Oregon Legislative Update

The 2026 legislative session began on Monday, February 2, as lawmakers convened to address a number of significant and complex issues within a condensed 35-day timeframe. During the short session, legislators are limited to introducing two priority bills each. Committees may introduce up to three committee bills, while the Senate President, House Speaker, Rules Committee, and Ways and Means Committee retain broader bill introduction authority.

Within these constraints, approximately 260 bills were introduced, covering topics such as transportation, education, federal law enforcement, agriculture, and, as in prior sessions, insurance proposals that could increase premiums and expose the industry to heightened litigation risk.

Revenue Forecast

One issue that has remained at the forefront of legislative discussions since the close of the 2025 session is the projected budget gap identified by state economists. On Wednesday, the February Revenue Forecast was presented, setting the stage for the Ways and Means Co-Chairs as they prepare to make a series of difficult budgetary decisions, including both reductions and targeted allocations.

State fiscal leaders had previously projected that passage of the federal “Big Beautiful Bill” last summer would result in an estimated $888 million negative impact on Oregon’s economy over an 18-month period. As a result, the September revenue forecast anticipated a biennial General Fund shortfall of approximately $373 million. Updated projections have since improved considerably, with the expected shortfall now estimated at roughly $63 million. Under the latest forecast, lawmakers are projected to have approximately $156 million more in combined General Fund and other revenues than previously expected.

This improvement includes an estimated $106 million increase in General Fund revenue, driven largely by stronger-than-anticipated corporate income tax collections and other revenue sources. That gain is partially offset by a decline of more than $40 million in personal income tax collections compared to the prior quarter. An additional approximately $50 million in available resources is attributable to Lottery revenues and Corporate Activity Tax collections coming in higher than forecast.

The economic outlook underlying the forecast remains steady but cautious. Growth is expected to continue at a moderate pace, inflation is projected to gradually ease, and unemployment is expected to remain in the mid–4 percent range. While recession risk has declined compared to earlier outlooks, it has not been eliminated. Forecasting officials also caution that changes in federal tax policy and the outcome of the final tax filing season could still shift revenue expectations in either direction.

This updated forecast coincides with legislative consideration of SB 1507, which proposes partially disconnecting Oregon’s tax code from certain recent federal tax changes. Oregon is one of a small number of states that automatically conforms to federal tax code changes unless the Legislature affirmatively decouples. The proposal would disconnect the state from three specific federal provisions while also establishing new state-level tax credits for businesses that increase in-state hiring and for low- and moderate-income Oregonians. Legislative revenue leaders estimate the proposal would preserve a net $291 million in state revenue over the next 18 months that would otherwise be lost due to federal tax changes.

Under the proposal, Oregon would maintain conformity with several federal provisions, including tax treatment related to overtime pay, tips, research and development expenses, and certain depreciating business assets. However, the state would decouple from the new federal allowance for full expensing of certain equipment purchases, preserving an estimated $267 million in state revenue over the next 18 months. The proposal would also disallow a new federal deduction for auto loan interest, preserving approximately $36 million, and disconnect from the Qualified Small Business Stock Exemption, preserving roughly $39 million. In total, decoupling from these three provisions is projected to retain approximately $342 million in state revenue that would otherwise go uncollected.

35 Days of Chaos: Upcoming Deadlines

Oregon’s short legislative session is constitutionally limited to 35 days, giving lawmakers just over five weeks to reach agreement and advance legislation through both chambers. Given the compressed timeline, the session moves quickly through a series of key deadlines that determine which bills remain viable.

The first major deadline occurs on Monday, February 9, when bills that have not been posted for a work session by midnight will effectively stall. Please note that the Rules, Revenue, Ways and Means, and Joint Committees are exempt from the deadlines outlined below.

Key 2026 Short Session Deadlines:

• February 9 – First Work Session Posting Deadline (Bills must be posted on a committee agenda for a work session)
• February 16 – First Chamber Deadline (Bills must have moved out of their first committee and be advancing to the second chamber)
• February 20 – Second Work Session Posting Deadline. (Bills must be posted on a committee agenda for a work session)
• February 26 – Second Chamber Deadline (Bills must have moved out of their second committee. Policy bills conclude after this date, except for those in deadline-exempt committees)
• March 9 – Constitutional Sine Die

HB 4098: Regulating Insurance Under Both Oregon’s Division of Financial Regulation & the Unlawful Trade Practices Act

HB 4098 would subject insurance to Oregon’s Unlawful Trade Practices Act (UTPA), resulting in dual regulation under both the Division of Financial Regulation (DFR) and the UTPA, and expanding exposure to both first- and third-party liability. This risks further destabilizing Oregon’s insurance market, and increasing premiums, at a time when affordability remains a top concern for Oregonians.

Historically, similar proposals have initially exposed insurance agents to third-party liability, prompting agent associations, including PIA/O, to advocate for an explicit exemption. In prior sessions, those efforts were successful in securing a carve-out for agents. In HB 4098, the bill begins with that exemption already in place: "(d) The activities of an insurance producer, as defined in ORS 731.104, that the Department of Consumer and Business Services regulates under ORS 744.052 to 744.089."

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