Oregon lawmakers worked into the night on Monday to plug the budget shortfall, with an eye toward making cuts that did not gut Medicaid or the social services Oregonians have increasingly relied on during the pandemic.
The cuts are not as deep as some had feared. They rely in part on reserves, including the public education stabilization fund for schools. Lawmakers also had increased federal Medicaid dollars to soften the blow to the general fund, which totals more than $360 million. But advocates are concerned about a lack of behavioral health funding.
The two chambers began the day at 8 a.m. The Senate passed the budget bill 20-7 around 9 p.m., then the House followed suit with a 35-22 vote about two hours later. The bill now goes to Gov. Kate Brown for a signature.
"While we may not agree on all the details, I appreciate that lawmakers protected critical state services including schools, health care and senior services, while also taking action to tighten belts in state government," Brown said in a statement.
The bill balances the budget for the rest of the fiscal year, which ends July 1, 2021. But lawmakers may have to make even deeper cuts to the next two-year budget during the regular session in 2021. Oregon faces an estimated $4 billion state revenue shortfall in the 2021-2023 biennium.
"We didn’t do that bad this time around," Senate President Peter Courtney, D-Salem, told reporters Tuesday. "The bad cut will come next time."
The special session was the second one of 2020. The first one in June focused on police accountability and COVID-19-related measures, like extending the moratorium on evictions.
A third special session likely would focus on policy issues, including the issue of how employees who contract COVID-19 while on the job can collect worker's compensation and business liability issues. The state will get another economic forecast in September, which will show how the state is weathering the pandemic. Courtney said budget issues could come up again in another special session.
For now, lawmakers approved a framework that trims 2.7% from the state general fund for human services, or about $180 million from the Oregon Health Authority, the Oregon Department of Human Services and smaller agencies like the Long-Term Care Ombudsman, Psychiatric Security Review Board and Commission for the Blind.
House Speaker Tina Kotek, D-Portland, said the budget keeps major programs intact, but said the special session "is far from the end of long-term conversations to put Oregon on the path to an equitable economic recovery."
Legislative leaders and the governor have continued to call on the federal government to send more COVID-19 relief to Oregon. Brown had delayed the special session while holding out hope that Congress would act.
Brown said Tuesday she has concerns about the new budget relying on reserves in the Public Employees Retirement System because it drains one-time resources. Brown didn't rule out future action to strike that out of the budget, but said she's still hoping Congress will take action.
“In terms of my actions, I am honestly leaving all options on the table," Brown said.
Oregon Health & Science University was largely spared in the budget bill, with the exception of a $238,000 reduction in rural health programs and a $100,00 cut to a data program.
And the Oregon Health Authority’s allocations include a variety of reductions throughout the system rather than deep cuts to any one single area. The overall budget increases when factoring in additional federal matching dollars for Medicaid for newly enrolled Oregonians and COVID-19, but reductions throughout the system will impact multiple areas.
"While we’ve tried to mitigate the impact of OHA’s share of the state’s budget cuts, there’s no getting around the effects these reductions will have on services Oregonians rely on, especially in our behavioral health programs," Oregon Health Authority Director Patrick Allen wrote in a message to employees on Tuesday. "I recognize the impact that lay-offs will have on the lives of our staff at the Oregon State Hospital. We will do everything we can to minimize the disruption these cuts will cause."
The bill eliminates about 21 positions in various administrative roles at the Oregon State Hospital and freezes new hiring for other positions to save money. The state also will delay until January the start of a new program that offers in-home behavioral health services to children, with the goal of keeping families united and youth out of foster care and residential facilities.
"Nobody enjoys cutting funding for programs that Oregonians rely on in the middle of a budget cycle in the middle of a pandemic but we are required to keep the budget balanced,” Rep. Rob Nosse, D-Portland, co-chair of the joint budget panel’s human services committee, said in an interview. “With a prudent use of reserves and a lot of scrutiny of our spending, I think we made the best of the situation that we can."
The picture could have been worse. Brown had ordered state agencies to draw up plans outlining a 17% cut for the rest of the fiscal year.
The economy dropped after the state temporarily closed non-essential businesses to slow the spread of COVID-19. State economists project revenues will be $2.7 billion less than expected for the rest of the fiscal year.
Brown has implemented about $150 million in state cuts, primarily through administrative steps like cutting back on travel and freezing hiring for non-essential state employees. She has to sign the budget bill for it to take effect.
Advocates have deep concerns about the lack of funding for community mental health programs, including the certified community behavioral health clinics. About a dozen Oregon clinics in mostly rural areas are part of a federal pilot program that has an enhanced Medicaid match. When a Republican-led walkout to kill a cap-and-trade bill during the session kept both chambers from reaching a quorum earlier in February, one casualty was a bill that would have put $15.3 million in state funding into the program and generated nearly $63 million in matching federal money.
“In order to stem the tide of this unprecedented pandemic, we must take seriously the emerging behavioral health tsunami by valuing our behavioral health workforce and investing in the community behavioral health system, not by reducing the budgets of an already underfunded system,” Cherryl Ramirez, executive director of of the Oregon Association of Community Mental Health Programs, wrote to lawmakers. “Investments in the behavioral health system yield significant savings and improved outcomes in education, public safety and medical systems.”
Although Oregon has yet to see a fresh inpouring of federal dollars, a 6.2% increase in the federal match for Medicaid has helped the budget outlook. The enhanced match is part of payments to help states pay for the cost of COVID-19.
The match amounts to more than half a billion dollars in additional federal money for Oregon this budget cycle, which ends July 1.
At the same time, the state is looking for ways to rein in Oregon’s costs even as the state’s overall Medicaid spending goes up with increased enrollment.
The Oregon Health Authority completed an adjustment in 2020 rates that coordinated care organizations receive for Medicaid patients. That adjustment amounts to a statewide 2.1% decrease, on average, of the per-person rate that coordinated care organizations receive. This means that they will get less money, on average, per person for 2020 than they previously would have received.
The adjustment is retroactive for all of 2020 and allowed through the legislation that created this year’s so-called CCO 2.0 program, which is aimed at increasing accountability for the coordinated care organizations that insure Medicaid members.
State actuaries calculated the adjustment, factoring in that Medicaid has healthier people who would normally have employer-sponsored coverage but who are staying in the program because they can’t find work and because federal rules prevent Medicaid from dropping people during the public health crisis. More people are joining the program as well.
“The longer disenrollments are suspended, the larger the population who would typically disenroll becomes as a percent of the total CCO population,” Dave Baden, chief financial officer of the Oregon Health Authority, wrote in a memo. “Healthier members staying in the program decreases the average per-member, per-month cost.”
Lawmaker approval of the rate change is not required. In the memo, Oregon Health Authority officials said a combination of increased federal matching dollars and state actions that help coordinated care organizations offset the drop in the rate. For example, coordinated care organizations will still get $150 million total in extra funding for making quality improvements in 2020 even though they don’t need to hit the benchmarks. State health officials removed that requirement because of the changes to the health care system during the pandemic.
The authority also is not lowering the rate based on decreased use of health care, which happened throughout Oregon when the state halted elective surgeries to preserve personal protective equipment and keep hospitals safe.
The move will save the state about $20 million in state dollars, but also prevent another $97 million in federal dollars from flowing to Oregon.
Elon Glucklich contributed to this story.