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Budget Battle Looms as Session Begins

Oregon’s 79th Legislative Assembly convened this morning for the 2017 Session. While there will be a host of bills introduced and debated, the budget for the 2017-2019 biennium is far and away the most critical component of legislation that will come out of this session. With existing resources, there is an anticipated budget shortfall of $1.8 Billion over the two-year budget period. To date, two budgets have been drafted for the public. Governor Kate Brown released her recommended budget in December. It attempts to address the $1.8 Billion shortfall through a series of revenue increases along with cuts to existing services.

In January, the Legislative Co-Chairs of the Joint Ways & Means Committee, Senator Richard Devlin (D- Tualatin) and Representative Nancy Nathanson (D- Eugene) released their draft budget framework, which did not include any new revenue sources, but rather focused exclusively on cuts to existing programs. A scenario they “believe Oregonians will reject.” An additional limitation to the Co-chairs budget framework is that it is solely based on general and lottery funds, without consideration of federal funds.

Comments made by Senate President Peter Courtney suggest that legislators should begin with the draft budget framework crafted by Senator Devlin and Representative Nathanson, known as the Co-chairs budget as they consider all the elements of the 2017-2019 budget.

In the Co-chairs budget almost every budget item faces a proposed cut, yet three areas face double-digit decreases from current service levels. Those include a 12.4% decrease to Education: Other, including reductions to Early Learning programs (including Head Start and Early Intervention/Early Childhood Special Education), Career Technical Education, administrative positions, and grants.

Transportation is slated for a 16.8% reduction from current levels. The reductions include public transit subsidies for seniors and person with disabilities, intercity passenger rail support, and continuing to use State Highway Funds for State Radio Project debt service.

The largest and most drastic cuts, both in percentage terms and raw numbers, are reserved for the Oregon Health Authority (OHA). The co-chairs budget proposes a 27.5% decrease from current levels, totaling over $881 Million over the next two years. The co-chairs framework suggest some revenue may be available to backfill the General Fund, however, the vast majority of the budget deficit will be met through program reductions.

The Co-chairs propose some the following:
• $250 Million in additional revenue from general funds, primarily gained through hospital assessment revenue
• Significant funding reductions for CCOs
• Reductions for dental and addiction services provided through the Oregon Health Plan
• Reduce inflationary increases for community mental health and addiction services, in addition to contract reduction
• Close parts of Oregon State Hospital, similar to Gov. Brown’s budget
• Reduce funding for Babies First, School-based Health Centers, Family Planning Services, Tobacco Cessation Programs, County Health Departments
• Eliminate Health Insurance for 335,000 adults via the Affordable Care Act (ACA) Medicaid expansion

The elimination of 335,000 adults from the ACA expansion would also result in the loss of over $1.2 Billion in Federal Funds. The federal match rate for this population is scheduled to drop this year from 100% to 95% meaning that the State would have to supplement the 5% from other funds in order to continue to cover this population through Medicaid.

The proposed cuts to healthcare have the potential to damage many of the tremendous gains made to Oregonians via Coordinated Care Organizations over the past five years. We expect there will be an incredibly robust discussion in the halls of the legislature over the next five months. The Ways and Means Subcommittee on Human Services, which manages the budgetary decisions for the Oregon Health Authority, will begin to hear from the Agency starting February 8 with invited testimony to help the committee prioritize services and funding needs. These hearings will continue as the biennial budget is composed and finalized in July 2017.

Posted on February 1, 2017 in Legislative Updates.