Gov. Tina Kotek wants to tap Oregon’s savings accounts to pay for expanded initiatives to tackle the state’s housing shortage, homelessness crisis, behavioral health care needs and poor education outcomes.
Kotek also wants the state to issue $770 million in debt to help build affordable homes for renters and new homeowners, according to a summary of her budget proposal unveiled Tuesday.
“We have a lot to do,” Kotek said at a press conference in Salem on Tuesday. “We must be bold, focused and mission driven to be sure we are getting the results Oregonians need.”
Increasing access to housing has long been a top priority for the governor, who served as state House speaker for nine years. With bonds included, she is pushing for lawmakers to approve more than $1 billion to build and preserve affordable housing in the next two-year budget.
“The housing crisis is one of the largest emergencies we have ever faced in Oregon and the human suffering it causes to individuals, families and communities is unacceptable,” Kotek said in a letter accompanying her budget plan. “We can and must rise to meet the moment.”
Kotek’s ambitious proposal comes as state economists have said it is more than likely that Oregon will enter a mild recession this year. The governor noted that one-time federal pandemic relief money, which allowed the state to further grow spending in recent years, will soon expire. Nonetheless, she is proposing a budget roughly $2 billion above the amount that budget analysts said would be necessary to maintain current service levels. Kotek said that pay increases for childcare and behavioral health providers and state workers are necessary even though the costs will carry into future budgets, because “we have to be able to do our job. ... We are investing in our core services, we are investing in our workforce so that people have what they need.”
Kotek noted that her budget plan makes tradeoffs. For example, she is not proposing new construction for state universities and instead wants to focus state bonding on building affordable housing. The governor would also like school districts to use some of their unspent federal pandemic funding as a match to receive state dollars for summer literacy programs.
The governor did not include a major potential cost in her budget proposal: tax incentives for the chip industry. Kotek said she is leaving those negotiations up to lawmakers.
Along with housing and homelessness, Kotek said her other top priorities are strengthening the state’s behavioral health system and improving early childhood education and literacy instruction while insisting on more accountability for schools.
“The expectation is that every agency will understand how their work connects with the governor’s top three priorities: housing, behavioral health and education,” Kotek’s budget plan said. “Their strategic plans will articulate how they are going to organize their work to house more Oregonians, get more Oregonians the care they need and support a strong educational system.”
For schools, Kotek wants lawmakers to approve $9.9 billion in core funding, more than the $9.5 billion that state budget analysts calculated Oregon would need to hold steady at current service levels but less than the $10.3 billion that schools advocates, including school boards and the statewide teachers union, say is necessary to prevent cuts.
On housing, Oregon ranks fourth highest in the nation for underproduction of houses and apartments with only California, Colorado and Utah doing worse at meeting their residents’ need for homes, according to a 2022 analysis. That report, which was commissioned by the Legislature, recommended that leaders create a specific team tasked with ensuring that Oregon is building enough housing — and holding state and local government entities accountable if they undermine that progress.
Kotek’s budget plan calls for the creation of a new Housing Production and Accountability Office focused on working with cities, counties and private developers to speed up housing production. “The office will also hold local jurisdictions accountable to state housing and land use laws to clear the path to increased housing production in cities and counties,” Kotek’s administration wrote.
In a shift from the previous governor, Kate Brown, Kotek plans to focus on improving the state’s systems of care for mental health and substance use. Her budget proposal notes that lawmakers have approved large increases in spending on those services and the law that voters approved to decriminalize small amounts of hard drugs, Measure 110, also redirected hundreds of millions of dollars to boost behavioral health treatment. Kotek said she is committed to maintaining those funding levels, which included higher pay to attract more providers, despite the expiration of federal pandemic aid lawmakers used to expand recent budgets. And Kotek said she is intent on fixing government administrative and structural problems that have prevented the widespread availability of behavioral health care that was promised.
“Oregon’s patchwork of funding and revolving strategic direction have left Oregonians with a confusing conglomeration of services and a hopeless outlook,” Kotek’s budget note acknowledged.
Her plan includes $34.5 million to increase staffing at the state hospital and pay for a complex case management unit to help patients with the most acute needs. “The ongoing staffing crisis at the Oregon State Hospital must end,” Kotek’s budget proposal states. “The patients who come to the state with hospital-level behavioral health needs deserve to have care provided by staff who have reasonable caseloads, reasonable hours, and reasonable wages, and no fear of coming into work.”
The governor noted that she supports creating a new cell phone fee to fund the 988 crisis intervention line, something that lawmakers are considering.
“With one-time federal resources expiring, future budget cycles may present difficult choices,” Kotek said in an open letter accompanying her budget proposal. “That should not dissuade us, however, from demanding more and working hard to deliver results for Oregonians.”
On education, Kotek wants to continue her predecessors’ focus on expanding access to quality early childhood care and instruction. Her proposals include $100 million in bonding to build more preschool facilities and $41.3 million to raise rates paid to childcare providers through the state’s Employment Related Day Care program that helps low-income working parents. She also wants to spend $62.5 million to raise pay for state-funded preschool providers, increase transportation support for those programs and lower class sizes for children who have disabilities or otherwise need specialized services.
For elementary, middle and high schools, Oregon bases funding on the numbers of students. Enrollment declined during the pandemic but has since leveled off.
Kotek’s largest proposed schools initiative is $100 million for “evidence-based, targeted literacy strategies,” following through on her campaign pledge to help all students master reading by grade three. She also wants to spend a smaller sum on literacy-focused summer programs for elementary students.
Currently, Oregon schools are not required to use a particular type of curriculum for early literacy. That’s left some districts relying primarily on increasingly discredited methods in which children use context clues from pictures and search for words they do know to help decipher unfamiliar words, rather than sound them out using knowledge of letter sounds.
As a result — and with 61% of Oregon’s third graders less than fully proficient at reading — early literacy advocates have been pushing for more training and coaching for teachers in phonics-based literacy instruction, particularly for teachers who work in districts with larger concentrations of children of color, those who need special education or low-income families.
The governor’s budget also singles out “systems to ensure programs are implemented,” suggesting that she favors a more muscular oversight role for the state Department of Education. That could rattle Oregon’s long tradition of letting individual school districts decide how to spend state funding.
Kotek also wants to earmark $50 million for summer learning programs but add some strings. She would reserve $20 million of it for preschool and elementary student literacy programming in summer 2023.
That’s markedly less money than summer programming advocates had hoped for. In 2022, when the state was flush with federal pandemic aid, lawmakers set aside $100 million for school districts to run summer programs, and another $50 million for community organizations to do so.
School districts still have millions in federal pandemic aid that is use-it-or-lose-it by summer of 2024 and can be used for summer programs. But summer learning supporters have said those efforts need a guaranteed funding stream going forward, to avoid a last-minute scrambles for families and schools alike.
In total, Kotek wants to spend $32.1 billion in state general funds and lottery funds over the next two years. That’s compared with the $30.7 billion budget that state budget analysts calculated Oregon lawmakers would need to approve to prevent cuts to current levels of services.
Budget analysts predicted late last year that the state only had the resources to spend about $30.1 billion and would face a $560 million budget shortfall for 2023-25 due to anticipated slowing of tax revenues. The next state revenue forecast is scheduled for Feb. 22. Kotek’s plan largely makes up the difference between budget analysts’ calculations of available resources and the governor’s desired spending level by counting money that state agencies have not spent this biennium, including due to hiring backlogs, and adding the money that Kotek wants to divert from automatically being deposited in the state reserve accounts, said press secretary Elisabeth Shepard.
During Kotek’s time as speaker, state lawmakers were repeatedly able to expand government spending with little effort because of repeated tax revenue windfalls. Now, Kotek wants to “redirect” $765 million that would otherwise be deposited into the state’s rainy day and education stability funds and spend that money over the next two years. She noted the two savings accounts combined already hold more than $2 billion. However, lawmakers can only appropriate money from the savings accounts by a three-fifths vote and that would require bipartisan support because Republicans picked up enough seats to eliminate Democrats’ state House and Senate supermajorities.
House Speaker Dan Rayfield, a Democrat from Corvallis, said in a briefing with reporters Tuesday that it makes sense to him to divert some money that that would otherwise go into the reserve funds to bolster the state budget as one-time federal pandemic funds run out. “Using $700 million of reserves as proposed in the governor’s budget is not outside the bounds of reason,” Rayfield said, although he did not say whether he would personally pursue the strategy.
House Republicans said in a statement that the caucus “is optimistic the governor’s budget does not call for tax increases, but we remain concerned Gov. Kotek and her agencies will raise fees on hardworking Oregonians.” Republicans expressed relief that Kotek did not propose diverting Oregon’s unique “kicker” tax rebate to boost government spending, and they reiterated their desire for lawmakers to issue the kicker as a check to taxpayers this year instead of the usual method of returning it as a credit when people file their taxes in 2024. “We are committed to returning these hard-earned dollars back to Oregon taxpayers,” Republicans said.
Education reporter Julia Silverman contributed to this report.
— Hillary Borrud; hborrud@oregonian.com
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