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Michael Dunne: I'm Michael Dunne. Due to so many factors, the war, high inflation, a stagnant economy and anemic job growth, budget concerns are front and center for many of us. Whether it's our own budget or that of the state, trying to figure out what to cut, when to save and what to defer occupies a huge amount of our attention. Today on the show, we'll delve into the macro and micro issues of budgets from two unique perspectives. First, we'll talk to the speaker of the Oregon House of Representatives about the budget issues the legislature dealt with in the just completed short session. Then we'll talk to an Oregonian reporter who did a deep dive on how federal tariffs are impacting both businesses and consumers. Oregon Speaker of the House Julie Fahey, Democrat from Eugene, welcome back. Thanks for coming in.
Julie Fahey: Thanks for having me, Michael.
Dunne: Well, it's been about a month since the short session ended. I read a quote from you that said, "We accomplished everything we set out to do, and more, far more than any of us thought was possible at the beginning of February." Start from there. Give us the highlights.
Fahey: Yeah. In Oregon, we have a short legislative session every other year. In the even-numbered years, they tend to be pretty limited in scope because we only have about five weeks. But with the level of challenges we are facing right now from the federal government, and with all the issues around cost of living we're seeing across the state, we knew this wasn't going to be a typical short session. We needed to have a much more ambitious agenda. As House Democrats, we had three major goals: first, to continue our work to make Oregon a more affordable place to live, with good jobs and thriving businesses; second, to insulate our state and Oregonians from the overreaches of the Trump administration; and third, to rebalance our budget. That is our obligation as a state legislature, to set our budget every two years and ensure we're coming in balanced. Last year's big federal budget bill, H.R. 1, unbalanced our budget almost immediately after we adjourned last session. So we had to make some cuts and find some new revenue sources to balance it.
Dunne: H.R. 1, the bill the Trump administration and Republicans passed, included a lot of cuts. Talk about how you and your caucus looked at that and determined what you could do about it in the short session.
Fahey: That's right. After the long session ended last year, the federal bill was signed into law a few days later, and that reduced the resources available to us as a state by about $900 million, which was pretty significant. We had to fill that hole. It got a little smaller as the economic picture improved somewhat in Oregon, but we still needed to make some relatively modest cuts to state budgets. Things like not filling vacancies and reducing travel. We also did what we call disconnecting from the federal tax code on several items. Oregon's tax code automatically connects to the federal tax code each year, so if the federal government makes changes, those flow through to Oregon. That has pros and cons. In this case, the federal budget bill extended a number of key tax breaks to businesses and to wealthier Oregonians that automatically flowed through to Oregon. Those may or may not have been what Oregonians would have chosen in terms of our own tax policy. So we broke from the federal code on a few key tax provisions, mainly around businesses and higher-income individuals, and that helped us balance our budget in the short term.
Dunne: The expression goes that the short session is a sprint, not a marathon. With something as challenging as this, did the compressed timeline help?
Fahey: I would say it does help to give people deadlines to make decisions. But I think what was most helpful was how much work we did in the run-up to the short session, on the budget in particular and also on the other key elements. We didn't have much of an interim, which is the time between sessions. Legislators were hard at work since the summer of last year, preparing both our federal response agenda and going through the agency budgets with a fine-tooth comb to figure out where we would want to make cuts, while protecting key services like education and health care. I'd also step back and note that the near-term challenge was to balance our budget for 2025-27. We budget in two-year terms. But when we look further out, we're facing about $15 billion in federal funding cuts from programs like Medicaid and SNAP over the next five to six years. That's very significant. So our job was to balance in the short term and also to try to set ourselves up for the long term, when the decisions will be much harder. How can we make sure our agencies are operating efficiently and preparing for what might be coming? And on the revenue side, we can't start new spending or new programs. We have to be very judicious about what we bring in.
Dunne: It's fair to say that a lot of what the federal government is doing is somewhat erratic. When you get together with your leadership team and caucus, how much of your work is being proactive versus reactive? Because sometimes you just don't know what's going to happen at the federal level.
Fahey: Absolutely. Our job is both to be reactive to what we're seeing from the federal government and to try to predict what might be coming, to put policies in place beforehand. But we also can't take our eye off the ball on the challenges we face here at home, around our schools, housing costs and health care. There's a lot happening locally on health care as well. I would say our workload in the short session was about double what it normally would have been because of everything we're seeing from the federal government. It was a very intense session, but it was really important that we continue to make progress on affordability and cost of living in Oregon, and also protect our state from what we're seeing on immigration, health care cuts, cuts to renewable energy subsidies and more.
Dunne: Obviously, the transportation bill was such a huge part of the longer session. Talk about what you were able to accomplish on transportation funding in the short session.
Fahey: In the short session, the work around transportation was part of our effort to balance the budget. To take a step back: last year, we were working to address the state Department of Transportation budget with some modest increases in resources, a 6-cent gas tax increase and some registration fee increases. Like every other state, we fund our transportation system primarily through the gas tax. As vehicles become more fuel efficient and electric vehicles become more common, the resources aren't covering the need anymore. Every state faces this issue. So we were working to modernize how we fund our transportation system. Part of that was a modest increase in the gas tax that we passed last fall, which has been referred to the ballot. People will vote on it in May. Those resources have been put on hold until that vote happens. So we needed to balance our budget at the state level, and we did that by making some really hard choices. We paused some planned safety improvement projects, including the Highway 58 passing lanes near Oakridge, and redirected those resources toward basic operations and maintenance: plowing roads, filling potholes and maintaining signage and striping. We also redirected from some programs doing important work, like Connect Oregon, which helps goods produced in the state get to market. There were no easy choices in how to balance that budget, but we needed to do it to keep Oregonians safe this year and through the winter.
Dunne: Up in Portland, the legislature funded some pretty significant improvements to Moda Center. Talk about why that was important.
Fahey: As a legislator from Lane County, I was not leading on that work, but: the Moda Center is the oldest unrenovated NBA arena in the country. With new ownership, Portland's leadership explored building a new arena, but that would have been cost prohibitive. Renovating the current Moda Center proved more cost effective. We had a lot of discussion about that decision. I was not immediately on board. I worked hard to make sure there were protections in place for taxpayers. Any time you're talking about a public subsidy for a stadium or arena, you need taxpayer protections. We wanted to ensure a 20-year lease so the team couldn't build a new arena and then leave for another city. Those kinds of protections were very important before I could support that allocation. I'd also note that the money we spent on the Moda Center was through bonding, and that money can only be spent to build things. It cannot be spent on schools or on delivering health care through the Oregon Health Plan. It's not fungible. We didn't spend $360 million instead of putting it into schools. We spent that money instead of building something else we could have built as a state. And the bonds will not be sold unless all of the conditions are met that we put in place in the bill to protect taxpayers.
Dunne: And they're getting a new tenant very soon: the Portland Fire of the WNBA. One of the other things you tackled was putting limits on immigration raids. Talk about that.
Fahey: Oregonians around the state, and people around the country, are seeing with their own eyes some of the abuses coming out of ICE enforcement. It was clear we would need to take action as a state. For me, one of the deciding moments came last fall. A friend of mine teaches in the metro area, and one of her favorite students had her father taken by ICE. Her mother had already passed away, so this student was left without a parent. My friend called me asking what she should do and what resources were available. It's very hard for families all around the state. So we came in with an agenda to protect civil rights and rein in some of the abuses we were seeing. We passed a bill that strengthened anti-discrimination protections for immigrants. We also wanted to ensure what I call safe homes, safe schools and safe hospitals. For safe homes, we passed a bill enabling people to sue when their home is entered without a judicial warrant. For safe schools, we required school districts and higher education institutions to have policies in place about notifying students and families when ICE is on campus. For safe hospitals, we required hospitals to have protocols around how they deal with ICE agents and immigration enforcement. We did a number of other things as well: increasing transparency and requiring identification for law enforcement, requiring law enforcement across the state, including immigration agents, to clearly display their agency and badge numbers, and restricting the use of masks. It was critical that we did all of this in a way that would pass legal muster. We've seen other states pass legislation that was immediately put on hold by courts. California's no-masks law is one example. So it was really important to me that Oregon passed legislation with a strong legal basis that could stand up in the courts.
Dunne: And it does seem like, looking nationally, states are taking a very active role in standing up to the federal government on this issue.
Fahey: We feel like we've got to protect our people at the state level. As a state legislator, I don't have any control over whether ICE comes to our state or whether they can conduct a raid, and that's really challenging. I would like to be able to say, stop it, not in Oregon. Our job was to figure out what, within the limits of our power as a state legislature, we can do to put a check on what's happening and protect immigrant families in the meantime.
Dunne: You talked about economic development. That was a huge priority for Gov. Kotek. How did things land in the short session?
Fahey: A big priority for me as well. In Oregon, we've been pretty lucky. Before the pandemic, our economy was growing and we had a relatively low unemployment rate, which let us focus in the legislature on things like housing and schools. But our growth rate has slowed and our unemployment rate is ticking up. Both the legislature and the governor have said we need a more intentional focus on job creation and economic development. In only five weeks, I think we made a pretty good swing at it. We worked to streamline permitting processes, so if a business wants to build something new or expand, we're cutting red tape to make that easier. We supported some small business recovery. Small businesses around the state are being hurt by the federal tariffs, so we passed a new program to create some tariff relief for small businesses. And as part of the tax reform bill we passed, we created a new jobs tax credit: for businesses that create new good-paying, high-wage jobs, they'll receive a tax credit for doing so. We did a number of other smaller things around investing in key industries here in the state, but those were the big swings in a five-week session. I'm looking forward to additional work in the interim to bring back in 2027.
Dunne: And if that wasn't enough, you all bought a waterfall.
Fahey: We did. It's funny. At a social event I went to right after the session, one of the first things someone said to me was, "Thank you for buying the waterfall and preserving it for future generations." There's still a lot to determine about how access to those falls will be preserved and what investments are needed to maintain trails and access. But I know it's been a beloved place, and we didn't want to see it fall into private hands.
Dunne: Speaker, my last question: looking forward to the next long session, what are some of the big issues you think will be at the fore?
Fahey: I do think the next session will be a Medicaid session. As we look at the cuts in federal funding coming our way, there are work groups and conversations right now about how Oregon should deal with roughly $12 billion in federal funding cuts. We're not a large state. Twelve billion dollars is a lot of resources, and we don't simply have them available to plug that gap. We're going to have serious conversations about coverage. Oregon has been a state where nearly 97 to 98 percent of Oregonians have health insurance coverage. That is great, and I hope we can maintain it in the face of these cuts. We've also been a leader in how we manage our Medicaid program. We use managed care through coordinated care organizations, which means we run a more efficient program than many other states. Do we save the federal government money with how we run our Medicaid program? We're going to have to talk about how we manage that structurally going forward. Do we need to cover fewer benefits? What do we do about how much we pay health care providers? Are there additional funding sources we can bring to bear for Medicaid? Those are all very difficult, thorny questions, and I think they'll be among the top issues we take on next year.
Dunne: She's the Oregon Speaker of the House, Julie Fahey. Always appreciate talking to you. Thanks so much for coming in.
Fahey: Thanks, Michael.
Dunne: Let's now talk with an Oregonian reporter about how tariffs are taking a bite out of local business budgets. Aimee Green covers personal finance for The Oregonian. Aimee, great to talk to you again. How are you?
Aimee Green: Hi, I'm well. Thank you.
Dunne: I enjoyed your article where you went around and talked to people about the impact of tariffs. It's been about a year since President Trump's Liberation Day, when he announced these tariffs. You talked to business people and consumers. What did you find?
Green: I found that, according to various organizations, tariffs have been passed on to American businesses and, in turn, to consumers. I wanted to find out what that actually looks like. How are we all paying more, and for what? So I went around and asked people: Have you noticed you're paying more, and for what? Can you tell if it's specifically because of tariffs? I also asked businesses what they're charging more for. Respected economists who've looked at this have said that in 2025 the average American household paid about $1,000 more because of tariffs. Congressional Democrats estimate that in 2026 the average American household will pay about $2,500 more.
Dunne: Let's start with the business people you talked to. What did they say, and maybe talk a bit about the confusion created by the way the Trump administration has rolled out and pulled back tariffs?
Green: Unpredictability. I heard that time and again from the businesses I spoke to. I mostly spoke to smaller businesses, because when I reached out to larger companies like IKEA or Nike, they weren't commenting specifically about raising prices. That's not a popular thing to publicize. One business owner really stuck out to me. He owns Showers Pass, a Portland outdoor apparel company that makes rain pants and jackets for cyclists and hikers. He said every time he places an order for apparel from Asia, he doesn't know what the tariff will be on that shipment. It could add $10,000 or $20,000 or it could be $50,000 on an order. He said he was mortgaging his house and drawing from his retirement savings to put together a million dollars to try to stay in business for another year and see how things play out.
Dunne: Let's talk about the Supreme Court ruling, because the court said what Trump proposed on Liberation Day isn't legal. He's now looking at other ways to impose tariffs. Talk a bit about that, because even though the court weighed in, the confusion hasn't stopped.
Green: In February, the Supreme Court said the president couldn't raise or institute tariffs on some countries under the International Emergency Economic Powers Act. Within hours, President Trump said he would use a different law to at least temporarily institute new 10% tariffs on most global goods, and that he would likely raise them to 15%.
Dunne: Let's talk personal finance. You also talked to regular consumers. What were some of their comments?
Green: I was surprised by the variety of examples they brought up, and by how specifically some of them could pinpoint the impact. One man told me he gets medication for a digestive condition. He buys it from a Canadian pharmacy because it's not made in the United States, and without it he wouldn't be able to absorb nutrients from food. He said that months after Liberation Day, he placed another order and the Canadian pharmacy told him the price had gone from $70 to $90 for his prescription. I also spoke with someone who loves photography and had been planning to buy a camera body. She hesitated before Liberation Day, and once it passed, she noticed the price jumped by $200 to $300 on the camera bodies she was looking at. She was irritated.
Dunne: Pull that thread a little more. Talk about the emotions people expressed to you.
Green: I was talking to people mainly in Portland, and one from Vancouver. President Trump is not popular in this area, no surprise, and there was a lot of frustration and anger overall. Everything is getting more expensive, and that's due to a combination of general inflation, fuel prices and tariffs. The Iran conflict is pushing gas prices up, too. Many of the people I spoke with could pinpoint specific things they're paying more for because of tariffs. I didn't really find anyone who was at peace with it. I did find one business owner who was fairly neutral about Liberation Day. His product is timber, grown, processed, milled and finished entirely in the United States, and he said it has actually helped his business. But he said he didn't want to get into the politics. He just noted that as a business, he's doing better than he was a year ago.
Dunne: A lot of this was supposed to bring back manufacturing and American-made goods. Did anyone tell you they're seeing more domestic products available?
Green: No. The one business owner I mentioned was pleased with the outcome for his business, but others said they simply can't get things in the United States that they used to buy here. Analyses show that manufacturing jobs are down since Trump took office and haven't roared back as he hoped. The White House says that will take time. But even for U.S. manufacturers, like automakers, many parts still come from abroad, which still raises their costs. I also spoke to the state economist, who wanted to stress that you can't blame all of the price increases on tariffs, or even most of them. His estimate was that tariffs cost the average American household $500 to $1,500 in the first year. That's just part of what we're all paying more. I'll also say: while most of the people I spoke with don't support the president, I've received emails from readers who clearly do. Even they gave a restrained response. They didn't want to criticize the president, but they also saw that higher prices are a real problem and didn't dispute that tariffs have contributed.
Dunne: Are people making significant changes to their personal finances because of what's happening? Are they forestalling vacations or really changing their buying habits?
Green: Yes, definitely. I ran into people who are trying to cut their grocery bills, shopping sales and at the cheapest stores they can find. I talked to one woman who said no, she hasn't noticed tariffs affecting her life, because she literally spends nothing on anything extra. She just buys food. For a different story, I was in a park recently and asked a mom if she had cut back on Easter candy. The price of chocolate has increased, mostly because of adverse weather and a shortage of cocoa, but also partly because of tariffs. She said she bought just one chocolate item for each of her kids' Easter baskets. And she said her children are beginning to absorb that money is becoming a big issue. Her 8-year-old son received birthday money from his grandparents and asked her if she wanted it so they could put it toward groceries. She told him, no, it's not that bad yet. Please don't worry. But it's on the minds of everyone, even children.
Dunne: From the mouths of babes.
Green: Yeah, exactly.
Dunne: Aimee Green covers personal finance for The Oregonian. I always appreciate talking to you. Thanks for spending some time with us.
Green: Thank you. Anytime.
Dunne: That's the show for today. All episodes of Oregon On The Record are available as a podcast at KLCC.org. Tomorrow on the show, a discussion with Dave Moss of the Eugene Symphony about the new show "Dolly Parton's Threads: My Songs in Symphony," coming up in May. We'll also discuss Ms. Parton's many connections to Eugene. I'm Michael Dunne, host of Oregon On The Record. Thanks for listening.
