Gov. Tina Kotek on Tuesday sent the heads of Oregon agencies a missive to tighten their belts to help close a projected $370 million hole in the state’s two-year budget caused by policies adopted by the federal government.
“I am asking you to leave no stone unturned to save taxpayer dollars,” the governor wrote.
Her letter told agency leaders to slow down their spending of state general fund and lottery dollars. She suggested holding vacant jobs open longer, cutting back on supplies and slowing down new projects or project expansions. The governor also put an immediate suspension on “non-essential” out-of-state travel for training and conferences.
Kotek did not pinpoint specific cuts but said Oregon’s chief financial officer will soon set customized budget reduction targets for each of the state’s agencies.
“These adjustments will not close the projected gap,” Kotek wrote. “Agencies should also begin preparing for additional reductions in the 2026 legislative session.”
President Donald Trump’s signature tax- and budget-cutting legislation, H.R. 1, is likely to cut some $888 million from Oregon’s revenue collections during the 2025-27 budget cycle, state economists said last month. And though legislative budget writers had set aside some money to guard against potential federal changes, it won’t be enough to cover the entire gap, leaving the state’s income $370 million behind its projected expenses for the biennium, they said.
Chris Allanach, the state’s legislative revenue officer, said in July that lawmakers have three possible responses to the projected shortfall. They could cut budgets, find ways to bring in more revenue or tap reserve funds.
Democratic lawmakers are considering suspending the state’s automatic connection to federal tax code to soften the blow of H.R. 1, the Oregon Capital Chronicle reported last week. They have until the end of the year to make that change or miss out on about $400 million worth of revenue. Sen. Mark Meek, a Gladstone Democrat, told the Capital Chronicle that lawmakers will discuss the possibility during Legislative Days meetings in Salem later this month.
Oregon Business & Industry, a powerful state lobbying group, has flagged that it opposes decoupling from the federal tax code, which it believes would harm Oregon businesses.