Kotek Responds to Inflationary Impacts While Bypassing New Spending Options
Governor Kotek unveiled her recommended 2025-2027 budget that includes more funding for key issues of housing, public schools and behavioral health. She included $1.75 billion to cover a projected Department of Transportation shortfall, but left it to lawmakers to raise that amount with additional taxes or fees. She generally didn’t call for funding major new programs.
Kotek proposed her spending increases after the most recent quarterly revenue report projected $39.3 billion available to spend in the next biennium, which is $6 billion more than the current biennium – and after another sizable income tax kicker refund in 2026.
Senator Daniel Bonham
Advocacy groups complained Kotek’s proposed spending hikes weren’t enough. Republican legislative leaders panned the budget for continuing to fund “failed strategies”. “More government spending and bureaucracy won’t fix Oregon’s housing crisis, homelessness epidemic, health care affordability or student success – it will make these issues worse,” Senate Republican Leader Daniel Bonham, R-The Dalles, said in a statement.
Even though available revenues are sharply up over the current biennium, Kotek said state operations suffer from the same inflated costs as Oregonians. “Our expenses, especially for for health and human services, have really grown, so the expenditure line is outpacing the money coming in the door,” Kotek said at a press conference. Her budget doesn’t call for layoffs.
Photo Credit: Ben Botkin/Oregon Capital Chronicle
Housing and Homelessness
Kotek recommended $880 million in state bonds for affordable housing units and related infrastructure. A similar amount was approved in the current biennium to expand and upgrade infrastructure for new housing and apartment construction to move toward her annual goal of 36,000 new housing units. New home construction has only reached half of that target.
The governor also requested $218 million to maintain existing shelter housing, $188 million to rehouse homeless people, $173 million for eviction prevention services and $105 million for long-term rental assistance. The latest count by the U.S. Department of Housing and Urban Development indicated more than 20,000 Oregonians were experiencing homelessness in 2023.
K-12 Public Education
Kotek’s budget seeks $11.4 billion for the state School Fund, up from the current biennium’s $10.2 billion. She has called for a reworked formula to calculate what it costs to continue current service levels that have been impacted by inflation. Teachers in two Oregon school districts went on strike seeking higher wages to compensate for higher costs of living. There also could be formula adjustments for districts with large numbers of minority and special needs students.
A significant portion of the increase could be swallowed by higher Public Employee Retirement System contributions. PERS officials announced earlier this year that lagging investment gains made higher contributions necessary for PERS participants.
Kotek’s proposed budget also includes $127 million to continue early literacy programs that seek to boost the number of schoolchildren who meet or exceed reading proficiency standards. Grants would be available to school districts, community organizations, tribes and the Dolly Parton Imagination Library. Another $78.5 million would be available for summer learning programs, which have been credited with erasing at least part of pandemic-era learning losses.
Her budget will request $25 million for youth behavioral health services and substance use disorder screening in schools and residential and community-based services. Kotek didn’t increase the funding level for the Employment Related Day Care, which is popular and has a long waitlist of families seeking day care.
Health Care
Kotek proposes to give behavioral health providers an additional $130 million to help retain workers and increase inpatient psychiatric care. She wants to use remaining American Rescue Plan funds to train behavioral health workers and add another 336 treatment beds statewide by 2026. Kotek wants $40 million for counties to continue deflection programs that allow people charged with drug possession to receive treatment instead of jail time.
She designated $2.5 million for grants to expand reproductive health services, including programs that help patients find services and state funding for providers to upgrade facilities in response to an increase in patients seeking abortions.
Transportation
The governor said an additional $1.75 million is needed to keep ODOT functional and handling project work. Lawmakers conducted an extensive round of field hearings earlier this year and have stood up a working committee to explore funding option. State transit providers have pitched a gradual increase in a statewide employee payroll tax that has funded expanded public transportation services and led to increased ridership.
Other Issues
The Oregon Community College Association said Kotek’s proposed $70 million increase for community colleges won’t be enough to avoid spending cuts and tuition hikes.
Environmental and climate groups urged greater spending on energy efficiency programs and disaster preparedness. Kotek recommended $25 million for planning and construction of renewable energy or energy resilience projects.
Kotek called for diverting $150 million from the state’s reserves to the Department of Forestry and Office of the State Fire Marshal to pay for wildfire costs. Her budget includes $130 million per year for fire mitigation and firefighting.
Kotek proposed $7 million to improve emergency response, $7 million to support women in the criminal justice system and $5 million to expand access to abortion and reproductive care facilities.
Her budget includes $9 million for the state police academy to graduate new police officers faster and $700,000 for a pilot project to investigate overdose deaths and prosecute illicit drug suppliers.
More than $14 million in federal Medicaid funding was requested to help formerly incarcerated Oregonians transition to freedom.
Trump Response
Anticipating litigation in response to Trump actions, Kotek asked for $2 million for the Oregon Department of Justice to defend state laws on reproductive care, environmental standards and immigrant protections. She proposed $7 million for services and legal representation for immigrants and $2 million for Oregon’s Bias Response Hotline.
