LFO recommends $22.97 billion DHS budget; Legislature approves provider rate increases and budget notes, advances SB 5526

The Legislative Fiscal Office told the Joint Subcommittee on Human Services on June 5 that it recommends a total-funds budget of $22,974,972,612 for the Department of Human Services and proposed a set of provider rate increases and program investments that the panel moved to the full Ways and Means Committee with no objections.

The recommendation “represents a 15.7% increase compared to the 2023-25 legislatively approved budget,” LFO analyst Gregory Jolivet told the subcommittee, and the recommended general fund budget “represents a 21.8% increase from the 23-25 LAB and a roughly 1.1% increase over the current service level budget.”

Why it matters: The DHS budget covers Medicaid, long-term care, child welfare, SNAP administration and other programs that serve older adults, people with disabilities, foster children and people experiencing homelessness. Changes to provider rates and budget notes in the package affect direct-care wages, inspection and licensing capacity, and the implementation timetable for new payment methodologies.

Most important details first: The LFO package includes $75 million general fund for Medicaid provider rate increases across Aging and People with Disabilities and IDD programs intended to increase direct-care wages and, in some cases, move provider types to new rate methodologies. Other headline investments in the recommendation include $19.7 million general fund for youth experiencing homelessness programs, $7 million for Family First prevention services, $600,000 to implement a SNAP elderly simplified application option, and $56.9 million general fund phased in to implement Agency with Choice services in APD and IDD. The recommendation also adds funding for inspections, mainframe modernization and security contracts in DHS field offices.

The LFO also recommended about $130 million in general-fund reductions to current service level items (services and supplies, IT purchases, postage and handling), about $43.4 million in reductions to program and training budgets, and approximately $48 million in one-time fund shifts.

Rate changes and timing: The LFO memo presented tables showing APD rate increases totaling $19.4 million general fund ($52.9 million total funds) and IDD rate increases totaling $33.2 million general fund ($90.9 million total funds). Most increases take effect July 1, 2025, and July 1, 2026. A proposed new acuity-based rate model for adult foster homes is scheduled for implementation Jan. 1, 2026, following consultation with providers; a new residential care facilities rate model based on individual assessments is also slated for Jan. 1, 2026.

On why some provider categories were not included, LFO analyst Gregory Jolivet said the office faced “tough choices” and aimed to target increases at provider types “that had been left behind,” while limiting increases where provider rates have already risen. He added that a non-state-employee salary pot of $75 million is included and that, with that investment, “it’s estimated that the DSPs could get to a base wage of 24 to $24.50 per hour.”

Lawmakers’ questions and concerns: Several legislators thanked LFO staff and supported the rate increases while urging caution about long-term sustainability. Representative Deal said, “I’m glad to see there are rate increases for APD and IDD.” Senator Celsrepo praised the rate study and emphasized enforcement: “I hope that the tools that we’re giving in this budget will allow the agency to have the authority and the conviction to get the bad actors out of the system.” Other members raised concerns that raising some wages could shift workers between program types and called for continued attention to enforcement, inspection capacity and community engagement.

Key performance measures and budget notes: The LFO recommended adding 11 new key performance measures and deleting eight outdated measures, including new targets for supported employment and reported food security. Budget notes attached to the recommendation require DHS to collect wage-transparency data from assisted-living, residential care, memory-care, adult foster home and in-home agencies on June 30, 2025, and again on Aug. 30, 2026; to implement an acuity-based adult foster home rate model on Jan. 1, 2026; to implement a restructured residential care facility Medicaid rate model on Jan. 1, 2026; and to use Safety and Regulatory Oversight (policy option package 101) resources to ensure providers have emergency response and person-centered policies, inspect new licenses and ownership changes within 120 days, and strengthen memory-care endorsement and staff training requirements.

What the subcommittee decided: The subcommittee adopted the dash-2 amendment (the amendment reflected the LFO’s recommended allocations) and moved Senate Bill 5,526 as amended to the Ways and Means Full Committee with a due-pass recommendation. The motion passed by voice with no objections recorded during the work session.

Discussion vs. formal action: The record shows extensive discussion of rate-setting, enforcement and program priorities; the formal actions were adoption of the dash-2 amendment and forwarding SB 5526 as amended to the full committee. The transcript does not record a roll-call vote tally for those actions—members indicated “no objections” and the motions were moved.

Additional implementation notes: LFO staff noted several technical adjustments tied to the Oregon Eligibility Program position transfers and to DHS “reshoots” that reflect updated caseload forecasts and cost-per-case changes. LFO also flagged that some increases are phased in over the biennium and that certain policy or methodology changes must occur within the appropriated funding.

Ending: The subcommittee thanked LFO staff Gregory Jolivet and Ella Cook for their work and signaled continuing oversight as implementation and provider monitoring proceed. The bill now moves to Ways and Means for further consideration.