2026 Transportation Funding Update

The Oregon Department of Transportation will avoid layoffs and deep service cuts following the passage of legislation that addresses a $297 million budget shortfall for the agency's maintenance and operations work.

The action prevents layoffs and widespread service reductions that would otherwise have disrupted daily travel and essential services. Highway maintenance crews will remain on the job, safety and storm response operations will continue, and DMV offices will remain open to serve customers. 

The legislation redirects $218 million from existing state transportation funds to support operations and maintenance. As a result, some programs will see impacts, including delayed or reduced grant funding for programs such as Safe Routes to School and Connect Oregon.

“This legislative action provides important short-term stability for Oregon's transportation system," said Interim Director Lisa Sumption. “It allows us to avoid deep reductions while continuing to focus on providing the services Oregonians rely on. At the same time, redirecting existing funds from programs that serve important functions is not a long-term solution. Oregon's transportation system needs a long-term fix."

In addition to the fund redirections, the legislatively adopted budget reduces ODOT's authorized spending levels by nearly $80 million. These reductions build on steps ODOT has already taken in recent years to control costs, including leaving positions unfilled. Since 2019, the agency has reduced spending by more than $500 million, and the current budget already reflects more than $200 million in reductions.

ODOT currently has about 700 vacant positions statewide, representing nearly 15% of the agency's workforce. More than 350 of those vacancies resulted from employees leaving the agency during ongoing financial uncertainty since July 2025.

Under the newly adopted budget, the agency will continue to leave more than 130 positions unfilled. The department expects to begin hiring for critical vacancies immediately, which will help restore staffing in key areas and strengthen frontline teams across the state.

While this legislative action stabilizes operations for the remainder of the current budget cycle, it does not resolve the underlying funding challenges facing Oregon's State Highway Fund. That fund supports not only ODOT, but cities and counties across the state. The current funding model is not keeping pace with rising costs and growing statewide needs. Lawmakers have stated they plan to revisit transportation funding during the 2027 legislative session.

Budget Reductions
The amendment to HB 5204 reduces ODOT's legislatively approved budget by $78.2 million in State Highway Fund resources across operations and maintenance functions. This builds on more than $150 million in reduced spending this budget cycle. These reductions will be met by holding more than 130 vacancies and reducing spending on services and supplies.

Redirection of Funds
The amendment to SB 1601 temporarily redirects state funds from a number of programs within ODOT's budget to provide $218 million in additional funding for operations and maintenance for the 2025-2027 budget cycle.

For grant programs, only funds that haven't been identified for specific projects are impacted. If a project has received approval for grant funds, those funds are protected and not impacted by redirection.

 
 
HB 2017 Named Projects: $91 million
House Bill 2017 was passed in 2017 to invest in Oregon's transportation system. Projects across the state were identified in the bill.

• Redirects $6 million from a Highway 58 passing lane project that proved infeasible.
• Redirects $85 million in state funds from projects that can be replaced by federal funds from the Federal Highway Administration's annual redistribution of remaining funds.
  

 
HB 2017 Fix-It Funding: $35 million
House Bill 2017 was passed in 2017 to invest in Oregon's transportation system. “Fix-it" funding is designated for projects that preserve bridges, pavement, and culverts.

• Redirects $35 million from bridge, seismic, paving, and other funds.
• ODOT will seek to replace these funds with unallocated HB 2017 funds rather than delay these projects.

 
Safe Routes to School: $17 million
Provides grants for communities to build sidewalks, safe crossings, and bikeways near K-12 schools to allow students to walk and roll to school safely. Funded at $15 million annually from the State Highway Fund.

• Redirects a one-time amount of $17 million.
• The next round of grants will be delayed by a year, and the funding amount will be reduced.
• Education grants and technical assistance are federally funded and will continue this year.
• There will be no impacts to projects that have already been selected.

 
Connect Oregon: $42 million
Funds aviation, rail, and marine projects via competitive grants and matching funds for federal grant programs. Funded by the vehicle privilege tax paid on the sale of new vehicles in Oregon.

• Redirects $42 million balances and future revenue not promised to projects.
• The current grant solicitation will be reduced in size.
• There will be no impacts to projects that have already been selected.

 
Oregon Community Paths: $8 million
Provides grants to build paved paths for bicyclists and pedestrians that are separated from car traffic. Funded in part by vehicle privilege tax paid by auto dealers when selling new vehicles in Oregon.  

• Redirects $8 million, eliminating existing balances not promised to projects, of the vehicle dealer privilege tax and revenue.
• This will reduce funding for the Oregon Community Paths program, but funding remains from federal dollars and the bike excise tax.
• There will be no impacts to projects that have already been selected.

 
Transportation Operating Fund: $20 million
Fund supports ODOT-authorized functions that can't constitutionally be paid for by the State Highway Fund. Funded by gas tax used in off-road equipment such as lawnmowers.

• Redirects $8 million from Community Charging Rebates Program. This will eliminate state funding for rebates to construct charging stations for this budget cycle. Federal grant funds to support this program still exist and will fund future cycles, in addition to NEVI (National Electric Vehicle Infrastructure) dollars that support EV fast-charging station construction statewide. There will be no impacts to projects that have already been selected.
• Redirects $5 million from Innovative Mobility Program. This will reduce grants to improve access to public and active transportation for historically underserved communities. Limited state and federal funds are still available. There will be no impacts to projects that have already been selected.
• Redirects $3 million from passenger rail. This will have no impact on Amtrak Cascades service due to budget adjustments and other available funds.
• Redirects $2 million from passenger rail grant match. These funds were no longer needed because the match for federal grants was shifted to the new Connect Oregon match program.
• Redirects $2 million from reserves. This will limit ODOT's ability to cover unexpected costs for non-highway programs.

 
Student Driver Training Fund: $5 million

• Enhances transportation safety through the education of teen drivers before they get their license. Sweeping a portion of the balance will reduce funding available for reimbursements to student driver training providers in the coming years.