State leaders prepare for budget shortfall

Oregon is currently facing a projected budget deficit of $373 million. With the passage of H.R. 1 – the “One Big Beautiful Bill” – Oregon is expected to see a decline in revenue in 2026, largely due to reduced federal payments for SNAP and Medicaid. Additional costs are also anticipated to meet new requirements for both programs, though those impacts have not yet been determined.

In order to balance the budget and re-establish a financial buffer, the state will need to identify $800–$900 million in cuts, savings, or new sources of revenue. The Governor has directed all state agencies to submit 5% budget reduction proposals to help prepare for the shortfall while protecting state reserve funds.

During the 2026 short legislative session, lawmakers will consider whether to disconnect from elements of the federal tax code, with any impacts taking effect in the 2026 tax year.