Oregon’s 35-day legislative session wrapped up on March 6, with lawmakers managing to plug a nearly $300 million hole in the Oregon Department of Transportation’s budget — at least for now.
The plan addresses a $297 million gap in ODOT’s maintenance and operations budget for the 2025–27 biennium, which supports highway crews, safety and storm response, and DMV services. The shortfall traces back to last fall, when a stopgap funding package meant to keep ODOT solvent was effectively put on hold after a citizen-led referendum effort referred its tax and fee hikes to the ballot. Until voters weigh in this May, the new revenue remains frozen.
To bridge the gap, rather than raising new revenue, lawmakers filled much of the shortfall by redirecting money already set aside for other transportation programs into the State Highway Fund. The changes were authorized in Senate Bill 1601, which temporarily shifts $218 million in funds among several transportation accounts. Redirected funds came from programs including Safe Routes to School, bridge and seismic work, paving, and community EV charging rebates.
On top of those redirections, the legislatively adopted budget also reduces ODOT’s authorized spending levels by $78.2 million in State Highway Fund resources across operations and maintenance functions, to be met by holding more than 130 vacancies and reducing spending on services and supplies.
For Oregon’s cities specifically, the session delivered some wins. Cities and counties stand to see roughly a 25–30% increase in their distribution from the State Highway Fund if voters approve the May ballot measure. Additionally, other city-focused legislation passed during the session eased grant matching requirements for smaller municipalities and expanded flexibility in how local lodging tax revenues can be used.
The harder work, however, lies ahead. Oregon’s State Highway Fund faces two compounding pressures: flattening gas tax revenue as drivers shift to more fuel-efficient and electric vehicles, and persistent inflation that makes maintaining the transportation system increasingly expensive. Republicans have signaled they want to focus on cost controls before any new taxes, while Democrats argue a major bipartisan transportation package will be necessary in 2027 to stabilize the system long-term. Without further legislative action, ODOT warns that the current fix provides no long-term structural stability, and the agency could face renewed budget cuts and service reductions in the 2027–29 biennium.
