This week I want to provide a quick update on recent legislative activity in Washington, D.C., that will have an effect on the budgets of all 50 states.
One of the fundamental principles of the public safety net is that the state and federal governments share the cost. As Oregon and the other states struggled to keep up with the rising caseload brought by Wall Street's global recession, we experienced the wisdom of that philosophy. The federal government stepped up and increased the percentage it pays for Medicaid -- one of the cornerstone services we jointly pay for -- as part of the economic stimulus package. That allowed our agency to support some of the other services that have fewer federal dollars and pumped some much needed revenue into our state economy. But, as you know, that increase is scheduled to end in December.
Some good news came this week with the passage in the U.S. Senate of a $26 billion package for schools and human services to extend a scaled-down version of the Medicaid increase to states through June of 2011. The package is scheduled to go to the U.S. House early next week. While there are no sure things in politics, the bill is expected to pass.
Some of those dollars will be coming to Oregon. The Medicaid increase will amount to approximately $143 million for Oregon and there are funds for schools as well.
These funds, I hope, will help alleviate pressure to make further reductions in the future. And more importantly, they provide the kind of reserve funds we will likely need to make it through the rest of the biennium and avoid the kind of reduction and restoration cycles that create confusion for clients and providers of services.
There is another forecast coming later this month, which will again take a look at all economic indicators and make an updated prediction of state tax collections through the budget cycle. And there will be another in late November. Given the fact that we remain at over 10 percent unemployment, it is unlikely to be a better picture and it is possible that revenues have decreased even more. That combined with continued record-breaking caseloads means that we could very well have another shortfall to address all too soon.
Meanwhile, we are preparing budgets for the Department of Human Services and Oregon Health Authority knowing that the state is facing a $2.5 billion shortfall next budget cycle.
So while it is very good news to have this short-term assistance from our federal partners, we have a long road ahead. We will continue to follow the plan laid out for us during the last e-board , manage our resources well and efficiently, prioritize our work, and be strategic in our approaches. It's likely that given the volatility in the economy and the revenue forecasts, the Legislature will need to wait until several more revenue forecasts are made before making any firm decisions about using the recent federal funds this biennium; it might be prudent to save for either later this biennium or next.
And meanwhile, it's a relief to know that those funds may soon to be on their way and available to help avoid any further reductions in services.