Oregon lawmakers poised to address crises with increased funds next year

With an addiction and drug crisis top of mind for many, homelessness and housing programs clamoring for money, and looming unrest in the state’s K-12 schools, Oregon lawmakers suddenly have another $335 million to spend.

But that news comes with a caveat: Lower revenues are now expected in coming budget cycles, tempering the long-term ambitions lawmakers might have for new money.

The revenue picture was delivered by state economists on Wednesday, part of a quarterly presentation that gives a rundown of Oregon’s economy.

Income taxes, driven largely by the wealthy, are expected to come in higher than thought just three months ago, and corporate profits continue to surge despite cooling inflation, State Economist Mark McMullen told a legislative committee. The state is also now anticipating a new infusion of taxes on out-of-state insurance companies.

For the current two-year budget cycle, the Legislature is now expecting $335.4 million in newly spendable money — cash that will be hotly pursued in the February legislative session.

Or sooner. The new forecast is likely to add pressure on lawmakers to step in and help resolve an ongoing teachers strike in Portland Public Schools, which has scuttled nine days of classroom instruction so far.

Funding for K-12 schools

Both the school district and teachers have hammered the Legislature for funding K-12 schools at insufficient levels they argue have led to the impasse. But with new movement by the striking union — the Portland Association of Teachers — apparently narrowing the gap between the two sides’ proposals, the newly identified state money is unlikely to go unnoticed.

Top lawmakers, however, insisted Wednesday they would not step in with a special allotment for Portland — especially at a time when other large districts around the state see potential labor disputes on the horizon.

“The point we’ve been making over and over again is that we cannot give PPS extra funds because that’s not how school funding works,” state Sen. Elizabeth Steiner, a Portland Democrat and one of the state’s top budget writers, said in a text message sent to OPB Wednesday morning.

Related: State money isn’t coming to end Portland teachers strike, lawmakers say

Any additional funding for schools, Democrats said, would need to be distributed among all school districts.

That’s a conversation that could arise in some form next year. But politicians are already teeing up other pitches for more funding in February’s short legislative session.

Money for housing and addiction treatment

Gov. Tina Kotek has said she will ask for at least $14 million in new money to pay for homeless shelters around the state, and the governor’s office has been working with the Oregon Department of Transportation on a funding pitch to help the agency carry out such basic functions as plowing roads, painting fog lines and cleaning up graffiti.

What’s more, lawmakers are scrambling to address an addiction crisis that’s recently prompted a special legislative committee, a symposium hosted by the attorney general, and no end to calls for a repeal of 2020′s Measure 110. A task force focused on cleaning up downtown Portland will unveil its recommendations next month, and they are likely to include requests for millions in state funds.

“Every day, hundreds of people are getting turned away from detox and addiction treatment services. People who do manage to get services are being released back into homelessness,” the Health Justice Recovery Alliance, a group that supports funding additional services under Measure 110, posted on social media following the forecast. “There is no excuse for not investing in the full continuum of care.”

Lawmakers reacted cheerily to the latest revenue picture, but also urged caution.

“This stability is the key to developing legislation to address critical issues like access to mental health and addiction treatment, affordable housing, and sustainable childcare funding,” House Speaker Dan Rayfield, D-Corvallis, said in a press release Wednesday, adding that the Legislature needs to “remain measured in our commitments given that the long-term forecast anticipates that population and migration rates will level out.”

Senate President Rob Wagner, D-Lake Oswego, said his chamber would focus new spending next year on housing and expanding available addiction treatment.

Republicans appeared to agree, though their message was sharper.

“Population in Oregon is stagnating as people flee — and choose not to move near — the drugs and crime Oregon is rapidly becoming known for,” House Minority Leader Jeff Helfrich, R-Hood River, said in a press release Wednesday. “During the upcoming short session, the House Republican Caucus will support legislation to make our state a safer, more affordable place to live and do business.”

Helfrich and other House Republicans have called on Democrats to upend the 2020 voter-approved law that decriminalized possession of small amounts of street drugs, echoing a growing number of interest groups. Democrats have signaled a willingness to tighten some drug laws, but there has not been much sign the majority party would agree to repeal decriminalization.

Related: Oregon cities join police, prosecutors in push to recriminalize drug possession

Oregon’s negative population growth

State economists on Wednesday also focused heavily on Oregon’s recent negative population growth. While in-migration to the state has remained steady, census data suggests the state saw a net decline in population last year as more people moved away than relocated to Oregon. It was just the fourth year since World War II that the state had seen a net decline, State Economist Josh Lehner said at the Legislature Wednesday.

A “silver lining,” McMullen said, is that Oregon has seen gains in residents aged 18-24.

“That’s really the most important competitive advantage,” he said.

Like other states, Oregon’s birth rate has declined recently, and the state is reliant on transplants to increase its numbers. Economists told lawmakers that population trends for 2023 are showing some signs of hope, but they also walked committee members through what Oregon’s economy might look like if the state finds itself locked into a long-term pattern of low or no growth.

Some impacts they highlighted: Declining tax revenues, a smaller labor pool that would make it harder for businesses to hire, and a decrease in demand for housing — albeit not enough to eliminate the state’s crisis.

McMullen cautioned that the picture he was offering was merely a thought experiment. “There is some uncertainty about what this sort of story would look like in Oregon,” he said. “Just to make clear: We’re not ready to go there yet.”