There are two pieces of budget information that I want to share with you this week.
The first is about a $10.8 million reduction in administrative costs that will be implemented over the next few months. At the July E-Board meeting we were asked to make these additional reductions in order to avert some of the service reductions that were in June's 9 percent budget reductions.
This $10.8 million cut represents about 6 percent of our remaining non-program related budget and is on top of the 9 percent cuts made in June and those that we have made throughout the past year.
As you know, the vast majority of our budget goes out into the community (about 85 percent). That's to doctors and hospitals through the Oregon Health Plan, to home health care workers, to foster care providers, to nursing homes. This is important to remember because while we are a large agency, a small portion of our budget stays in Salem or is used to cover our administrative costs. The $10.8 million reduction will be significant.
We are meeting this budget cut in three ways: We will be reducing management service staff throughout the agency by another 25 people through layoffs or early retirements over the next few months. We worked hard to keep staff reductions to a minimum. As more details about this become available, I will keep you informed. We will also continue to hold vacancies open, and in fact we have more vacancies than we originally anticipated last June so there are some savings there. And we are further tightening expenditures in service and supplies -- such as further reducing travel and reductions in professional services contracts.
The effect of these cuts, frankly, will be two-fold. First, there will be the human toll for those people who lose their jobs. I know this will bring great difficulty to them and their families. Second, it will be more difficult for us to do our jobs. We are already working with a 5 percent workforce reduction, and this will mean there will be even fewer of us to do the work before us in a time when the need for health and human services has never been greater. There will be reduced capacity to meet administrative demands, program oversight and compliance. We will have to make some difficult choices about prioritizing our work and focusing on the most mission-critical tasks. And, of course, we will continue with our efforts of continual improvement started with the Transformation Initiative. This will be key to our ability to manage with fewer staff and financial resources.
The other piece of budget news is that this morning the Governor's office released the next round of budget cuts that came after the fall revenue forecast showed an additional $377 million shortfall. DHS's portion of the newest statewide reduction is $104 million.
However, it has been the intent of legislative leadership and the Governor to use the additional federal Medicaid dollars that the U.S. Congress recently approved to mitigate further reductions to our programs.
This will give us and our clients a reprieve. But as you know, given the volatile economy, there is still the possibility of additional budget reductions coming in the future. Yesterday the employment department announced that the unemployment rate remains unchanged at 10.6 percent. The next economic forecast is in November. That will be the starting point for the difficult budget decisions that will have to be made by the new 2011 Legislature that starts in January.
So while it is good news that we have this reprieve, it doesn't make it any easier for clients and staff affected by the earlier budget reductions. I know that the workforce reductions are going to be hard to deal with. It is also difficult to continue living under the specter that things will get worse before they get better. I wish it were otherwise. As always I will continue to keep you informed in a world of continuing and rapid change.