2027–29 Agency Request Budget: Director’s Message

Greetings,

This message is admittedly long, but it's one of my most important messages of the year. So, please forgive me.

On Tuesday, ODHS released our Agency Request Budget for 2027-29 (scroll down a bit to the first blue box). This proposal reflects months of work by staff across the agency, as well as input from partners and providers. Thank you to everyone who helped us make difficult choices while keeping the people and communities we serve at the center.

The agency request budget is our opening proposal-not the state's final budget. The Governor will use requests from all state agencies to develop a balanced statewide budget. The Legislature will then consider and adopt a final budget during the 2027 session.

A different budget environment

Agencies received budget instructions this year that new funding proposals or Policy Options Packages (POPs) had to be cost-neutral. This means that any new investment had to be supported by savings or changes elsewhere in our budget.

At the same time, the 2025 federal budget bill known as H.R. 1 is shifting significant new costs and responsibilities to states. These federal changes will affect ODHS programs, operations and the people we serve. Some costs and impacts are still developing.

Governor Kotek directed agencies to focus on sustaining services for people in Oregon and Tribal communities while protecting Oregon values, improving customer service and operating more efficiently. We built our request around that direction, with people's safety, stability and access to essential supports as our highest priorities.

Caseload and service costs continue to grow

Oregon's changing population is a major driver of our request. ODHS is serving more older adults and more people with physical, intellectual or developmental disabilities. The cost of providing care is also rising.

Our current service level budget-the amount needed to continue services under current laws and policies-includes a $941 million General Fund increase for caseload growth and the rising cost per case. This is a 20% increase over the 2025-27 biennium and one of the largest sources of General Fund growth in the request.

These estimates are based on the state's twice-yearly caseload forecasts. The next forecast, expected in September 2026, may change the amount needed.

Focused investments in children, families and safety

Because new POPs had to be cost-neutral, we focused on a small number of investments that protect people, strengthen customer service and improve how ODHS operates.

Three proposals support the shared goal that children should grow up in family homes whenever possible:

• One would increase payments to foster families caring for children with intellectual and developmental disabilities. This would help more children live with families instead of in group settings.
• A second would expand crisis response, in-home coaching and caregiver support. The goal is to help foster families respond to children's needs and prevent disruptions.
• A third would pay Tribal foster families at the same rates as state foster families. This would support fair compensation and help more Tribal children remain connected to their Tribes, families and cultures.

Another proposal would improve the Office of Aging and People with Disabilities' licensing and safety systems. The CALMS proposal would replace paper and email processes with one online system, making it easier to manage information, support licensed providers and respond to safety concerns.

We had considered requesting a separate budget appropriation for the new Office of Customer Experience which is a central piece of our Transformation Project that aims to improve how we serve customers. The new division will oversee service delivery across several ODHS programs. Our goal is to better organize our services around the needs of a community member, rather the program silos.

After further review, we determined that a separate appropriation is not essential to begin Transformation. We will move forward now within our existing budget structure and use cost allocation to make needed adjustments.

Required reduction options

Oregon law requires every agency to identify possible reductions equal to 10% of its current budget and rank them from least to most disruptive.

In developing this list, we worked to:

• Protect the safety and stability of the people we serve.
• Limit harm to local providers and programs.
• Reduce impacts on our workforce wherever possible.
• Preserve the agency's ability to meet its legal and operational responsibilities.

These options are not decisions. They are a required part of the budget process. However, given the state's financial outlook and new federal costs, we must recognize that some reductions may ultimately be necessary.

If I were to leave you with one message about our Agency Request Budget (ARB) it would be: the options are not final, however the budget pressures are real.

What happens next

The budget will continue to change as new information becomes available. Major factors include future revenue and caseload forecasts, the full effects of federal policy changes, the Governor's statewide priorities, legislative decisions and unexpected needs that may require a state response.

This was a difficult request to build, and harder decisions may still be ahead. Whatever the final budget brings, we will continue to support our employees and put the children, adults and families who rely on ODHS at the center of our choices.

Thank you for your leadership and for the care you bring to this work. Your steadiness, honesty and partnership will be especially important as we guide our communities in the month ahead.

You can stay up to date on all budget and other ODHS news on our newsroom or social media.

Thank you,

Liesl

Liesl Wendt, Director, ODHS