Getting down to business: Q&A with the gubernatorial candidates

“It’s important to diversity the economic base. If you look at Oregon in 1970 vs. 2005, you will see the change in the economy,” says Kulongoski. He has three initiatives in that area:

The first is to establish a bio-based signature research center, modeled after the Oregon Nanoscience and Microtechnologies Institute (ONAMI), which is a partnership of industry, academic and government groups. The bio center would be a partnership between private industry and the state’s universities “to create new value-added products from forests and agricultural land as well as manufacturing jobs.” It would be focused on R&D in clean energy, green building and bio-based products, and be funded with up to $7 million in state investment.

The second is putting $1 million to $2 million into an Oregon Translational Research and Drug Discovery Institute. It would bring together the state’s universities and biotech companies to “bridge the gaps between research, development and commercialization in the area of infectious disease” and provide drug development resources.

The third is to emphasize trade missions. He plans to lead missions to China, Korea, Japan and Europe in the next two years. He also plans to strengthen Oregon’s relationship with Washington State. “Portland/Vancouver is a single economy. I want former Gov. Gary Locke to lead a trade mission with Gov. Chris Gregoire and me to China. I want to get businesses to expand here.”

He adds that he is “talking to Gregoire about a common venture capital pool from both our pension funds. We need to find the startup capital. Oregon has the potential to be a national leader in renewable energy.” He plans to invest in the development of the nation’s first commercial-scale wave energy park. The investment will range from $4.6 million to $6.6 million with the goal of attracting two or three major manufacturers of wave energy devices to Oregon by 2012.

He says he will continue to focus on transportation infrastructure because of its importance in attracting new companies to the state. “I created Connect Oregon, a $100 million program to build the infrastructure in rural communities. I’ll come back with Connect Oregon II. It will focus on seaports, railroads, regional airports.” He plans to commit another $100 million for the second phase.

He says that one of Oregon’s strengths is its potential to be the leading West Coast distribution center. He plans to build on that with Connect Oregon II, making strategic investments in roads and bridges to speed up freight corridors, and expanding the state’s industrial land inventory. He plans to put another $100 million in his next budget for industrial land infrastructure improvements and create an Industrial Land Development Unit to help find land for companies to expand and to ensure adequate infrastructure.

How would you improve the business climate?

Kulongoski plans to introduce a package of more than two dozen initiatives that he says will streamline business regulations and the time and money businesses spend in the process. They include a central development permit application and processing center, a streamlined review process for wetland delineation and environmental regulations, and a clearinghouse for questions about state and local permitting.

What’s your plan to help education?

“The message in high school is that there’s no opportunity if you don’t go to college. One thing we need to do is restructure community colleges and K-12 to show students there are alternatives to going to college.” He has two proposals aimed at education. First is the Education Enterprise program. It sets a floor of $6 billion for K-12 funding, an increase of 16% over current levels, and sets a 10% increase in school funding every biennium. The program would increase resources for preschool (including fully funding Oregon Head Start), K-12, community colleges, universities and job-skills training. Kulongoski wants to increase the corporate minimum tax to help pay for this plan. The second is an overhaul of the workforce training program. He plans to commit $25 million more toward expanding the state’s skills training programs, and bring together trade unions, employers and government to jointly decide how to target resources.

How will you help Oregon thrive in the global economy?

Kulongoski says he plans to put $3.7 million into creating a Northwest Food Visioning, Innovation, and Productivity Center (VIP Center) that would work with the industry and the Food Innovation Center to share ideas and technologies. The proposal also includes putting $900,000 into a Community Seafood Initiative, which will focus on new product and market development. He projects the VIP center to generate between $6 million and $15 million in “industry productivity enhancements” in 2007-09.

He plans to put $10 million more into ONAMI, and $3.3 million in job-training and research and development resources in “value-added manufacturing processes.” The proposal includes three new senior faculty positions at Portland State University, new lab equipment and expansion of the matching applied research grant program Oregon Metals Initiative.

What’s the biggest barrier for business in Oregon?

“Business sometimes is its own worst enemy. They project that they believe taxes are killing them. But we’re one of the lowest in the country in tax burden. I think because of the instability of the revenue system, governments rely more and more on fees and assessments, which has an indirect impact on businesses. The instability creates a situation where we don’t provide the necessary investments in education and health care and the overall revenue structure relies on fees.”

Revenue instability is the biggest barrier to business?

“Yes.”

How do you fix it?

”There is no magic solution. I believe citizens will support [changing the revenue structure] if you tell them how it will be spent. For instance, spending on education is important. I can’t afford to lose 25% of the state general funds like I did in 2001-2003. No other state fell further than Oregon did. You have to talk to the public about fairness, stability, give them something to invest in.”

What is your tax reform plan?

“I want to put the corporate kicker into a rainy-day fund. That’s a great investment for Oregon, and I’ll propose it in my budget. I want to figure out how middle-income taxpayers can pay less. If you’re asking me if there’s a need for tax reform, the answer is yes.” But he would not say if he supports a sales tax, although in April during a debate with two Democratic challengers, he said a tax stability plan would include “a substantial reduction in income tax, and looking at a consumption tax of some kind.”  He says he currently does not support changing the individual kicker. He advocates increasing the corporate minimum tax to help fund education initiatives, but would not say by how much. (Any change to the kicker tax would take voter approval.)

How would you address the growing number of uninsured Oregonians and the rising cost of health insurance?

A priority is his Healthy Kids Plan, which aims to provide every child in Oregon with access to health care, targeting the 117,00 children who currently do not have health insurance. He would use $110 million in state funding and $182 million in federal matching funds each biennium to back the plan. “We’re also trying to expand the waiver system of the Oregon Health plan to address prevention, and cover more people.”

What will you do if Measure 48, the spending limit cap, passes?

“I’ve done enough budget cutting for one lifetime and I am going to work to avoid ever having to go back to the days of when I first took office.” He says his proposals and initiatives are all dependent on Measures 41 and 48 being defeated. And, if they do pass, “I’m well aware there’s going to be a chilling effect on doing anything about the corporate kicker.” It’s estimated that the state will send back $1.3 billion in taxes to individuals and businesses next year, and that if both Measures 41 and 48 pass, it would take about $3 billion out of the state coffers.

What will your $3 billion cut look like?

“Easy. Look at what happened when I got elected. I lost $3 billion in ’01-’03 [from the downturn in the economy]. Legislators didn’t help cut the budget, and voters killed Measure 30. Eventually the economy did turn around. In 2005-07, the state had more resources, so we put more money into K-12. There is no gentle way to say it: You learn to live with whatever revenue you have. Right now we are putting together three budget options: if nothing happens, if one of the measures passes, and then if they both pass.”

What will be your priorities if the measures pass?

“Education. I refuse to walk away from that. We will fully fund Head Start.” He says he also wants to reverse the “25-year disinvestment” in higher education. Since funding education will take about 61% of the budget, what comes after that? “There are constitutional requirements, like corrections. And I’m committed to the state police.” He says he is looking for dedicated funding for the state police and at increasing the number; one of his options for funding is a surcharge to car insurance. “But kids always come to the top.”  He reiterated his Healthy Kids Plan would be a priority.

What would success look like if you have four more years as governor?

“The most important thing is an investment in education and skills training. Diversifying the economy will bring better jobs and better pay. We need a fair trade policy, and a commitment to manufacturing. There has to be a national health care system. Everyone knows that.”

“The workforce issue is just bizarre: There’s high unemployment, but companies can’t find people to fill the jobs they have. We have a huge range of occupational opportunities that are going unfilled at the same time we have high unemployment and an education system that isn’t preparing them for the workforce. Businesses are unwilling to expand here because they don’t think they will be able to get the workforce they need. The education system is not connected to the economy. Education is my passion. But it needs to be connected to the economy. How are we training and preparing our youth for career opportunities that are here? We are leaving our kids untrained for 21st century careers, and leaving our businesses with no one to hire.”

Saxton thinks the hostile business climate isn’t about a specific rule or regulation, it’s about the attitude of those in state government. He says he constantly hears from businesses about Oregon’s high “hassle tax” and that it chases away companies. He wants to infuse everyone who works in a state job with the need to help businesses, not punish them, if they run afoul of a rule or regulation. “It’s an attitude, but it starts at the top.”

How do you make that happen?

“It’s the people. You don’t need new rules or laws. I will ask for resignation of every agency head, commission member and board head. We need a different team. You can’t be a leader if you’ve got the wrong people on the bus.”

After you get a new team, what’s the strategy for business?

“Education and knowledge is the key for economic growth. Which means we have to have a great education system, which includes K-12, higher ed and vocational education. You can’t have an education system like ours and expect to have a knowledge-based economy. It’s the No. 1 thing businesses are concerned about. Where would I spend money in Oregon? There are public safety issues we need to improve. The next thing is to focus on education.”

Saxton says he will work to link business and education, to match the workforce needs to education funding, in partnership with the business community. How? “You need to make it your priority for budgeting. Workforce training broadly defined must align with the budget.”

How will you recruit more companies to Oregon?

“The governor needs to be personally involved. I can’t think of a better way to spend my day than either helping existing business to expand or calling on new businesses. I’m going to be the governor who goes and makes the sale.”

How else will you improve the economy?

“We have to preserve the diversity that we have. For instances: food processing and timber products. We used to be a fabulous state for food processing. I want to make a priority out of growing Oregon national resource-based industry. I don’t have some plan that says we’ll be the state that does ‘X.’ When you see opportunities, you have to deal with them.”

What are some of those missed opportunities?

“There’s a whole missing piece in the alternative-energy sector. You have to have a critical mass and the clusters that work. You need to attract the manufacturing of it. Companies are looking for industrial lands, speed of government. We haven’t had a commitment to developing those industries. I don’t have some plan that says, ‘Here’s the billion dollar tax credit.’ I don’t think that’s what does it. It’s the package of things. A climate that isn’t a hassle, a good place to live with good schools.”

What will you do to help create jobs?

“I represent a lot of Oregon businesses in my law practice. They aren’t sitting there waiting for the governor to help them. They’re looking for a climate where they can do business. They don’t need incentives to create jobs. They already want to create the jobs, but they can’t fill them. You have to have a commitment from the governor to be a partner. I’m not a big fan of a big program of government giveaways.”

How will you be a partner with business?

“Oregon is being a barrier to economic growth. It’s not that Oregon has a neutral government; it’s a negative and most of that is attitude. I approach every problem with, ‘Where are we trying to get?’ In the steps to get from here to there, the fewer involving government, the better.”

Where are you trying to get?

“The economy needs to be diverse. The last several governments have put all their eggs in high tech, and turned their backs on natural resources, manufacturing and agriculture. My No. 1 goal is to make sure we are diverse enough. Goal No. 2 is to emphasize the creation of jobs with higher pay. Oregonians have dropped to the bottom in wages. When we talk about jobs created lately, they’ve been low-wage. That brings us back to expanding the knowledge-based jobs. It’s not my job as governor to pick the industry to help, but to create the climate where creative, innovative people can invest and expand. Investments are happening in places that have a good climate, not the lowest taxes or the easiest laws.”

How will you invest more in education?

Saxton says he does not believe that more money is the answer to the state’s education woes. “The money will come from state government being run more cost effectively.”  Saxton also says he will encourage more freedom in school options, such as charter schools, home schooling and magnet schools; trim health care and administrative costs; push performance-based pay; and support teacher mentoring. He also wants to see greater control at the school level for hiring, budgeting and professional development.

What is your tax reform plan?

“Get rid of the capital gains and estate taxes. They are both negative taxes for businesses. They encourage businesses to leave the state. The income tax is volatile, but that doesn’t mean spending has to be volatile. Oregon spends every red cent. If you spent on a trend line, you’d have stability, you’d have a rainy-day fund. The state behaves in an irresponsible way when it comes to spending.” Saxton says he would consider an “alternative use” for the corporate kicker refund if there was a tradeoff in reducing other taxes, such as capital gains and estate. He did not have specifics about amounts, saying that still needs to be ironed out. He says he would not touch the personal kicker, and does not support a sales tax.

What will you do if Measure 48, the spending limit cap, passes?

“It will force government to spend less money, and put more of a premium on controlling government costs. It still gives you an increase over previous budgets. You have to make sure you get value, and prioritize.”

What are your priorities?

“Public safety, education and the social  safety net. The human services department is the most bureaucratic. It’s inefficient. It’s a target-rich environment for improvements. There are fewer people getting help and services have been reduced while the costs of the system have gone up. I reject the idea that we have to pick among the programs. It’s the model that doesn’t work. I’m not looking to cut services. I want to do it without raising taxes by redirecting money that’s in the program now. Oregon has one of the most expensive delivery systems in the country. The costs of the bureaucracy are completely out of line. But at some point you do run out of money and there are things you don’t do.”

How would you address the growing number of uninsured Oregonians and the rising cost of health insurance?

“Oregon leaves employers with only two choices: the fully loaded insurance policy or nothing. That’s completely wrong. Our goal ought to be to maximize the number of people with insurance. I want to get the most people possible insurance with employer-provided private insurance. Let employers provide a basic package. Let’s strip out some of the government mandates, which create the costs. How do you help consumers? Make sure there’s more of a competitive marketplace, make sure they have information. I do not favor government providing any kind of universal health care.”

Saxton said that uninsured children should be helped by the state, though he does not have a specific plan for that yet. Saxton also wants to expand the Oregon Medical Insurance Pool, “so small businesses and high-risk individuals can get the insurance they need at a cost they can afford.”  He also supports tort reform, greater transparency of the cost of medications and medical procedures, and expanding Medicaid for Oregonians.

How would you help employers offer basic health care?

Saxton says he would work to eliminate state mandates, but he would not require businesses to offer insurance, even a basic plan. He said he was “intrigued” by the recent Massachusetts health care plan, but needed to further study it. (It requires that everyone in Massachusetts have health insurance. Those who can afford insurance will be penalized if they don’t purchase it, and government subsidies to private insurance plans will help the working poor and uninsured children. Businesses with more than 10 workers that do not provide insurance will be assessed up to $295 per employee per year.)

What would success look like after four years with you as governor?

“That Oregon figured out how to deliver a great education to all its residents. Education is the most important thing we do for business development, in fighting crime, in giving kids a chance. It’s a great payoff.”