Local schools are facing yet another financial cliff as federal budget cuts hammer the Oregon state budget.
The state’s 197 school districts are no strangers to budget issues in recent years, as enrollment declines, rising costs and the end of federal COVID-19 relief money have taken a toll.
Already this fall, two of Oregon’s largest school districts are preparing for the worst — Portland Public Schools is poised to cut another $50 million for the next school year, while Salem-Keizer Public Schools is bracing for at least a $25 million deficit for 2026-27.
Those cuts could be even deeper if Oregon’s Nov. 19 economic revenue forecast comes in as bleak as some are expecting.
Education leaders want to be ready.
“There are forces outside of schools’ control — from federal funding reductions to the loss of Medicaid and SNAP benefits — that compound the challenges families, communities and educators face,” said Krista Parent, executive director of the Coalition of Oregon School Administrators, on a call with reporters that also included the Oregon Association of School Business Officials and two district superintendents.
“The ripple effects on learning are real and profound for Oregon students,” she said.
Parent is paying special attention to H.R. 1, President Trump’s One Big Beautiful Bill Act, which congressional Republicans passed in July. The state is shifting money to cover critical programs as Oregon stands to lose more than $15 billion in federal funding for healthcare, food assistance and other purposes in the coming years.
The group of education leaders said Wednesday that Oregon’s economy is faltering due to the impact of federal policy changes. As a result, the state is preparing mid-year budget reduction scenarios in anticipation.
Those scenarios could cut 2.5% to 5% from different school funding streams. The school leaders said mid-year reductions are rare and haven’t been used since the recession.
“While classrooms are full of energy and promise right now, we are mindful that federal and economic decisions made in the coming weeks and months could significantly affect Oregon students and the programs that serve them,” said Parent, who was the superintendent of the South Lane School District and national superintendent of the year before going to COSA.
Even a 1% reduction in the state school fund could significantly harm local schools.
For a small district like Umatilla, which enrolls about 1,400 students, a 1% reduction translates to a loss of roughly $200,000.
In Salem-Keizer, which enrolls close to 37,000 students, a 1% reduction in state funding would mean a loss of $4 million per year.
How districts handle funding cuts depends on how much they have to make up. School leaders often absorb small gaps by not filling open positions. But when they have to save more, districts may eventually consider things like administration cuts, staff layoffs and furloughs, shortened school days or years, or closing entire schools.
And if these school leaders are forced to make cuts in the middle of the year, they’re less able to plan out thoughtful approaches. They have to make quick changes that aren’t always in the best interest of students.
“It takes at least a few months to start to develop that collaborative work,” said Umatilla Superintendent Heidi Sipe, “to work through those ideas and develop solutions that put kids at the forefront and not simply, ‘How do we make sure that we’re not overspending the funds that we have,’ which is a survival instinct.”
That’s why leaders like Sipe are asking for one especially hot commodity: time.
“Knowing the information as soon as possible and trying to reduce the impact as soon as possible is essential,” she said.
Salem-Keizer Superintendent Andrea Castañeda knows that announcing budget reductions is just the start of the process.
“The very next thing that will happen is our staff will say, ‘Where’s the [$25 million] coming from? Is it my job? Is it my school? Is it my kids’ sports team? Is it my theater program?” she said. “I will not be able to answer any of those questions, or really even get a handle on how to prepare to answer them, until I know what our reduction target is.
“The longer it takes for people to tell us the target,” she said of the state, “the weaker our decisions will be, the more rushed our dialogue will be, and the more contentious the process will be.”
However, leaders like Parent with COSA believe there is still time for a thoughtful, measured response from the state before local districts have to take action.
One of the state’s options is tapping into Oregon’s Education Stability Fund.
This savings account was created in 2002 through a constitutional amendment approved by voters. The fund receives 18% of net lottery proceeds deposited every quarter, according to the state, meaning it gets replenished every year, even if state leaders choose to tap into it.
This is separate from the state’s Rainy Day Fund, which is emergency money available to all state programs and services, not just education. During the 2019-21 biennium, the state withdrew $400 million from the Education Stability Fund to balance the budget.
“We’re not advocating for, like, go take the whole $1.2 billion that sits in that fund and spend it all now,” Parent said. “But let’s look at it as a potential option for whatever reductions or rebalancing has to happen in the current biennium.”