Gov. Tina Kotek directed Oregon agency leaders to begin “immediate cost-saving measures and prepare for further reductions” Sept. 16 in response to a projected shortfall in the state budget.
“President Trump’s reckless tariffs and chaotic approach to economic policy and the passage of H.R. 1, with devastating consequences for the Oregon Health Plan and SNAP, have created an approximately one percent ($372.7 million) shortfall in Oregon’s budget,” Kotek said in a statement referencing’s Trump’s One, Big Beautiful Bill that Congress passed in July.
Agency directors received a letter from the governor directing them to slow spending, prepare for reductions and reduce out-of-state travel.
“Agencies should also begin preparing for additional reductions in the 2026 legislative session,” Kotek said in the letter sent to agency leaders. The short legislative session will begin in February.
Lawmakers passed the current two-year budget, which began July 1, during the 2025 legislative session.
In August, Oregon state economists said they predict revenue for the two-year budget cycle will be down more than $888 million from projections they made in May. They also revealed the projected $373 million shortfall. State economists said General Fund revenues will total $34.9 billion, down from a projected $35.6 billion.
In her letter, Kotek said the budget created during the session was “poised to build on progress in key areas.”
“The legislature passed budgets that would help us stay the course on what is working,” she wrote.
“In the wake of failed leadership from the Republican-led federal government, we must step up to the plate,” Kotek added. “This is not what we had planned for, but it is what we must do.”
Kotek directed state leaders to slow general and lottery fund spending by holding agency positions vacant longer, reducing spending on services and supplies and slowing the implementation of new or expanding programs. She said agency leaders should leave “no stone unturned to save taxpayer dollars.”
Kotek said the state chief financial officer will determine reduction targets for all state agencies and that all “non-essential” out-of-state travel for trainings and conferences was suspended immediately. It was unclear when agency leaders would receive those specific determinations.
“We will make tough, sensible decisions while protecting the core services Oregonians rely on,” Kotek said in a statement. “This challenge is not unique to Oregon, but how we respond will be. Our resilience, teamwork, and determination have carried us through hard times before. They will again.”
The Oregon Center for Public Policy urged Kotek to call another special session before the end of the year to adopt a static tax connection and decouple Oregon from the automatic connection to the federal tax code.
According to the Oregon Capitol Chronicle, lawmakers will discuss the possible decoupling from federal tax code during Legislative Days meetings scheduled to begin Sept. 29. Another revenue forecast is scheduled Nov. 19. Dianne Lugo covers the Oregon Legislature and equity issues. Reach her at dlugo@statesmanjournal.com on X @DianneLugo or Bluesky @diannelugo.bsky.social.
This article originally appeared on Salem Statesman Journal: Gov. Tina Kotek directs state agencies to begin ‘cost-saving measures’
