OBI Policy Analysis

Governor Brown’s Proposed 2019-21 Budget

Published Wednesday, January 2, 2019

Gov. Kate Brown released her proposed budget on Nov. 29. This document, which highlights the governor’s priorities for the 2019/2021 fiscal biennium, will be the framework for the Legislature’s budget considerations when lawmakers convene on Jan. 22.

Below please find subject-by-subject highlights from the Governor’s proposed 2019-2021 budget that are of interest to Oregon Business & Industry (OBI). Further analysis and discussion will take place in OBI steering committees.

Tax and Fiscal Provisions in the Governor’s Budget
Governor Brown’s budget and policy agenda includes several policies that will result in additional taxes on the business community.

  • Funding the state’s Medicaid expansion (more than $1 billion including revenue in future biennia).
  • Implementing a program to reduce carbon emissions.
  • Increasing funding for education ($2 billion, to be raised through a tax package developed by the Legislature).

The Governor proposes to extend the sunset date for all tax expenditures set to expire in the next biennium, including those for the earned income tax credit, food processing equipment, and natural gas and propane vehicles.

The budget also allocates $100 million to help school districts cover the $375 million in increased PERS contributions.

Education Across the Pre-K through 20 Continuum
Education Overall
The Governor’s budget proposes increasing total funds from the 2017-2019 legislatively approved budget by 6.6 percent in the education program area. Beyond the recommended budget, the Governor will work with the Legislature to provide an additional $1.3 billion investment in improving kindergarten readiness, outcomes targeting third grade, and graduation rates.

The Governor’s budget invests $423.2 million total funds to the Early Learning Division. In the Governor’s investment plan, she proposes $285.8 million in new investment in preschool and kindergarten readiness strategies to serve 10,000 more children.

K-12 State School Fund
The Governor’s budget funds the State School Fund at $8,972.4 million plus an additional $100 million to offset PERS costs through PERS side accounts created through legislation in the 2017 legislative session.

Class Size and Length of School Year
A large portion of the Governor’s investment package is dedicated to the School Improvement Fund to reduce class sizes in kindergarten through third grade, and ensure all school districts provide a full, 180-day school year. The proposed investment to this fund is $793.7 million.

Career and Technical Education (M 98)
The High School Graduation and College and Career Readiness Fund (Measure 98) was created for schools to invest in dropout prevention, career and technical education (CTE) and college-level experiences for students. The Governor’s total proposed investment would fully fund the Measure 98 commitment at $303.2 million—making per student allocation $847 per year. This pledge, however, is not met through the Governor’s base budget as it maintains last biennium’s investment of $170 million and, under her investment plan, calls for an additional $133.2 million to be put into the fund.

Educator Advancement Council and Fund and the Chief Education Office
The Educator Advancement Council, which provides recruitment, preparation and professional learning for pre-K-12 educators through educator networks. The Council currently resides in the Chief Education Office. The Chief Education Office by statute would sunset in June 2019. The Governor’s budget allows the office to sunset and moves the two programs housed in the Office: The Educator Advancement Council moves to the Department of Education and the State Longitudinal Data System to the State Chief Information Officer. The sunset of this office saves $2.9 million for the upcoming biennium. The Governor’s budget invests $58.6 million in the Council.

The Governor’s base budget decreases the Community College Support Fund (CCSF) by 4.7 percent from the previous biennium’s legislatively approved budget funding the CCSF at $543 million. Under the investment plan, the Governor proposes a total investment of $646.7 million in the CCSF and proposes an additional $70 million for CTE capacity at community colleges.

The Public University Operations and Student Support Fund funding is flat in the base budget at $736.9 million. In the Governor’s investment plan, a $856.9 million budget is proposed.

Health Care
Medicaid (Oregon Health Plan)
In her base budget, the Governor holds growth in Oregon Health Authority (OHA) general fund funding to 12.8 percent by assuming Medicaid will be funded by the plan approved by her Medicaid workgroup, which includes the following taxes:

  • Increasing the reimbursable hospital assessment on Diagnostic Relate Group (DRG) hospitals to 6.0 percent from 5.3 percent (the current 0.7 percent “real tax” is eliminated).
  • Reinstatement of the premium tax currently scheduled for sunset at the close of 2019 at 2 percent of premiums and a broadening of that tax’s base to include stop-loss coverage. Revenues from this component of the plan will also be directed to the Oregon Reinsurance Program in the Department of Consumer and Business Services.
  • A “Subsidized Employer Assessment,” or a tax on employers whose employees are covered by the Oregon Health Plan.
  • A $2 per pack tobacco tax.

Coordinated Care Organization 2.0
The Oregon Health Authority (OHA) has been working toward an advanced coordinated care system for the new coordinated care organization (CCO) contracts. The Governor has outlined the priorities that focus on the following: improving the behavioral health system, increasing value and pay for performance, maintaining sustainable cost growth and addressing social determinants of health and equity. In addition to the investments that support this endeavor included in the Governor’s budget for OHA, the budget includes an additional $1.9 million to support those priorities.

Energy and Environment
Oregon Climate Authority
The Governor’s budget eliminates both the Carbon Policy Office and the Oregon Department of Energy and creates a new office—the Oregon Climate Authority. The budget for this office is $96.2 million total funds. The Oregon Climate Authority will be responsible for implementing the state’s climate and clean energy strategies and tracking progress toward the state’s climate goals. This would include the carbon cap-and-trade program, greenhouse gas emissions reporting and accounting, energy markets data and analysis, energy and climate policy analysis, and other energy programs that support the state’s climate and clean energy goals.

Department of Environmental Quality
The Governor’s budget increases the DEQ’s 2017-2019 legislatively approved budget by 19 percent. Significant investments are made in air and water quality programs to address permitting backlogs.

Pay Equity
The new Pay Equity Law (HB 2005) goes into effect January 1, 2019. The state has conducted a pay equity analysis as part of the implementation for the law. The analysis has shown that the state will need to make pay adjustments to achieve pay equity. The Governor has allocated $15 million for potential costs to state agencies. The budget for the Chief Human Resources Office includes the addition of classification and compensation staff to implement pay equity, as well as other resources to assist state agencies.

Employment Department Modernization Initiative
The Employment Department is moving forward with the plan to upgrade its technology system. The Department will continue to use the Modernization Funds received from the Federal Government in 2009 to support their modernization initiative. The project started during the 2015-17 biennium and is currently in the advanced planning stage. The Department expects to reach the development stage by the close of the 2019-21 biennium. The Governor’s budget is supporting the use of $19.9 million Other Funds. It represents a 311.9 percent increase from the 2017-19 Legislatively approved budget. The project budget for this biennium is expected to fund 55 positions.

The Chief Justice’s agency request budget is $925.5 million total funds. It includes $545.8 million General Fund (including General Fund debt service), $378.3 million Other Funds and $1.4 million Federal Funds. This requested budget includes all programs and all policy packages submitted for legislative consideration. The Department request supports a long-range plan to provide seismic and other upgrades to the Supreme Court building and circuit court facilities and meet minimum security standards in all circuit courts. The budget includes judges and staff compensation and benefit adjustments, as well as funding court operations and continuing drug, mental health and domestic violence courts. The budget also requests additional judges and staff to improve timely services to the public and increase access to justice. A portion of the Judicial Department budget is passed through to other entities, primarily counties, for courthouse capital repairs and replacement, court security and other services.

Investments in Court Modernization

  • New positions for judges and increased support staffing.
  • Judicial compensation increases to better align the salaries of Oregon attorneys and judicial officers to their peers in the 13 Western states.
  • Preservation and seismic retrofitting for the Supreme Court Building.
  • Bonding support for courthouse replacements in Multnomah, Lane, Clackamas, Benton and Linn counties.
  • Support of facility infrastructure, safety and other upgrades for local courts.