Oregon’s anti-business reputation is showing anew. And this time it’s reflected in the management of the state’s own funds. In 2003, the legislature created the Oregon Investment Fund for the purpose of investing in Oregon based business start-ups. In other words, Oregon state government entered the venture capital business and dedicated $100 million dollars to assist creating new businesses and new jobs in Oregon. A very laudable idea but one destined for disappointment given the business world’s aversion to starting, growing, or even staying in Oregon.
So how has this great experiment worked? Well, according to a recent report, the Oregon Investment Council was only able to place $7 million of that $100 million in Oregon based businesses. And what did that do for Oregon’s economy? Well, they really don’t know. They can’t tell us how many jobs were created in Oregon as a result of that paltry $7 million.
They claim that over 200 jobs were impacted — that’s the economists’ way of measuring the ripple effect of one job being created. The commonly accepted ripple effect is that each job created “impacts” ten other jobs (e.g. suppliers, support services, etc.). That would suggest that about 20-25 jobs have been created as a result of these investments — not much bang for the bucks. (Frankly, $7 million invested as 6% annually would produce enough interest income to pay 20 people $20,000 a year).
But fear not though, the money is not sitting idle. The Oregon Investment Council, through its agent Credit Suisse First Boston, has pledged approximately $76 million of that fund in the “Pacific Northwest” and in doing so has “impacted” 1,671 jobs. Let me be clear. In four years, the Oregon Investment Council has only been able to place 75 percent of the funds earmarked to invigorate business growth in Oregon. And of that 75 percent, only 10 percent went to Oregon based businesses. The remaining 90 percent went to businesses that chose to locate, grow, and develop anywhere but Oregon. Wow, there’s a ringing endorsement of Oregon’s business climate.
Let’s give credit where credit is due. The idea to create this fund was the brainchild of two Portland liberal Democrats — Rep. Mitch Greenlick and Brad Avakian. The biggest problem is that they turned it over to another Democrat to actually make it work — Governor Ted Kulongoski. And for Kulongoski, the fundamentals of business are a foreign language. It’s not that Kulongoski is malevolent — he’s not trying to drive business out of Oregon. Rather he is just inept. Kulongoski has spent virtually his entire adult life working for either government or unions. His experience in the business world is practically non-existent. He has surrounded himself with the usual cadre of liberal democrat support — environmentalists, labor union officials, and fresh faced liberal activists. Oh sure, Kulongoski can always point to some Portland businessman who enjoys having his picture taken with the governor and willingly nods at all of the nonsense that is spewed by his “blue ribbon commissions.” But, in the long run, even when Kulongoski tries to listen to them, he either can’t understand what they are telling him or their message is drowned out by the other special interests in the room.
And it isn’t much better amongst the other statewide Democrat office holders. State Treasurer Randall Edwards has announced that he is “satisfied” with the progress being made on the Oregon Investment Fund. If $7 million out of $100 million stirs Edwards to “satisfaction”, I assume that zero would only invoke mild concern and that might not be for several more years. The man charged with management of Oregon’s finances cannot be “satisfied” with such a weak performance. He should be outraged that so little has been done. And he ought to be damn well boiling over the fact that 90 percent of the investment and job creation has gone anywhere but Oregon.
But there are those out there that do understand business and business climates and their assessment is a bit more pointed. Eric Rosenfeld, a partner in a Portland based venture capital firm, responding to the news that 90 percent of the investment has gone outside of Oregon, said, “By investing in out-of-state funds, we’re really shooting ourselves in the foot. This is a chance to create our own venture capital infrastructure. Unfortunately, this is making San Francisco and Seattle stronger for venture capital at Oregon’s expense.”
So give Ted a call and tell him how much you appreciate his work in creating jobs anywhere but Oregon.