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In order to know whether or not Oregon's economy and competitive position is improving over time, is critical to track key measures over time compare them to other states. Working with the Oregon Progress Board, the Oregon Business Plan has published four editions of the Competitive Index since 2002. |
Competitive Index, Innovation Index and Oregon benchmarks
An important mechanism for tracking Oregon's economic progress is the Competitive Index. Since the Oregon Business Plan was launched in 2002, the Oregon Business Plan Steering Committee and the Oregon Progress Board have published four updates to the Competitive Index. The index measures how well Oregon is doing in giving its businesses a competitive advantage. Oragnized in seven sections, it begins with indicators of Oreogn's general economic well being, suggests the health of Oregons traded sector industries, then covers the Four Ps for Prosperity and public finance. The last time the Competitive Index was published was 2007.
Beginning in 2007, the Oregon Innovation Council began publishing its Oregon Innovation Index. This document evaluates Oregon's performance over time on key measures of Pioneering Innovation including invention, translation, commercializiation, economic prosperity and innovative business climate.
Both the Competitive Index and the Innovation Index were helped by the excellent work of the Oregon Progress Board. The Progress Board maintains the Oregon Benchmarks, key measures of Oregon's economic, environmental and community health. Unfortunately, the legislature cut fuding for the Progress Board in 2009. We hope that this funding will be restored or that an alternative method of tracking Oregon's progress in these areas will be developed. Not measuring outcomes is a great way to not achieve them.
While we believe the Competitive Index, Innovation Index and the Oregon Benchmarks are instructive, we have summarized our take on Oregon's progress below.
Jobs and Incomes
On this most basic measure of progress, Oregon unfortunately gets a failing grade. Oregon's per capita income has been declining for more than a decade. Oregon's per capita income is now at 91% of the national average, its lowest level since the measure has been recorded. We also have a lower share of adults working than in the past. These trends result in lower levels of tax revenues to fund education and other services, further contributing to declines in jobs and incomes. We outline this distrubing cycle and ways to get out of it in our presentation "Breaking out of the Circle of Scarcity."
Industry Clusters
While Oregon is not immune to national trends of declining manufacturing employment, Oregon's manufacturing industry clusters out-performed those in other states during the last economic expansion.
Oregon also has done a good job at developing a new clean technology ("green") industry. According to the PEW Center on the States, Oregon now has a larger share of total employment coming from clean technology than any other state.
The "Great Recession" took a major toll on Oregon's forest products industry. Oregon is the #1 providor of lumber for the U.S. housing market. The housing downturn has hurt this industry tremendously.
People
When it comes to reaching the ambitious goals outlined in the Oregon Business Plan - that 40% of Oregonians should have at least have a Bachelor's degree, 40% at least an Associate's or technical degree and 20% at least a high school diploma that demonstrates college and work readiness - Oregon is headed in the wrong direction. Oregonians currently entering the workforce are significantly less educated than the generation leaving the workforce.
Education funding has also been declining as we spend more of our tax dollars on prisons and human services. This is particularly true for higher education. Spending on the Oregon University System and Community Colleges has grown at only 1% over the past decade, despite significant enrollment growth (higher education spending in Oregon is not tied to enrollment growth, so in real terms, spending has declined significantly). At the same time, spending on human services and corrections grew at 6% and 5%, respectively. These trends can be seen in this chart.
In essence, consciously or not, our state policy is to guarantee every criminal in Oregon a prison bed but not every graduating senior an affordable seat in a college classroom.
Oregon is also operating with an opaque and fragmented budgeting process that does not give policymakers the tools to invest more strategically in its people. While we speak of a PreK-20 education system, the budget is siloed. While the higher education budget has thousands of line items, the K-12 budget is a single number. Rather than focusing the dollars on groups of students and desired outcomes, we focus on agencies and institutions.
The Oregon Business Plan has outlined a new budgeting process for Oregon. We believe that a new budgeting process is the first step toward reaching the 40-40-20 goal.
Despite cause for concern in our human investment strategy, there are many bright spots:
- Oregon continues to be ranked among the top 10 states for attracting young, highly educated workers.
- Oregon has made significant investments in new data systems to track student progress over time and across institutions.
- Oregon has established rigorous high school diploma requirements that require students to demonstrate essential skills.
- Oregon has stepped up its investment in engineering education through the Engineering and Technology Industry Council.
- Although still inadequate, Oregon has expanded need-based aid for college students through the Oregon Opportunity Grant.
- Oregon created an education stability fund in 2002 and its first general purpose rainy-day fund in 2007.
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Coming Soon...
Pioneering Innovation
Oregon has made significant progress in improving its capacity for economic innovation, though much work remains. The Oregon Innovation Council tracks progress on a number of innovation indicators through the Oregon Innovation Index.
Productivity
Industrial lands: Under Governor Kulongoski's leadership, progress was made in the early part of this decade certifying industrial sites and putting them on a searchable online database. However the "low-hanging fruit" is gone and Oregon again finds itself without shovel-ready land to support high wage manufacturing and distribution industries. Review our industrial lands initiative for more information.
Transportation: The condition of Oregon's roads consistently ranks among the top ten of US states.
Bridges:The condition of state bridges declined dramatically from 2000 to 2003 then stabilized through 2005. Improved bridge conditions, reflected in 2008, reflects a trend that is expected to continue through 2011. Two major factors contributed to this trend. First, beam testing done by Oregon State University demonstrated that concrete bridges retain much of their strength even with structural cracking. Bridge inspectors are using this new guidance as they perform their routine inspections. Second, new and strengthened bridges funded in part from the Oregon Transportation Investment Act (OTIA) are being constructed at a rate not seen since the "Interstate Era" of the 1950's. While the OTIA will enable many new and strengthened bridges, a substantial portion of the funding will be provided by bonding the State Bridge Program for a 25 year period. The combination of less funding available in the long term and an aging bridge population (more than one third of the bridges are greater than 50 years old) will result in a future decline in state bridge condition.
This ranked During the Kulongoski administration Oregon greatly improved its investment in transportation with the Oregon Transportation Investment Act (OTIA), Connect Oregon, and the Jobs and Transportation Act of 2009. However the backlog of needed maintenance, modernization and optimization of the transportation system is still great. Oregon must continue its investments or risk falling behind to other states and nations that are investing heavily in transportation infraIn 2006structure.
Taxes: Oregon's business tax climate improved significantly with the adoption of the single sales factor tax apportionment in 2003. Under the single sales factor, only in-state sales relative to all US sales matter in determining how much of a company’s profits are apportioned to and thus taxable by Oregon. The single sales factor is an attractive tax policy for companies that invest in Oregon property and people but sell their products and services primarily outside of the state. By exporting their products and services, these companies bring in new revenue that gets re-circulated in the local economy. Oregon has also taken a number of steps in the wrong direction. The passage of Measure 66 in 2010 gives Oregon the second highest income tax rate and highest capital gains tax rate in the nation. Given our proximity to Washington State with no personal income tax but similar quality of life and amenities, Oregon's high personal income tax rates discourage wealthy people from moving to and staying in Oregon.
Regulatory Climate: Funding for the Governor's regulatory streamlining office was cut in 2009, and many local municipalities have failed to follow the state's lead in permit streamlining.