Oregon’s new governor delivers ‘mission-focused’ budget proposal

Oregon’s new governor zeroed in on three priorities — housing, education and mental illness — in a $32.1 billion biennium budget proposal that she characterized as “mission focused.”

Tina Kotek was elected in November, replacing termed-out fellow Democrat Kate Brown.

“The 2023-25 governor’s recommended budget starts and ends with the housing and homelessness crisis because housing is fundamental to everything else in a person’s life,” Kotek said.

The state has 18,000 homeless people, 11,000 of whom are unsheltered, according to the governor’s budget.

Kotek also prioritized reducing homelessness in her Jan. 9 inaugural address during which she declared a state of emergency.

“The housing crisis is one of the largest emergencies we have ever faced in Oregon and the human suffering it causes to individuals, families and communities is unacceptable,” Kotek said. “I have called on the legislature to support an urgent $130 million homelessness package as quickly as possible in the legislative session.”

On her first day in office, Kotek signed an executive order establishing a statewide housing production target of 36,000 homes per year, and Tuesday, she recommended in her budget a $1.02 billion investment in affordable housing production and preservation. That figure represents an 80% increase in housing over recent construction trends, according to the budget document.

Her executive order established a bipartisan housing production advisory council to establish a framework for meeting that target.

She has also proposed the creation of a new office called the Housing Production and Accountability Office to provide technical assistance to local governments and housing developers to reduce land use and permitting barriers to housing production.

“We will not reach our housing production target, overnight, or even in a year,” Kotek said. “But every step closer is a step in the right direction, and I will continue building partnerships with local government and private sector developers to make real progress.”

Kotek follows Hawaii Gov. Josh Green and Washington Gov. Jay Inslee, both Democrats, in making housing a top priority in their budget addresses.

Green also declared a state of emergency on the issue, and Inslee proposed a $4 billion general obligation bond referendum to ramp up housing construction.

Kotek’s budget includes plans to issue $770 million in GOs to build more affordable homes for renters and new homeowners.

The $130 million appropriation she wants the legislature to approve by June would be used to build permanent supportive housing and maintain rent assistance and services.

Her budget proposal separately would include $118 million from the lottery and general fund to preserve existing affordable homes, including manufactured housing.

Kotek arrives in the governor’s office after nine years as speaker of the state House of Representatives.

She had to win a three-way race to win the governor’s office that included a former Democrat running as an independent, threatening to siphon of Democratic votes. But Kotek ultimately prevailed with 47% of the vote to 43.5% for Republican Christine Drazan.

She will enjoy solid Democratic majorities in the legislature.

In his first speech as House speaker Jan. 9, Dan Rayfield, D-Corvallis, called for lawmakers to deliver a housing package within 60 days.

“Oregonians have called out for fast, decisive action to fix this crisis,” he said. “We have to deliver.”

Minority Republicans signaled they would fight against additional funding to combat homelessness. Her entire housing package totals more than $1 billion.

In a statement, the House Republican Caucus said the governor is neglecting other crises the state is facing beyond the three she emphasized in her budget.

“As the caucus that represents every corner of our state, one of our greatest concerns remains that the governor’s proposed homelessness initiative does not reach beyond the urban centers of our state,” the statement said. “If Gov. Kotek is going to stay “Mission Focused” on being a governor for all of Oregon, this must start now.”

In a press conference following her budget reveal, Kotek said she represents all Oregonians, and that the affordable housing and homelessness crisis is a statewide issue.

The Republicans also noted that the state has spent almost $1 billion on the homelessness crisis during the 2020-2022 biennium.

“This was done under Gov. Kotek’s watch as speaker,” the House Republican Caucus said. “Now, Gov. Kotek wants to spend another $305 million over the next two years, not including $705 million in debt refinancing authority.”

House Republicans said they are concerned that spending on homelessness could result in increased agency fees for Oregon taxpayers. They added, however, that they are “optimistic” that the governor will honor her promise to not raise taxes, and supported her move to pay a kicker, which gives the state’s taxpayers a tax refund if revenues exceed a certain threshold.

“According to the most recent revenue forecast, Oregon families will receive an average of $5,200 back on their taxes in the form of a surplus credit known as the “Kicker,” said Senate Republican Leader Tim Knopp,R-Bend. “I’m relieved to see that the Governor’s proposed budget doesn’t pull money from the kicker – it’s the right thing to do.”

The House Republican Caucus said housing, education and mental illness should be priorities, but it just wants to add to the list.

“We are disappointed there was no initial mention of other crises impacting our state such as transportation backlogs, a severe drought impacting our agriculture industry, public safety in our communities, or Oregon’s severe public defender crisis,” House Republicans said.

Oregon is entering a challenging and complex budget environment with about $3.5 billion of one-time funding, spurred by resources from the federal government, about to expire, Kotek said.

She recommended keeping the existing $2 billion of reserve funds in place, and redirecting $765 million that would have been automatically added to these reserves into targeted spending that she says are aimed at better serving Oregonians in these three key areas.

“This vision for Oregon’s future cannot be realized in one budget cycle. But this plan provides a roadmap for how we are going to reach our state’s long-term goals,” she said.

“There will be no new taxes,” Kotek said. “We are relying on the dollars that go into reserves to meet the goals of the budget.”

She added that the $2 billion in reserves represents the highest number Oregon has ever had.

“As someone, who has worked through two recessions and multiple downturns, I want to protect those dollars,” Kotek said.

The governor added that she supports plans to work with Washington state to rebuild the Interstate 5 bridge that connects the two states, and wants lawmakers and the Oregon Department of Transportation to work on finding revenue sources other than raising gas taxes to pay for the project.

“I have been a strong, strong supporter of replacing that bridge,” Kotek said. “I live right next to it, and in my budget I have continued funding for its design, but I am also telling ODOT that they need a funding plan so that they aren’t solely relying on the gas tax.”

She added given the cutbacks Oregonians are having to make to deal with inflation, she doesn’t want to add an additional burden of increasing gas taxes.

Her transportation proposal provides funding to make the voluntary pay-by-the-mile road usage program mandatory. The budget called the program an alternative method to raise revenue to offset the ongoing decline of fuel tax revenues.

The budget also includes funding for 15 capital improvement projects to upgrade existing ODOT facilities during the 2023-25 biennium and support for the three ODT revenue generating bond programs.

The state expects to receive $1.2 billion from 2022 to 2026 through the federal Infrastructure Investment Job Act.

“The issues I am focusing on are concerns for both Republicans and Democrats,” Kotek said. “We might disagree on some of the strategies, but it focuses on statewide issues.”

She added that there are no service cuts in the budget because she wanted to insure that Oregonians could tap needed services.

Ways and Means Co-Chair Senator Elizabeth Steiner, D-Portland, said lawmakers “are aligned with the governor on the priorities that must be protected as we work to craft a balanced budget.”

“We are facing a complex budget year that will require us to make some hard choices,” Steiner said.