Oregon Group suggests initiatives to spur Oregon’s economy-Budget crisis or not, Oregon needs to invest in the foundations of its high-tech economy — or risk watching it wither.

So insists a group of business leaders, educators, researchers and bipartisan politicians chartered by the 2001 Legislature to find ways to ease collaboration and increase "knowledge-based" economic development in the state.

By:
Ted Sickinger
The Oregonian
Portland, OR
http://www.oregonian.com

The group, known as the Oregon Council on Knowledge and Economic Development, or OCKED, met Monday in Corvallis to give final approval to a broad set of recommendations that members say are crucial to the state’s economic future, despite the potential sticker shock.

The council is recommending $36 million in new state and federal spending to foster high-quality research and development in Oregon, speed the commercialization of technologies developed here, attract new sources of venture capital and develop a strategy to keep the state’s work force on the leading edge.

Those broad-based goals are backed by specific recommendations that range from the establishment of nationally recognized "signature" research centers to offering income and capital-gains tax breaks to lure individual venture capitalists and entrepreneurs to Oregon.

The council will begin a full-court marketing press in coming weeks, hoping to convince legislators, newspaper editorial boards and Governor-elect Ted Kulongoski that the recommendations should be built into the new budget, despite the current fiscal crisis.

Economic development has become a top priority for business and political leaders as Oregon looks for a way out of its lingering recession, persistently high unemployment rate and deepening budget crisis. But the state has little discretionary money, or precedent, of investing in such initiatives.

Council members stressed that the recommendations focus on areas promising significant returns in terms of more, higher-paying jobs and an increased tax base.

"This is less than 1 percent of the discretionary part of the general fund," said Allen Alley, chairman of the council and chief executive of Tualatin-based Pixelworks, which makes chips that control video images. "That’s not a huge commitment when you’re talking about nurturing and growing the cornerstone of our economy. The return they can give far exceeds the investment we’re asking to be made."

The council supports two longstanding priorities of the technology community: doubling the number of engineering graduates in the state and creating a top-tier engineering school, at a total cost of $40 million.

The largest new initiative is $10 million in state funds to create a signature research center, which the council hopes would attract an additional $20 million in federal funds. The proposed pilot center would develop miniature devices and materials used in energy, environmental and biological systems.

Examples of such systems include fuel cells, automotive heating and cooling systems, bio sensors and microreactors for water purification and toxic-waste remediation.

The area was selected based on current research activities at Oregon universities, ties to existing industry and the potential to create new businesses and jobs.

"We can’t out-M.I.T. M.I.T. or out-Stanford Stanford. We’ve got to go where they’re not," said Jim Johnson, a council member and former Intel executive. "What we would be striving for is to become the leader or one of the top leaders in this area, with more researchers and more research dollars being expended here than anywhere else."

Some of the more controversial recommendations aim to enhance the investment climate in Oregon, namely a recommendation to eliminate the state’s capital gains tax and a plan to offer tax breaks to individual venture capitalists and entrepreneurs who agree to live and invest here.

Oregon, said committee member and venture capitalist Scott Gibson, is considered a third-tier state in investment opportunities. And unless Oregon creates the right environment to attract world-class venture capitalists, it will undermine its ability to create successful start-ups such as Mentor Graphics and Sequent Computer Systems.

One potential program: eliminate income taxes for venture capitalists who can certify that they have invested $2 million annually in Oregon and have access to untapped funds of at least $80 million.

"What we’re talking about is applying some of the same ideas that we’ve used to attract companies to individuals," Alley said. "Let’s recognize that there’s been a shift. In an economy where wealth is created by ideas, we’re marketing our state to individuals rather than multinational companies. How do we attract and retain these individuals?"

A number of the council’s recommendations have no cost, such as aligning the missions of the Oregon University System and the Oregon Economic and Community Development Department to focus on turning their ideas into viable sources of revenue.

Another example would have Oregon’s public universities streamline approval of contracts so they can work more effectively with the private sector.

The committee also recommended a variety of proposals to enhance the competitiveness of Oregon’s work force, from improving teacher training and increasing technology use in classrooms, to developing a roadmap for the state’s work force based on high-demand occupations.

Council members acknowledged Monday that a marketing message would play a crucial role in garnering support in the proposals. Some, such as Gibson, openly said that they were unlikely to have the full spending plan approved.

Others, such as Johnson, said the state should spend the entire $76 million — including efforts to bolster engineering education — or forget the whole thing.

"There isn’t a CEO anywhere in the world who can’t take less than 1 percent of his budget and focus it on their strategic future," Johnson said. "It’s time for Oregon to make that decision. It’s time for Oregon to rally around a solution."