Breaking Out of a Circle of Scarcity: The Oregon Business Plan's Challenge for the 2010s and Beyond

Breaking Out of a Circle of Scarcity The Oregon Business Plan

Overview
What is the Oregon Business Plan?
The Circle of Prosperity: The Foundation of the Oregon Business Plan agenda
The Circle of Scarcity: The reality of Oregon since 1997
Framing the Challenge for the next decade
Getting to Work: The OBP agenda for 2010

What is the Oregon Business Plan?
A shared vision of Oregon’s economic future and what it takes to get there
A common agenda for the business community
A sustained, productive partnership between business and public leaders

Business Plan Framework
Goal
+
Vision
+
Strategy
+
Initiatives

Oregon Business Plan Goal
Jobs and the Economy Goal: Quality jobs for all Oregonians

Goal
+
Vision
+
Strategy
+
Initiatives

OBP Vision: Traded Sector Success Through Innovation
Leading-edge traded sector (export) companies are the engine that grow quality jobs and statewide prosperity.
Oregon has many companies competing well through innovation in product and process, good R&D, smart marketing, and other practices.

Traded Sector Drives Growth Traded/Export Sector Suppliers Local Sales to rest of world Most jobs are here: schools, hospitals, grocery stores, restaurants But firms in this sector drive the economy

Traded Sector ≠ “Large”
Large and small is not the appropriate distinction.
88% of Oregon businesses that export are “small” businesses.

Clustering is Critical
Traded sector success isn’t random – traded sector businesses cluster
Similar and related businesses draw advantages from proximity
Places specialize

Oregon Industry Cluster Network
High Tech
Semiconductors + electronic components
Software
Education technology and services
Bioscience
Advanced Manufacturing
Metals
Machinery
Transportation equipment
Defense
Food Processing
Aviation
Footwear, sports apparel and outdoor gear
Natural Resources
Forestry and Wood Products
Agriculture
Nursery products
Tourism
Clean Technology
Solar manufacturing
Environmental Technology and Services
Energy efficiency
Electric vehicles
Green building and design
Wind energy
Wave energy
Creative Industries
Film and Video
Design

Goal
+
Vision
+
Strategy
+
Initiatives

Four Ps for Prosperity
People : Support for the education & training of our current & future workforce.
Place : Working to enhance Oregon’s quality of life and resource utilization.
Productivity : Ensuring the availability of cost-competitive public and private resources and services.
Pioneering Innovation : Support for innovative research, business formation, availability of investment capital, and commercialization of research.

The Fifth P: Public Finance AKA “The Circle of Prosperity” Strong Economy Higher Per Capita Income & Lower Poverty Rate Lower Tax Rates for Our Chosen Level of Public Services Good Public Services & Higher Quality of Life Lower Costs Higher Revenues

Goal
+
Vision
+
Strategy
+
Initiatives

Progress on some past initiatives
Reform PERS
Invest in roads and bridges
Establish innovative signature research centers
Boost the number of engineering graduates
Identify shovel-ready industrial land
Support higher K-12 standards
Improve international air access
Simplify and streamline regulation and permitting
Create a state rainy-day fund
…… ..but much work remains in these and other areas

2010 Regional Meetings

Leadership Summit: December 13 th 2010 Oregon Convention Center
Bring together business, political & community leaders from across Oregon
Make commitments to act on specific initiatives identified in the Plan
Identify road blocks
Celebrate successes

How Are We Doing?
Private sector health
Public sector health

The Circle of Prosperity Starts with a Strong Economy Where Do We Stand? Strong Economy Higher Per Capita Income & Lower Poverty Rate Lower Tax Rates for Our Chosen Level of Public Services Good Public Services & Higher Quality of Life Lower Costs Higher Revenues

Per capita income OR, WA v. US Average Washington Oregon US

Non-metro per capita income OR, WA v. US Average Non-Metro Washington Non-Metro Oregon

Per capita income Portland, Seattle metros v. US Average Seattle Metro Portland Metro US

If Oregon looked more like Washington…

Price of Government:
Revenue & Taxes as a Share of Personal Income
1977 2000 1980 1990 2007 0% 5% 10% 15% 18% State & Local Revenue State & Local Taxes General/Lottery Fund (State Only)

Revenue per capita OR v WA and US average Washington Oregon

Medicaid/Corrections spending is growing as a share of personal income Medicaid, human services, corrections

Medicaid, human services, corrections Education operations less tuition (all levels) Education spending is shrinking as a share of personal income

Average Annual Growth in General Fund, 2000-2011

The Road Ahead

Slow Economic Recovery 1980 1990 No change 2007 State forecast 2001

28% of children under 5 live with a single parent 22% live in poverty 23% have no English speaking parent

The number of Oregonians aged 65+ will increase 46% during 2010-2020. Or about 60 per day. And, as they retire, they’ll take their diplomas and experience with them.

Fewer workers to pay for an aging population

The incoming workforce is less educated

Legacy costs of a poorly designed and managed public pension system have come due

Costs of an Aging Population will Hit Soon Source: ECONorthwest calculations using data from Mercer, Kaiser Family Foundation, and Health Affairs

Decade of Deficits Revenues (bns.) Expenditures (bns.)

In March 2009, we anticipated no revenue growth for 2011-13… Source: ECONorthwest calculations based on information from Oregon Governor’s office, and Illustrative spending assumptions 2009-11 2011-13 % Change RESOURCES General/Lottery 14,442 16,019 11% Stimulus/Reserves 1,584 0 -100% Total 16,026 16,019 0% EXPENDITURES K-12 SSF 5,982 OUS, CCWD, PreK 1,903 Human Services 4,531 Public Safety 2,523 All Other 965 PERS Increase - Total Expenditures 15,903 Ending Balance 123

… a sizable increase in PERS costs… Source: ECONorthwest calculations based on information from Oregon Governor’s office, and Illustrative spending assumptions 2009-11 2011-13 % Change RESOURCES General/Lottery 14,442 16,019 11% Stimulus/Reserves 1,584 0 -100% Total 16,026 16,019 0% EXPENDITURES K-12 SSF 5,982 OUS, CCWD, PreK 1,903 Human Services 4,531 Public Safety 2,523 All Other 965 PERS Increase - 368 N/A Total Expenditures 15,903 Ending Balance 123

… assumed modest healthcare and corrections increases… Source: ECONorthwest calculations based on information from Oregon Governor’s office, and Illustrative spending assumptions 2009-11 2011-13 % Change RESOURCES General/Lottery 14,442 16,019 11% Stimulus/Reserves 1,584 0 -100% Total 16,026 16,019 0% EXPENDITURES K-12 SSF 5,982 OUS, CCWD, PreK 1,903 Human Services 4,531 4,984 10% Public Safety 2,523 2,674 6% All Other 965 PERS Increase - 368 N/A Total Expenditures 15,903 Ending Balance 123

… and no growth in K-12 or elsewhere. Source: ECONorthwest calculations based on information from Oregon Governor’s office, and Illustrative spending assumptions 2009-11 2011-13 % Change RESOURCES General/Lottery 14,442 16,019 11% Stimulus/Reserves 1,584 0 -100% Total 16,026 16,019 0% EXPENDITURES K-12 SSF 5,982 5,982 0% OUS, CCWD, PreK 1,903 Human Services 4,531 4,984 10% Public Safety 2,523 2,674 6% All Other 965 965 0% PERS Increase - 368 N/A Total Expenditures 15,903 Ending Balance 123

And that suggested a brutal biennium for post secondary education. Source: ECONorthwest calculations based on information from Oregon Governor’s office, and Illustrative spending assumptions 2009-11 2011-13 % Change RESOURCES General/Lottery 14,442 16,019 11% Stimulus/Reserves 1,584 0 -100% Total 16,026 16,019 0% EXPENDITURES K-12 SSF 5,982 5,982 0% OUS, CCWD, PreK 1,903 1,047 -45% Human Services 4,531 4,984 10% Public Safety 2,523 2,674 6% All Other 965 965 0% PERS Increase - 368 N/A Total Expenditures 15,903 16,019 1% Ending Balance 123 0

And now, in September , forecasts have dropped and the challenge is far greater. Source: ECONorthwest calculations based on information from Oregon Governor’s office, and Illustrative spending assumptions 2009-11 2011-13 % Change RESOURCES General/Lottery 13,464 15,042 12% Stimulus/Reserves 1,469 0 -100% Total 14,933 15,042 1% EXPENDITURES K-12 SSF 5,982 5,982 0% OUS, CCWD, PreK 1,903 70 -96% Human Services 4,531 4,984 10% Public Safety 2,523 2,674 6% All Other 965 965 0% PERS Increase - 368 na Total Expenditures 15,903 15,042 -5% Ending Balance -970 0

With no sales tax and recent income tax increases, Oregon income and capital gains taxes are among the highest in the nation M 66

Will we circle into a drain?
Low investments in education and high income tax rates threaten further erosion of personal income levels
The U.S. and Oregon economies appear poised for a slow, jobless recovery.
Aging of the Baby Boom generation will increase the age 65+ population by 46% during 2010-2020, putting upward pressure on Medicaid spending.
High health inflation will continue, which will drive up the costs of Medicaid and public employee compensation.
Legacy costs of a poorly managed/conceived public employee pension system have come due.

Jobs agenda to get the economy moving
Redesign public services to support the economy
Revamp the tax system to incent economic growth
How to turn things around: Focus on Jobs and Income

Decade of Deficits Revenues (bns.) Expenditures (bns.)

Decade of Deficits with Oregon at 97% US Avg. Income Revenues Expenditures

How Can We Grow Jobs and Income?
Agree that it is important, in GOOD times, not just bad.
Agree that increasing incomes is the best way we can support families, public services and non-profits.
Build community culture that respects business and responds to needs. (Attitude of public officials is important).

Grow Income: Welcome High Wage Jobs in Good Times and Bad

Support Industry Strategies
High Tech
Semiconductors
Software
Bioscience
Advanced Manufacturing
Metals
Machinery and transportation equipment
Footwear, sports apparel and outdoor gear
Natural Resources
Forestry and Wood Products
Ag
Food processing
Tourism
Clean Technology
Solar manufacturing
Environmental Technology and Services
Energy efficiency
Electric vehicles
Green building and design
Wind energy
Creative Industries
Film and Video
Design

Support Regional Strategies

Identify statewide policy initiatives Develop specific actions and set priorities among them.
Improve tax and budget policy
Strengthen education and workforce development
Reduce health care cost and improve quality
Enhance transportation infrastructure
Strengthen our capacity for economic innovation
Ensure reliable, affordable and clean energy
Strengthen access to capital
Ensure the availability of shovel-ready industrial land., connected to infrastructure
Simplify/streamline regulations and permitting
Preserve/strengthen economic development tools and incentives

Initiatives – The heart of the Business Plan
Tax and Budget Policy
New budgeting process
Short-term revenue policy
Long-term adjustments.
Employee compensation
Strengthen education and workforce development
Reduce healthcare costs and improve quality
Transportation infrastructure
Innovation policy
Energy
Industrial lands
Regulatory/permit streamlining
Access to capital
Economic development tools
How we balance the budget over the next decade has critical implications for growing jobs and incomes We also must pursue tactical actions to spark both near and long term job and income growth.

Jobs agenda to get the economy moving

Redesign delivery to reduce cost and maintain service Raise Taxes Reduce / Eliminate Services

Redesign 101: Develop a long range vision

Redesign 201: Calculate the per unit costs of everything (and tie them to results)

Redesign 301: Follow the money, challenge systems to deliver more with less, and drive better outcomes (especially in education)

Education Redesign

The Charge
Increase students attaining degrees to meet 40/40/20.
Cut an average 1-year from time to degree
Increase minimum standards in reading, writing, and mathematics
Reduce costs per student by 10 percent or more by accelerating learning, applying new learning tools, and shrinking overhead
Possible Areas for Redesign
Revamp incentives to reward student achievement, credit, and degree completion
Create performance-based scholarships
Redesign financing of special education and ELL
Incent districts and colleges to consolidate delivery and administration
Reconsider the state role in student transportation
REDESIGN EDUCATION

Healthcare Redesign

The Charge
World class health for each Oregonian by 2020
Medical care at 10% of GSP
Universal access to healthcare
Healthy and satisfied users
Healthy communities in the top five or above of World Benchmark of Health
Design an insurance exchange that gets the incentives right for customers and providers
Payment reform
New benefit package designs
Value-based purchasing
Administrative simplification
REDESIGN HEALTHCARE

Corrections Redesign

The Charge
Identify fiscally sound, research-based sentencing and corrections policies that protect public safety, hold offenders accountable, and control costs
Create a modern system of uniform, transparent, and proportional sentencing guideline practices that optimizes prison use
Selectively adjust M11 sentences
Expand and enhance home detention and supervision
Implement incentives and performance goals for counties
REDESIGN CORRECTIONS

The Charge
Ensure a high quality public sector workforce whose compensation is benchmarked to comparable private sector occupations
Sunset the 6% PERS pickup
Phase-in employee participation in healthcare costs
REDESIGN LABOR

Tactical jobs agenda to get the economy moving

Tax System Redesign

The Charge
Develop a stable revenue source for education and other critical services, and create an environment for economic growth
Reduce the capital gains rate
Put the Rainy Day Fund in the Constitution with a 10% cap to be filled with personal kickers
Create a higher education stability fund to be filled with corporate and capital gains kickers
Set aside an ending balance for the Rainy Day Fund
REDESIGN REVENUE/TAX POLICY

Steering Committee
Associated Oregon Industries
Oregon Business Association
Oregon Business Council
Portland Business Alliance
Oregon Innovation Council
Engineering and Technology Industry Council
Oregon Association of Minority Entrepreneurs
Oregon Business Development Commission
Oregon Board of Higher Education
Oregon Transportation Commission
Regional at-large members

Endorsements (Partial List)

file://	5
http://www.seasidechamber.com	5
http://orbusinesscouncil.org.gravitatehosting.com	4
http://www.oregonbusinessplan.org	2

Breaking Out of a Circle of Scarcity: The Oregon Business Plan's Challenge for the 2010s and Beyond

by The Oregon Business Plan on Jun 28, 2010

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Breaking Out of a Circle of Scarcity: The Oregon Business Plan’s Challenge for the 2010s and Beyond — Presentation Transcript