Bracing for a brutal budget forecast next week, Oregon state agencies are floating an array of potential spending cuts that, if approved, would lay waste to many basic services.
While the cuts are far from certain — some are likely not even possible — they offer a glimpse of what a possible $3 billion blow to Oregon’s revenues might mean.
Agency proposals available Tuesday morning include shuttering most Oregon prisons, steeply narrowed state police activity, elimination of financial aid to thousands of Oregon students, and drastic reductions to some of the state’s safety net programs.
“There are some significant reductions on this list that are very difficult to see on the list,” said Eric Moore, chief financial officer at the Oregon Department of Human Services, in a presentation of the agency’s proposed cut package Tuesday morning.
A summary of the agency's suggested reductions includes some $325 million in cuts in areas such as addiction recovery services and child welfare, plus reduced funding for group homes and services for aging populations. More than 100 employees could be laid off, and another 400 positions could be left vacant.
“It is not a list that we enjoyed putting together,” Moore said. “At the level of reduction on this list, trying to do the least harm is very, very difficult.”
Among cuts floated by other agencies:
— In seeking $147 million in general fund cuts, the Oregon Department of Corrections raised the possibility of closing 10 of Oregon’s 14 prisons and laying off hundreds of employees, even as the agency acknowledged that move is “not logistically possible” since thousands of prisoners would have to be crammed into the four remaining state institutions.
“The only way for us to significantly reduce cost is to close prisons,” said DOC spokeswoman Jennifer Black. “There is no way to meet the allotment reductions of the size for this exercise any other way.
— The Oregon State Police raised the possibility of laying off more than 200 employees and closing offices in St. Helens, Tillamook, McMinnville, Government Camp, Hermiston, Albany, Prineville, La Pine and Grants Pass .
"These reductions, while dramatic, [are] a budget exercise," OSP Superintendent Travis Hampton wrote to staff. "Now we do the hardest part, we wait for something beyond our control: the May 20th revenue forecast that will give us an idea what type of scenarios we are truly looking at."
— The state’s Higher Education Coordination Commission has proposed nearly $13 million in cuts to financial aid grants for Oregon students. Those cuts could impact more than 10,000 students, according to the agency’s proposal.
—The Oregon Department of Education is mulling cuts of nearly $730 million to its $8.6 billion general fund budget, including a $636 million reduction in funding to school districts around the state.
The proposed budget cuts, ordered last month by Gov. Kate Brown, come with plenty of caveats.
Preparing for a blow to Oregon's $22.4 billion general fund brought on by an anticipated reduction in income taxes, Brown directed agencies to propose 17 percent reductions in their general fund spending for the fiscal year that begins July 1.
Those types of cut lists represent a blunt instrument that leave little room for the subtlety and prioritizing that will accompany actual budget trims. Budget officials, for instance, have suggested Oregon would be loath to trim things like health or safety net programs at a time when they’re most needed.
The cuts also don't take into account more than $1.6 billion in reserves Oregon has built up over the years in preparation for an economic downturn. A report by Moody's Analytics suggested Oregon is among the best-prepared states in the nation to weather a recession.
Federal relief funding that Oregon has received also isn't reflected in Brown's cut scenario. To date, the state has received more than $1.3 billion in federal aid. Brown and other governors have called on Congress to pass another package to help states plug budget gaps.
“We haven’t made any final decisions, and the agency plans serve as important information gathering at this point,” Brown said in a statement Monday, prior to allowing bureaus to unveil their proposed cuts. “We know a potential cut of this magnitude would be extremely drastic.”
Though a budget forecast won’t be released until May 20, state officials in recent days have increasingly used $3 billion as an upper limit for how far the current two-year budget might be impacted by the pandemic. State economists have only grown more pessimistic in their outlook in recent weeks, according to some of the state’s top budget writers.
“The thing that we cannot lose sight of is there is an important step that must occur before we can start drafting budgets: You must know what your actual hole is,” said state Rep. Dan Rayfield, D-Corvallis, a co-chair on the Legislature’s budget-writing committee. “Just because you’re short $3 billion does not mean you’re going to have a $3 billion hole.”
Budget forecasts are never a certainty, but the unprecedented turmoil caused by COVID-19 likely adds even more chaos to the predictions state economists are planning to make next week. For instance, while it’s clear that personal income taxes and lottery revenues have plummeted as Oregon’s economy shuttered, it’s not clear how soon they might improve.
As of Tuesday morning, 32 of Oregon’s 36 counties had filed applications to be allowed to enter “phase one” of the governor's reopening framework. Counties approved to do so by the Oregon Health Authority will be permitted to reopen restaurants, bars, salons, and malls as early as May 15.
“To the extent the economy can come back with little to no increase in infections … we could see a gradual rebound of the Oregon economy that could lessen the severity of these reductions,” Department of Human Services director Fariborz Pakseresht said Tuesday.
It remains to be seen how many communities will immediately be approved to begin reopening, however, and counties that see an uptick in infections could be closed again.
While Brown's cuts focus on the state's general fund, other aspects of the state's $85.8 billion budget also stand to take a hit. Revenues from gas taxes have dropped dramatically amid the pandemic, creating funding issues for the Oregon Department of Transportation. Lottery funds that go toward schools, state parks and other priorities also plummeted as restaurants and bars closed.
