Governor’s budget starts education funding talks in good place

Published: December 3, 2024

Gov. Tina Kotek has officially proposed $11.36 billion for the 2025-27 State School Fund, a robust 11% increase from this biennium.

It's welcome news for education advocates. School leaders, watching their budgets devoured by inflation, have argued hard for an increase in state funding to match their rising costs.

"This is a good budget," said OSBA Executive Director Emielle Nischik. "Our school leaders still have deep concerns about some rising costs such as pensions and special education, but now we can talk about what our students need to thrive rather than what our schools need just to survive."

Kotek released the 2025-27 Governor's Budget on Monday, Dec. 2. It proposes $39.3 billion in state-directed spending, a 17% increase from this biennium. Most of that, though, is going to inflationary costs at all state agencies, with relatively little devoted to new state programs.

The governor's budget is the first public marker in the debate over the State School Fund and other education funding. The governor's proposed spending plan, required by statute, does not set any state agency budgets, nor does it go into detail on every expense. But it can influence the Legislature's budget writers, particularly when they all belong to the same party.

Kotek's news release on the budget reflected her priorities, highlighting her focus on addressing homelessness and the housing supply, improving behavioral health systems, and increasing support for children, education and especially early learning.

Kotek's education spending proposals that most directly affect school districts and community colleges include:

• $100 million in additional grants for school districts to continue early literacy work started in 2023.

• $78.5 million for summer learning over two years, an increase from the $30 million allotted for 2024.

• $186 million for the Oregon School Capital Improvement Matching Program, nearly doubling the amount from 2023-25.

• $340.8 million for the High School Success Fund, a 4.9% increase.

• $1.2 billion for the Student Investment Account, an 11% increase for the portion of the Student Success Act that provides direct grants to school districts.

• $4.4 billion for post-secondary education support through the Higher Education Coordinating Commission, a 6.5% increase.

Nischik praised Kotek for her work with education advocates to identify crucial and appropriate education spending but said additional investments are still needed.

School districts that have been underfunded for decades are struggling to lift up pandemic-traumatized students while dealing with new financial pressures, such as the growing number of students needing special education services, Nischik said. She said this budget will help open a more fruitful conversation during the legislative session.

Education advocates, legislators and the governor's office have been discussing budget amounts for 2025-27 since the end of the last legislative session. The talks have two distinct threads: the amount schools will need with inflationary costs just to keep doing what they are doing now, and how much additional money schools need to create the kind of education system communities and families want.

In recent years, the arguments over how much money it takes to maintain staff and programs as costs and salaries go up, known as the current service level, have consumed most of the oxygen. According to school business officials, legislative budget writers' assumptions have consistently underplayed the actual cost increases schools face. Education advocates have been forced to expend most of their energy during legislative sessions just trying to get schools' basic cost increases covered.

In 2023, legislators frequently noted that $10.2 billion was a record State School Fund, but school officials warned it would not be enough for all school districts to maintain current offerings. Many districts have found themselves dipping into savings or cutting staff and programs to balance budgets.

The Portland Public Schools strike in 2023 and the Greater Albany Public Schools strike this year highlight districts' struggles to keep up with wage demands with their existing funds.

Kotek took notice and vowed funding reform while working with education representatives, including OSBA. In July, the governor's budget analysts adopted calculations methods more in line with school business officials' understanding, adding roughly $515 million to the current service level estimate.

"The change in CSL is historic," said Morgan Allen, Coalition of Oregon School Administrators deputy executive director of policy and advocacy, "It's a much more accurate reflection of the costs districts are facing."

Allen said every district will be facing financial concerns if the money proposed by the governor doesn't show up in the final budget. As the Legislature goes through the budgeting process, Allen said, education advocates will be focusing more on specific funding needs, including special education and facilities.

By law, Oregon can't budget to spend more than it is projected to bring in over a biennium. The Nov. 20 Oregon Economic and Revenue Forecast vastly increased what is possible with the 2025-27 budget, though.

Since 2017, Oregon economists have significantly underestimated how much revenue the state would have in a biennium, leading to budgets far below the state's actual resources and big kicker refunds. For 2023-25, the budget forecast undershot by an estimated $2.8 billion.

New Chief State Economist Carl Riccadonna told legislators the office has revised its calculation methods. The Nov. 20 forecast, his first report, landed with a bang, raising the state's projected available resources for 2025-27 by $2.3 billion. A governor and legislators who had been staring at a potentially tight budget suddenly were given a lot more breathing room.

Education advocates see this as an opportunity to shift the funding conversation away from merely current service level and toward budgets that respond to the needs of students, staff and schools.

The Quality Education Commission offers a kind of benchmark. The commission has produced the Quality Education Model since 1999, offering research-driven best education practices and calculating the resources necessary for a high-quality public education system. The State School Fund has never come close to the model's funding estimates, though.

This biennium's report that came out in August estimated a $12.7 billion State School Fund in addition to other education funding is needed to fully implement its recommendations. Kotek's proposal is just over 11% from the model, far closer than Oregon has ever managed.

Chris Cronin, who will be OSBA's Board president in 2025, said the governor's budget is encouraging.

"I hope the Legislature will carefully consider these recommendations," said Cronin, a Grant County Education Service District board member. "I hope legislators will listen to OSBA members and our education partners about what schools need to really serve our children."

- Jake Arnold, OSBA
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