Oregon’s Death Spiral

Tuesday’s newspapers carried a stunning story regarding Oregon’s future. The Oregonian referenced a recent speech by Governor-elect John Kitzhaber to the Oregon Business Summit:

“Oregon is headed for a fiscal catastrophe unless its leaders make dramatic changes in the way the government spends its money and delivers services, business leaders told state officials Monday.

“Gov. –elect John Kitzhaber agreed and said he is willing to work with the business community on specific actions to boost the state economy and make state programs more efficient.

“’On its current course, Oregon is literally on a death spiral,’ Kitzhaber told about 1,000 business, political and community leaders at the annual Oregon Business Summit.”

The stunning part of this story is not that Oregon is in a death spiral but the utter lack of accountability for the fact that Oregon is in a death spiral.

John Kitzhaber, during his previous two terms as Governor, together with Govs. Ted Kulongoski and Barbara Roberts, were the chief architects of the tax and spend spree that Oregon has experienced for the last two decades and yet not one critical question has been asked by the Oregonian of either Kitzhaber or Kulongoski regarding the state of the state or the effects of their administrations.

And while speakers at the Oregon Business Summit were routinely morose about the state of Oregon’s economy and its outlook for business growth, not one critical question was asked about the Portland business community’s culpability in Oregon’s decline. For years the Oregon Business Council – populated by Portland business leaders – has sponsored the Oregon Business Summit for the sole purpose of endorsing whatever programs the sitting governor has proposed. Under Kitzhaber it was protecting salmon and increasing funding (without accountability) for public schools. Under Kulongoski it has been “green growth” with high subsidies for uneconomical alternative energy producers and increased regulatory burdens for business under the guise of “sustainable” business practices.

Not once has the Oregon Business Council demanded that a sitting Democrat governor undertake a comparative competitive analysis of Oregon vis-à-vis other states in an effort to grow business. During my tenure on the Oregon Business Council my questions about a business agenda were routinely rebuffed by other noting that Oregon’s “quality of life” was sufficient to attract business. When I suggested that “quality of life” usually begins with a job, I was told that Oregon doesn’t want just any job, only high paying jobs populated by well-educated people. (I assumed they went back to smoking dope after I left the room.)

For two decades, Oregon’s Democrat politicians have treated business like an ugly stepchild whose sole duty is to shut up and pay. There has been no restraint in spending, no restraint in taxing, and no restraint in increasing regulatory burdens – and, frankly, no protest from Portland’s business community. There has been no recognition of job creation – except the demands of Oregon’s public employee unions to increase the number of public employees.

Even at the Oregon Business Summit the need for job growth has been underwhelmed. The Oregonian reported:

“A plan circulated at the conference calls for creating 25,000 jobs a year for the next 10 years, and for raising per capita incomes above the national average by 2020. To get there, the plan says, the state must do better by schools and universities. It also must offer a more industry-friendly environment, including providing land for business growth and cutting capital gains taxes that put a damper on growth.”

According to the Bureau of Labor Statistics, Oregon’s workforce grew by 32,600 between October of 2009 and October of 2010. The paltry job growth of 25,000 won’t even keep pace with the growth of the workforce let alone make inroads into the 160,000 jobs lost since the beginning or Oregon’s most recent recession.

I’m not sure whether John Kitzhaber actually recognizes the gravity of Oregon’s economic situation or whether he is simply paying lip service. I know that his predecessor, Gov. Kulongoski, to this day remains clueless. How someone can watch the state’s general fund budget projections go from a $2 Billion deficit to $3.5 Billion and then in one month add to that burden another 1,100 public employees at a cost of $250 million each biennium while making speeches about the need for fiscal restraint is simply beyond me.

I suspect that Kitzhaber is only marginally more economically literate than Kulongoski and that while he can look earnest and give a good speech, when it comes to action there will be precious little spending cuts, no performance accountability and another round of tax increases proposed.

Until Oregon’s politicians get serious about cutting 10,000 public employee jobs, freezing wages (including step increases), forcing public employees to pay for a portion of their healthcare insurance and eliminating the “defined benefits” retirement plan (PERS), Oregon state government’s fiscal decline will continue unabated. Until Oregon’s politicians get serious about a tax structure that discourages the attraction, growth and retention of business, Oregon’s economic decline will continue. Until Oregon’s politicians begin to care more about people and less about spotted owls, salmon and public employee unions, Oregon will continue to trail the nation in terms of unemployment and income per capita. Until Oregon’s politicians begin to demand accountability along with expenditures, Oregonians will see the continuing decline of school performance and increase in wasted boondoggles similar to the Oregon Wireless Interoperability Network (OWIN) and Portland’s famed water bureau billing system.

As Pacific Power Chairman Pat Reiten noted:

“’It’s painful to say this, but Oregon isn’t so special a place any more,’ Reiten said. ‘It’s in decline. It’s below average.’”

For over two decades, Oregon’s politicians have demonstrated their inability to lead Oregon to a better tomorrow. It’s time for the business community to step forward to lead that change. If they don’t, they can meet again at the end of Kitzhaber’s term and collectively wring their hands about what might have been.