Oregon’s new governor requests $1B for housing spending

“You’re going to see in the budget that the state has a bigger role in housing and homelessness because we have to,” Kotek told reporters Tuesday at the State Library of Oregon in Salem. “I am proposing investments to disrupt the damaging and expensive pipeline of Oregonians moving from homelessness to prison or the state hospital.”

Kotek has urged the Legislature to provide a $130 million homelessness package as soon as possible, aimed at reducing the number of people living outside. The package would fund 600 new shelter beds and provide rental assistance to tenants and landlords to stem evictions.

Kotek said the biggest challenge in preparing the budget is determining how to keep programs afloat with $3.5 billion in one-time federal funding that will expire when the national COVID-19 emergency eases. Federal aid money, along with better-than-expected revenue growth, helped state governments, including Oregon, build historic cash surpluses during the pandemic.

Sovereign finance analysts expect a $4 billion surplus at the end of the current fiscal cycle. But they’ve also forecast a mild recession this year, which could help turn the surplus into a $560 million budget deficit over the next two years.

Despite those projections, Kotek said its budget would not tap into the $2 billion currently in the state’s reserve fund; Instead, $765 million intended to be placed in the reserve would be diverted to their priorities.

The proposed budget would not impose any new taxes, Kotek said, although it expects lawmakers to pass legislation that will create a monthly cell phone tax to fund the new national 988 Suicide and Crisis Lifeline.

Republicans in the Oregon House of Representatives said they were “optimistic” the budget would not increase taxes, but also expressed concern that spending would not be divided fairly between urban and rural communities.

“One of our greatest concerns remains that the governor’s proposed homelessness initiative will not extend beyond the urban centers of our state,” the House Republican caucus said in a press release. “If Governor Kotek is to remain ‘mission focused’ to be a governor for all of Oregon, it must begin now.”

Some Republican lawmakers have criticized an executive order that Kotek signed into office earlier this month on her first full day in office, declaring a state of emergency for the homeless. The order only declares a state of emergency in parts of the state where vulnerable homelessness has increased by at least 50% since 2017, leaving out some rural areas.

The bulk of the proposed $1 billion in housing funds would fund the construction and maintenance of affordable housing. About $770 million in general commitment bonds would go toward building more units for renters and new homeowners, and $118 million in lottery and general fund money to keep existing affordable homes on the market.

Kotek highlighted the intersection of the homelessness, mental health and criminal justice crises and called for $50 million to be allocated to understaffed Oregon State Hospital, which is suffering from overcapacity. The majority of patients in the public psychiatric hospital are people charged with criminal offenses who have been sent there by a judge to receive treatment designed to help them participate in their own defence. Of these so-called aid-and-assist patients, 60% were homeless before their arrest, Kotek said in her budget application.

Kotek also sees increasing capacity at local mental health and addiction treatment centers as a way to ease some of the burden on the state hospital.

Oregon has grappled with its approach to drug use. In 2020, it became the first state in the country to decriminalize petty possession of hard drugs after voters approved Vote 110. The measure was intended to divert hundreds of millions of dollars in cannabis tax revenue to drug treatment and harm reduction programs, but it was only recently that the audit found the money is slow to come out the door. Meanwhile, meth and opioid-related overdose deaths have continued to rise.

Kotek’s proposed budget would allocate nearly $280 million for addiction treatment, overdose prevention, and peer support services, drawn from Measure 110 and federal Medicaid funds.

Education and early learning are other funding priorities for Kotek. Math and language test scores have plummeted in Oregon due to the pandemic, and every county in the state is considered a childcare desert for infants and toddlers, meaning the number of children requiring care is reducing available spots by at least 3 to 1 exceeds.

Kotek’s budget would invest $100 million in literacy programs aimed at helping children learn to read and invest a similar amount in expanding and creating more childcare and preschool facilities. More than $60 million would help provide a living wage to childcare workers, who often cite low wages and a lack of benefits as reasons for leaving or not entering the sector.

But universities say the budget’s proposed funding for higher education is insufficient.

“Oregon’s public universities today require more government support than ever to maintain essential programs and comprehensive services for an increasingly diverse student body, and to mitigate the effects of inflation on students and their families, and provide them with a higher standard of living immediately after graduation, according to Presidents of the Eight.” Oregon Public Universities in a press release.

Kotek acknowledged that her budget will not fund the large capital improvement projects for which the universities have requested funding because it would spend the bulk of the state’s general interest on housing.

The legislature must approve Kotek’s budget request in the coming months before the next budget period for 2023-2025 begins in July.

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Claire Rush is a corps member for the Associated Press/Report for America Statehouse News Initiative. Report for America is a nonprofit national service program that brings journalists into local newsrooms to cover undercover topics.