions and are the result of a good deal of compromise across the aisle,” Sanchez said. “Throughout the process we stayed focused on safety and stability in our state and local roads and bridges.”
Lieber said the bipartisan process offers short-term stability but does not solve ODOT’s long-term financial problems.
“Redirecting funds, holding positions open and deferring maintenance are manageable in the short term, but they’re not sustainable solutions for this essential state agency,” she said.
