Oregon has two reserve funds meant to ensure state agencies and services remain whole and public school budgets aren’t throttled

By Alex Baumhardt, Oregon Capital Chronicle

The Oregon Legislature is meeting this week to consider some major cuts to current spending levels as a large revenue deficit looms. That’s because the state’s tax code automatically replicates new federal tax cuts, including ones passed by Congressional Republicans this summer that will reduce state revenue.

To minimize short-term pain, schools, education advocates, public service unions and industry groups are calling on lawmakers to tap into state reserve funds to fill gaps so they aren’t forced to make mid-year cuts to jobs and programs Oregonians depend on.

Oregon has two funds meant specifically to help weather economic crises. One, the $1.9 billion Rainy Day Fund, can be broadly used to keep state agencies and services whole. Another, the $1 billion Education Stability Fund, is meant to help schools stay afloat.

But tapping those funds isn’t as easy as it sounds, as legislative revenue officer Chris Allanach explained. Allanach leads the nonpartisan Oregon Legislative Revenue Office.

In each case, three-fifths of the Legislature, or 18 senators and 36 representatives, must approve the withdrawals, and certain economic standards must be met. To tap education reserves, the governor can also declare an emergency. Oregon Democrats have enough of a majority to approve the withdrawals without any Republican votes.

Oregon Rainy Day Fund

Oregon’s $1.9 billion Rainy Day Fund is a reserve account to help the state weather major economic crises.

The state Legislature created the fund in 2007, when two-thirds of members voted to redirect the $319 million corporate kicker tax credit to the new reserve account, rather than sending the money back to corporations. A kicker tax credit is triggered when the state collects at least 2% more tax revenue than it initially expected during the most recent budget cycle.

The fund today is also seeded with corporate income tax collections and up to 1% of the general fund every two years. The money in the fund also grows through earned interest.

Money can be withdrawn if three-fifths of the state Legislature approves AND:

• The state’s two-year budget outlook shows at least a 3% drop in expected revenue OR
• Payroll data shows unemployment going up two quarters in a row OR
• A quarterly revenue forecast shows a 2% decline in expected revenue since the last legislatively adopted budget was passed.

Withdrawals are capped at two-thirds of the fund’s balance at the beginning of the biennium, amounting to a current cap of roughly $1.27 billion. The Legislature last tapped the fund during the 2009-11 two-year budget cycle, withdrawing $351 million in response to the Great Recession. It has not withdrawn monies from the fund since a special legislative session in 2010.

If left untouched, it is expected to hold nearly $2.2 billion by July 2027, when the next two-year budget cycle begins.

Education Stability Fund

The $1 billion Education Stability Fund is meant to help stabilize education spending in a budget emergency.

Voters amended the state constitution in 2002 to create the fund, an investment account seeded quarterly with 18% of the state’s net lottery proceeds.

Money can be withdrawn under the same conditions as the Rainy Day Fund, with one more option: three-fifths of the state Legislature approves and the governor declares an emergency.

Withdrawals are capped at 5% of general fund revenue in the prior biennium, amounting to a current cap of $1.3 billion.

Lawmakers most recently withdrew $400 million during the 2019-21 two-year budget cycle to help schools navigate new expenses during the COVID pandemic. Before that, lawmakers from 2007 to 2013, on three separate occasions, withdrew a total of $757 million to balance education funding in response to the Great Recession.

If left untouched, it is expected to hold more than $1.25 billion by July 2027.

Alex Baumhardt has been a national radio producer focusing on education for American Public Media since 2017. She has reported from the Arctic to the Antarctic for national and international media, and from Minnesota and Oregon for The Washington Post. This story first appeared in the Oregon Capital Chronicle.

Related story: Lawmakers to discuss ‘painful’ cuts for Oregon agencies under $373 million deficit (Nov. 17, 2025)