Gresham Chamber of Commerce Economic Summit -- Building Economic Vitality: Our State, Our Region

By:  John Kitzhaber
Date: Oct. 18, 2012
Location: Gresham, OR

Good morning. I'm pleased to join you here today to talk to you about something that's on all of our minds and that's certainly been a focus of my administration for the past year and a half -- getting Oregonians back to work, in every community across the state.

As you all know, the recession hit Oregon hard and rural Oregon counties even harder, and our state faced a fiscal crisis as bad as any in the nation. We still have a ways to go, but we're seeing signs that Oregon's economy is improving. As we've seen time and time again, even when faced when tough challenges, Oregonians never give up. Our citizens' resiliency is driving positive changes across the state, and as we pull out of the economic downturn, that's never been more important.

We often hear the phrase "economic recovery," but we here today know that recovery is not going to be good enough for Oregon to be competitive nationally and globally in the 21st century. Economic recovery suggests that we're going to go back to doing the things that we did in the past. We don't need economic recovery; we need to continue to accelerate the economic reinvention that's already happening throughout the state.

It's through economic reinvention that we ensure an enduring prosperity reaches people in all corners of the state. It's how we will reach our ambitious goals to create new jobs and train a workforce that's ready for the jobs of the future. It's how we'll raise the per capita income of Oregonians above the national average.

This reinvention is already under way throughout Oregon, and believe it or not, unemployment is lower in Hood River, Boardman and Corvallis than in the Portland metropolitan area. Why? Because we have islands of innovation in both urban and rural communities that are tapping into Oregon's natural assets and market advantages in new and creative ways.

From biomass energy entrepreneurs at the Port of Morrow creating jobs that pay 150 percent of local wage rates, to the cutting edge, home grown companies that will emerge from the Oregon Nanoscience and Microtechnologies Institute in Corvallis, an economy of innovation is emerging in Oregon. It's one of our best opportunities and hopes for the future because it's locally driven and based on our state's natural strengths -- strengths including our solid base in agriculture, forestry, and advanced manufacturing … our promising research and development initiatives … our geography, with access to burgeoning Asian markets … and our exports that include not only materials and products, but also human capital and expertise.

For this reinvention to take hold, we must have a strong foundation. Since taking office in January 2010, we've closed a $3.5 billion budget gap and balanced our state budget, and we did so civilly, without tearing the state apart like they did in Wisconsin. We've increased access to capital and streamlined regulations, while taking steps to make our state government nimbler and smaller. We've built local infrastructure. We've developed new strategies to promote business equity and opportunities for small and emerging businesses. And we've created a network of Regional Solutions centers dedicated to local economic priorities.

From all this effort, here's what we're seeing. Our unemployment rate has gone down one and a half percentage points. In the last 18 months, we've created 25,000 jobs in Oregon, and more than 13,000 jobs in the last four months alone. We had the second fastest growing economy of any state in the nation in 2011, prompting Forbes Magazine to name Oregon one of the Top Ten States in America for doing business. We're also ranked the number one location for manufacturing, number two for the lowest tax rates on new investments, and one of the five top states for the lowest overall business tax burdens in the United States.

All of this is good and promising news, but we can't pretend that there aren't still plenty of challenges ahead or that our gains have been spread equally around the state. Too many parts of Oregon are still struggling with double-digit unemployment. We have not created enough jobs that pay more than the national average.

So it's good to acknowledge the progress we've made while reminding ourselves that our work is far from over. We have to maintain and even increase our momentum to ensure that all Oregonians have a more prosperous future. Here are a few areas where I think we need to focus:

First, and perhaps foremost for your community, we have to make sure we have the room to support innovative businesses. To that end, Business Oregon, Metro, the Oregon chapter of NAIOP (the Commercial Real Estate Development Association), the Port of Portland, Portland Business Alliance, and my Portland Metro Regional Solutions Team recently completed a comprehensive examination of the Portland metro region's larger industrial sites. The process was a good example of partnership between public, civic and private partners to begin to address the region's economic challenges.

This project had several goals. First, we needed to examine the supply of market-ready sites within the existing Portland urban growth boundary. We then needed to determine the costs and benefits of developing each site. And from there, we needed to begin a state and regional dialogue on the tools and policies necessary to maintain a market-ready inventory of such sites for traded-sector investments. Basically, what land is out there, already zoned appropriately, to support our state and regional economic strategies?

Their resulting report concluded that the region lacks a "market-ready" supply of industrial land to attract and grow the types of catalytic employers that can boost the region's ability to provide family wage jobs and compete in the global economy. Out of 56 sites the team examined, only a handful were determined to be "market ready." And out of these sites, only one was larger than 100 acres -- the LSI industrial site in Gresham.

Other potential industrial sites in the region will require investments and actions to make them development ready. Our biggest challenges include lack of public infrastructure such as water and sanitary sewer; stormwater management; and transportation. Addressing infrastructure barriers would remove the market viability gap for many of these sites and open them up for development.

We know that this work is relevant to areas beyond the Portland metro area. Communities across the state face these same challenges. If anything, challenges in rural communities are even greater, with less access to capital and more hurdles in successfully recruiting new firms.

But if we can overcome these challenges, the report tells us, we can create vital family-wage jobs while providing important fiscal benefits to state and local governments. Further, industrial site readiness is not only an important economic development tool; it's also an important part of helping our land use system function better. A focus on readiness helps increase land efficiency by steering efforts and resources towards sites within Urban Growth Boundaries.

Like so much of our work, making progress requires engagement and partnerships from all levels of government and the private sector. It also requires patience, especially for those areas that require more in-depth regulatory approvals like brownfield cleanup, and zoning and annexation. But the effort is worth it if we can address the shortage of market-ready large industrial sites in this region and across the state. A competitive supply of market-ready sites is critical to the expansion and recruitment of traded-sector industries.

The way to tackle this challenge is for all of us to commit to this initiative and leverage where we can to see results. But the work and the ownership of the process lie with the regional stakeholders. Local and regional stakeholders need to come together to prioritize and lead the implementation. And when it is clear that there is the will and the focus, we will coordinate the appropriate state agencies to support the effort through the Regional Solutions Team.

Second, we need to continue supporting a strong, educated workforce.
The Oregon Workforce Investment Board has been hard at work on a plan that gets Oregonians back to work while preparing citizens not just for the jobs of today, but for the careers of the future. The Oregon at Work plan was released earlier this summer to improve the way our state provides workforce services to better meet the needs of citizens and businesses.

It's focused on enhancing private/public sector partnerships to better identify and meet industry needs for a highly skilled workforce; creating Certified Work Ready Communities; and investing in an integrated workforce system to respond to the needs of today's industries while preparing for future shifts in our economy.

If we work together, we can create an Oregon where employers know they can locate, grow, and find highly skilled and productive employees; where Oregon's graduates and job-seekers are ready to contribute to our state and to our economy; and where incomes rise.

This is true not only for the large, influential companies we are proud call Oregon home, but also Oregon businesses of every size. The fact is, the average company in this state has 15 employees. It is the companies that you work with everyday in your communities that make up the bulk of Oregon's economy. The 85,000+ businesses in Oregon with fewer than 500 employees are leading our recovery and putting Oregonians back to work, and they need the reassurance that employees are ready and able to work.

This same idea motivates much of our work in education. We are, for the very first time, aligning funding and governance across the entire educational spectrum, from early childhood, to K through 12, to post-secondary education and training. We're investing in better learning outcomes for all students, and we're focused on early childhood education so that every child will be ready to learn when they get to school, and reading at level in the third grade, because we recognize that early educational success of children is probably the cheapest, most efficient, and best job training program that we could possibly put together.

Oregon's high quality of life and long-term prosperity are dependent on a diverse economy with family wage jobs, where businesses can innovate and grow. A skilled workforce is essential to achieving this vision, and I'm happy to report we're pursuing positive change on a number of fronts.

Third, we have to be creative about how we solve problems, support burgeoning businesses, and create an environment that encourages entrepreneurship and innovation. I already mentioned one -- Regional Solutions -- which operates solutions centers across the state that help remove barriers and support local economic initiatives and development. They work by bringing together businesses and community leaders to identify and pursue local community and economic development priorities.

There's also our STEP program, which gives small businesses access to training and capacity-building, and helps them attend trade shows and trade missions, to increase their export opportunities. So far we have about 90 businesses participating in the program, and as they're able to increase the value of volume of their exports, it supports our overall goal to double the value of Oregon exported products and services over the next decade.

New funding means that we have about 30 percent more in this program over last year, so we can support small business participants in addition to providing scholarships for export training through the Small Business Development Center at Portland Community College; grants for industry-led business missions; and export counseling training for economic developers through the Oregon Economic Development Association and the Brookings Metropolitan Export Initiative.

Later this month, I'll be part of a delegation to China and Japan that includes government representatives, established Oregon businesses, and heads of research and commercialization centers promoting their work and their products. In particular, as the result of collaboration between local entrepreneurs and investors and Chinese institutions, the delegation will have a significant focus on exporting Oregon's expertise in sustainable building products and innovative design.

Our focus on innovation is not just about the specific programs or initiatives, but also about changing our culture. A culture of innovation, focused on infrastructure that helps us meet our goals; a mindset that we need to reduce barriers while accelerating partnerships; a framework for state and local governments to work collaboratively with the private sector and the educational sector -- these are what Oregon will need to thrive in the 21st century economy.

By infrastructure, I mean not only core infrastructure like the CRC and other bridge and road projects, but also infrastructure like energy efficient buildings, transmission lines, water projects, and a smart grid. Resources that we counted on in the past have become much more scarce and uncertain. I'm working with treasurer Ted Wheeler and his counterparts in Washington and California to develop a West Coast infrastructure exchange that will seek to support projects of regional significance with institutional capital. If we get this right, if we do this right, we can become less dependent on infrastructure funding from Washington, D.C., and begin to attract outside capital and private investors who see the opportunity and potential profit in this new emerging sector.

And by collaboration, I mean that we'll need to continue doing something that makes us a little unique as state. In Oregon, we know that job creation and economic recovery are not partisan issues or political footballs. Are there going to be differences between business and labor, between Republicans and Democrats? Absolutely. But creating jobs and moving our economy forward simply should not be one of them, nor should it be to cast this as a false choice between sound environmental stewardship and creating jobs.

Collaboration will be key as we continue serious conversations about our system of public finance. I have been meeting for the past six months with business and labor leaders and other stakeholders to find common ground on a way to reform our system of public finance that makes it more predictable, stable, and rational; that better positions Oregon for economic growth and development; and that provides adequate and stable resources for crucial public services, particularly our system of public education. We simply have to better protect our economy, better protect our school system from the boom bust economic cycle that plagued us in the past. This is not a three-month project; it's not a six-month project. But I am absolutely committed to seeing it through.

Fortunately, what we've seen in this state over the last 18 months is Republicans and Democrats coming together, putting their differences aside, stepping up to the challenge. We've seen the private sector and the public sector partnering in new ways, and in new directions, because we share a common vision for the State of Oregon, and we're acting on that vision in new and measurable ways.

This will be especially important as we approach the next biennial budget and legislative session. But we're starting from a much better place than even a year and a half ago, and we're continuing to make remarkable progress. Oregonians in the last 18 months have demonstrated their ingenuity, their resiliency, and their entrepreneurial spirit. We have the near-lowest unemployment rate we've had in three years. We have been named one of the top ten states in which to do business. We've balanced our budget. We've improved our credit rating. We've made state government more efficient. We're investing in better outcomes for children and in better health care results. All in all, Oregon is creating an environment in which 21st century companies can grow, adapt, and thrive.

We should be proud of what we've done together, and we should recommit ourselves to do better, much better, over the next 18 months. I've often said that somewhere in America there needs to be a state that demonstrates that we have the capacity to weather our toughest challenges without losing our sense of community, without losing our commitment to one another. I think Oregon's doing that, and I think it's taking us in a new and innovative direction that will help us rebuild our economy while becoming stronger and more united along the way.