🌲 Oregon Legislative Days: Focus on Revenue, Education, and Healthcare

I went to Salem on Monday for the first day of the three Legislative days. I watched two other committtees on zoom. It is great Oregonians value open public meetings and access. Salem was dominated by the state's latest revenue forecast, the complex task of budgeting against the backdrop of federal funding uncertainty caused by the federal budget bill H.R. 1, the shut down, and enduring issues in the state's schools.

💰 Revenue and State Finances

Oregon lawmakers received a mixed, but slightly heartening, economic picture from the state's fiscal office:

• Initial Deficit vs. Revised Forecast: Heading into the days, state budget writers were bracing for a potential $373 million shortfall in the current 2023-2025 biennium. However, the newest revised revenue forecast delivered better news: the hole is expected to be nearly closed, shrinking the gap to an estimated $63 million.

  This $310 million improvement is largely attributed to a surge in corporate tax receipts from prior tax years and a generally improving, though uneven, national economic outlook. Most of the increase ($266.9 million) came from stronger-than-anticipated corporate income taxes, which are historically volatile and tough to predict. A deficit remains this 2025-2027 biennium , but it's smaller.

• Confidence in the Data: The ability of analysts to make firm long-term projections was explicitly undermined by the impacts of the recent federal government shutdown. The interruption of federal data streams, grant flows, and economic indicators has significantly eroded confidence in the accuracy of the underlying revenue data, forcing state economists to rely on incomplete information and leading to a notable decrease in overall confidence in the long-term sustainability of the current revenue bump. This is not to mention the impacts of the tariffs—which hurt Oregon, particularly our farmers, a lot. They may also be eliminated by the Supreme Court. We'll see.

• Future Outlook: Despite the short-term improvement, budget writers still face a projected shortfall near $600 million for the 2025-2027 biennium when factoring in unavoidable cost increases and maintaining necessary reserve funds.Longer term outlook is even more bleak.

• Decoupling option seems dead. In order to make changes to the Oregon Tax code, the legislature would have to call special session. Overall, it would have generated $890 million.I think we ought to have 'decoupled' already and taken control of our fiscal policies. There are two areas that benefit large corporations that should have been set aside, such as the bonus depreciation and the one time versus amortized research and experiment expensing (384 and 166 million resepectively) and a couple should be maintained such as exempting tips and overtime.

🎓 Education Funding and Structure

Education faces a dual challenge of federal policy shifts and profound changes in student attendance:

• Federal Program Disruption: As mandated by the federal H.R. 1, Oregon is preparing for the dismantling of the U.S. Department of Education functions, requiring state agencies to absorb or redirect key processes like Title I funding distribution and student loan management.

• Enrollment and Absenteeism Crisis: Legislative committees received sobering data on student engagement. Chronic absenteeism in Oregon, defined as missing 10% or more of school days, remains significantly high, at approximately 33.5%—far exceeding the national average. Concurrently, major school districts throughout the state, including those in Clackamas County like West Linn-Wilsonville, have experienced notable enrollment declines (around 2-2.5%). This combination of fewer students overall and more students regularly absent puts extreme pressure on district budgets and the State School Fund's allocation formulas.

  • Clackamas County Focus: Districts in Clackamas, such as North Clackamas School District, are actively reviewing multi-tiered strategies to address the chronic absenteeism problem, defining internal categories like "trending chronic" (94.9%–92.5% attendance) to target interventions earlier than the state’s 90%threshold.

• Higher Education Changes: H.R. 1 also forces major shifts in financing, including the elimination of the Grad PLUS loan program and capping of Parent PLUS Loans to streamline and reduce federal student borrowing.

🏥 Healthcare and Coverage

I'll address this topic more fully in a separate post. The healthcare sector was already in a state of high alarm due to COVID, chronic understaffing and under-funding now add forthcoming federal policy changes:

• Medicaid Program Cuts (H.R. 1): The federal H.R. 1 is projected to reduce federal Medicaid spending in Oregon by an estimated $11.7 billion over a decade, primarily by cutting back on the federal share of funding for the Oregon Health Plan (OHP).

• New Federal Mandates: The greatest concern for state administrators is the immediate operational and coverage impact of the new federal requirements within H.R. 1:

  • Work Requirements: Starting in 2026, states must establish work or community engagement requirements (e.g., 80 hours per month) for non-exempt adults in the Medicaid expansion population, a change expected to cause a significant loss of coverage. As a former policy analyst we would categorize this as a very dumb idea.

  • Shorter Eligibility Periods: The law introduces six-month eligibility redeterminations for the expansion population, replacing annual reviews. This increased frequency is projected to cause significant administrative "churn," leading to temporary coverage gaps and an increased number of uninsured Oregonians. We know how this work and has big harmful ripple effects not to mention the devastating impacts on people's lives- everyone pays in the end.

  • Mandatory Cost-Sharing: H.R. 1 requires states to implement mandatory cost-sharing for Medicaid expansion adults above 100% of the federal poverty level beginning in 2028, adding financial barriers for a population already living on limited income. We've studied and shown how this does ZERO good.

• Announced Closures and Service Reductions: Anticipating the eventual reduction in funding and the loss of insured patients, closures and service cuts are already being announced by providers. News reports cited that at least two rural Oregon hospitals are already set to close their obstetrics units, with some hospitals leaving communities without a local maternity ward. I worked with the Coos Bay Hospital and know they have been on the financial edge too. The Oregon Health Authority (OHA) is also planning to cut over 90 full-time positions and is proposing to reduce payments to hospitals that serve a high volume of Medicaid patients to address the anticipated financial strain.