DEQ budget hearing spotlights fee increases, Clean Water loans and lab equipment bond in Senate Bill 5520

Salem — At an informational hearing of the House Subcommittee on Natural Resources on Monday, April 7, Department of Environmental Quality officials outlined the governor’s 2025–27 budget recommendation included in Senate Bill 5520, saying the package is intended to stabilize core services while making targeted investments in water infrastructure, air monitoring and laboratory equipment.

The department’s budget presentation, given by Sione Filimonoye Hala of the Chief Financial Office and Director Leah Feldon, said DEQ is “primarily funded by other funds” — fees, permits and charges — and that rising costs have prompted modest fee increases proposed for air, water and materials‑management programs alongside some reductions in water quality services. Hala said the governor’s recommendation also relies heavily on non‑limited funds tied to the Clean Water State Revolving Fund and orphan site programs.

Why it matters: The governor’s package would preserve loan capacity for water infrastructure projects while seeking additional revenue to maintain permitting and monitoring functions. Legislators pressed agency leaders on the distribution of funding, the potential program impacts of general‑fund reductions and equipment needs at the state laboratory that DEQ says are critical to continuing drinking‑water, harmful algal bloom and PFAS analysis.

DEQ described three principal components of the governor’s recommendation. First, more than a third of the agency’s budget is non‑limited funds that provide near‑market‑rate loans and large expenditure authority for programs such as the Clean Water State Revolving Fund; the agency told the subcommittee the 2025–27 non‑limited budget includes roughly $340,000,000 in limitation dedicated to below‑market loans for water pollution prevention or mitigation. Second, the governor’s package proposes modest fee increases for the air quality, water quality and materials management programs after discussions with fee payers; DEQ said these are intended to stabilize or increase services. Third, the budget includes a bond‑funding request to upgrade laboratory capital equipment that DEQ calls obsolete.

Laboratory needs and bond request: Laboratory and Environmental Assessment Division Administrator Laurie (Lori) Pillsbury told the subcommittee the DEQ lab in Hillsboro processes thousands of samples each year but operates aging and, in some cases, obsolete instruments. Pillsbury said one liquid chromatography–tandem mass spectrometer used for PFAS and other emerging contaminants is about 20 years old and no longer serviceable; replacement cost for that class of instrument is about $450,000. She said other essential instruments used for fish‑tissue, sediment and dioxin methods are likewise past typical replacement lifespans and that many core particulate monitors were deployed in 2005 and are near end of life.

To address capital shortfalls, Pillsbury said Policy Option Package (POP) 142 would authorize expenditure of bond‑sale proceeds in the amount of $1,350,000 in other‑fund limitation to upgrade critical laboratory equipment and monitoring infrastructure; two related POPs would cover bond expenses and debt service. DEQ staff said the lab also received targeted equipment funding in prior biennia (including HAB analyzers) but that a longer‑term capital replacement plan needs dedicated funding.

Staffing, service reductions and contingency scenarios: Director Feldon described the budget as a “stabilizing” proposal that largely restores capacity to pre‑2008 staffing levels but noted program growth has increased the agency’s workload. She outlined agency options required by state law for 5% and 10% general‑fund reductions: a 5% cut would eliminate three permit‑writing positions, reduce support for the Lane Regional Air Protection Authority and cut monitoring of harmful algal blooms and some clean‑water planning contracts; an additional 5% (to reach 10%) would shrink the air‑quality monitoring network, eliminate water‑quality permitting and compliance positions and reduce biological monitoring in impaired water bodies. Feldon and other DEQ presenters emphasized that the general‑fund share is concentrated in air and water programs; land quality and central services receive little general fund.

Greenhouse gas reporting fee package: Feldon and Matt Davis (policy and external affairs manager) described a POP to adjust greenhouse‑gas (GHG) reporting fees. DEQ said the GHG reporting surcharge has not been indexed since 2010 and rising operating costs and inflation have eroded program resources. The agency is seeking $950,000 per biennium to maintain current staffing and verification functions; the proposal would authorize rulemaking to consider increasing the cap on large payers and establishing a minimum fee so smaller reporters pay amounts more commensurate with the agency’s workload.

Other program notes provided during the hearing: DEQ described securing approximately $197,000,000 under the federal Climate Pollution Reduction Grant (funds to flow through DEQ and to the Department of Energy and Department of Transportation for program implementation); ongoing community response and cleanup efforts at the J.H. Baxter wood‑treating site in Eugene; a multi‑agency nitrate‑reduction plan for the Lower Umatilla Groundwater Management Area targeting a basin goal of 7 mg/L nitrate in groundwater; and a West Bend prescribed‑fire pilot in which roughly 1,800 acres were burned with additional monitoring and community outreach.

Law and oversight: Multiple presenters reminded the subcommittee that DEQ implements delegated federal programs; the agency’s air and water programs are rooted in the Clean Air Act and Clean Water Act, respectively, and federal oversight (EPA) affects rulemaking, permitting and funding. The department also noted passage of Ballot Measure 76 as a source of certain lottery funds and that drinking‑water laboratory work is tied to Safe Drinking Water Act responsibilities.

What wasn’t decided: The hearing was informational; the subcommittee did not take formal votes on Senate Bill 5520 or any POPs during the session. DEQ officials said the greenhouse‑gas fee adjustments and the laboratory bond authorization would proceed through rulemaking or standard budget‑and‑legislative processes if the legislature approves the governor’s recommendations.

Looking ahead: DEQ will continue briefings over the next two days to review the agency’s three core programs — air, land and water — in more detail. Lawmakers on the subcommittee questioned tradeoffs inherent in general‑fund reductions and asked staff to provide additional information about the distribution of indirect rates and use of bond proceeds for lab capital.