LFO Analyst: LaMonte

The Economic Development Department provides economic and cultural enhancement throughout the state and administers programs that aid businesses, communities, and people. The Economic Development Department receives Lottery Funds and disburses the funds to a variety of programs, including regional and rural development, industry development, and ports.

The 1997 Legislative Assembly directed that Oregon's economic development system be redesigned to meet the changing economy in Oregon, to provide flexibility in funding statewide and regional needs, and to focus on funding for rural and distressed communities. The Department has seven budgetary divisions:

• Program Services provides overall policy direction, service delivery and program support, including ports and international trade staff support;
• The Community Development Program includes state and federal funds that support the Department's community, business and ports services and funding programs;
• The Tourism Commission promotes Oregon and helps create jobs in tourism-related industries;
• The Film and Video Office develops the film and video industry in Oregon;
• The Oregon Arts Commission, added to the agency in 1993, fosters the arts in Oregon;
• The Oregon Progress Board evaluates Oregon's progress in meeting Benchmark goals; and
• The Lottery Pass-Through Division is used to account for lottery resources distributed to programs outside of the agency.

The Director of the Economic Development Department is appointed by the Governor and confirmed by the Senate. This Division includes the Office of the Director, Field/Port Services, International Services, Finance Services, Business and Industry Services and Central Services. Division services include project development, coordination of financing, and contract development and administration. It also includes administrative support to the agency in the areas of fiscal and personnel management, information processing, research and marketing, and staff support and direction.

The Department has restructured internal operations and established six cross-agency regional teams in the Field and Port Services Program. These teams coordinate the efforts of the Community Solutions Field Teams. Services include planning and financial assistance for Oregon's communities and 23 ports and distribution of federal block grants and lottery backed loans and grants for infrastructure (e.g., water, sewer, electricity, and roads), and public works and business and industry development activities.

Other programs and services include:

• International Services, which provides staff and marketing services in foreign markets including offices in Japan, Korea, and Taiwan, and contracted services in other countries, including Germany and Mexico. Activities include the sister cities programs to host visitor exchanges and cultural events. The program works with state agencies such as the Department of Agriculture to market Oregon products internationally, and with internal agency programs such as tourism, to combine product marketing with state promotional activities. The 1997 Legislature approved $167,000 to explore opening an office in Shanghai, China during the 1997-99 biennium. However, the International Trade Commission recommended that these activities be deferred pending a review of all potential emerging markets;
• Business and Industry Services, which provides direct assistance to Oregon's businesses to help them expand, create new jobs, train and retrain employees, and to attract new businesses to Oregon;
• Finance Services, which coordinates funding for projects, and manages program revenues including lottery funds, bond proceeds and revolving loan funds; and
• Central Services, which includes fiscal and personnel management, information processing, research and marketing, and staff support and direction for the programs in the Economic Development Department.

The Division is supported by Lottery Funds, Federal Funds for administration of federal programs and the Community Development Block Grant program, and Other Funds from interest earnings and loan repayments, and from the Safe Drinking Water Revolving Loan Fund that is administered by the Department.

Community and regional needs and the needs of businesses drive the workload. External forces, including changes in Oregon's economy, have a direct impact on the workload. Workload is also driven by changes in organization and staffing. The revisions to the budget structure and the change in direction and responsibility of the Economic Development Commission have a major impact on staff workload, as does the additional workload generated by the Safe Drinking Water Revolving Loan program and increased funding for infrastructure investments.

The Governor's budget was a reduction of $7.3 million (22.2%) from 1997-99 estimated expenditures, primarily as a result of reduced federal funds revenue from the transfer of the Job Training Partnership Act program to the Office of Community College Services. The Governor's budget included:

• $200,000 Lottery Funds and 2.0 FTE to improve management and coordination of international trade activities, and
• $114,617 Other Funds (from revolving loan fund revenues) and 1.0 FTE for a rural infrastructure technician, for the additional staff workload that will be generated by the $45 million in lottery-backed bonds for infrastructure proposed in this budget.

The legislatively adopted budget is a reduction of $7.2 million from 1997-99 estimated expenditures, primarily as a result of reduced Federal Funds revenue from the transfer of the Job Training Partnership Act program to the Office of Community College Services. The budget includes:

• $200,000 Lottery Funds and 2.0 FTE to improve management and coordination of international trade activities;
• $114,617 Other Funds (from revolving loan fund revenues) and 1.0 FTE for a rural infrastructure technician, for the additional staff workload that will be generated by the $45 million in lottery-backed bonds for infrastructure proposed in this budget;
• $230,000 Lottery Funds and .75 limited duration FTE for a contractual trade representative in China; and
• adjustments for reduced Attorney General, Department of Administrative Services and Secretary of State assessments.

The Division's revenues include fees and service charges, interest earnings, loan repayments, federal grant funds, and over $145.2 million in nonlimited other funds from the sale of program specific revenue bonds and lottery backed bonds. Programs include the Special Public Works Fund, Industrial Revenue Development Bonds, and Water/Wastewater Funds for the investment of proceeds from lottery backed bond sales. Other Fund revenues include $25 million for the Safe Drinking Water Revolving Loan Fund and a lottery fund bond program to provide the state match for the Safe Drinking Water program. Lottery Funds carryover represents unspent lottery allocations from prior biennia, generally for projects which are begun but not yet completed in the current biennium, which are carried forward for expenditure.

The bonding authority, managed through the Oregon Bond Bank, for the Special Public Works Fund, the Water/Wastewater Fund, and the Industrial Revenue Development Bond program, was increased from $100 million to $200 million in 1993. The Legislative Assembly has provided more flexibility in the use of funds for financing activities across program lines, adding to the loans, grants and bonds issuance that are processed. In addition, a new and ongoing program has been added with the Safe Drinking Water Revolving Loan Fund and the bonding authority that has been provided for the 20% match.

The Governor's budget for Community Development Programs was an increase of $111.3 million over 1997-99 estimated expenditures, primarily as a result of revised assumptions about nonlimited bonding activity. The Governor's budget had an increase of $55 million to current service level estimates for lottery-backed bonds, which included:

• $5 million for the state's matching fund for the Federal Safe Drinking Water Revolving Loan Fund. The Health Division receives the principal ($25 million for 1999-2001) and contracts with the Department to administer the program. The 1997-99 Legislature bonded $6 million in state matching funds for the federal funds allocated in 1997-99.
• $10 million for the state's share of future Columbia River channel deepening (the total state share is estimated to be in the $25-30 million range, and additional funding will be required in 2001-03).
• $40 million for sewer, water and community infrastructure needs.
• $1.7 million in Other Funds for the cost of issuing these bonds.
• $1.1 million for debt service on the new lottery-backed bonds.

The legislatively adopted budget has an increase of $126.3 million over 1997-99 estimated expenditures, primarily as a result of revised assumptions about nonlimited bonding activity, and increased Other Funds limitation for bond proceeds. The legislature approved a total bonding limit of $45 million, which may be used on the following projects:

• $5 million for the state's matching fund for the Federal Safe Drinking Water Revolving Loan Fund. (The Health Division receives the principal $25 million for 1999-01 and contracts with the Department to administer the program. The 1997 Legislature bonded $6 million in state matching funds for the Federal Funds allocated in 1997-99);
• $40 million for sewer, water and community infrastructure needs;
• $17.7 million for the state's share of future Columbia River channel deepening (The total state share is estimated to be in the $25-30 million range, and additional funding will be required in 2001-03.); and
• $20 million in bonding authority for a Coos Bay natural gas pipeline.

The availability of bonding capacity within the $45 million cap depends on assumptions about when the authority will be used for the Coos Bay and Columbia River projects. Bonds for the Coos Bay pipeline will be issued subject to local voter approval of an equal level of local bonding, which could occur as early as November 1999. It is not anticipated that the $17.7 million in bond authority for the Columbia River channel deepening project will be needed in the 1999-01 biennium. However, the legislature established enduring bonding authority, so any of these bonds may be issued during the 01-03 biennium.

The 1999 Legislature also approved $1 million in lottery-backed bonds for the Oregon Garden project in Silverton, outside of the $45 million cap. The Department will use existing limitation to distribute the bond proceeds. Debt service is included in the Lottery Pass-Through Program.

The Tourism Commission is a marketing agency for Oregon's statewide visitor industry. Tourism produces ad campaigns, and publishes literature on campgrounds, hotels/motels and restaurants that are available around the state. The 1995 Legislative Assembly replaced Tourism's statutory advisory committee, the Oregon Tourism Council, with the Oregon Tourism Commission. The Commission, which is appointed by the Governor, has policy authority over the tourism function. Administrative authority over the staff support and financial administration of the Tourism remains with the Economic and Community Development Department. The Commission works to increase public and private partnerships to promote tourism.

The primary source of revenue for Tourism is lottery funds. It also receives revenue from publication sales and anticipates increased revenue from its public/private partnership initiative. The program received a U. S. Forest Service Federal Funds matching grant to promote tourism.

Tourism works in partnership with the private sector, state and federal agencies (Parks, U.S. Forest Service, and ODOT), Department programs such as Key Industries, local and regional visitors associations, and domestic and international travel programs to promote Oregon tourism. Tourism also formed partnerships with other states and Canadian provinces in the Pacific Northwest. Tourism estimates that close to $20 in visitor spending is generated for each state dollar invested.

The Governor's budget was an increase of $644,319 (11%) over 1997-99 estimated expenditures, primarily as a result of current service level adjustments and an additional $250,000 in Federal Funds from a Forest Service matching grant to promote tourism. The Governor's budget provided $154,290 in Other Funds limitation from partnerships with other tourism service providers, and 1.0 FTE to increase the effectiveness of Asian tourism marketing activities.

The legislature approved the Governor's budget and added $195,000 in Lottery Funds to expand tourism activities. The budget was also adjusted to reduce Attorney General, Department of Administrative Services and Secretary of State assessments.

The Film and Video Office is a marketing agency for Oregon's statewide promotion of film, television and information services. The 1995 Legislative Assembly authorized the semi-privatization of the Film and Video Office, which provides the program with greater flexibility in marketing activities. The Economic and Community Development Department is responsible for the pass-through of Lottery Funds to the Office. The Office produces ad campaigns, and publishes literature on sites and facilities that are available around the state for movie and television production, and is involved in the development of information infrastructures (including fiber optics and telephone linkages). The Office also works with Oregon's software developers to promote software products.

The Office is supported by Lottery Funds.

The Governor's budget funds the program at the current service level. Increases to 1997-99 estimated expenditures reflect standard inflationary assumptions.

The legislature approved the Governor's budget with adjustments for reduced Attorney General, Department of Administrative Services and Secretary of State assessments.

The Arts Commission is responsible for making art available to all Oregonians by working with other agencies on a variety of initiatives in education, arts and tourism, and communications systems (such as the Oregon Public Broadcasting System). The Commission is responsible for a number of activities including: evaluating the impact of arts on Oregon's economy; distributing National Endowment for the Arts (NEA) funding for programs in Oregon; working with the leadership of local arts commissions; conducting assessment and maintenance to protect existing public art and approving new public art; and supporting Oregon's Art in Education program. The Commission became a part of ECDD in 1993.

The Arts Commission receives federal NEA funding, Lottery Funds, and Other Funds from the 1% for Arts program and from donations. The 1% for Arts program is a state law which requires that one percent of appropriations to construct or alter certain state buildings must be used for the acquisition of art works. About 65% of the Commission's funds are used for special payments, which are grants to individuals and non-profit programs that support the goals of the Arts Commission.

In addition to its existing responsibilities, the Arts Commission is actively cooperating with the Tourism Commission to promote arts activities that draw visitors. Examples include art fairs, wine and jazz festivals, and performing arts and plays.

The Governor's budget funded the Commission at the current service level and added $200,000 General Fund and 1.0 FTE to provide staff support to the Governor's Task Force on Cultural Development. Increases to 1997-99 estimated expenditures primarily reflected increases in the projected allocation of federal funding. In addition, the Governor's budget proposed a $1 million Emergency Fund allocation for the development of a public-private cultural trust fund.

The legislatively adopted budget is an increase of $439,321 above 1997-99 estimated expenditures. The legislature added $200,000 General Fund to support the Task Force on Cultural Development, and $300,000 General Fund to continue the Arts Reaching Youth Initiative. The legislature established the Cultural Trust Fund, but did not approve a $1 million Emergency Fund allocation to the Fund. The Task Force on Cultural Development is encouraged to seek funding from private and business sources. The budget is increased as a result of projected increases in federal funding for arts activities and is also adjusted for reduced Attorney General, Department of Administrative Services and Secretary of State assessments.

The Oregon Progress Board consists of nine members appointed by the Governor. Functions include evaluating Oregon's progress in meeting the goals established in the "Oregon Benchmarks"; updating the Benchmark measures; defining new measures; and addressing strategies for meeting the Benchmark goals. The 1997 Legislative Assembly re-authorized the Progress Board as a statutory program.

The Board is funded by a combination of General Fund and Other Funds. Other Funds support in 1995-97 included a $100,000 national award and foundation funds received for the Benchmark program. The Board also receives funding from communities for the development of Community Benchmarks and partners with other state agencies to fund statewide reports on the Benchmarks.

The primary workload of the Progress Board has been the updating of the Benchmarks and expanded work with communities. The Board has been directed by the Legislative Assembly to include benchmarks and agency progress in meeting the benchmarks as part of the state budget process.

The Governor's budget funded the program at the current service level and included $111,649 General Fund and 1.0 FTE to permanently fund a limited duration position that has existed for over a biennium. Increases to the 1997-99 estimated expenditures primarily reflect estimated increases in Other Funds revenues from increased partnerships and revenues from expanded projects.

The legislatively adopted budget is an increase of $150,941 to 1997-99 estimates, primarily as a result of increased estimates of Other Funds revenues and expenditures from increased partnerships and revenues from expanded projects. The legislature did not approve funding to convert one limited duration position to permanent status.

This is a budgetary division that receives Lottery Funds and passes the funds through to a variety of entities.

The division is supported with new Lottery Funds allocations.

The Governor's budget included $1.25 million in debt service on the $6 million of lottery-backed bonds issued in 1997-99, and $2.1 million in debt service for the proposed $55 million in lottery-backed bonds proposed to be issued in 1999-01. The funding was based on an assumption that bond issuance would be staggered throughout the biennium. Ongoing debt on all of these bonds would be approximately $10 million starting with the 2001-03 biennium. Other increases to the 1997-99 estimated expenditures reflected the obligation of future lottery resources established in SB 710 in 1997, which obligated $15 million for special projects, including the Columbia River deepening project, over the next two biennia.

The legislatively adopted budget is an increase of $9.5 million in Lottery Funds compared to 1997-99 estimated expenditures. The increase is attributable to current service level adjustments ($1.25 million in debt service on the $6 million of lottery-backed bonds issued in 1997-99, and the $15 million obligation of future lottery resources established in SB 710 1997), and $4.4 million in debt service for the bonding authority authorized by the 1999 Legislature. This includes debt service on $45 million in community development projects, and bonding for Columbia River channel deepening, the Oregon Garden and the Coos Bay Pipeline. This funding reflects the assumption that bond issuance will be staggered throughout the biennium.

LFO Analyst: Britton

The Employment Department provides employment and workforce development services, administers unemployment insurance benefits, and promotes and regulates childcare activities. Department services are provided through 28 field offices, 19 outreach/satellite offices, the Salem central office, and 157 touch screen information kiosks.

The Department is funded with Federal Unemployment Tax Act (FUTA) funds, Employer Unemployment Taxes, Wagner-Peyser funds from the U. S. Department of Labor (DOL), federal childcare block grants, interest from the Benefit Reserve Fund, and Penalty & Interest revenue. The Child Care Division is supported with the General Fund and federal childcare funds.

The Department also includes the Employment Appeals Board that hears appeals from denials of Unemployment Insurance (UI) claims. The Board is a separate entity entirely funded by the DOL, but is included within the Employment Department's organization.

The Support the Unemployed program's primary function is to provide wage replacement income through the UI system to eligible unemployed workers while they are searching for suitable new employment. The Department supports the unemployed by providing employment assessment, reemployment intervention assistance, and identification of other available programs for dislocated workers. The program is also responsible for making eligibility determinations, enforcing UI laws, hearing initial appeals of unemployment insurance disputes, collecting employer payroll taxes, and managing the unemployment trust fund. The Employment Appeals Board handles disputes about unemployment and employer tax related decisions.

The main source of revenue for the Support the Unemployed program is Federal Funds, composing 95% of the total operating expenses. Decreasing levels of federal support during the 1980s led to supplemental funding for agency administrative expenses through a legislatively approved diversion of federal payroll taxes. The 1991 Legislature established the Benefit Reserve Fund through an offset of unemployment payroll taxes over a three-year period. Interest earned on the Benefit Reserve Fund is deposited in the Supplemental Employment Department Administrative Fund (SEDAF) and is dedicated to agency administrative expenditures. Payments of unemployment benefits to claimants are nonlimited and are paid from employer unemployment taxes collected by the Employment Department, held in the U.S. Treasury, and continuously appropriated by Congress for benefit payments.

The 1993 Legislature directed the Department to discontinue supplemental UI funding by staying within anticipated federal revenues. OED transferred positions and funding during 1993-95 from this program to the Promote Employment/Develop the Workforce programs. The transfers were made possible through the implementation of efficiency measures and new technology such as the Interactive Voice Response system enabling claimants to file for UI benefits by phone and allowing for faster claim processing and payment and automated tax reporting. Much of the program's workload is dependent on economic conditions and the filing of initial unemployment claims. Estimated benefits are based upon state economic growth, the number of workers covered by the unemployment insurance program, and state wages. The program's budget includes a $1 million reserve from SEDAF to accommodate workload fluctuations.

The Governor's recommended budget of $1.2 billion was 25 percent higher than the estimated expenditure level for the 1997-99 biennium. The increase is the result of several factors. First, and most significantly, the 1999-01 forecasted unemployment insurance benefits (nonlimited funds) and related caseload staff (Federal Funds) include the assumption that the state-wide insured unemployment rate will exceed 4.5% and trigger a provision in Oregon law (ORS 657.331) that allows for an increased claim duration period. The normal maximum claim length is 26 weeks. When the "additional benefits" unemployment rate is reached, claims can be extended for an additional 6.5 weeks. Although the 1997-99 biennial legislatively adopted budget included this assumption, the Department no longer expects the "additional benefits" mechanism to be activated during this biennium. Thus, forecasted benefits for the 1999-01 biennium are appreciably higher than estimated levels for the 1997-99 biennium. In addition, the forecasted benefits for next biennium include assumptions for lower economic growth, increased overall wages, and increasing numbers of workers covered by unemployment insurance. Each of these assumptions raises estimated benefit costs. Program expenditure levels for next biennium also include the effects of inflation.

The number of FTE included in the Governor's budget for the 1999-01 biennium of 654.61 was about 30 FTE lower than the estimated number for the 1997-99 biennium. The net reduction was the result of three factors. First, the Employment Department's hearings unit was being moved within the Department and consolidated with other hearings units from several state agencies. This action removes 51.25 FTE. (See the Central Hearings section below.) Second, expected caseload growth in unemployment insurance required more federally funded FTE (14 FTE). Third, the Governor's budget expanded the unemployment insurance program for agricultural workers by adding additional staff to process claims (9.8 FTE). The program expansion was part of proposed legislation that would have agricultural workers' employment and earnings covered by unemployment insurance to the same extent as work in non-agricultural employment is covered.

The legislatively adopted budget includes two changes to the Governor's budget. First, the budget excludes a $1.3 million federally funded package that required passage of either SB 982 or HB 2245 and funded an expansion of the unemployment insurance program for agricultural workers. Neither bill passed the Legislative Assembly. Second, the budget includes reductions of $10,702 Other Funds and $482,915 Federal Funds to reflect changes in the Department of Administrative Services, Secretary of State Audit Division, and Employment Relations Board charges.

The Promote Employment/Develop the Workforce program assists job seekers in finding employment by matching their skills with employers' requirements, and assists people in making career changes by providing labor market information and career development resources. The Department has improved customer service delivery through the Employment Department Information Network (EDIN) project, which includes placement of kiosks in accessible locations for public use. The kiosks use touch-screen technology to provide employment information to citizens in 157 locations, including retail stores, libraries and government offices. Other business innovations include an interactive voice response system. The Department provides specialized placement services for targeted groups such as welfare clients, migrant farm workers, veterans, dislocated workers, ex-offenders, homeless individuals, youth, and disadvantaged workers. Employment offices have been transformed into "Job and Career Centers" that provide clients with a full range of placement services. OED has developed active partnerships with other employment and training agencies to provide coordinated services and will be a lead agency in developing "one-stop" career centers.

The Promote Employment/Develop the Workforce programs are funded primarily through federal Wagner-Peyser funds, the SEDAF, Penalty & Interest revenues, and contracts for services. The Shared Information System (SIS), a database that provides cross-agency data on vocational training participants, is jointly funded by the Employment Department, the Department of Human Resources, Department of Education, and the Office of Community College Services/JTPA. The budget also includes a $719,600 pass-through General Fund for the Regional Workforce Committees.

Several issues face the Department's program to promote and develop the workforce. First, Congress recently passed the Workforce Investment Act. Though the full budgetary impact of this legislation is hard to predict, the Act establishes the One-Stop service delivery model as the "access" point for employment services. Thus, the Act requires further service integration among the agencies that provide vocational assistance. Second, the JOBS Plus program fund, financed by a $42 million UI tax diversion in 1996, is projected to be exhausted between June 2001 and February 2002-clearly, not enough to fund the program in the same way through the 2001-03 biennium. The legislature will need to address this funding issue during the 1999 Legislative Session if it wants the JOBS Plus program to continue. Action during the 2001 Session would create a funding gap because additional revenue from another diversion would not be collected until April 2002. Whether a diversion would cause an increase in the unemployment tax schedule is not yet clear. Third, analysis of the current workforce indicates a mis-match between the skills employers are requiring and the skills of the labor force. A recent departmental publication states "while a college education is the key to labor market success for many individuals, the labor force is developing and already contains a surplus of college graduates. At the same time, labor shortages are occurring in non-college jobs, primarily jobs requiring workers with on-the-job training." Finally, although the state continues to have relatively low overall unemployment, a number of regions within the state continue to have high unemployment rates.

The Governor's recommended budget was 11 percent higher than the estimated expenditure level for the 1997-99 biennium. The proposed increase is the result of adding the effects of inflation as well as a number of program enhancements. These enhancements include:

• An enhanced job-matching program that will allow the Department to evaluate a skills-based job matching tool that will improve its service to both job seekers and employers ($0.5 million OF).
• Seven more FTE to recruit and retain Jobs Plus employers ($0.7 million OF).
• The purchase of the Eugene employment services office ($2.5 million OF).
• Staff and expenditure limitation for Department contract services to other state and federal agencies, and local communities ($2.9 million OF).
• Further progress on the federally funded One-Stop implementation grant activities. This grant is attempting to foster greater coordination between vocational service agencies ($0.4 million FF).

The Governor's budget also included a debt service payment of $1.7 million. This will be the final payment for Eden Project financing. The project, begun five years ago, expanded services by offering public access through kiosks, and enhanced the agency's other technological tools.

The legislatively adopted budget includes four changes to the Governor's budget. First, the budget removes the $719,600 General Fund pass-through to regional workforce committees. The Legislative Assembly's action is based on the assumption that other possible funding sources exist and that there are higher priorities for use of the General Fund. Second, the budget does not include the Governor's recommended budget package of $725,714 Other Funds that would have expanded the JOBS Plus program. This reduction to the Governor's budget reflects concerns about the projected exhaustion of the JOBS Plus Wage Fund and the cost-effectiveness of the program. The Employment Department may come to the Emergency Board during the interim to request funding for JOBS Plus employer recruiters if further consensus can be reached about these concerns. Third, the budget adds $285,790 in Other Funds expenditure limitation that had inadvertently been omitted for payment of debt service on Certificates of Participation (COPS) that will be used to purchase the Eugene office building. The fourth change to the Governor's budget, reductions of $254,796 Other Funds and $176,278 Federal Funds, reflect changes in the Department of Administrative Services, Secretary of State Audit Division, and Employment Relations Board charges.

The 1993 Legislature created the Child Care Division through the consolidation of child care functions formerly located in three separate state agencies: the Office of Child Care Coordination in the Department of Human Resources, the Day Care Unit in the Children's Services Division, and the Commission for Child Care. The Division ensures that families have access to child care information and services, administers federal child care funds for low income families, establishes basic standards for child care services, licenses child care centers and family group homes, and enforces mandatory registration of family child care providers. General Fund appropriations support day care regulation, the Commission for Child Care, and child care resource and referral agencies based in local communities.

The Division oversees Oregon's allocation of the federal Child Care and Development Fund (CCDF), and receives Other Funds revenue from day care center and care provider licensing fees. CCDF administration is provided through an interagency agreement with the Adult and Family Services Division (AFS) of the Department of Human Resources. The funds are used to provide direct assistance to low income working and student parents, migrant workers, and parents receiving substance abuse treatment. CCDF funds are also used in the development of dependent care information, referral programs and school-age child care programs. Most of the Federal Funds are distributed to state, local, and community-based agencies. Licensing fee revenue, supplemented with the General Fund, is used to support the childcare facilities licensing and regulation program. The Division also coordinates efforts and funding with public childcare service initiatives, including Private Industry Councils, the Oregon Employer Council and other business and professional organizations.

Increases in the number of single parent families and dual income households are generating growing childcare needs in Oregon. As more parents work or attend school or training programs, the demands for an accessible, affordable, high quality child care system increase. The Division is attempting to support these demands through programs that enhance child safety and health, promote childcare worker training and provider information resources, and ensure compliance with state and federal child care laws.

A number of events during 1998 raised the level of interest in the issue of childcare regulation. First, the KOIN TV series entitled "Daycare Nightmares" reported that the Child Care Division had stopped conducting unannounced visits to certified facilities, does not inspect family childcare homes, and only investigated the most serious complaints against family child care providers. At its April 1998 meeting, the Emergency Board funded three limited duration certifier positions to assist with the regulatory workload. The Government Oversight Subcommittee of the Senate Transportation and General Government Committee held hearings on regulation of family child care businesses during the summer and fall of 1998. Based upon its findings, the subcommittee developed draft legislation that would require the Division to conduct pre-opening and renewal inspections on family childcare businesses, including random unannounced visits.

The Governor's recommended budget is 42 percent higher than the estimated 1997-99 biennial expenditure level. A small portion of the increase is the result of inflation and state government charges. The rest of the increase is caused by two factors. First, the Governor's budget includes $1.7 million of federal funds for childcare resource and referral services (CCR&R) and services to children with special needs. This funding was to have been spent during the 1997-99 biennium, but was not because of program delays. Thus, the estimated expenditure level for the 1997-99 biennium is about $1.7 million lower than it would have been if the funds had been used as originally expected. Second, the Governor's budget includes two federally funded program enhancements that increase the agency's ability to regulate childcare. The first enhancement of $1.3 million adds 8.5 FTE certifiers who will inspect and monitor childcare centers and one FTE to continue the management of the Child Care Division's numerous contracts. The second enhancement of $1.0 million would add 8 FTE to provide on-site reviews of all new family childcare registrants within three months of the issuance of a temporary registration certificate.

The legislatively adopted budget includes the Governor's recommended packages to enhance childcare regulation, childcare resource and referral services and services to children with special needs. In addition, the Division's budget includes General Fund appropriations to the Emergency Board of $3,274 in the event Attorney General costs are higher than expected and $7,903 to account for possible delays in hiring additional childcare program certifiers. Finally, the adopted budget for the Child Care Division includes an overall reduction in Department of Administrative Service, Secretary of State Audit Division, and Employment Relations Board charges of $16,544 General Fund, $6,064 Other Funds, and $5,410 Federal Funds.

The Governor's recommended budget established a new Central Hearings Panel within the Employment Department. Under the proposal, the hearings units from several state agencies, including the Employment Department's own hearings unit, would be consolidated to form one larger unit. The program would conduct hearings for the Employment Department, the Department of Transportation's Driver and Motor Vehicle Services Division, the Department of Human Resources' Adult and Family Services Division, the Department of Consumer and Business Services Insurance and Finance and Worker's Compensation Divisions, Water Resources (water rights), Oregon Liquor Control Commission, and the Construction Contractors Board.

The revenue to support the Central Hearings Panel would be Other Funds from agencies that transferred hearing officers and support staff. The Central Hearings Panel of the Employment Department would contract with the other agencies to conduct their hearings. The Employment Department hearings' cost (about $6.7 million of the $20.1 million) is composed of Federal Funds and Other Funds and is transferred (along with 51.25 FTE) to the Central Hearings Panel.

The policy of consolidating various hearing functions is not new to Oregon State government. The issue is at least 20 years old and has been supported by various constituents in the past. The 1997 Legislative Assembly passed HB 2948 that established an independent Office of Administrative Hearings as well as a procedure and standards of review for hearings conducted by the hearing officers. Bill proponents were concerned about the fairness of the administrative hearings process given the fact that some hearing officers are employed by agencies who are parties to the cases they adjudicate. Although the Governor vetoed the bill, he appointed an interim study group to examine the current administrative hearing processes and suggested changes, and he committed to working with proponents to achieve reasonable reforms. The workgroup was composed of legislators, hearing officers, and agency heads.

The Governor's budget included $20.1 million within the Employment Department for the proposed central Hearings Panel. This amount included the costs of current hearings officers and support staff salaries and other payroll expenses, related services and supplies, eight new administrative positions for the proposed division, and indirect costs. The consolidation is expected to cost about $2.1 million above maintaining the positions and related costs within current agencies. The additional cost consists of the eight new administrative positions as well as new indirect costs.

The legislatively adopted budget for the Central Hearings Panel is implemented through HB 2525 and increases the Governor's recommended budget by $78,517. The increase results from the addition of one position from the Department of Transportation to the Central Hearings Panel.

The Special Administration Program serves as the depository for penalty and interest charges on the delinquent payment of employer unemployment insurance taxes. The program's budget includes payment of annual dues to the Interstate Conference of Employment Security Agencies and other administrative costs for which Federal Funds are not available.

During the 1995-97 biennium, penalty and interest (P&I) revenues passed through the Special Administration Fund as transfers out for use in other programs; a small amount of the pass through was used to pay for the special administrative expenses of the agency. This procedure was discontinued prior to the 1997-99 biennium.

LFO Analyst: LaMonte

The Oregon State Fair and Exposition Center conducts an annual state fair of up to 17 days and provides services for ongoing exposition activities including recreational vehicle and organization meetings, concerts, and consumer products and services shows. The Fair responds to the needs and interests of visitors, participants, exhibitors, concessionaires, vendors, and facility users.

The Fair is not generating sufficient revenue to fund operations and maintain its facilities. A 1998 performance audit by the Legislative Fiscal Office, the Department of Administrative Services and the Secretary of State's Audits Division found that:

• The Fair is failing financially and risks default on its bonded indebtedness;
• Attendance at the Fair has declined over the past ten years;
• Facilities have not been adequately maintained and improved, and $11.6 million is needed in the 1999-01 biennium to bring facilities to a standard operating level; and
• There is no consensus on the future of the Fair or the methods to resolve the current fiscal crisis.

The 1999 Legislature responded to these issues by directing that an interim legislative committee develop a long-range strategic plan for the agency that addresses functions, funding, capital construction and maintenance needs, and ongoing operations. Up to $8.6 million in renovation bond authority was withheld pending the actions of this committee and approval of the capital construction plan by the Emergency Board.

The agency is responsible for activities related to the annual Oregon State Fair and for ongoing Exposition Center functions. This includes all permanent and temporary staff, supplies, equipment, maintenance, and related support functions.

In the 1997-99 biennium, the Fair is expected to receive $12.5 million in Other Funds revenue from grounds admission, commercial exhibit fees, ride and show admissions, parking, space rental fees, and food concessions. This revenue is projected to increase to $12.7 million in 1999-01, which is not a sufficient rate of increase to cover increases in fixed operating costs or to fund essential maintenance. The Fair has bonding authority for capital construction and renovation projects. To date, the Fair has met all of its debt service payment obligations. However, in 1997, it defaulted on the provision of its bond rate covenant that required the agency to maintain a fund balance equal to 150 percent of annual debt service. A financial consultant was hired as required by the covenant. The financial consultant identified rate and fee increases that are estimated to generate an additional $300,000 per year. The agency has been unable to identify any permanent alternative funding source that would generate sufficient revenue to maintain facilities and operations.

State Fair attendance figures have been declining over the past decade, although attendance stabilized between 1995-97 and 1997-99. Total events are projected to remain stable at approximately 560 both in the current biennium and in 1999-01. The agency competes with convention and exposition centers in the region. Many of these convention centers receive some form of subsidy from local governments, and have newer facilities. The agency does not receive a subsidy, and would need to charge higher event rates to turn a profit. Also, the deteriorating condition of facilities affects the ability to generate additional revenues. The agency cannot significantly raise fees and remain competitive in this market. Therefore, the agency is projected to have a negative cash flow early in the 1999-01 biennium unless alternative funding sources are identified.

The Governor's budget had an increase of almost $12 million (over 101%) above 1997-99 estimated expenditures, including $10.6 million in Other Funds from lottery revenue bond proceeds for the $11.6 million in facility maintenance needs identified in the 1998 audit report. Also included was a $727,809 General Fund subsidy to continue programs, such as agricultural and floral exhibits, that are key to the mission of the agency but do not generate sufficient revenue to cover costs and to meet cash flow needs.

The legislatively adopted budget is an increase of $2 million compared to 1997-99 estimated expenditures. Adjustments include:

• $1.5 million in net Other Funds expenditure limitation from lottery bond proceeds for critical facility issues; ($8.6 million in bonding authority is deferred pending establishment of a long-range funding and operating plan by an interim substantive committee. The substantive committee will report to the Emergency Board by no later than March 2000. No bonds will be issued for the $8.6 million until the Emergency Board approves. The legislature also approved limitation for bond issuance costs.)
• $657,200 General Fund to enable the annual State Fair to continue programs, such as agricultural and floral exhibits, that are key to the mission of the agency but do not generate sufficient revenue to cover costs, and to meet cash flow requirements;
• Two laborer positions (2.0 FTE) supported with existing funds through a reduction in the agency's services and supplies budget; and
• a $250,000 reduction in Lottery Funds operating subsidy.

This program pays the principle and interest on construction bonds.

The program receives revenue from operations and is proposed to receive lottery funds revenue to repay debt service on the capital construction and improvement bonds.

The Governor's budget funded this program at the current law projection for existing debt service costs, and added $1.44 million in Lottery Funds to pay debt service and costs for the $10.6 million of new lottery revenue bonds included in this budget.

The legislatively adopted budget is an increase of $1.49 million compared to 1997-99 estimated expenditures. The budget funds this program at the current service level for existing debt service costs, and adds $1.2 million in Lottery Funds to pay debt service and costs for the potential $10.6 million of new lottery revenue bonds that may be issued. The Department of Administrative Services will unschedule Lottery Funds in excess of debt service obligations on the $2 million in proceeds approved by the legislature. If the full bonding authority is approved, the agency will have ongoing debt service in future biennia in excess of $3 million.

LFO Analyst: Bailey

The Oregon Historical Society (OHS) was chartered by the state in 1898 to collect, preserve, exhibit, and publish materials of a historic character. The OHS is a nonprofit organization that is financed largely by membership fees, contributions, and publication sales. The state provides a supplemental grant through the Department of Administrative Services.

The Governor's recommended budget proposed a General Fund appropriation of $864,450, which provided the same level of funding as the current biennium adjusted for inflation. This amount compared with $840,905 appropriated for 1997-99 and with $900,000 appropriated for 1995-97.

The legislature approved an appropriation of $1.3 million General Fund, which is $400,000 more than the Governor's recommended budget. The additional appropriation is intended to restore cuts the Society has incurred in recent biennia and to support the service it provides to schools and students statewide.

LFO Analyst: Bailey

The Housing and Community Services Department provides financing and support for the development of affordable housing in the state and for the delivery of services for economically needy Oregonians. The Department works with public, nonprofit and for-profit organizations to provide affordable housing and with community-based organizations to deliver other services. The Department administers federal and state programs to alleviate homelessness and poverty and also directs the state's mobile home park ombudsman program. The State Housing Council, a seven-member, Governor-appointed board, provides program and policy oversight of the Department. The Council meets monthly and approves single-family residential loans over $150,000 and all other qualified loans and grants over $100,000.

The Department's budget is supported primarily by Other and Federal Funds (98% of the 1999-01 recommended budget). Other Fund revenue sources include proceeds from the sale of bonds, mortgage loan principal repayments, Community Integration Project (CIP) loans; interest from investments, renters' refundable deposits; gains on sales of investments and foreclosed properties, and mortgage insurance. Most of the Department's Federal Funds come from the HOME program ($20.9 million), Section 8 federal rent subsidies ($61.5 million), community services block grants ($7.2 million), low-income energy assistance block grant ($26.3 million), emergency shelter grant ($1.5 million), and weatherization assistance funds ($3.0 million).

In 1991, the legislature appropriated $14 million General Fund to establish the Oregon Housing Trust Fund, which is administered by the Department and used to subsidize construction of new, or rehabilitation of existing, affordable housing. In 1993, $1.5 million was added to the corpus, bringing the total to $15.5 million. Trust fund grants can be used for actual construction or rehabilitation costs, mortgage subsidies for eligible multi-unit projects, preservation costs of affordable housing, and pre-development costs such as planning, feasibility studies, appraisals, and architectural plans. The trust fund principal is preserved, and only the interest is used for housing development grants. The corpus of the trust fund has not been increased since 1993.

Several factors indicate that the demand for affordable housing will continue to outpace the available supply in the next biennium. Oregon population is expected to increase by 1.5 percent annually over the next biennium, and housing costs continue to outpace wage growth in the state, suggesting that fewer properties will be affordable for low-income residents. Moreover, four metropolitan areas in the state are among the 25 least affordable markets in the nation, and one area is second behind San Francisco in affordability, according to a recent report by the National Association of Homebuilders. The expected population growth and increases in housing costs likely will increase the demand for all types of housing including low income, affordable housing, and emergency shelter.

Another factor adversely affecting the supply of affordable housing is the expiration of time periods agreed to on some multiple family, affordable units. In other words, the owners of these units have maintained them as below-market rentals for the required length of time and can, therefore, convert these units to market-rate rentals. This diminishes the inventory of affordable housing at a time when the demand for new units is still outpacing the supply of such units.

While the Department's programs provide financial support for developing affordable housing, the cost of construction or rehabilitation is such that many units command rents that are still too high for many residents whose income is at or below 50 percent of the median income level. As a result, a large segment of this population is unable to qualify for the affordable housing developed under the Department's programs or must pay 50% or more of their disposable income for housing.

The Governor's recommended budget reflected a 37 percent increase in total funds and a 36.2 percent increase in the General Fund appropriation over the 1997-99 legislatively approved budget. Major increases in the operating budget reflected a $5.0 million General Fund increase in the Housing Trust Fund for providing more affordable housing and $25.0 million Other Funds in lottery-backed bonds to fund, in part, the Governor's Livability Initiative. (This initiative involves contributions by other agencies; the entire initiative is discussed separately.)

The Governor's budget also included a $1.5 million Other Funds policy package with 3.0 FTE for information technology enhancements including new hardware and software. Under this package, the Department would implement a database with ad hoc interfaces. The database would incorporate external data sources, share data with community action agencies (CAAs), and integrate certain CAAs' data processing functions.

Two other policy packages in the Governor's budget added $1.0 million Other and Federal Funds (8.0 FTE) to maintain adequate fiduciary controls over the Department's projects that were financed with bond resources. The second package added $818,000 ($655,000 OF, $113,000 FF, and $50,000 GF) and 6.0 FTE to provide technical assistance to sub-grantees and housing expertise and staffing for the Governor's Community Solutions Team. The budget also provided $940,000 Other Funds to support relocation of the Department to space in the North Mall complex when it is completed.

The largest increases in the total budget occurred in the Other Funds-Nonlimited expenditures with the largest increase occurring in the debt service budget category. This reflected increased bonding activity, both new issues and refunded bonds. It also included the issuance of escrow issues, which are low-interest, short-term bonds. They were reflected in debt service because they must be paid off or refunded within a year. Federal Funds Nonlimited were for Section 8 rent subsidy payments.

The legislatively adopted budget in total is 32.4 percent greater than 1997-99 estimated expenditures but only 1.0 percent greater than the 1999-01 current service level. The majority of the increase over 1997-99 is in nonlimited debt service and other nonlimited expenditures, as discussed above.

The legislature approved all of the packages in the Governor's recommended budget with two major exceptions: the $5.0 million General Fund enhancement to the Housing Trust Fund and the $25.7 million lottery backed bonds for the Governor's Incentive Fund. The Legislative Assembly, however, did provide in HB 2153 for bonding resources for the Incentive Fund. Several major projects, such as Columbia River dredging and the Coos Bay pipeline, hold a priority position for the available bonding. If any of the priority projects do not materialize, the Housing and Community Services Department is authorized to issue bonds for the remaining amount of total bonding authority in HB 2153, up to a maximum of $25.0 million. Bonds issued by the Department would likely come late in the biennium. Therefore, debt service for any bonds will likely be relatively small and will be paid by the Economic Development Department. In HB 2088, the legislature established the Community Development Incentive Project Fund and approved a $1.00 Other Funds expenditure limitation to use any bond proceeds that may become available.

The legislature also added $1.00 General Fund and a $1.00 Other Funds expenditure limitation to support the Oregon Food Bank's acquisition of food and construction of a distribution facility, if additional funding becomes available. The Department's Federal Funds expenditure limitation was increased by $4.7 million in anticipation of increased federal resources for residential energy assistance, weatherization, assistance for the homeless, and the Community Services Block Grant.

In SB 5511, the legislature provided a special purpose appropriation of $1.0 million in the Emergency Fund for migrant housing. It also reserved $89,000 of the general purpose Emergency Fund to cover costs of the Farmworker Housing Interim Task Force established to evaluate the current housing situation for Oregon farm workers and recommend actions the state can take to address farm worker housing problems.

LFO Analyst: Bailey

The Oregon Public Broadcasting (OPB) is an educational and public broadcasting network serving Oregon through noncommercial public television and public radio stations. The 1993 Legislative Assembly privatized OPB and provided for a supplemental grant through the Department of Administrative Services.

The Governor's 1999-01 budget proposed $3.4 million in General Fund support, which compared with $3.3 million for 1997-99 and $3.2 million allocated from Lottery Funds in 1995-97.

The 1999-01 legislatively adopted budget provides $3.4 million in General Fund support, which is the same as the Governor's recommended budget.

LFO Analyst: Bailey

The Oregon Department of Veterans' Affairs (ODVA) has three program areas: the Veterans' Loan Program, the Veterans' Services Program, and the Veterans' Home Program. The Veterans' Loan Program, funded entirely through Other Funds, provides loan servicing and Department administration. It is responsible for repayment of approximately 70 percent ($2.0 billion) of the State of Oregon's general obligation debt. The Veterans' Services Program provides counseling, claims assistance, conservator services, and partnerships with counties and organizations to support local veterans' programs. The Veterans' Services Program is funded with General Fund and Other Funds from conservatorship fees. The Veterans' Home Program is a new program that involves the operation of a skilled nursing care and Alzheimer's Disease facility in The Dalles, Wasco County.

The Loan Program provides home acquisition and home improvement loans to veterans at favorable interest rates. Since 1945, the Department has lent over $7.2 billion to homeowners in Oregon. The Program is made up of:

• Director's office - communications, program evaluation, and human resources.
• Loan Services - functions dealing with the loan program, including originating and servicing the loans;
• Financial Administration - overall financial oversight of the Department, including accounting, information services, records, and financial management.
• Administrative Services - services loans and contracts once they are delinquent, and provides general support to the agency for daily operations (data entry, forms, procedures, word processing, building management, mail, motor pool, collections, etc.)

The largest sources of ODVA Other Funds revenues for the 1999-01 biennium are veteran loan and contract-related repayments ($540 million), interest earnings ($200 million), bonding authority ($100 million), insurance premiums ($18.5 million), and other service charges, licenses, fees and miscellaneous revenues ($5.4 million).

During the past several biennia, the loan portfolio has been declining; currently over 39,000 accounts are being serviced. Low interest rates have led to an increase in early loan repayment and lower investment yields, which negatively impact the loan program's financial performance. Most outstanding debt is fixed rate, noncallable debt. Efforts are being made to reduce federal and state restrictions which limit eligibility to veterans with active duty service prior to 1977. ODVA's farm/home loan delinquency rate has improved greatly over the years. In 1985, Oregon's delinquency rate led the nation; now it is only 1.8 percent, one of the lowest in the country.

The Governor's recommended budget of $24.2 million Other Funds was an increase of five percent over the 1997-99 estimated expenditure level. The proposed budget added $252,423 for replacement of microfilm indexing software that is not Year 2000 compliant, $150,000 to replace outdated microfilm image capture and retrieval equipment, $91,500 for replacement of four older air conditioning units, and $50,000 to complete the replacement of 16-year-old carpet.

The Governor's budget was reduced by $586,780 Other Funds for changes in the Oregon State Treasury debt management charges, and $10,145 Other Funds to reflect the decrease in Attorney General fees from $92 to $90 per hour. Other reductions include Department of Administrative Services assessment charges of $26,628 Other Funds and Secretary of State audit assessments of $126,500 Other Funds.

The Veterans' Services Program includes:

• Counseling and claims ($852,000), which assists veterans, their dependents and survivors to obtain service-connected and non-service related benefits. Over 10,000 active veteran claims are currently being monitored.
• The Conservatorship program ($1.05 million), which provides conservatorship services for veterans and their dependents who are determined to be "dependent persons" and who are recipients of U.S. Department of Veterans Affairs' benefits. Conservatorship services are provided when no other entity or person is willing or able to act as conservator. The staff serve as trust officers, file required legal reports, apply for all benefits due the veteran, and counsel with families, hospital personnel, social workers, and with protected persons to ensure their needs are met within the resources available. About 300 clients are currently under conservatorship.
• Educational Assistance ($31,000), which provides financial help to offset some of the educational expenses of honorably-discharged Oregon veterans whose GI educational benefits have been exhausted.
• Service delivery partnerships, which includes the Aid Program, Aid to Counties, and Aid to Veterans' Organizations ($984,000). Aid to Counties is an effective network of trained individuals operating in 33 Oregon counties which began in 1947 to help counties provide services to veterans on a local level. Up to 75 percent of the cost of administering each of the county offices is reimbursed, with a limit of $12,500 per year. Aid to Veterans' Organizations was established in 1949 and consists of partnerships with other veterans service organizations in Oregon, such as The American Legion, AMVETS, Disabled American Veterans, and Veterans of Foreign Wars. This aid was set at 50 percent in the 1950s, but has not been adjusted for inflation and now represents much less.

The program is funded primarily through the General Fund but it also receives conservatorship fees. The 1999-01 estimated conservator fees are $500,000.

Oregon has 360,400 veterans, 39,500 of whom served in the post-Vietnam era. Approximately one-third of Oregon's adult homeless population are veterans. The aging veteran population is increasing the demand for veterans benefits, assistance, and conservatorship services. Additional needs have been created by veterans of recent conflicts with claims resulting from the environment in which they served, including claims related to Agent Orange and Post Traumatic Stress disorders. The need for services is increasing at a time when the services available remain constant or may decline, especially at the county level. The state is required to provide educational aid to eligible veterans who request the aid; funding for Aid to Counties and Aid to Veterans' Organizations is discretionary. Oregon counties may discontinue or reduce their level of support for local Veterans Services Offices, leaving veterans without local services. This further increases the demand on ODVA for services. With the shortage of General Fund resources, the ODVA may have difficulty meeting the demand for service. ODVA's inability to provide service, however, could shift workload to state public assistance agencies.

There are a number of factors that affect the workload of the program, including the rapid evolution in health care programs, increasingly complex health claims, an aging war veteran population, and downsizing of the US Armed Forces and resulting separation of veterans who use educational and vocational rehabilitation programs. The Department has dealt with the workload through a combination of improvements in processes and automation. However, projecting actual workload is difficult because the number of veterans who may access services is unpredictable. The Veterans Services Program continues to rely on approximately 9.0 FTE staff funded from the Loan Program, whose time is shared between the Loan and Services Programs as needed.

The Governor's recommended budget was an increase of 2.6 percent over the 1997-99 estimated expenditure level. There was a $14,160 enhancement to the Special Payments program for training in the County Veterans Service Offices and an additional $9,160 for educational aid to veterans to meet additional demand in 1999-01.

The legislature reduced the Governor's recommended budget by $42,891 General Fund for vacancy savings and $335 General Fund for the decrease in Attorney General fees from $92 to $90 per hour.

The Oregon Veterans' Home in The Dalles, Oregon, provides skilled nursing and Alzheimers disease care to Oregon veterans. The Home opened in November 1997 and has a bed capacity of 151 residents. Funding for construction and equipping of the facility was from a 65 percent federal grant matched to a 35 percent state obligation contributed by Wasco County. The Home will be self-supporting when it is fully (95 percent) occupied, which is expected to occur by November 1999. The 1997 Legislative Assembly directed that General Fund moneys not be used for operating costs; ODVA is defraying the phase-in costs by using funding from the Oregon War Veterans' Fund. In addition, the Oregon Veterans' Home Trust Fund was established to help fund operating costs.

The Veterans' Home Program consists solely of Other Funds. Revenues are primarily moneys received from the residents of the Home, Medicare reimbursement, and a per diem amount received directly from the federal Veterans Administration. Veterans who reside in the Home receive benefits not available to them if they reside elsewhere. Veterans receive aid and attendance benefits with their regular pension, and their social security benefits also provide revenue with which to pay for their care in the Home. When the Home is fully occupied, the excess revenues will be used to repay the Oregon War Veterans' Fund within five years. The newly established Oregon Veterans' Home Trust Fund is dedicated to the Home and supported by donations. It has grown from zero in 1993 to $142,400 in mid-1999.

Expenditures for the Home are entirely Other Funds dollars and relate to the cost of providing residential care. Operation of the Home was contracted out to a health care service provider. Obtaining and maintaining a high occupancy rate at the Home is important to the financial condition of the Home, and a statewide marketing effort is being made to bring the Home to full occupancy, and also to obtain and retain qualified nursing personnel. After one and a half years of operation, there were 104 residents, an occupancy rate of 69 percent, and the Alzheimer's Unit was full.

The Governor's recommended budget of $12,581,404 funded the Veterans' Home at the current service level.

The Legislative Assembly adopted the Governor's recommended budget for the Veterans' Home program. This will be the first full biennium of operation for the Veterans' Home.