Oregon Lawmakers Resist Calls to Tap Education Reserve Fund Amid School Budget Crises

SALEM, OR — Oregon legislative leaders and Governor Tina Kotek are holding firm against growing pressure from school districts and education advocates to tap the state’s $1 billion Education Stability Fund, even as districts facing major budget deficits announce hundreds of potential layoffs. The debate intensified in late April 2026 as Portland Public Schools (PPS), the state’s largest district, proposed significant staff cuts, highlighting a statewide financial crunch that many education leaders say can only be softened by accessing the emergency reserves. Despite pleas from districts across Oregon, state leaders have signaled that an infusion of cash from the reserve fund is not forthcoming. In a February statement, Gov. Kotek said she did not anticipate allocating additional dollars beyond the current budget for schools and that “the Legislature is not taking up any reserves.” This stance has been maintained through the spring legislative session, leaving districts to manage shortfalls on their own. These shortfalls are having tangible consequences. PPS officials warned of the potential for hundreds of layoffs as they grapple with their own budget woes. Other districts report they are being forced to consider slicing services, implementing furlough days, and cutting programs in areas like sports and theater. One school leader told OPB that the prolonged uncertainty from the state makes local decision-making more difficult and contentious, as staff and community members worry about which jobs and programs will be eliminated. Advocates argue that using the Education Stability Fund (ESF) is precisely what it was designed for. Jim Green, executive director of the Oregon School Boards Association, has called on lawmakers to use the fund to prevent deep cuts during a financial downturn. School officials stress they are not asking for the entire reserve to be spent at once. Instead, they propose a strategic withdrawal to smooth budget cuts over several years and help manage escalating fixed costs, particularly for the state’s Public Employees Retirement System (PERS), according to PPS chief of staff Deborah Kafoury. This crisis comes even after the State School Fund received a $600 million increase for the 2025–27 biennium. However, district leaders argue this increase has been insufficient to cover core obligations, such as fully funding special education and other unfunded state mandates, while also keeping pace with inflation and rising operational costs. The Education Stability Fund was established in 2002 through a voter-approved constitutional amendment. It is seeded with 18% of the state’s net lottery proceeds, ensuring it is continually replenished. It is distinct from the state’s general $1.9 billion Rainy Day Fund, which can be used for any state agency. Accessing the ESF is not a simple matter; it requires a three-fifths majority vote in both chambers of the Legislature. While Democrats hold such a majority, the funds can typically only be tapped if specific economic triggers are met or if the governor declares an emergency. The financial pressure on schools is a symptom of broader economic challenges. Oregon’s K-12 enrollment has fallen by over 43,000 students, or about 7%, since 2020, reducing per-student state funding for many districts. Simultaneously, the state government is facing its own revenue deficit, partly because Oregon’s tax code automatically mirrors federal tax cuts, which has reduced state revenue. This has led lawmakers to consider what they have called “painful” cuts across state agencies, making them reluctant to draw down reserves. While the immediate focus is on public school funding, the situation reflects a broader issue of fiscal management that directly impacts the business community. Relying on emergency reserves to plug structural budget gaps is not a sustainable long-term strategy, creating an unpredictable environment for businesses trying to plan for the future. The ongoing, high-stakes negotiations in Salem make it difficult for companies to forecast their own tax liabilities and make confident decisions about hiring, investment, and expansion. This fiscal uncertainty at the state level can chill private sector activity, as businesses value stability and predictability above all else. In our experience, this is precisely the kind of volatility that underscores the need for proactive financial planning and risk management. When public funding streams are unreliable and tax policies are subject to sudden shifts, businesses must build their own resilience. This is where strategic financial guidance becomes critical. C&S Finance Group LLC helps clients navigate these challenges through our outsourced CFO services, providing the sophisticated financial modeling and strategic planning needed to thrive in an uncertain economic climate. To learn how to better insulate your business from external fiscal shocks, contact C&S Finance Group LLC at csfinancegroup.com. Looking ahead, all eyes remain on the Oregon Legislature and Governor Kotek. As the legislative session progresses, the key question is whether the mounting pressure from layoffs and program cuts will force leaders to reconsider their position on the Education Stability Fund. Some advocates, like the Portland Association of Teachers, have even called for a special legislative session to address the funding crisis, a move that would further escalate the political stakes.