A trio of Oregon Department of Transportation snowplows clear the westbound lanes of Interstate 84.

Gov. Tina Kotek will order lawmakers back to the Capitol for a special session at the end of August to address a $350 million funding shortfall in the Department of Transportation’s budget that led to hundreds of state employees receiving layoff notices this month.

Kotek announced Tuesday that she will call a special session on Friday, Aug. 29, for lawmakers to pass legislation to pay for basic road maintenance and operations, local government transportation spending and transit needs.

Kotek didn’t share details of a funding plan, and her office shared the special session announcement early with the Capital Chronicle with the condition that the outlet not talk to lawmakers or anyone else until after a formal announcement.

But in recent weeks, lawmakers have been publicly floating the idea of a 6-cent gas tax increase, split evenly between the state and local governments. A last-ditch effort to stave off layoffs on the final day of the legislative session would have resulted in a 3-cent gas tax increase, with all proceeds going toward the state transportation department.

Kotek said she and her team have worked every day with lawmakers, local leaders and others to figure out a solution and timeline for transportation funding.

“Oregonians rely on these basic services, from brush clearing to prevent wildfires to snow plowing in winter weather, and they are counting on their elected representatives to deliver adequate and stable funding,” Kotek said in a statement.

She added that she has asked the Department of Transportation to postpone layoffs, which were scheduled to take effect at the end of the month, for another 45 days. Nearly 500 employees began receiving layoff notices on July 7, but the process of laying off union-represented state employees is complicated. More layoffs are anticipated in early 2026 unless the Legislature appropriates more money.

Some employees who received layoff notices can choose to move to a comparable job held by an employee with less seniority, meaning the exact positions to be cut wouldn’t be known for weeks or even months.

“I am confident that lawmakers will step up next month to avert these layoffs by approving the necessary funding for the state’s transportation needs,” Kotek said. “I appreciate their partnership and am eager to be on the other side of this crisis.”

Lawmakers knew going into the legislative session that addressing the state’s transportation system needed to be a top priority. Stagnating gas tax revenue as more Oregonians drive electric or fuel-efficient vehicles, years of decreasing federal investment in state transportation systems, aging infrastructure and rising construction costs blew a hole in the Oregon Department of Transportation’s budget.

But Democratic leaders failed to convince Oregonians, legislative Republicans and even crucial members of their own caucuses that it was worth paying significantly higher taxes and fees without flashy new road projects and other noticeable results. Republicans, likewise, couldn’t find support for their counterproposals to fund road maintenance by cutting spending on transit, environmental initiatives and the transportation department’s equity work.

Democrats continued to pare down their transportation funding proposals until the final day of the legislative session, going from a 10-year, $14.6-billion package to one that would raise $11.7 billion over 10 years to a 3-cent gas tax increase that would generate just $2 billion. They took so long to reach a vote on the final proposal that they would have needed Republicans to agree to waive rules that require reading bills on three separate days, and Republicans refused.

Kotek immediately signaled that she would call lawmakers back in a special session. She acknowledged Tuesday that whatever legislation emerges will be far from the ambitious multi-year package lawmakers envisioned earlier this year. Instead, it will focus on filling the immediate $350 million hole in the state transportation department’s budget to halt layoffs and keep maintaining roads, as well as postponing anticipated cuts to transit services throughout the state.

“The special session will be focused on critical near-term solutions to stabilize basic functions at ODOT and local governments,” she said. “This is just the first step of many that must be taken to meet our state’s long-term transportation needs.”