New Oregon Gov. Tina Kotek’s first budget plan calls for big spending on housing, education and behavioral health

New Oregon Gov. Tina Kotek wants to spend $1 billion in the next two years to preserve and build more affordable housing, funnel more than $9 billion to public schools and devote millions to increase staffing at the Oregon State Hospital, under a $116.5 billion proposed spending plan released on Tuesday.

A governor’s proposed budget is a moral document — a signal to the legislators actually responsible for balancing the state’s books of what the state’s chief executive considers most important. So it’s no surprise that Kotek’s proposed 2023-25 budget focuses on the central issues she talked about on the campaign trail: Oregon’s housing crisis, improving access to mental health and addiction services, and improving outcomes for Oregon students.

“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 wrote in the budget document. “We can and must rise to meet the moment.”

The new governor’s housing push is an ambitious one. She’s already called on the state to build 36,000 new homes a year, an increase of 80% over current production.

As a result of her focus on that and other priorities, Kotek acknowledged on Tuesday she will forego other possibilities. Kotek has proposed funding none of the major capital improvement projects requested by public universities and community colleges, recommending instead a smaller slate of maintenance projects.

And the governor has proposed skipping a normally scheduled payment into the state’s reserve funds, which currently hold more than $2 billion, in order to pay for $765 million of her priorities.

Sen. Elizabeth Steiner, a Portland Democrat and one of the Legislature’s chief budget writers, was broadly complimentary of Kotek’s proposed budget. But she told OPB she needed to study the governor’s proposal further, including the push to forego paying into the rainy day fund.

”I have to understand what that really means in term of the numbers,” Steiner said. “I have been one of the people who has pushed very hard to put as much money as possible into reserves because we’re going to have a recession at some point.”

Senate President Rob Wagner, D-Lake Oswego, said in a statement he and other legislative Democrats would take Kotek’s proposal “seriously,” though ultimate responsibility for passing a balanced budget falls to the state’s General Assembly.

Republicans also signaled some approval of Kotek’s priorities. The Senate Republican Office issued a release applauding the governor for not seeking to claw back any of an expected $3.68 billion “kicker” refund to personal income taxpayers to pay for her priorities. Republicans have called on Democrats to agree to pay out the upcoming kicker in the form of state-issued checks, as opposed to a credit on tax returns as usual.

“Oregonians across the state feel the impacts of inflation and other rising costs,” state Sen. Daniel Bonham, R-The Dalles, said in a statement. “They deserve to spend their hard-earned money how they see fit – to plan for emergencies and spur the economy.”

While the governor said her proposal didn’t rely on new taxes, she acknowledged that she has assumed passage of a bill that would assign a new tax to phone service in the state as a way to pay for a new 988 hotline aimed at people in crisis.

The housing portion of Kotek’s budget builds on an ask she’s already made to lawmakers: $130 million to prevent homelessness for more than 8,700 households, rehouse 1,200 people currently without shelter and create 600 new shelter beds within one year.

Kotek’s budget calls for creating a state Housing Production and Accountability Office to provide technical assistance and support local governments and housing developers. Under her plan, the new agency will play a central role in helping lessen land use and permitting barriers that prohibit housing production.

“The state is taking a bigger role on housing and homelessness because we have to,” Kotek told reporters on Tuesday. “All the agencies have been told: You might not think that it’s your job, but it is your job so think about it.”

About 18,000 Oregonians are experiencing homelessness now, according to state estimates, and about 11,000 of those have no shelter whatsoever. Oregon has one of the highest homeless student rates in the country, according to Kotek’s budget, and Native Americans are four times more likely to be represented in the homeless population; other communities of color are also overrepresented.

In addition to the $130 million in immediate money Kotek has requested, here are some of the other housing highlights:

• $172.2 million to help people connect to long-term rental assistance
• $73 million to create long-lasting homelessness prevention programs in Oregon
• $24.1 million to maintain shelter operations, including the 600 new shelter beds and those created through the Project Turnkey projects
• $4.5 million to help people who provide housing support pay for affordable insurance
• $5.3 continued emergency response coordinated by the Oregon Department of Emergency Management and Oregon Housing Community Services
• $130 million to build new permanent supportive housing
• $770 million in bonding to help build new affordable homes for renters and new homeowners
• $118 million to preserve existing affordable homes, including manufactured homes and another $4 million to support replacing old and inefficient manufactured homes
• $13.6 million for down payment assistance
• $5 million for community land trusts
• $9.4 million to improve community access to housing by helping with language translation, technical assistance to Oregon Housing Community Services
• $5 million to Oregon’s nine sovereign tribal nations

During the 2022 campaign for governor, Kotek was the only leading candidate who said she would not try to repeal Measure 110, the pioneering drug decriminalization measure voters passed in 2020. The idea behind the measure was to focus fewer resources on penalizing drug users and more on treating them, but the rollout was slow.

Now, Kotek said, hundreds of new supportive housing and residential placements are in the pipeline, and she believes combined with her budget proposal the state could finally move away from being “in constant crisis” and move toward “proactive interventions.”

Kotek said she wants to invest state taxpayer dollars to reduce hospitalizations and overdoses, provide timely access to behavioral health and offer the least restrictive environment for people to meet their needs. She is also proposing staff increases and facility upgrades to the state hospital.

Here are some of the other behavioral health funding highlights:

• $195.7 million continued funding for aid and assist services, peer respite centers, housing for transition-age youth and more
• $40 million to increase additional mental health residential capacity
• $14.9 million to fund civil commitment services, expand jail diversion services to all counties, intervention and outreach to patients before people are civilly committed
• $12.3 million for expanding rehabilitation services
• $8.7 million for substance use disorder for treatments at Oregon State Penitentiary and Snake River Correctional Institution
• $18.4 million to fund 988 suicide and crisis lifelines
• $47.6 million for programs like CAHOOTS to divert people from hospital and jail
• $278.9 million in addiction treatment, overdose prevention, peer support services, funded partly by Measure 110 grants
• $15 million for inpatient treatment and recovery community centers
• $40 million to reduce deaths associated with opioid use
• $7.7 million to help prevent youth and adult suicides
• $127 million for Medicaid rate increases for increased wages for behavioral health workers
• $60 million for loan repayment, scholarships and tuition stipends for licensed behavioral health providers and students in the workforce pipeline
• $20 million to increase Oregon Health Authority’s health care provider incentive program to recruit and retain diverse health care workers
• $34.5 million to increase staffing at the Oregon State Hospital
• $3.5 million to create an established health equity unit at the state hospital
• $4.2 million for the complex case management unit at the Oregon State Hospital
• $8 million to upgrade the hospital facilities and improve patient recovery

Oregon’s graduation rates are among the lowest in the nation, and the state lacks adequate child care and early learning services. Kotek proposes spending big in improving student literacy and expanding physical spaces for pre-school and child care.

But the governor is likely to face pushback from school officials for the $9.9 billion she wants to steer toward the State School Fund, which pays for K-12 education in the state, up from $9.3 billion in the current budget. While state budget officials have said that the fund needs roughly $9.5 billion in the next budget cycle to avoid service cuts, the Oregon School Boards Association is skeptical of that math and instead believes Kotek and state lawmakers need to approve $10.3 billion for K-12 schools to avoid cuts, Executive Director Jim Green said on Tuesday.

“We appreciate the governor increasing the state school fund allocation within her proposed budget,” Green said in a statement. “She is making young people a very strong priority, but students need more investment in their education.”

The Oregon School Employees Association was upbeat about Kotek’s proposal, calling it “a strong step toward responsible K-12 funding that benefits both students and the frontline education workers...” The Oregon Education Association, the state’s largest teachers’ union, called the budget “a significant movement in the right direction for public education funding,” but echoed the believe that $10.3 billion was a more realistic number for maintaining current service levels.

The governor acknowledged that the actual amount of investment in K-12 schools was likely to be a moving target throughout the legislative session.

“I suspect we will have a robust conversation during the session about how we can get that number higher,” Kotek said on Tuesday.

Here are some of the other education-spending highlights:

• $100 million to increase student literacy and ensure preschool and elementary school educators have the training, time and materials they need
• $20 million for summer programs aimed at increasing literacy
• $62.5 increasing pay rates for early learning professionals
• $41.3 million increase rates for employment-related day care enhancements or ERDC
• $5 million to co-locate early childhood education and affordable housing
• $100 million to expand physical capacity of preschool and child care facilities
• $30 million for summer enrichment programming
• $18 million to increase investments in student success plans
• $1.4 million to implement ethnic studies
• $4.8 million for rural and small school technical assistance

CORRECTION: This article has been updated to reflect that Kotek’s budget proposal is for $116.5 billion in total spending.