Brown Budget Closes Junction City Psychiatric Hospital, Hikes Sin Taxes

The newly elected governor’s 2017-2019 budget increases the hospital assessment tax and restores an insurance tax to offset a $1 billion reduction in federal funding to Medicaid. Oregon Project Independence would lose funding, and the General Assistance Program for the homeless would end Gov. Kate Brown boldly called on Oregon to cover all children living in Oregon, regardless of immigration status.

Gov. Kate Brown’s budget for the next biennium calls for closing the Junction City state mental hospital, raising tobacco taxes and offering the Oregon Health Plan to immigrant children who live here without legal permission.

The budget restores a tax on insurance companies and managed care organizations, increases and turns part of the hospital assessment into a true tax, and would end the revived General Assistance program, cutting off a critical means for Oregon’s burgeoning homeless population to get off the streets.

“Balancing the budget with program cuts alone would mean taking health coverage away from thousands of Oregonians. It would mean some families would not have access to preschool or early childhood education opportunities that support student success. It would mean no more Oregon Promise,” Brown told reporters Thursday morning at the Capitol.

“These are not cuts I am willing to make. Even with these revenue increases, this budget still contains major program cuts – painful cuts – to higher education, natural resources agencies, and programs for vulnerable populations. This is both unavoidable and unacceptable,” she added.

Brown prepared the budget in the wake of voters’ rejection of Measure 97, which would have raised $5 billion in new corporate tax revenues. The total state budget comes in at $174 billion, with $20 billion in the general fund.

Traditionally, the governor releases a budget in early winter of even-numbered years that acts as a starting point for budget negotiations for a two-year cycle that begins in July of odd-numbered years. The legislative budget-writers, Sen. Richard Devlin, D-Tualatin, and Rep. Nancy Nathanson, D-Eugene, will put together their own budget proposal early next year, and it’s the responsibility of the Legislature to pass a budget before the end of the 2017 session.

Brown is asking for $35.2 in new tobacco taxes and $33.8 million in new liquor taxes -- both of which will need Republican support to get through the Legislature.

She would raise cigarette taxes from $1.33 to $2.18 per pack, moving Oregon from the 30th-highest state tax to 13th, but still significantly lower than California and Washington. Oregon’s current below-average tax is less than Republican states like Texas and South Dakota.

The cigarette tax increase would raise $21.5 million while an increase in snuff and cigar taxes would generate another $13.7 million.

Closing the Junction City hospital may also be easier said than done. Although the facility was opposed by many mental health advocates, including Sen. Alan Bates, D-Medford, and Rep. Carolyn Tomei, D-Milwaukie, it has served a critical role in treating civilly committed patients. The Oregon State Hospital in Salem has seen a sharp increase in the number of people admitted for mental health treatment before they can stand trial for petty crimes, and Junction City provides a relief valve.

The state spent $80 million to construct the hospital, which opened less than two years ago.

OHA Budget

The budget for the Oregon Health Authority actually would decline from $20.6 billion to $20.4 billion, although the general fund would increase slightly from $2.14 billion to $2.17 billion to offset a reduction of $1 billion in federal funding, as the state must increase its share of covering Medicaid recipients made eligible by the Affordable Care Act. Most of the deficit will be made up through other funds, such as the hospital assessment.

Coordinated care organizations will also take a haircut, as the state is reducing the administrative allowance in their rates and only increasing other rates for inflation six out of the 24 months in the budget cycle. Rates for Medicaid payments made outside the CCO system were also cut.

Brown also does not wish to renew the Hospital Transformation Performance Program, designed to help hospitals shift their service model away from brick-and-mortar facilities and emergency rooms.

“Hospital revenues and margins have increased significantly since 2014, as have CCO margins and reserves,” according to the budget document.

Meanwhile, the size of the state social service bureaucracies will still grow, with 7 percent more employees at the Oregon Health Authority and 3 percent more positions filled at the Department of Human Services. The salary costs at the health authority have increased 29 percent in the past three years.

Special HEP C Fund

In a win for PhRMA, the budget creates a special $32 million fund to draw $164 million in other funds to provide earlier treatment to Hepatitis C carriers. An unfettered monopoly has allowed the drugmakers to set extortionary and budget-busting prices, which would erase much of the savings the state has made in the Medicaid program, due to the large number of people carrying the virus, which causes liver disease.

At the same time, the budget notes that limiting access to the drugs to only Medicaid patients with active Hep C symptoms -- as Oregon has done -- has led to lawsuits in other states. The drug manufacturers, who readily sell the lifesaving drugs for a fraction of the cost in other countries, have engaged state Medicaid programs and health insurers in a game of chicken, with millions of Hep C patients caught in the middle.

The Oregon Public Health Division will continue to rely overwhelmingly on federal grants, with the general fund contribution increasing less than 1 percent to $43.5 million, part of an overall budget of $648.3 million.

Because the state has traditionally delivered public health services through county governments, Oregon chips in one of the lowest shares of state funding in the nation. But with the solvency of timber-dependent counties teetering in southern Oregon, public health services will become increasingly imperiled.

In one of her boldest moves, Brown sets aside $55 million to expand the Oregon Health Plan to include children who do not have legal permission to reside in the United States, and are thus ineligible for Medicaid and federal support. California and Washington already offer health benefits to unauthorized immigrant children.

“The governor’s initiative reflects the return on investment achieved when children have health insurance coverage -- they have fewer emergency room visits, have improved social and emotional funding, do better in school, miss fewer school days and are more likely to graduate school and go to college,” according to the budget document.

DHS Budget

The Department of Human Services budget would grow from $10.6 billion to $11.3 billion, with the general fund spend increasing $400 million to $3.2 billion. The federal government’s matching rate dropped from 64.4 to 63.3 percent of costs, but the state will still increase rates for family foster care and behavioral rehabilitation services to bolster the child welfare system.

Community developmental disability programs and brokerages would have their rates cut, but the budget draws down the Fairview Housing Trust fund to increase rates to direct service providers for people with intellectual and developmental disabilities.

The Oregon Project Independence program budget to help middle-class seniors gets whacked, as do rates for nursing care facilities. The general assistance program, passed as part of a legislative package to mitigate Oregon’s housing shortage and homelessness problem, would lose all its funding.

General assistance was a popular, bipartisan proposal in the 2016 session because of its ability to draw federal funds to help house homeless people with disabilities, particularly mental illness, thousands of whom live outdoors in Portland and Eugene -- a palpable black mark on Oregon’s progressive reputation.

Chris can be reached at [email protected].

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