Oregon stands to lose more than $15 billion in federal funding for health care, food assistance and other purposes in the coming years, under the sweeping spending bill congressional Republicans passed earlier this year. That’s the preliminary conclusion by Gov. Tina Kotek’s office, which in recent weeks asked state agencies to crunch the numbers for what the so-called One Big Beautiful Bill Act might mean for their ability to provide services. OPB political reporter Dirk VanderHart joins us to explain.
Note: The following transcript was transcribed digitally and validated for accuracy, readability and formatting by an OPB volunteer.
Dave Miller: This is Think Out Loud on OPB. I’m Dave Miller. Oregon stands to lose more than $15 billion in federal funding for health care, food assistance and other programs in the coming years, under the sweeping spending bill congressional Republicans passed last month. That’s according to Governor Tina Kotek, who asked state agencies to crunch the numbers. She says that the One Big Beautiful Bill Act will lead to needless, callous hardship.
OPB politics reporter Dirk VanderHart joins us now with more details. Good to see you.
Dirk VanderHart: Hey, Dave.
Miller: I want to start with the biggest piece of the federal funding that is going away. What did the governor’s analysis tell us about Medicaid, the Oregon Health Plan?
VanderHart: It had a lot to say about this. The bottom line is this is the place Oregon expects to be hit the hardest in terms of this bill. The state’s analysis suggests that Oregon is going to lose out on more than $11 billion in federal funding between now and 2031 as a result, and that is just for a whole bunch of reasons. The bill created new restrictions on who can receive Medicaid services, but also how much the federal government is willing to pay for some things, in some cases reducing that. And also how states are able to fund this match money that they all sent to the federal government in order to get money back.
All of that is going to take a big toll on how Oregon offers health care to low income residents. In the current two year budget, the impact is expected to be around half a billion dollars – not much in the scheme of things – but that really ramps up in coming years as pieces of this bill begin to take effect.
Miller: What is that going to translate to, according to the governor’s office’s calculations, in terms of the number of Oregonians who would lose their health insurance?
VanderHart: We don’t have an end all be all number. There are just so many moving parts to this.
One very key provision of H.R.1 is this new work requirement that says people need to work or volunteer at least 20 hours a week in order to qualify. The Oregon Health Authority says that between 100,000 and 200,000 people could lose their health care because of just that requirement. One major red flag here is that the state and other entities are saying people won’t just cease to need health care because they lose their health insurance. They’re going to be showing up to emergency rooms, they’re going to be very sick. There won’t be these provisions in place to actually pay health care providers for their services. So they are raising the specter that particularly rural hospitals, people that are caring for these folks are really going to be put out because of this.
Miller: It’s not just the state’s going to get billions of dollars less in Medicaid money from the feds. It’s also going to have to spend more of its own money to manage the system. What’s happening here?
VanderHart: The analysis released this week was all about how much the state stands to lose in federal money. But you are right, it didn’t quantify this other piece which is additional costs posed because of the bill. So for instance, currently Oregon goes over its Medicaid rolls every two years to figure out whether the people that get health insurance still qualify for health insurance. The federal bill says we now have to do that, and other states have to do that, every six months. That is expected to be a hugely time consuming process, it’s expected to involve hundreds of people really scrutinizing our roles and figuring out who qualifies, and that will cost money. We don’t have an end all be all number right now, but it’s going to cost a good chunk of money.
Miller: What did analysts say about food benefits?
VanderHart: So SNAP benefits, what we used to call food stamps, is the area state officials are saying will be second most impacted by this bill. The analysis suggests the state is going to lose out on around $3 billion in federal aid between now and 2031. That’s for a bunch of reasons, as you can expect. One is that the federal government could require Oregon to pay up to 15% of SNAP benefits going out to people. That’s a first, the federal government has always covered 100% of these. Oregon will also be required to shoulder more of the administrative costs of this. And once again, there are work requirements built into this bill for people that receive SNAP, so presumably people will lose their benefits, there’ll be less money coming because of that reason.
Miller: What did the Oregon Department of Transportation say about major projects like plans for I-5 widening at the Rose Quarter?
VanderHart: That is the piece that ODOT has identified as the hit of this bill. Under the Biden administration, that Rose Quarter project was approved for $450 million in federal money. That was to build this huge cap over Interstate 5, as it goes through Portland’s Rose Quarter, to build essentially a new community on top of. Nearly all of that money under this Trump bill has now been rescinded. I think we got a bit of it, but maybe $400+ million is gone, which means this Rose Quarter project is facing big, big questions about how it’s gonna come up with its $2 billion price tag.
Miller: Can you help us understand the broader context here? Just for the coming two year budget cycle, the state says it’s going to lose out on $1 billion for federal funding in the biennium that just started in July. How does that compare to the federal money that is still expected to come in, or the total biennium budget?
VanderHart: We count 33% of our total budget every two years as federal money. So in the case of the budget lawmakers passed in June, around $44 billion they are counting on this federal money. We are now losing $1 billion of that. That hit though is expected to ramp up incoming budgets. I think the hit is nearly $6 billion for the next two year budget; it gets even higher after that. And that is again because H.R.1 is staggered in its implementation and some things take effect later.
Miller: One of the points that actually was a surprise to me – maybe it shouldn’t have been, but it’s hard to keep track of all this stuff – is that we’re not just talking about direct federal funding the state’s going to lose out on. The bill that passed in Congress is also going to mean that less Oregon income tax is collected. What’s happening here?
VanderHart: This is because of the way Oregon’s tax code works. We use taxable federal income as a jumping off point for how much people owe in their state taxes. And since this bill is partially about tax cuts, extending new tax cuts, people don’t have to pay taxes on tips and some of these things, we are now going to see a lower starting jumping off point for state taxes. And that means that we expect less money in state taxes just because of federal tax cuts.
Miller: How much less?
VanderHart: We saw an analysis come out last month. The state expects to take in around a billion dollars less in state money in the current budget as a result of this and there are somewhat lessened impacts in the coming two budgets I think. This budget, next budget and the one after that, I believe the overall impact is around $1.7 billion. That’s big money, that’s real money when it comes to crafting our state budget.
Miller: Have Democrats said anything about this issue in particular, the tie between federal tax code and Oregon income tax receipts?
VanderHart: We haven’t heard a lot publicly. In talking to leading Democrats, I guess I should say, it is clear they are considering action. I think in particular that might look like disconnecting Oregon’s tax code more from the federal tax code, so we are not just assuming some of these tax cuts when we are calculating state taxes. That’s tricky because it is essentially a vote to increase people’s taxes, so that means it’s gonna require a three-fifths vote. It’s gonna require all Democrats to stick together to pass it or they need to to pick off some Republican votes, this dynamic we’re very used to in Salem these days.
But it is very clear there is a lot of worry right now about belt tightening in Salem. We haven’t seen it a lot in recent years, but there are real concerns about service cuts, layoffs – the kinds of things you see in a period of austerity.
Miller: How have Oregon Republicans responded to the governor’s announcement?
VanderHart: What we largely hear from Republicans, they don’t take it on often, but when they do talk about this federal bill they typically see it as a pretty good thing. They see it as a way to rein in federal spending, to ensure that people who shouldn’t be receiving federal assistance are being weeded out and that is especially been the contention we’ve heard from Congressman Cliff Bentz. He’s the only Republican in the Oregon delegation, he’s the only member of the Oregon delegation that voted for this bill. And he says, by and large, this is a very good thing for a whole host of reasons.
This week we also heard from Christine Drazan, she’s the House Republican Leader who said Oregonians are actually more imperiled by the Democratic policies that this state is enacting than this federal bill. She pointed specifically to a tax hike package to pay for transportation that Democrats are teeing up for an August 29 special session. I think we can pretty reliably assume she opposes that.
Miller: Dirk, thanks very much.
VanderHart: Yeah, my pleasure.
Miller: Dirk VanderHart is a member of our political reporting team.
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