With today’s release of Oregon Governor Tina Kotek’s 2025-2027 budget, the contours of big debates about transportation funding and priorities are coming into focus.
Kotek’s budget puts funding for the Oregon Department of Transportation at $7.3 billion over the next two years — that’s about $1.75 billion over what ODOT is asking for. That gap doesn’t mean ODOT gets more money. It means Kotek assumes the legislature will make up the difference in the 2025 session when they hammer out what’s expected to be a massive transportation funding package. That package is being viewed as a necessity, not just to build and maintain infrastructure, but to keep ODOT afloat.
ODOT says they face a severe financial crisis due to three main causes: declining gas tax revenue, high inflation that makes projects more expensive, and many strings attached to available funding.
The agency’s requested budget of $5.7 billion includes unprecedented layoffs and other cuts they say, “would be devastating to ODOT’s ability to maintain and operate Oregon’s transportation system safely and reliably.” To balance their budget, ODOT says they’d have to fire 1,000 employees — including 164 staffers from Region 1 alone. ODOT is dependent on the Governor and lawmakers to bail them out and the next eight months will reveal how political considerations mesh — or don’t — with state priorities.
With this challenging road ahead, members of the state’s Joint Committee on Transportation spent their summer break hosting 12 town halls and roundtable discussions in cities across Oregon. They heard a bevy of concerns and perspectives from over 1,100 Oregonians and are now using that feedback to inform in-depth discussions about what to fund — and how to fund it — in three months of meetings hosted by JCT members.
13 meetings have been held since mid-October. Three workgroups meet twice a month and are focused around three categories of interest. The workgroups are named: “Back-to-Basics Maintenance and Preservation”; “Public and Active Transit,” and “Finishing 2017 Priority Commitments.”
That last workgroup is grappling with how to fund the “unfinished business” of House Bill 2017, which are two mega-projects included in the previous transportation package and are billions of dollars short seven years later. ODOT and some lawmakers maintain that voters were “promised” the completion of expansions to I-5 through the Rose Quarter and I-205 through Clackamas County and Oregon City (including a new Abernethy Bridge). While some experts disagree about what was promised, the conventional wisdom in Salem is that getting those projects done in the 2025 package is essential to rebuilding trust in ODOT and the legislature.
I’m still working my way through the 13 meetings (they’re about 2-3 hours long each) and will be reporting out what I’ve learned from them in the days ahead.
As for the Governor’s budget, it doesn’t include any ideas for how to raise new transportation revenue. And the legislative workgroups haven’t made any official proposals yet either. But those are coming soon as conversations sharpen in the coming month.
Some of the ideas I’ve heard tossed around are: indexing the gas tax to inflation, expand the payroll tax to fund public transit, expand the current “vehicle privilege tax” (the one half of one percent tax dealers pay on sale of new cars), a bicycle tire tax (yes, seriously), EV charging taxes, congestion pricing, fees tacked onto home deliveries, and many more.
As ODOT triages its budget and difficult votes loom over lawmakers, we are entering a very interesting phase of debates about transportation funding and priorities that will shape our state for years to come. Strap in and stay tuned.
Thanks for reading.
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A few questions from my time in discussing the annual PBOT cuts when I was on the TBAC, that might help you sift through all the crap:
During severe cuts, most transportation departments will try to do less maintenance projects and switch to long-delayed but already-funded capital projects. Often during deep cuts, PBOT had all kinds of tricks to try to get more funding from City Council, such as offering to cut power to city street lights and signals in a rolling blackout (never actually done, but apparently technically possible), but the usual trick was to inflate the number of workers it has by including “paper positions”, those they haven’t hired yet for future positions, as well as those who they know are leaving for various reasons (retirement, taking on a new position or role, temporary seasonal workers, limited-term employees, interns). When push came to shove in extreme cases, some of the maintenance workers could be “retrained” to do the same job under a different job title for a capital project.
Great thoughts – thanks, David. We really need more visibility into these aspects of ODOT’s budget. The fact that they can claim the dire necessity of widened freeways when they can’t even fill the potholes on Barbur fills me with rage.
I think their claim would be the legislature specifically instructed them to build the Rose Quarter project, but the potholes on Barbur fall under their regular (and oft delayed) maintenance, which is only funded to the extent the legislature gives them money.
In other words, the problem lies with the legislature rather than ODOT.
Hello Jonathan, thanks for your reporting. I am a bit confused: did the governor propose a $7.3 billion budget, $1.7 billion above what ODOT had asked ($5.7 billion)? It seems like that would be good news for ODOT, or?
Hi Stephan. Sorry this wasn’t more clear. Yes that is what happened. But it’s not necessarily good news for ODOT because the budget isn’t finalized and the Governor’s budget is only assuming that the legislature will come up with enough new revenue to fill that $1.7 billion gap.
Much of this is political. ODOT wants their budget to raise alarms in order to create political urgency for more funding. So ODOT made their budget reflect 900 or so fewer positions and a threat that if more money isn’t raised by the legislature this coming session, all those folks will be out of a job. And for Gov Kotek, she could not propose a budget that assumed 900 jobs would be lost at ODOT, so she added phantom funding to her budget and put the onus to raise it back on herself and legislators. Hope that makes sense.
Ironically, the $1.7B amount is also the most recent 2026 kicker estimate. So, it may not be hard for the legislature to find the revenue, there just won’t be a kicker in 2026 and they’ll probably go after new taxes as well because, well, Oregon.
From my brother:
HB2017 not only included freeway mega projects, it also included tolling to pay for the projects and manage traffic. Keeping the freeway projects while slashing toll schemes, and plugging budget holes with general fund revenue won’t restore my trust in the government.
Worse yet is how they want to plug project budget gaps with revenue created through bonding which creates debt. ODOT current “debt service” (paying back loans) line item is $648 million over two years. For context, the entire Public Transportation Division (which includes bikes) is $513 million.
The process of borrowing funds (municipal bonds) now to pay for current and future projects is typically referred to as “deficit financing”, which has been encouraged by the Feds since at least the 1950s – some people blame Robert Moses, others Hausmann from the 1850s – it’s a rare jurisdiction that doesn’t do it. It’s not just highway departments that do it, it’s also common for water, sewer, dams, police armored cars, fire engines, housing projects, and oil pipelines. The City of Portland has a huge debt. And it’s not just used to pay for projects either, but also for over-generous pension plans, PERS, and perks.
“ODOT says they face a severe financial crisis due to three main causes: declining gas tax revenue, high inflation that makes projects more expensive, and many strings attached to available funding.”
I don’t find that very compelling.
The State Highway Fund revenues continue on an upward trend (see Table 7). Maybe not quickly enough to keep up with inflation, but they’re going up.
The Fund brought in $3,287 million in 21-23 and is projected to bring in $3,375 in 23-25 and $3,455 million in 25-27, etc. Gas tax revenues are projected to increase through 2025, and CCD and DMV income is expected to continue to increase through 2033, meaning their overall revenue is projected to increase continually.
As their revenues aren’t actually decreasing, one could say their crisis is due to bad financial management — examples include continually massively underprojecting the costs of their highway megaprojects by hundreds of millions and billions of dollars (in periods of low inflation and high inflation), spending tens of millions of dollars on PR and lobbying for highway expansions, and so forth.
Great point about PR spending. I have the impression that about half of the Rose Quarter budget is to convince the Black community in North Portland that the project a good idea and will somehow undo the harm done in the 1960s and 70s.
And if convincing won’t work, bribing may.
Construction cost index is way up, even when compared to CPI. While it is true that gas tax revenues have increases a small amount over that period, the numbers are effectively flat when compared with the massive increase in construction costs.
https://www.mortenson.com/cost-index
And given the talks about deportations and tariffs, it seems that our construction costs will only balloon further. This is going to be a major issue for any capital project in the future.
It will be interesting to see whether the 700 million the Feds give Oregon for highways goes up or down the next few years. If the head of Cemex is hired as Tranportation secretary I bet it goes up.
We likely can kiss off any funding for mass and alternative transit from DC.
Do you mean “kiss goodbye”?
I read on one of JM’s Monday Roundups from a few months ago a report that not even 20% of the highway funding approved by Congress during the Biden administration even got out of the door – transferred from DC to states and cities it was intended for – because of project delays, lack of matching funds, not enough local capacity to build stuff – reasons for delays we are all familiar with. And this wasn’t unique to Biden, all previous presidents (including Trump version 1) have had these same issues.
If I was Musk and trying to find $2 Trillion to cut, I’d go after all these unspent highway projects, at least as far as Dubya in 2000 – you don’t build it now, then Uncle Sam’s taking back his money – and end these highway boondoggles ASAP.
… and spend it on more Hyperloops between parking garages. Most of the incoming admin is focused on looting, not cost-savings. Any ‘savings’ found will go straight ino pockets, not to more-useful projects or – heaven forfend – the taxpayers.
My assumption is that states like Texas will receive the horn of plenty for 30-lane freeway projects in Houston, and states like Oregon will just get the horn.
Trump and Musk are on the populist platform, and most hate traffic and believe we can build our way out of it. I have coworkers who believe that we should have been “intelligent” like in Houston and built 10 lane freeways everywhere despite traffic being better here. Musk has a direct conflict of interest in funding highway boondoggles, as the extra road space is essential for his dream of autonomous vehicles. It’ll be the cutting of social welfare and the increase of highway boondoggles IMO. If anything, we are going to see the restrictions on the unspent money removed and freed up for highway boondoggles.
good explainer on that: https://www.youtube.com/watch?v=040ejWnFkj0
Here’s my take on the new ideas to fund transportation:
The bike tire tax is really really stupid. I buy my tires online, from international retailers (since my bike is unusual and has rare tires). How will the state collect those taxes, exactly? And yes – it will cost the state more to collect these taxes than they will net, but I say let ’em do it so we can continue to defuse the ridiculous argument that “cyclists don’t pay their fair share.” I’ll also pay a per-mile cycling tax as soon as the state does the same for motor vehicles and it’s indexed to weight of the vehicle/bike.
https://bikeportland.org/2017/07/13/bike-tax-a-big-moment-for-cycling-movement-says-oregon-congressman-blumenauer-234586
Sounds similar to what Blumenauer was saying back in 2017.
If the bike tax didn’t change that sentiment, why would a bike tire tax?