16. Oregon Business Council

A Moment of Economic Reckoning for Oregon A Le%er to the Governor’s Prosperity Council Oregon is entering a different economic era. Economists do not formally declare recessions at the state or metropolitan level. But respected na;onal and local observers have described current condi;ons in Oregon and Portland as “recession-like.” Job growth trails the na;on. Popula;on growth has stalled. Business investment is increasingly uncertain. Public ins;tu;ons—from universi;es to local governments—are facing fiscal stress. These cyclical pressures would be serious enough on their own. But they are unfolding alongside something more profound. For the first ;me in modern history, Oregon is entering an era of popula;on scarcity. Natural popula;on growth has turned nega;ve. Domes;c in- migra;on has slowed. Talent is more mobile than at any point in history, and states are compe;ng fiercely for people, ideas, and capital. For decades, Oregon’s central economic ques;on was how to manage growth. Today the ques;on is whether we can generate it at all. As the Oregon’s Choice framework argued, unmanaged expansion is no longer the primary threat. Stagna;on is. Sustained prosperity depends on modest popula;on growth, rising produc;vity, and a compe;;ve value proposi;on for households and employers. This shiQ requires a corresponding shiQ in policy ambi;on. A First Test — and a Warning Signal The recently completed short legisla;ve session offered an early indica;on of how the state is responding to this new reality. Lawmakers came together around targeted ini;a;ves, including the proposed renova;on of the Moda Center to help retain the Portland Trail Blazers. That effort reflects an understanding that civic confidence and economic vitality are closely linked. At the same ;me, measures aimed more directly at strengthening Oregon’s long-term compe;;ve posi;on fell short. Proposals to expand industrial land supply and reinforce research and development incen;ves did not advance. Funding for industrial site readiness was 1

reduced significantly from the Governor’s original proposal. These outcomes suggest that business leaders and elected officials are not yet aligned on the scale of the challenge confron;ng the state. The lesson is not that policymakers lack commitment. It is that the problem statement itself remains contested. Beyond Conven7onal Economic Development Many observers have concluded that Oregon simply needs to “do more economic development.” That ins;nct is understandable but incomplete. Tradi:onal economic development tools — marke:ng, reten:on, recruitment, and targeted incen:ves — remain important. But they cannot subs:tute for the broader task now before state leadership: restoring Oregon’s overall appeal. Today, key elements of that appeal are under strain. Housing costs remain among the highest rela;ve to income in the na;on, and despite sustained policy a[en;on, produc;on outcomes have not improved materially. Public school performance ranks near the bo[om na;onally. The tax system is vola;le and increasingly misaligned with an economy shaped by mobile talent and digital work. Land use and regulatory frameworks designed for a different era now constrain both housing supply and industrial expansion. Climate-related risks, par;cularly wildfire and smoke, threaten one of Oregon’s enduring compara;ve advantages — quality of place. Taken together, these pressures create the condi;ons for what some analysts describe as a depressed cycle of stagna;on: declining popula;on growth, fiscal stress, reduced investment, and weakened public confidence. Early signs are visible across the state — school closures, university budget reduc;ons, rising local levies to sustain basic services, and growing infrastructure backlogs. Missed Opportuni7es Oregon’s recent economic performance increasingly reflects opportuni;es foregone. Major traded-sector investments that could anchor long-term job and income growth have been lost, delayed, or redirected because of the state’s cost structure, regulatory complexity, infrastructure constraints, and limited supply of development-ready industrial land. In May 2024, Greater Portland Inc. reported that the region had lost six clean-technology and advanced manufacturing prospects with a combined es;mated capital investment of approximately $5.6 billion. Several cited the lack of large, shovel-ready sites as a decisive factor in choosing other loca;ons. These were the kinds of projects capable of genera;ng thousands of jobs, strengthening supply chains, and expanding the long-term tax base. 2

Other recent decisions reinforce the pa[ern. Daimler Truck ul;mately located a planned U.S. ba[ery-cell manufacturing facility in Mississippi rather than the Portland region, ci;ng speed-to- market and site readiness considera;ons. Recruitment materials prepared by regional partners document addi;onal prospects that bypassed Oregon aQer concluding that infrastructure ;melines, permifng certainty, and land availability were more favorable in compe;ng states. Access to large-scale electrical loads has emerged as another recurring constraint. Limita;ons in genera;on, transmission capacity, and si;ng ;melines increasingly hinder the state’s ability to compete for energy-intensive industrial investment. These missed opportuni;es translate directly into fewer high-wage jobs, reduced capital forma;on, and a weaker long-term fiscal base. At the same ;me, some exis;ng traded-sector employers face regulatory burdens that threaten the viability of legacy opera;ons. The cumula;ve effect is a business climate in which poten;al Oregon wins too oQen become growth somewhere else. The Charge to the Council Against this backdrop, the Governor’s Prosperity Council has a clear and urgent responsibility. Its task is not simply to assemble another list of policy ideas. It is to produce a coherent set of recommenda:ons — bold enough and credible enough to signal to Oregonians, to na:onal investors, and to the broader public that the state understands the stakes and is prepared to act. Oregon’s strengths remain formidable: natural assets, innova;ve industries, entrepreneurial communi;es, and a tradi;on of long-term planning. But strengths alone are not a strategy. They must be matched with ins;tu;onal reform and renewed policy clarity. The Council’s work should therefore focus on five interrelated systems that most directly shape the state’s compe;;ve posi;on. Five Structural Priori7es for Oregon’s Economic Renewal Oregon’s economic challenges are structural, not cyclical. Restoring compe;;veness requires sustained ac;on across a small set of core systems that shape growth, investment decisions, and the state’s overall appeal.

Ins:tu:onalize a Durable Growth Strategy and Governance Model. Oregon needs an enduring statewide framework to align economic priori;es across government, business, educa;on, and regional partners. A successor Prosperity Council, supported by a small public-private backbone organiza;on, should coordinate sector strategies, strengthen 3

business reten;on and recruitment, and sustain long-term focus on traded-sector growth. 2. Sharpen the Land Use Problem Statement and Organize Reform Op:ons. Oregon’s land use system remains a founda;onal strength but now constrains housing produc;on, industrial site readiness, and clean energy deployment. The Council should clarify the scale of these constraints and organize leading reform op;ons — including UGB moderniza;on, improved inventory standards, accelerated permifng, and scalable infrastructure financing — to enable legisla;ve ac;on in 2027. 3. Restore Tax Compe::veness and Revenue Sustainability. The current tax structure is increasingly misaligned with a mobile workforce and compe;;ve na;onal economy. Reliance on personal income taxes, pyramiding effects from the Corporate Ac;vity Tax, and high marginal local rates in Portland are weakening Oregon’s value proposi;on. Reform should improve compe;;veness, stability, and long-term revenue durability while suppor;ng traded-sector growth. 4. Execute Regulatory Moderniza:on. The cumula;ve expansion of Oregon’s regulatory code has increased delay, uncertainty, and compliance costs. A disciplined regulatory budge;ng framework — with measurable reduc;on targets, more consistent rulemaking prac;ces, and independent economic impact review — can restore predictability while maintaining essen;al protec;ons. 5. Strengthen Talent Development and Improve Educa:on Performance. Stronger talent pipelines and improved educa;on outcomes are central to long-term growth. Oregon should build on emerging sector-based workforce consor;a, be[er align educa;on and training with industry demand, and implement a clearer statewide assessment and accountability framework to improve K–12 performance and workforce readiness. A Signal Moment Periods of structural change oQen create moments of unusual clarity. This is one of them. If Oregon responds incrementally, the state risks driQing into a prolonged period of modest growth, fiscal constraint, and diminished na;onal relevance. If it responds decisively, it can renew its economic model for a slower growing, more compe;;ve na;on. The work of the Prosperity Council should aim unmistakably at the la[er outcome. Its recommenda;ons should help restore confidence in Oregon’s future — and reaffirm that the state remains a place where people and businesses can thrive. 4

Parent: Appendix E: Submissions & Feedback · PDF: pp. 208-211