Democratic House Speaker and Republican House Minority Leader share priorities for Oregon’s short legislative session

On Monday, Oregon state lawmakers will convene in Salem to start the 2026 short legislative session. They’ll have just 35 days to tackle their legislative priorities, including the future of transportation funding, housing and rebalancing the state budget,

which is facing a nearly $900 million shortfall due to an estimated loss in state revenue from tax changes under the One Big Beautiful Bill Act. Both Republican and Democratic lawmakers have also seized on growing concerns around affordability and the cost of living, although with different views on what’s to blame. Also expected on the agenda is legislation Gov. Tina Kotek is sponsoring to accelerate job growth and ease business permitting as part of a multi-pronged effort that Kotek recently unveiled and appointed former state Senate Republican leader Tim Knopp to lead.

House Minority Leader Lucetta Elmer, R-McMinnville, and House Speaker Julie Fahey, D-Eugene, join us to share their perspectives and priorities for the legislative session.

Editor’s Note: This description has been updated to accurately reflect the source of the nearly $900 million state budget shortfall. We also mischaracterized the source of this shortfall in the on-air conversation. OPB regrets this error.

Note: The following transcript was transcribed digitally and validated for accuracy, readability and formatting by an OPB volunteer.

Dave Miller: This is Think Out Loud on OPB. I’m Dave Miller. Oregon lawmakers will start the 2026 legislative session on Monday. Since this is an even numbered year, it’s a short session, meaning they’ll have just 35 days to tackle their legislative priorities, including the future of transportation funding, affordability, improving Oregon’s business climate, and responding to the militarized federal approach to immigration enforcement.

But the biggest order of business is the budget, which is facing a nearly $900 million shortfall due to federal spending cuts. In a few minutes we’ll hear from the Republican lawmaker Lucetta Elmer, who is the House minority leader. But first we’ll hear from Julie Fahey. She’s a Democratic state representative from West Eugene and Veneta and the Speaker of the House. I talked to her yesterday and started by asking her what kinds of cuts she’s considering to close that shortfall.

Julie Fahey: Well, just to set the stage, Dave, thanks for having me. Last year in the 2025 legislative session, we knew that the federal government was likely going to cut funding to states, so we budgeted very conservatively to protect core funding for services like schools and public safety. So we left a big surplus at the end of the session. And as you mentioned, once H.R. 1, the big ugly bill passed, there was a substantial reduction in the funding that we were receiving because of those tax breaks that were in H.R. 1.

In addition, there’s going to be a federal funding cut, almost $15 billion in federal funding over the next six years for programs like Medicaid and SNAP. And then the final impact that that bill had is that it puts administrative costs on states that we never had to bear before. So it was an unfunded mandate for the administration of things like Medicaid and SNAP. So all of that created a substantial budget challenge for us headed into the short session.

Last fall we asked agencies to look at what are the reductions that you might be able to put forward, to make sure that our government is functioning efficiently and effectively. We are going to do everything we can to protect core services throughout this process of balancing our budget. That means things like schools and rural healthcare and wildfire prevention and fighting. So what we’re looking at [is] a balanced approach to balancing the budget that would include some targeted reductions, make sure that our agencies are operating efficiently, some disconnecting from some of those big tax breaks that were given away in H.R. 1, and then perhaps a targeted use of our reserve funds as well, our rainy day funds.

Miller: All right, there are a lot of things there and one of them that in the middle is disconnecting from some of those federal changes. Can you explain what that means and no longer, I guess, automatically having Oregon’s income tax rates and rules being tied to federal rules?

Fahey: Sure, so for your listeners, Oregon is one of a handful of states that automatically connects our federal tax code or our state tax code to the federal tax code. So when Republicans in Congress passed the big ugly bill, there were a substantial amount of tax giveaways, tax breaks in that bill, primarily to big corporations and wealthy Americans. And so those tax breaks automatically flowed through to Oregon’s tax codes.

Congress doesn’t need to balance their budget. The federal government doesn’t have a balanced budget requirement, so they added trillions of dollars to our deficit with that bill. In the state of Oregon, we have to balance our budget. So with those big tax breaks flowing through to our tax code, that put us in a deficit right now, we have to correct that. So what we’ve been doing since that bill passed is looking through those tax breaks and saying, are there any of these that actually benefit working people in Oregon, things like no tax on tips? We might want to keep those to make sure that Oregonians can feel the benefit of that.

And then, are any of those business tax breaks beneficial for our economy? Do they grow jobs? Do they encourage investment here in our state? And if there are any of those that don’t actually benefit Oregon, they don’t grow our economy, they don’t encourage investment or jobs, then we want to disconnect and say you can still get that federal tax break, but we’re not going to give that tax break here in Oregon.

Miller: This is a very short session. It’s 35 days, and we’re talking now just a couple of days before it starts. Do you and the budget writers already have a pretty good sense for the kinds of cuts that you’re gonna end up supporting and the kinds of tax changes that you’re gonna push for, or is it still up in the air?

Fahey: We have been working for many months on this issue, during the interim between the sessions. So our ways and means folks, our budget writers, have been prioritizing those potential cuts for the last few months, and we do have a good sense of where we feel like we can cut and still protect core services, the things that Oregonians rely on. On the revenue side, we’re continuing to have conversations.

There’ll be a rollout of a potential package next week, and I’m confident that what we are putting forward will both help Oregonians keep more money in their pockets, working and moderate-income Oregonians, and we ensure that our tax policy actually benefits job creation and investment here in Oregon and not in other states.

Miller: How do you plan to address affordability and the cost of living in the context of cuts to the safety net?

Fahey: It’s a really great question. Vote affordability and the cost of living is still very top of mind for Oregonians and for voters, and so we have to stay focused amid all of the chaos that the federal government is throwing at us. We have to stay focused on doing the work that voters sent us here to do. There are a handful of things that we are looking at in the short session. We had a big agenda last year around housing affordability and health care affordability, particularly utilities. We passed a package of bills about the affordability of utility bills.

This session we are focused on, I am supporting an increase in what’s called the Earned Income Tax Credit, which is a tax credit for low- and moderate-income families here in Oregon to help them put more money back in their pockets. We’re also looking at a slate of consumer protection bills, including a really important bill addressing predatory lending practices here in Oregon. There’s a loophole that we would like to close where predatory lenders are exploiting, with very high interest rates. Then we’re going to continue our work on housing affordability, building more housing here in Oregon.

Miller: Will your caucus be putting forward any bills specifically in response to the Trump administration’s militarized approach to immigration enforcement?

Fahey: Absolutely we will. This short session is happening against a very challenging backdrop, given all of the decisions from the federal government. We’ve talked a lot about the big ugly bill, but what we haven’t talked about is the blatant abuses of the Constitution and rule of law that we are seeing, including brutal tactics by ICE, detaining a family here in Oregon who was just trying to seek medical care for their child. Shooting Americans dead in the street in Minnesota, that is creating real fear and uncertainty, and it means that we have an entire other part of our agenda that is needing to deal with all of these challenges responsibly.

Our federal response package that we’ve put forward includes a number of bills related to immigration enforcement, things like empowering Oregonians to sue federal agents for violating their constitutional rights. It also includes, very importantly, we are seeing the weaponization of private data by the federal government in ways that we have never seen before. We have a number of bills that are related to strengthening data privacy so that sensitive information can be kept private and not weaponized by the federal government or sold by data brokers to the federal government. So that’s a critical piece of our package as well.

Miller: I want to turn to transportation funding. As many listeners probably remember, your caucus was unable to pass a transportation package during the regular 2025 session. And then the governor eventually called you all back for a special session where you did pass a slimmed down package. It increased the gas tax along with various fees and was expected to raise more than $10 billion over 10 years. Then opponents of the tax increases gathered a ton of signatures very quickly to refer the revenue raising portions of the package to voters, so those tax increases are now on hold. What lessons did you take personally, as a lawmaker, from this whole saga?

Fahey: I think as you tell the timeline of that story very well, I think what I am focused on is how can we be successful moving forward? We know that the package that we passed last session, in the special session, was always going to be a temporary fix, a short-term fix focused only on the basic operations and maintenance. There are other big questions about how do we modernize our transportation system and how do we move forward and fund some of the major projects in the state that don’t have a funding source right now. So what we’re focused on in the short term is how do we set a table for this year that can come in 2027 and really have a productive conversation?

I think bringing in the stakeholders earlier is a really important piece of that, but I would also just say that as much in terms of the lessons that I have learned, I have been very clear, as the Speaker of the House, that my job is to govern for the whole state. It’s not to lead the Democratic Party. That’s for the Democratic leader. My job is to govern for the whole state, and that means that to the extent that the Republicans in the legislature want to have a seat at the governing table, there is a seat available for them. That was true for the last couple of years in the transportation conversation, and it continues to be true. And so what I hope is that the Republican leaders will join us at the table and really participate in what could a bipartisan solution to this problem look like.

Miller: Let’s turn to some other issues. Last month, as part of her efforts to boost business friendliness or business success in Oregon, Governor Tina Kotek said that she’d pushed a bill in the upcoming legislative session that would fast track major development projects. What can you tell us about her proposal?

Fahey: Oregon has had the benefit for many years of enjoying fairly robust economic growth and a very low unemployment rate. So that has really allowed the legislature and state government to focus on some other challenges that we face as a state: housing costs, homelessness, behavioral health care. But our economic growth is slowing in the state of Oregon. Our unemployment rate is creeping up and so the legislature and Governor Kotek are pivoting to have a much more intentional focus on long-term economic growth, long-term job creation here in this state.

The governor has a proposal this session that would do a number of things. The fast tracking of the permitting is one important piece of that. It’s something that we’ve heard from the business community, that it takes too long to get through some of these government processes. And if there are things that we can do that both keep the protections in place that the permits were intended to provide and also speed things up for business so they have more certainty, I think that’s really important.

One of the other key pieces is about getting what’s called industrial land readiness. For example, in my part of the world in Eugene, we do have industrial land within the urban growth boundary that is zoned for industrial use, but it’s not served by water or wastewater or other important infrastructure. So last session we allocated some funding for this topic of making sure our land is moving ready for businesses that may want to invest, and the governor’s bill proposes additional investments on that front.

Miller: Julie Fahey, thanks very much.

Fahey: Thank you very much, Dave. Thanks for having me.

Miller: Julie Fahey, a Democrat from Lane County, is the Speaker of the Oregon House. We talked yesterday afternoon. This morning, I sat down with Lucetta Elmer. She’s a Republican state representative from McMinnville and the House minority leader. I started by asking her what her caucus’s priorities are for the session that starts on Monday.

Lucetta Elmer: As the Republicans, looking at the short session, understand it’s 35 days. That is just not a lot of time at all. I think looking at the purpose of short session, historically speaking, it’s been a time where we can fix, tweak, do some minor adjustments to things that just needed it from the long session.

Miller: That’s historically been the case. But there’s always policy bills that get introduced and then questions about should we even be talking about this.

Elmer: Exactly. So we’re pretty authentic to what we believe is the true intent of short session. And we also only get two bills to bring forward, each representative. So I really suggested to my caucus as they were thinking about which priorities to bring forward to remember that the purpose of the short session and to understand that we’re in a budget deficit, so bringing forward something that costs a lot of money isn’t probably going to make it across the line.

Miller: So let’s turn to that. Because of the One Big Beautiful Bill that Republicans in DC passed, Oregon is facing a shortfall of a little bit under $900 million for the current biennium. How do you think the state should deal with that?

Elmer: Yeah, that is a great question and obviously top of mind discussion that’s happening in real time. I think that first of all, we need to understand that those funds, while they won’t be part of the government budget, they will be part of the overall money that’s flowing through Oregon. Those are funds that will just be able to stay in the taxpayers’ pockets. And I think that one scenario that we could look at, if we want to try to see a silver lining, is the governor’s talked about her economic prosperity council and really bolstering up Oregon’s economy. This, in my view, is a great way to do that. Now we have all of those dollars to the tune of, I think it comes out to a little over $3,000 per taxpayer that they’re getting to keep and invest back in our economy.

Miller: Just to be clear, it’s not a one to one, I mean, some of that money is going to Homeland Security, a lot of it. It’s not like all of those hundreds of millions of dollars come back to Oregon or U.S. taxpayers. Some of that is just simply being spent.

Elmer: My understanding is that savings would come back to Oregon. The dollars are still here. They’re just not with the government. They’re with the taxpayers.

Miller: All of that, I mean, no, we’re not all of that money, but I don’t want to get held up on that.

Elmer: I mean, one way or another, those are tax dollars, right? So I mean the tax dollars are coming from the taxpayers.

Miller: Yes, and some of it is being spent on new things, on a huge buildup of ICE and Homeland Security and Border Patrol.

Elmer: Correct.

Miller: That taxpayer money.

Elmer: Correct, right. What I’m saying is that the taxpayer dollars can stay with the taxpayer with those, or it can go towards all of those government funded things. So the money is still here now. Maybe some of that does go back to the feds. Is that what you’re saying?

Miller: Exactly. Being spent.

Elmer: Right, being spent. So I’m saying it would stay with the taxpayer instead of going to a government project.

Miller: OK, let’s not get held up on this.

Elmer: Sure.

Miller: For the money that was going to go towards healthcare for kids or for families, people who don’t have that much money or food assistance, we’re talking about $900 million that was gonna go specifically for those things. How do you think the state should make up that shortfall?

Elmer: That is a good question. And I definitely have understanding and empathy and want to make sure that the least of those are helped and that no one wants to have a scenario where children are facing food insecurity. Absolutely not. One of my passions is children. I’ve sat on the early childhood committee and privately have invested a lot of time and energy into children and all of their issues. So definitely empathetic towards this, but I do think there are a few things to point out. Oregon is ⅓ dependent on those federal dollars for our budget. That’s a lot. That is something that we as a state within our budget talks need to address. We’ve put ourselves in such a vulnerable position by having that much dependency on the federal government.

I think some of the requirements coming back to us when we’re looking at this saying, OK, we’re not wanting to take away from our most vulnerable, from our youngest and our oldest, and people that are well below the poverty line, but people that are able bodied, people that can work, there’s a requirement, halftime or volunteer. Let’s hit some benchmarks, because I really believe that’s the philosophical shift we need to have if we want to see a future where Oregonians are prosperous, and we’re not growing how many people have to be on assistance. I mean, the goal should be to help, definitely help people that need it to get them up and out of that low valley, right? So I want to make sure that while we’re helping, we’re also having other programs that are looking towards the future on how sustainable is this? Are we helping or are we growing the number of people that need that help?

Miller: I’m curious about transportation funding. What lessons did you take from the whole transportation saga last year, culminating in the very fast signature gathering that was successful to refer the new taxes to the ballot?

Elmer: What lessons did I learn?

Miller: Yeah.

Elmer: Lessons in patience. It was a long session, right? We were there six months. We spent the first half of our year in Salem, and the big topic was transportation. I think maybe it came a little late, but the action part of the conversation, we weren’t able to pass the package, as you know, during that long session, and there was a lot of friction, and not just Republican versus Democrat, within the parties. So we were called back into that special session. And at that point, Republicans asked, “Hey, when are we going to meet to talk about what this looks like?” And we were very clearly told, “We don’t need you at the table.”

That was hard because I do, I’m a firm believer that the minority voice is just as important and needs to be represented for our government to work. So we were brought into a special session on a weekend of a holiday, and it was drug out for quite some time and the bill, quite frankly, was rammed down our throats. I think that is what evoked Oregon to say, “Hold up. This is enough.” I mean, so many people came to the Capitol to testify, and it didn’t matter. They knew where they were going. They had the votes. They did it. So then you see this unprecedented event that happened, you know, 250,000 signatures collected in less than 35 days.

Miller: More than were needed.

Elmer: Right.

Miller: As a kind of show of force, it seemed.

Elmer: Yeah, we didn’t expect that. We knew we would gather the signatures. We had no idea we would gather four times as many as needed. So I think Oregon is crying out to say, “Listen, we want our voice here. We want to be heard.”

Miller: So Democrats have supermajorities that let them pass tax increases without your caucus’s votes or support.

Elmer: Correct.

Miller: But the last two months maybe suggests that they may not have supermajority support among the electorate for those increases, that in fact voters may well say no to them in May if that’s when it turns out the vote is going to be. Do you think that’s going to mean, have you seen a change in your Democratic colleagues as they’ve been talking to you about transportation funding going forward? I ask this because they said, “Hey, we welcome Republican input. We want to work with them. We want this to be a bipartisan bill.” Obviously, there’s major disagreement about whether or not that happened to the extent that you wish it had in the last session, but I’m wondering if you sense a change in Democrats that you’ve talked to, maybe privately or quietly, because of this referendum.

Elmer: Yeah. We hope. We’re hopeful, and I think it probably stems from the fact that again, grassroots Oregonians, everyday voters, are talking to their legislators, and so Republican and Democrat alike. So we have Democrat legislators that are hearing in droves from their constituents saying, “We don’t want this,” and I’m happy that there are some that are listening. We, the Republicans, were getting flooded with voters from the metro area because last session, their legislators weren’t listening. So I’m happy to hear that they are, and I think that is probably why we’re seeing some of the Democrats say, “We’re not sure that this is the best move.”

Miller: Although having roads and bridges that are functional and not crumbling, that’s not a partisan issue. How you pay for it gets a lot trickier. What are the contours of a funding package that your caucus would support and that would not lead you to refer a new package back to voters?

Elmer: Well, I will say that fundamental sentence you said at the beginning, one would think that’s truth, but it’s not for everyone in that building.

Miller: You mean that having roads and bridges not crumble is not partisan?

Elmer: Well…

Miller: Who doesn’t support that?

Elmer: If we’re going to say that, then that means that we put our money where our mouth is, right? And that that would be the priority. We haven’t been able to agree on what the priority is. We keep seeing dollars being sucked up for bike paths and EV charging stations, and I’m not saying those aren’t important, but if we have to just say we only have this much money and we need to dial in on the seismic probability of our roads and our bridges aren’t crumbling, like we’re still sometimes having those conversations.

That is frustrating because I do believe that we should be able to say, yes, we all agree 100% unanimously we don’t want to see our roads and bridges crumbling. What was the next part of your question?

Miller: The contours of a funding package that your caucus would either support or not refer to voters, even if you don’t love it.

Elmer: Right. That is a difficult question because if you look at how much Oregon is taxed, we’re one of the highest taxed states in the nation. So to say that we don’t have money isn’t accurate. The priorities may line up different. But for this question you’re asking, what we’ve been presented with is only looking at the ODOT budget. And I have to wonder, if we were able to look at the whole state budget, could we reprioritize some things to where we didn’t have to make any cuts in ODOT?

Miller: Can you answer that question? What would you take money away from, whether it’s from the Department of Human Services or Corrections or Education, the really big places where the money is?

Elmer: I think I would look at human services. That takes up 50% of our budget. I mean, it has grown astronomically. So that’s a great place to look. I would also look at some of these agencies that have an 18 to 24 month ending balance or contingency rainy-day fund, do we really need 2 years of that? Could we dial that back?

I think there’s lots of places to look, but if we want to say no, all we can do is look within the state highway fund, within the ODOT budget, it does become more challenging. I’ve said this before, I think that we should prioritize keeping those ODOT jobs. We need people that have the longevity and they have the understanding of what it takes. I don’t want to skimp and save on that when it comes to who knows how to make sure the bridge is safe.

Miller: Leader Elmer, thanks very much.

Elmer: You’re welcome.

Miller: Lucetta Elmer is a Republican state representative from McMinnville and the House minority leader.

“Think Out Loud®” broadcasts live at noon every day and rebroadcasts at 8 p.m.

If you’d like to comment on any of the topics in this show or suggest a topic of your own, please get in touch with us on Facebook, send an email to thinkoutloud@opb.org, or you can leave a voicemail for us at 503-293-1983.