A 70-year old tax rate leaves Oregon aviation agency at risk of $3 million shortfall

The Oregon Department of Aviation receives 50% of its revenue from the jet fuel tax, followed by funding from the Port of Portland, aircraft registration fees and royalties from renting out its aircraft hangars. But the jet fuel tax rate going to the agency hasn’t changed since 1955 and without an increase, the agency expects to face a $3 million budget shortfall in the 2027-29 budget cycle.

The situation mirrors that of the Oregon Department of Transportation’s, which is facing its own impending financial crisis at the end of the 2025-27 budget cycle. Oregon voters in May rejected a Democratic-led law to raise the gas tax, registration fees, title fees and the payroll tax used to pay for public transit. Without new revenue, transportation agency officials say they will have to lay off staff and slash services.

Laying off staff to save money, however, is a risky option for the 15-person aviation agency. The few positions the agency has are essential to comply with federal regulations, inspections and facilitating grants, Sugahara said. 

As aircraft become more fuel-efficient and pay less jet fuel tax and as personnel and maintenance costs increase, aviation agency leaders warned no new revenue would mean deferring airport maintenance and inspections, or worst case scenario closing some of the 28 state-owned airports it manages — facilities essential for wildfire response and emergency air medical transportation.

The agency owns several airports throughout the Cascades, including the Oakridge and McKenzie Bridge State Airports. 

“Those airports are used constantly for wildfires,” Sugahara said. “Helicopters base there, and they fly a lot of missions, so without those, fires would be pretty much out of control because it takes time to get to the fires and also to be able to refuel and then get additional water or any other supplies that are needed.” 

Lawmakers in 2015 raised the jet fuel tax rate from 1 cent to 3 cents per gallon, but the proceeds of that tax hike were set aside to establish airport grant programs. That hike didn’t increase the agency’s operating budget.

In 2025, lawmakers proposed a bill to increase jet fuel tax to 6 cents, but the bill stalled during the committee process as business groups, the Port of Portland and commercial airports opposed the proposal. 

Sugahara said his agency is already extremely cost-efficient. Rather than hiring outside contractors or renting equipment to maintain its airports, the agency buys necessary equipment and tasks its three-person maintenance crew with the work. 

For instance, in 2023, the agency purchased a paint-marking machine rather than renting one, resulting in savings of $152,000. In 2025, the agency spent $180,000 to buy a skid-steer,  a piece of heavy equipment used to clear vegetation that had previously cost $24,000 to rent for a single month. 

“Where we can find efficiencies and use technology, we have been doing it and figuring out ways to pinch pennies,” Sugahara said. 

Established in 1921, the Oregon Department of Aviation is the country’s first state aviation agency. It manages, supports and regulates small Oregon airports and drone technology. 

“Many of the 28 state airports are in really small, rural communities,” Oregon’s State Airports Manager Tony Beach told the Capital Chronicle. “For many, that is their only connection to the national airspace system, and they rely on them for commerce, tourism and recreation. People like to fly into these communities, so it’s a really important aviation connection.”

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