It’s not often you see the word “bankrupt” used in relation to Oregon state government, especially when the word comes from somebody as measured as Gov. Tina Kotek. But the fund that insures the state of Oregon’s legal settlements and pays out claims—from routine workers’ compensation payments to state employees, to huge legal settlements—is teetering on insolvency, according to Kotek. Here’s how the governor described the situation in the 2025–27 budget recommendations she unveiled in December: “A major increase in risk charges from the 2023–25 level is needed to prevent the assets declining to zero, bankrupting the fund.” In other words, the governor wants the state agencies that incur liabilities to pay more out of their budgets to cover claims. (The fund paid out $99.8 million in 2023 versus revenues of about $66 million.) Through the Department of Administrative Services risk management team, the state collects payments from state agencies and uses the money to pay legal settlements, including workers’ compensation, and to purchase commercial insurance for state buildings. That means the state self-insures against most risks. Part of the problem for the risk management fund is that legal settlements have gotten more expensive. In 2023, for example, the state agreed to pay $40 million to four foster children who alleged the Oregon Department of Human Services neglected them, the largest such settlement in Oregon history. COVID also caused an increase in workers’ compensation claims, and even though state office buildings are mostly empty, the cost of insuring them has skyrocketed. Oregon Public Broadcasting has previously noted the fund’s worsening finances, but what has not previously been reported is Kotek’s invocation of bankruptcy—or just how long lawmakers have failed to meet the legal requirement that the fund be “actuarily sound.” Records show the state has failed to comply with that requirement for at least seven years. In plain English, that means the fund is supposed to maintain cash equal to 70% of future liabilities. In fact, the fund hasn’t met that standard and finished fiscal year 2023 at 16%. “Our funded ratio is heading toward zero,” DAS risk manager Shelly Hoffman told lawmakers last year. But Kotek and Democratic leaders have not fixed the problem—which they are in a position to do since Kotek directs state agency managers and the Legislature sets agency budgets. (Senate President Rob Wagner, D-Lake Oswego, and House Speaker Julie Fahey, D-Eugene, did not respond to questions.) House Minority Leader Christine Drazan (R-Canby) says Democrats need to shore up the fund, pronto. “When it came time to balance the budget and follow the law, [Kotek] chose her agenda over responsible governance,” Drazan says. “Budgets reflect priorities, and it was not a priority for Tina Kotek, as speaker of the House or as governor, to make sure Oregon was well run.” Kotek spokeswoman Roxy Mayer pushes back on that criticism. “The governor has worked to responsibly manage the risk fund in the entire context of her budget recommendations since taking office,” Mayer says. “She has monitored and addressed its fiscal state every year she has been in office.” Mayer notes that Kotek supported bills in the 2023 and 2024 legislative sessions that would have increased the risk fund’s assets (both failed) and that Kotek is pushing for a $120 million increase this session. That’s to Kotek’s credit. But DAS’s most recent annual report (for 2023) shows that underfunding occurred in the last three full sessions that Kotek served as speaker of the House: 2017, 2019 and 2021 (see graph above). “The reality is, we’ve been headed for this cliff for a few years, and leadership has knowingly put us in this precarious position,” says Senate Minority Leader Daniel Bonham (R-The Dalles). “At the same time, they continue to grow government, which only exacerbates the problem—as government grows so too does our exposure to litigation.” Just how severe the problem is today is unclear, in part because DAS failed to produce an annual report for 2024 as it did for previous years. An agency spokeswoman tells the Oregon Journalism Project that’s because “they perceived it to have had low readership.” Drazan, who ran against Kotek in the 2022 governor’s race, doesn’t think much of that explanation. “It doesn’t matter if anybody reads the report or not; it matters that the report is available,” she says. “Transparency should be mandatory, not optional.” This story was produced by the Oregon Journalism Project, a nonprofit investigative newsroom for the state of Oregon. OJP’s stories appear in partner newspapers across the state. Learn more at oregonjournalismproject.org. STORY TIP OR IDEA? Send an email to Salem Reporter’s news team: info@salemreporter.com. A MOMENT MORE, PLEASE– If you found this story useful, consider subscribing to Salem Reporter if you don’t already. Work such as this, done by local professionals, depends on community support from subscribers. Please take a moment and sign up now – easy and secure: SUBSCRIBE. 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