The 2026 legislative session will primarily focus on rebalancing the state general fund after impacts from the federal budget bill passed this summer, H.R. 1, created a significant gap in the state budget. Changes to federal tax laws, to which the Oregon tax code is tied, are projected to result in at least a $63 million dollar budget hole in the current biennium (possibly closer to $370 million), and current projections forecast an expected loss of $15 billion in federal funding for Medicaid and food assistance over the next six years.
Members and staff from the Association of Oregon Counties (AOC) met with Ways and Means Co-Chairs Senator Kate Lieber and Representative Tawna Sanchez for a special state budget briefing this month. The co-chairs provided a detailed overview of the state’s general fund challenges and options for rebalancing in 2026. The message relayed by county representatives to the co-chairs was clear – counties across Oregon are facing significant budget challenges of their own and cannot bear cost shifts or funding cuts. The Legislature should consider AOC and counties to be reliable partners with whom to collaborate on solutions for efficient delivery of critical public services to every Oregonian.
The Legislature is constitutionally required to pass a balanced biennial budget and has three basic options for addressing the gap — reduce spending, increase revenue, and access reserve accounts. To reduce spending, all state agencies were asked to submit proposals for both 2.5% and 5% budget reductions that could be adopted in the 2026 session along with a list of all programs established or expanded since 2021. Ways and Means Subcommittees received presentations on these reduction proposals during November Legislative Days, and have been subsequently holding stakeholder meetings to solicit feedback. AOC staff is meeting with legislators and providing ongoing feedback on proposals related to the delivery of essential county services.
The Department of Administrative Services published a detailed overview of the estimated impacts of H.R. 1, available here. The Legislative Revenue Office’s report on the impact of H.R. 1 on state general fund revenue is available here. This public folder includes estimated impacts by program areas.
The revenue forecast provided to the Legislature by the state economist in February will dictate exactly how much of a state general fund revenue gap the Legislature must fill during the 2026 short session. AOC will keep our members up to date as conversations about budget cuts and rebalances continue.
Contributed by: Mallorie Roberts | Legislative Affairs Director