Oregon Governor introduces $500 million increase for schools and alters funding model

Oregon’s public schools are facing a financial cliff this school year as the substantial federal investment of recent years comes to an end. In response, Governor Tina Kotek is proposing changes to help schools cope with rising costs in the future. The proposed adjustments are expected to increase the State School Fund by $515 million for the 2025-27 school years.

Over nearly two years, Oregon’s 197 school districts have utilized most of the $1.6 billion in federal COVID relief funds allocated to the state. With these funds set to expire in September, the services, programs, and staff they support are in jeopardy.

“School districts nationwide are grappling with budget shortfalls due to various factors, including the expiration of federal pandemic relief funds, declining enrollment, and inflationary cost increases,” stated Kotek in a recent news release announcing the proposed changes.

These efforts follow heightened demands for financial assistance from districts. Last fall, teachers from Portland Public Schools staged a strike lasting more than a month, citing low wages and poor working conditions. Kotek pledged to address school funding and compensation challenges in Oregon in response to the strike.

In the wake of the strike, leaders from other major districts also warned of dire budget circumstances. Several superintendents released a video in May denouncing the state of school funding in Oregon as a “crisis,” explaining the necessity to cut hundreds of jobs to maintain financial stability.

Seeking additional education funding, these leaders appealed to the Legislature for support.

“Our current situation is heart-wrenching and devastating. We are not pointing fingers; instead, we are seeking assistance,” expressed Andrea Castañeda, Superintendent of Salem-Keizer Public Schools, in the video.

Various education groups in Oregon expressed appreciation for Kotek’s proposed changes.

Reacting to the announcement, Morgan Allen, Deputy Executive Director of the Coalition of Oregon School Administrators, described it as “extremely positive.” Emielle Nischik, Interim Executive Director of the Oregon School Boards Association, viewed it as a promising start.

“Our work for students necessitates sufficient and dependable funding,” Nischik emphasized in an email. “While this doesn’t resolve our funding challenges, it sets the stage for more meaningful discussions about the State School Fund in the Legislature.”

Decades of inadequate funding

In 2023, during an extended legislative session, lawmakers approved a $10.2 billion school funding package, marking the largest public K-12 education budget ever in Oregon. Despite this allocation, which directed over $8.8 billion to the State School Fund, school leaders argued that it was insufficient following years of underinvestment and escalating costs from inflation.

Historically, legislators have not met the recommended funding levels advised by the state’s Education Quality Commission, responsible for ensuring the operation of highly effective schools in Oregon. This has perpetuated challenges in school funding.

Oregon’s school funding woes have been compounded by voter-approved measures in the 1990s that limited the state’s property tax capacity to fund schools. Consequently, school funding from property taxes plummeted, leading the Legislature to rely more heavily on the state’s general fund, which supports various state services.

Sen. Michael Dembrow, D-Portland, expressed the critical need for enhancements to the State School Fund. However, he voiced concerns about the source of additional funds, noting the absence of new tax increases or revenue streams to accompany the proposed changes.

“It remains uncertain what other budget areas might face cuts to accommodate this extra half-billion dollars,” Dembrow remarked. “Personally, I fear it could come at the expense of higher education, which is already significantly underfunded.”

Proposed Revisions

Kotek’s first proposed change to the State School Fund involves altering the allocation schedule to provide schools with 49% of their budget in the first year of the biennial cycle and the remaining 51% in the second year. This adjustment aims to bolster funding in subsequent budgets, ensuring they are based on the previous cycle’s second-year allocation. Districts could expect at least $217 million more in their 2025-27 budgets as estimated by Kotek’s advisors.

The second proposed change pertains to refining the data used for projecting future compensation. By narrowing the salary data projection window from 20 to 10 years, approximately $500 million could be allocated to schools for hiring educational staff in the 2025-27 budget.

Additionally, Kotek recommends that the Legislature consider annual changes in local property tax revenues. Current practices limit the consideration of revenue from the first year of the biennial budget when planning for the subsequent cycle, impairing the state’s ability to increase school funding in response to rising property tax revenues beyond the budget cycle. By integrating annual local revenue adjustments, an extra $55 million could flow into the State School Fund for the 2025-27 school year, according to Kotek’s office.

“The governor’s commitment is evident in these proposed changes,” remarked Dembrow. “The details of how these changes will be funded in her upcoming budget release in December will be crucial in assessing their feasibility.”