Governor Kotek Proposes Tax Increases to Prevent ODOT Layoffs

Salem, Oregon- Governor Tina Kotek on Thursday released a funding proposal to address a budget shortfall that state officials say could lead to hundreds of layoffs at the Oregon Department of Transportation, closures of maintenance facilities and reductions in transit services.

The plan would raise the gas tax, vehicle registration and title fees, and the payroll tax to provide additional revenue for the State Highway Trust Fund in the 2025-27 budget cycle. It would also preserve the state’s emergency reserves for wildfire suppression and other urgent needs.

“In the weeks since the adjournment of the legislative session, my team and I have worked every day with legislators, local partners, and key stakeholders to zero-in on a focused solution for the immediate crisis in our transportation system,” Kotek said. “I am confident that lawmakers will step up this month to avert these layoffs and I appreciate their partnership in getting to the other side of this crisis.”

Under the proposal, half of revenue from the gas tax, vehicle registration fees and title fees would go to ODOT to avoid layoffs, service cuts and the closure of 12 maintenance facilities. The remaining highway funds would be distributed to counties and cities under the current 50/30/20 formula.

A 0.1% increase in the payroll tax would be directed to the Statewide Transportation Improvement Fund, which supports transit services statewide, including programs for seniors and veterans.

Senate President Rob Wagner, D-Lake Oswego, called the measure “a targeted, near-term, and necessary fix to a statewide crisis.”

House Speaker Julie Fahey, D-Eugene, said the timing is critical. “We’ve heard from mayors, county commissioners, and transit leaders across the state who have been clear that the stakes are real and the timeline is urgent,” she said.

Without additional revenue, ODOT says it will begin a first round of layoffs Sept. 15, followed by a second wave in January 2026. Officials warn the cuts could delay emergency and weather-related road maintenance across Oregon.

Key proposed increases include:

Gas tax: Up 6 cents to $0.46 per gallon.

Vehicle registration: Base fee for most vehicles up $42 to $85; additional increases for high-mileage and electric vehicles.

Title fees: Base fee up from $139 to $216. Payroll tax: Up 0.1 percentage point to 0.2%.

The proposal also calls for phasing in a mandatory Road User Charge beginning in 2027 for electric vehicles, with hybrids and plug-in hybrids added in 2028. Vehicles paying the charge would not pay supplemental registration fees.

Legislative leaders pledged in July to work toward a funding solution in a special session, but the first layoff deadline is little more than a month away.