Oregon Gov. Kotek tells state businesses to cease journey, put together for finances cuts

Kotek’s letter to company administrators comes after a finances surplus become a $373 million shortfall in a matter of weeks

Gov. Tina Kotek ordered a right away halt to state staff’ non-essential out-of-state journey and directed businesses to search out extra methods to chop prices on Tuesday after Oregon’s finances surplus from just a few months in the past become an almost $375 million shortfall.

In a letter to all state company administrators, Kotek wrote that tariffs and the Republican megalaw handed in July that expands tax cuts and slashes federal funding for Medicaid and meals advantages means the $37.3 billion two-year finances lawmakers handed and he or she signed this summer time gained’t be enough.

“I am directing state agencies to begin immediate cost-saving measures and prepare for further reductions,” she mentioned in an announcement. “We will make tough, sensible decisions while protecting the core services Oregonians rely on.”

Along with suspending journey, her letter directs all businesses to arrange for future cuts by slowing spending, equivalent to by holding positions vacant for longer durations, lowering spending on provides and companies and ready to implement new or increasing applications.

The state’s chief monetary officer will decide targets for lowering prices at every company, Kotek wrote.

Lawmakers handed their finances in June with a projected surplus of $472.8 million, most of which might have gone to the state’s wet day fund on the finish of the finances cycle in 2027. The wet day fund is a reserve account to assist the state climate main financial crises.

But by the point state economists provided their next quarterly revenue forecast in late August, that surplus had become a $373 million deficit.

Oregon expects to lose about $888 million in income over the subsequent two years, largely as a result of the state tax code robotically aligns with adjustments to federal tax coverage. That means new federal initiatives, like exempting extra time pay and suggestions from earnings taxes and permitting people and companies to instantly deduct 100% of the price of  “depreciating assets,” equivalent to actual property and gear, will apply to state taxes as nicely until lawmakers divorce the 2 tax codes.

Sen. Mark Meek, D-Gladstone and chair of the Senate Finance and Revenue Committee, mentioned lawmakers will focus on their choices after they return to Salem on the finish of the month for Legislative Days. That’s when legislative committees meet on the Capitol each few weeks exterior of scheduled legislative classes for informational hearings on numerous points.

The present $372 million deficit doesn’t embody different prices to implement federal coverage adjustments. An earlier evaluation Kotek’s workplace launched estimates that cuts to federal applications will price the state $15 billion over the subsequent decade.

“In the wake of failed leadership from the Republican-led federal government, we must step up to the plate. This is not what we had planned for, but it is what we must do,” Kotek wrote in her letter to company administrators.

---

Kotek’s letter:

September 16, 2025

Dear Agency Leaders,

Together, we created a 2025-2027 advisable finances poised to construct on progress in key areas.

From persevering with to enhance customer support to creating headway on entrenched challenges, now we have been organizing ourselves to do extra with constrained sources. The legislature handed budgets that may assist us keep the course on what’s working. This is a direct reflection of what your businesses ship to Oregonians day by day. Thank you to your management.

Fulfilling our cost to enhance the lives of Oregonians can’t be undermined or swayed in instances of shortage. In reality, that calling rings even louder. Budget challenges demand that we, as leaders, have the braveness to take our greatest laid plans and put them again on the drafting board as situations change – to sharpen our pencils, do extra with much less, and floor ourselves in what issues most. This second upon us, following months of chaos and uncertainty pushed by the Trump Administration’s financial insurance policies and Congress’ passage of H.R 1, which may have devasting penalties to the Oregon Health Plan and the Supplemental Nutrition Assistance Program (SNAP), requires all of us to dig deep and get artistic.

As you understand, the mixed influence of nationwide insurance policies mirrored within the September Revenue Forecast yields a fiscal setting ensuing within the 2025-27 Legislatively Adopted Budget (LAB) not being in steadiness with projected revenues for the biennium. The hole we should collectively overcome is $372.7 million General Fund {dollars}, which is roughly one % of the present LAB.

This estimated deficit doesn’t account for prices required to implement H.R. 1, which is prone to widen that chasm. For Oregon, the cuts to federal applications are projected to achieve $15 billion {dollars} over the subsequent decade. In the wake of failed management from the Republican-led federal authorities, we should step as much as the plate. This isn’t what we had deliberate for, however it’s what we
should do.

I’m asking you to depart no stone unturned to save lots of tax-payer {dollars}. This problem isn’t distinctive to Oregon, however how we reply can be. Our resilience, teamwork, and willpower have carried us via onerous instances earlier than. They will once more. We will persevere. This work should start now and proceed to happen as we reply to real-time financial indicators within the December and March income forecasts forward.

As a place to begin, I direct all state businesses to hold out the next cost-saving methods, efficient instantly and till additional discover:

• All businesses ought to gradual operational General and Lottery Fund spending: The LAB is probably going the ceiling for obtainable sources, and it’s prudent to state of affairs plan for future cuts later within the finances cycle. The longer we wait, the tougher reductions can be to implement. Examples of slowing operational progress embody holding positions vacant longer after turnover, lowering spending on companies and provides, and slowing implementation of recent or increasing applications.
• Oregon’s Chief Financial Officer (CFO) will decide discount targets for all businesses: These targets will bear in mind particular person company working prices, equivalent to service prices for twenty-four/7 operations.
• The state will scale back out-of-state journey prices: All non-essential out-of-state journey for trainings and conferences is suspended beginning at present.

Based on the latest income forecast and unknowns round implementing H.R. 1, businesses ought to plan for these price financial savings to be included of their 2025–27 finances changes. Please notice that these changes is not going to shut the projected hole. Agencies also needs to start
getting ready for added reductions within the 2026 legislative session.

CFO will comply with up with you on how greatest to satisfy the financial savings goal for working budgets in addition to discount choices for the 2026 legislative session based mostly on Oregon’s financial outlook.

I’ll proceed to replace you on the state of affairs and reply within the coming months as wanted.

Thank you to your steadfast service to Oregonians. It is your work that provides me confidence we will make smart reductions whereas sustaining progress.

Sincerely,

Governor Tina Kotek