Major Decisions Loom on Transportation, Medicaid, Housing and K-12 Schools
The 2025 Oregon Legislative Assembly convenes January 21 to consider a major transportation funding measure, approve a Medicaid budget and bolster K-12 school funding. Democrats may try to Trump-proof reproductive health access, environmental protection, election integrity and immigrant rights under Oregon law.
Democrats flipped a Senate seat in Bend, giving them a three-fifths supermajority. A House race in Woodburn is so tight it will require a recount, but if Democrat Lesly Munoz maintains her narrow lead, it would give House Democrats a supermajority, too. That supermajority could be delayed for the selection of a replacement for Rep. Lisa Reynolds, D- Beaverton, who was appointed to fill the remainder of Senator Elizabeth Steiner’s Senate term. Steiner resigned after her election as state treasurer.
Boosting housing production will continue to command legislative attention as the state produced less than half of Governor Kotek’s aggressive annual target of 36,000 new units. Kotek and lawmakers will have a chance to view response to recriminalizing small amounts of illicit drugs, which was approved during the 2024 short legislative session.
House Majority Leader Ben Bowman
There will be new faces in leadership roles. Senate Kate Lieber, D-Beaverton, will be Senate co-chair of the Joint Ways and Means Committee. Rep. Ben Bowman, D-Tigard, has been elected as House Majority leader. After Rep. Jeff Helfrich, R-Hood River, announced he will step down as House Republican Leader, the GOP caucus will need to choose a replacement. Returning Senate President Rob Wagner, D-Lake Oswego, will have the most seniority in leadership.
The legislative session serves as the opening round of the 2026 gubernatorial election. Kotek, elected in 2022, is expected to seek a second term. One of her 2022 general election opponents, Christine Drazan, R-Canby, regained her legislative seat and was chosen to lead House Republicans in the upcoming session.
Transportation Funding
Oregon Department of Transportation officials announced the agency faces a projected revenue shortfall of $354 million in the next biennium. Without additional funding, they said they could be forced to lay off 1,000 ODOT employees and reduce services. Also on the hook are major transportation projects approved by the 2017 legislature but not yet started or completed.
Legislators conducted a statewide listening tour earlier this year to hear testimony on how to address ODOT’s shortfall as well as a pitch to increase funding for public transportation, which has expanded service and gained ridership with state funding.
Going into the 2025 session, there isn’t a consensus on how to backfill ODOT’s revenue shortfall or whether to increase state funding for transit service.
Medicaid Budget
Medicaid services for low-income Oregonians, older adults, children and people with disabilities are funded jointly by federal and state governments. The Oregon Health Plan, which is Oregon’s Medicaid program, faces an estimated biennial funding shortage of up to $500 million. People of any age or immigration status can qualify for coverage.
Crafting a budget with increased funding involves raising taxes on healthcare providers including insurers, hospitals, nursing homes and managed health care plans. It also could be impacted by new federal immigration and healthcare policies under President Trump.
Following a practice instituted by former Governor John Kitzhaber, Medicaid budgets have been collaboratively negotiated with provider taxpayers to balance access and cost. New services have been introduced over time that enhance service and lower charity care by providers.
Legislators will consider a Medicaid budget as the GOP-controlled Congress eyes significant changes in the program such as imposing a work requirement and limiting Supplemental Nutrition Assistance Benefits (SNAP) to offset federal revenue losses by extending Trump’s 2017 tax cut measure.
K-12 School Funding
Large and small school districts are under pressure to raise student math and reading test scores with budgets that haven’t kept pace with inflation. Budgetary pressure intensified as federal funding provided during the Covid pandemic has ended and enrollments have declined.
School districts in Portland and Albany have experienced teacher strikes, and Salem-Keizer Public Schools nearly averted a strike. Other districts around the state are tied up in contentious labor negotiations, which have led to calls for rethinking how Oregon funds public schools.
Kotek has proposed tweaking how local tax revenue fluctuations are calculated in the State School Formula, which is estimated to send an additional $55 million to local school districts. She also called for a more accurate current service level adjustment for inflation that would raise state school funding by $515 million in the 2025-2027 biennium. Kotek will likely urge extension of her $9 million early literacy initiative approved in the 2023 session and continued support for summer learning programs to combat pandemic learning loss.
However, that gain will be more than offset by higher estimates of K-12 school and college employee contributions to the Public Employees Retirement System that total $670 million over the next biennium. The sharp increase results from post-pandemic hiring and recently underperforming investments in private equities, according to PERS Director Kevin Olineck.
If Trump successfully deep-sixes the U.S. Department of Education, funding streams for special education and Title I schools with a disproportionate share of students from low-income families could be reduced, delayed or eliminated.
Housing Production
With housing production faking far short of Kotek’s 36,000 unit annual goal, she hired a pair of housing construction veterans to lead the newly established Housing Accountability and Production Office. They will likely be the face of housing legislation this session.
Joel Madsen served 10 years as executive director of the Mid-Columbia Housing Authority and on Kotek’s Housing Production Advisory Council, which recommended changes to reduce barriers to building more houses. Tony Rocco worked more than 20 years as a structural program chief for the state’s Building Codes Division and as a laborer, home inspector and licensed contractor.
“I know firsthand how barriers to construction can affect development and I understand the importance of protecting consumers by ensuring the housing being built is safe, efficient and cost-effective,” Rocco said.
Trump-Proofing Policies
California Democratic Governor Gavin Newsom has embarked on an effort to create a firewall to protect state voter ID, climate laws, disaster aid, abortion protections and LGBTQ+ rights from new presidential executive orders or GOP-backed legislation. Kotek and Democratic leaders who control the Oregon legislature may follow Newsom’s lead.
Newsom asked the Biden administration to advance federal reimbursements for Covid relief spending and disaster aid before leaving office to provide a financial cushion in case Trump follows through on a campaign pledge to withhold aid to California. He’s also asking for quick action on waivers to phase out fossil fuel vehicles and funding for high-speed rail. Newsom’s request that has the most bearing on Oregon is for quick approval of pending waiver requests related to reproductive health, behavioral health and Medicaid funding.
Oregon officials did preventive work after Trump’s first election in 2016. Actions included codifying the right to an abortion in state statute, sidestepping Trump rules on air and water safeguards and limiting what information could be shared with federal immigration officials. Leaders in Oregon, California and Washington also formed a coalition to work together to protect reproductive rights. Oregon Democrats may pursue protecting access to a medical abortion using Mifepristone, which a GOP-controlled Congress may seek to restrict. Kotek has already ordered stockpiling the drug.
