Oregon Braces for $15 Billion Loss as Federal Tax Bill Slashes Health Care and Food Assistance

The implementation of the H.R.1 – One Big Beautiful Bill Act – this week prompted Oregon Governor Tina Kotek to issue an urgent appeal to heads of departments to immediately introduce cost-saving strategies.

The Bill Will Have a Devastating Effect on the State’s Health and Nutrition Programs

Kotek warns that the passage of H.R.1 will have devastating effects on the Oregon Health Plan and the Supplemental Nutrition Assistance Program (SNAP).

The governor says in a letter that immediate action is required, ‘following months of chaos and uncertainty driven by the Trump Administration’s economic policies and the passage of H.R. 1.’

Oregon will have to overcome a collective $372.7 million General Fund shortfall, or 1% of the current Legislatively Adopted Budget (LAB).

The governor says cuts to federal programs in Oregon are projected to reach $15 billion over the next decade.

Calling for immediate cost-saving strategies, Kotek has asked state agencies to slow operational General and Lottery Fund spending by holding positions vacant longer after turnover, reducing spending on services and supplies, and slowing implementation of new or expanding programs.

She has also called for the immediate suspension of all non-essential out-of-state travel for training and conferences.

Stopping Taxation on Overtime and Tips Will Cost the State Millions of Dollars

The largest revenue loss is the cessation of overtime taxation, which is expected to reduce state revenue by $221 million over the next two years. Furthermore, the ‘no tax on tips’ policy will further reduce state revenue by $77.7 million over the same period.

A ‘rolling reconnect’ tax policy has been in operation in Oregon since 1997, automatically adjusting the state’s tax code whenever changes are made to the federal tax code by Congress. While the system simplifies tax filings for Oregonians, it also means that state revenues can instantly decrease.

To prevent new federal tax cuts from eroding state revenue in the future, lawmakers should adopt a ‘static connection’ policy to lock the Oregon tax code to federal rules on a specific date, says Daniel Hauser, the deputy director of the Center for Public Policy. This system would enable Oregon to keep the same tax codes in effect before the passage of a federal bill.

Hauser’s organization is calling on lawmakers to take immediate action and to call another special legislative session before the end of 2025, warning that delaying the issue until the 2026 short session will result in millions of dollars being lost.

The matter will be discussed by the Senate Committee on Finance and Revenue between September 29 and October 1.