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83rd OREGON LEGISLATIVE ASSEMBLY--2025 Regular Session
House Bill 3879
Sponsored by Representative SMITH G
SUMMARY
The following summary is not prepared by the sponsors of the measure and is not a part of the body thereof subject
to consideration by the Legislative Assembly. It is an editor’s brief statement of the essential features of the
measure as introduced.The statement includes a measure digest written in compliance with applicable readability
standards.
Digest: The Act makes several changes to the way the state budget is constructed. It sets up a
detailed process for making an outcomes-based budget. It requires reports of vacant positions. It
requires a budget stress test. It requires zero-based budgeting.(Flesch Readability Score: 61.2).
Directs the Governor and Legislative Assembly, in developing an outcomes-based budget, to use
a process to establish the priorities of state government.
Requires state agencies to report to the Director of the Oregon Department of Administrative
Services when any budgeted position is vacant for at least six months. Prohibits filling of a vacant
position if the director determines that insufficient reasons exist for retaining the position.
Directs the Oregon Department of Administrative Services, in coordination with the Legislative
Fiscal Officer and the Legislative Revenue Officer, to prepare a biennial budget stress test report
that estimates the effects on state finances of negative economic conditions.
Declares the policy of the state to use zero-based budgeting in developing biennial budgets. Re-
quires state agencies to include information justifying all proposed expenditures in agency request
budgets.
Takes effect on the 91st day following adjournment sine die.
A BILL FOR AN ACT
Relating to state financial administration; creating new provisions; amending ORS 291.200, 291.216,
291.217 and 291.263; and prescribing an effective date.
Be It Enacted by the People of the State of Oregon:
OUTCOMES-BASED BUDGETING
SECTION 1. ORS 291.217 is amended to read:
291.217. (1) As used in this section:
(a) “Continuous improvement” means a set of actions designed to permanently improve state
agency performance, either in a specific targeted area or across all levels of an agency, through the
use of structured process analysis and problem solving.
(b) “Outcomes-based budget” means a budget that allocates government resources to those uses
of taxpayer moneys and fee revenues that will best produce the outcomes most important to the
residents of this state, that generates options for funding, that uses service redesign, competition,
collaboration and prioritization to drive continuous improvement and innovations, and that can be
used to align government, nonprofit and private resources to help produce the desired outcomes.
(c) “Performance management” means a formal, comprehensive set of business processes, in-
cluding strategic planning, performance measurement, leadership, process management and human
resources that help ensure more efficient and effective management operations and practices and
reducecosts.
(d) “Performance measurement” means a process of assessing progress toward achieving prede-
termined program objectives, including information on the efficiency with which resources are
NOTE:Matter in boldfaced type in an amended section is new; matter [italic and bracketed] is existing law to be omitted.
New sections are in boldfaced type.
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transformed into goods and services, the quality of those goods and services, the results of a pro-
gram activity compared to its intended purpose and the effectiveness of state agency operations in
terms of their specific contributions to program objectives.
(e) “State agency” means every state officer, board, commission, department, institution, branch
or agency of the state government whose costs are paid wholly or in part from funds held in the
StateTreasury.
(f) “State government” has the meaning given that term in ORS 174.111.
(2) As part of the Governor’s budget required under ORS 291.216, the Oregon Department of
Administrative Services and the Governor shall submit an outcomes-based budget. The outcomes-
based budget [shall] must:
(a) Be based on the desired results of state agency continuous improvement actions, perform-
ance management and performance measurement[ , shall];
(b) Describe and measure state agency efforts to implement process improvements [and shall];
(c) Reflect state agency efforts to achieve, through process improvements, quality service de-
livery at a lower cost[.]; and
(d) Reflect the priorities of state government established using the process described in
subsection (3) of this section.
(3) In developing an outcomes-based budget, to determine the outcomes most important
to the residents of this state, the Governor and the Legislative Assembly shall use a
performance-based process that establishes the priorities of state government. The process
must include, at a minimum:
(a) Determination through a public, collaborative method of a set of statewide, priority
results that every resident of this state should expect from state government, with provision
for periodic review of those priorities;
(b) Identification of indicators of progress toward achievement of each of the statewide
results;
(c) Identification of proven or promising strategies for achieving each of the statewide
results;
(d) Valid performance measures for each of the indicators of progress;
(e) Identification and descriptions of each activity of each state agency, the estimated
cost of maintaining each activity and the quantifiable results intended to be derived from
each activity; and
(f) A results-based prioritization of state agency activities that most directly accomplish
the desired statewide results and that connect to identified strategies.
(4) In determining a set of statewide, priority results under subsection (3) of this section,
the Governor and the Legislative Assembly shall consider, without limitation:
(a) Protecting people and communities through law enforcement, courts and corrections;
(b) Providing for an educated citizenry by ensuring that all children receive an equal
opportunity to achieve academic success;
(c) Promoting job creation and entrepreneurship and a healthy, efficient market;
(d) Providing a safety net of social services;
(e) Building and maintaining the infrastructure to accommodate transportation and
utilities;
(f) Requiring state agencies to conduct business in an efficient, transparent and ac-
countablemanner;
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(g) Managing public property and natural resources, including protections for air, water,
soil and ecosystems, while protecting property rights of private property owners; and
(h) Oregon benchmarks.
[(3)] (5) The budget for each state agency shall:
(a) Identify how the agency is addressing continuous improvement, including the priorities and
considerations described in subsections (3) and (4) of this section, performance management and
performance measurement; and
(b) For each agency program, state the number of persons served, or other units of service
provided, by the program.
[(4)] (6) The Joint Committee on Ways and Means, the Emergency Board, the Joint Interim
Committee on Ways and Means and the Legislative Fiscal Office may review performance manage-
ment and performance measurement processes for services provided by contract by state agencies
or by school districts.
SECTION 2. ORS 291.200 is amended to read:
291.200. (1) It is the intent of the Legislative Assembly to require the Governor, in the prepa-
ration of the Governor’s budget, to state as precisely as possible what programs the Governor re-
commends be approved for funding under estimated revenues under ORS 291.342. If estimated
revenues are inadequate, the Legislative Assembly intends that it be advised by the Governor as
precisely as possible how the Legislative Assembly might proceed to raise the additional funds. It
is also the intent of the Legislative Assembly, in the event that the additional funding is not possi-
ble, to be informed by the Governor precisely what programs or portions thereof the Governor re-
commends be reduced accordingly. Finally, if the Governor chooses to recommend additional new
programs or program enhancements, the Legislative Assembly intends that the Governor specify how
the additional funding might be achieved. [The Legislative Assembly believes that the state government
must allocate its resources for effective and efficient delivery of public services by:]
[(a) Clearly identifying desired results;]
[(b) Setting priorities;]
[(c) Assigning accountability; and]
[(d) Measuring, reporting and evaluating outcomes to determine future allocation.]
(2) In addition to the intentions of subsection (1) of this section, in preparing the Governor’s
budget, the Governor and the Legislative Assembly shall use an outcomes-based budgeting process
described in ORS 291.217 [(2) and (3)].
(3) To achieve the intentions of subsections (1) and (2) of this section, it is the budget policy of
this state to create and administer programs and services designed to attain societal outcomes and
to promote the efficient and measured use of resources.
(4) To effect the policy stated in subsection (3) of this section, state government shall:
(a) Allocate resources to achieve desired outcomes;
(b) Express program outcomes in measurable terms;
(c) Measure progress toward desired outcomes;
(d) Encourage savings;
(e) Promote investments that reduce or avoid future costs;
(f) Plan for the short term and long term using consistent assumptions for major demographic
and other trends; and
(g) Require accountability at all levels for meeting program outcomes.
SECTION 3. ORS 291.216 is amended to read:
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291.216. (1) The Governor’s budget shall include a budget message prepared by the Governor,
including recommendations of the Governor with reference to the fiscal policy of the state govern-
ment for the coming biennium, describing the important features of the budget, embracing a general
budget summary setting forth the aggregate figures of the budget so as to show a balanced relation
between the total proposed expenditures and the total anticipated income, with the basis and factors
on which the estimates are made, the amount to be borrowed, and other means of financing the es-
timated expenditures for the ensuing biennium, compared with the corresponding figures for at least
the last completed biennium and the current biennium.
(2) The Governor’s budget shall be supported by explanatory schedules or statements, classifying
the expenditures reported in the budget, both past and proposed, by organization units, objects and
funds, and the income by organization units, sources and funds, and the proposed amount of new
borrowing as well as proposed new tax or revenue sources, including a single comprehensive list
of all proposed increases in fees, licenses and assessments assumed in the budget.
(3) The Governor’s budget shall be submitted for all dedicated funds, as well as the state Gen-
eral Fund, and shall include the estimated amounts of federal and other aids or grants to state
agencies or activities provided for any purpose whatever, together with estimated expenditures
therefrom.
(4) The Governor’s budget shall embrace the detailed estimates of expenditures and revenues.
It shall include:
(a) Statements of the bonded indebtedness of the state government, showing the actual amount
of the debt service for at least the past biennium, and the estimated amount for the current
biennium and the ensuing biennium, the debt authorized and unissued, the condition of the sinking
funds and the borrowing capacity.
(b) The Governor’s recommendations concerning tax expenditures identified under ORS 291.214.
(c) Any statements relative to the financial plan which the Governor may consider desirable or
which may be required by the Legislative Assembly.
(5) The Governor’s budget shall use the estimated revenues under ORS 291.342 for the fiscal
year in which the budget is submitted as the basis for total anticipated income under subsection (1)
of this section, subject to adjustment as may be necessary to reflect accurately projections for the
next biennium.
(6)(a) The Governor’s budget shall present information regarding the expenses of the state in the
followingcategories:
(A) Personnel expenses, including compensation and benefits for state employees, but excluding
costs of services contracted out and temporary service costs.
(B) Supplies, equipment and the costs of services contracted out.
(C) Special payments.
(D) Capital construction.
(E) Capital outlay.
(F) Debt service.
(b) For each category described in paragraph (a) of this subsection, the budget shall show actual
expenditures for the prior biennium and estimated expenditures for the current biennium.
(c) As supplemental information to the budget, the Governor shall include an estimate of the
projected costs of continuing currently authorized programs in the next biennium. The estimate shall
include, but is not limited to the projected costs of:
(A) Removing one-time expenditures;
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(B) Program phase-ins and phase-outs;
(C) Personnel expenses compared to existing compensation plan agreements, including position
vacancy experience calculations;
(D) Inflation for services, supplies and medical costs;
(E) Transfers between state funds or accounts;
(F) Mandated caseload changes; and
(G) Debt service for previously issued debt.
(d) The budget shall show the total increase in the cost of salaries and benefits for all state
positions.
(7) The Governor’s budget shall include:
(a) The total number of positions and full-time equivalent positions included in the budget.
(b) The average vacancy rate in the present biennium.
(c) The number of permanent, full-time equivalent vacancies as of July 1 of even-numbered years.
(8) The Governor’s budget shall include computations showing budget figures as a percentage
of the total General Fund, federal fund, fee or other source category, as may be appropriate.
(9) The Governor’s budget shall include, in a format that provides side-by-side comparison with
the State Debt Policy Advisory Commission report of net debt capacity, a six-year forecast, by debt
type and repayment source, of:
(a) That portion of the capital construction program required to be reported by ORS 291.224 that
will be financed by debt issuance.
(b) The acquisition of equipment or technology in excess of $500,000 that will be financed by
debtissuance.
(c) Other state agency debt issuance for grant or loan purposes.
(10) The Governor’s budget shall include the outcomes-based budgeting information required by
ORS 291.217 [(2) and (3)].
(11) The Governor’s budget shall include recommendations regarding available funds that could
be used to make lump sum payments to the Public Employees Retirement System under ORS 238.229.
(12) The Governor’s budget shall include a narrative summarizing the racial impact statements
required under ORS 291.206.
SECTION 4. The amendments to ORS 291.200, 291.216 and 291.217 by sections 1 to 3 of this
2025 Act apply to budgets prepared for, and biennial budgets adopted for, biennia beginning
on or after July 1, 2027.
VACANT POSITIONS
SECTION 5. ORS 291.263 is amended to read:
291.263. (1) As used in this section, “state agency” [includes any state officer, department, board,
commission or court, the Legislative Assembly, its committees, officers and employees.] has the
meaning given that term in ORS 291.002.
(2)(a) A state agency shall inform the Director of the Oregon Department of Administrative
Services of any [position] budgeted position in the agency that has remained vacant for a contin-
uous period of at least six months by including a report on the position in the estimate submitted
to the [department] Oregon Department of Administrative Services under ORS 291.242. The de-
partment may consider the vacancy in its determinations under ORS 291.244 and may reduce the
amount allotted to the state agency.
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(b) To retain an unfilled position included in the estimate submitted to the department
under ORS 291.242, a state agency must provide specific and valid reasons for retaining the
position to the director.
(c) If the director determines that the reasons given by the state agency are insufficient:
(A) The director shall inform the state agency of the reasons why the reasons for re-
taining the position submitted by the state agency are insufficient; and
(B) The state agency may not fill the position.
(3) A state agency that has been prohibited from filling a vacant position under sub-
section (2) of this section may include a request to fill the position in an agency request
budget filed under ORS 291.208.
[(3)] (4) The department shall, on or before February 1 of each year, provide a report to the
Legislative Fiscal Officer of any position that has remained vacant for a continuous period of at
least six months. The department shall include in the report the amount and source of funds for the
position. For each position included on a previous report under this subsection, the department shall
notify the Legislative Fiscal Officer of conditions that affect the position, including recruitment
actions, filling the position or using the position for purposes other than what was anticipated in
the legislatively approved budget. The Legislative Fiscal Officer shall review the list and make
recommendations on adjustments to agency position authority to the Joint Committee on Ways and
Means.
BUDGET STRESS TESTING
SECTION 6. (1) Each biennium, the Oregon Department of Administrative Services, in
coordination with the Legislative Fiscal Officer and the Legislative Revenue Officer, shall
prepare a budget stress test report that estimates the effects on state finances of hy-
pothetical economic conditions.
(2) The budget stress test report:
(a) Must include consideration of at least two sets of hypothetical economic conditions,
with one set of conditions simulating a mild economic downturn and another set of condi-
tions simulating a severe economic downturn;
(b) Must estimate the effects of each set of hypothetical economic conditions on state
finances, including, at a minimum, effects on revenues, demand for government services,
expenditures and levels of formal or informal reserves;
(c) Must compare the effects of each set of hypothetical economic conditions with the
effects of baseline conditions representing no economic downturn; and
(d) Must include recommendations for prudent amounts of reserve funds.
(3) The department shall submit the budget stress test report to the Legislative Assembly
in the manner provided by ORS 192.245 in the last calendar quarter of each even-numbered
year at the same time the department reports the estimate required by ORS 291.342 (2)
during that quarter.
ZERO-BASED BUDGETING
SECTION 7. Section 8 of this 2025 Act is added to and made a part of ORS 291.201 to
291.222.
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SECTION 8. (1) As used in this section, “zero-based budgeting” means budgeting that
begins with the assumption that initial funding amounts for each component of a budget are
zero and that contains justification for each proposed expenditure.
(2) It is the policy of the state to use zero-based budgeting in developing biennial budget
plans.
(3) Agency request budgets that are filed by or prepared for a state agency under ORS
291.208 must contain the following information:
(a) A description of activities that the agency performs and a justification for the exist-
ence of each activity by reference to statute or other legal authority;
(b) For each activity, a quantitative estimate of any adverse impacts that could reason-
ably be expected if the activity were discontinued, together with a full description of the
methods by which the adverse impact is estimated;
(c) For each activity, an itemized account of expenditures that would be required to
maintain the activity at the minimum level of service required by the statutory or other legal
authority, together with a concise statement of the quantity and quality of service required
at that minimum level;
(d) For each activity, an itemized account of expenditures required to maintain the ac-
tivity at the current level of service, together with a concise statement of the quantity and
quality of service being provided; and
(e) A ranking of all activities that shows the relative contribution of each activity to the
overall goals and purposes of the agency at the current level of service.
SECTION 9. Section 8 of this 2025 Act applies to agency request budgets for biennia be-
ginning on or after July 1, 2027.
CAPTIONS
SECTION 10.The unit captions used in this 2025 Act are provided only for the conven-
ience of the reader and do not become part of the statutory law of this state or express any
legislative intent in the enactment of this 2025 Act.
EFFECTIVE DATE
SECTION 11.This 2025 Act takes effect on the 91st day after the date on which the 2025
regular session of the Eighty-third Legislative Assembly adjourns sine die.
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