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A Strategy for Oregon’s Economic Prosperity

My Fellow Oregonians:

A robust economy is the foundation for Oregon’s future. My top priority as Governor will be to transform Oregon's economy into one that is strong, resilient, internationally competitive and insulated from the boom/bust cycles that have plagued us in the past. This will necessarily require similar transformational changes in a number of other major systems including education; public finance; health care; energy; and community development.

This transformational change must enhance rather than deplete our natural environment and the quality of life that so characterizes Oregon; and it must reach across urban and rural Oregon, with the goal of increasing the per capita income in each region of our state above the national average. During the years I served in the Oregon Legislature and as Governor, I have gained a set of experiences, perspectives -- and some hard lessons learned -- that can help Oregon make this important transition.

This is a tall order and it is not going to be easy. Oregon’s “boom and bust” economic cycle has interfered with stable investment in education and workforce training. This has led to falling per capita incomes as compared to other states; which, in turn, has made it ever more difficult to adequately support the public infrastructure on which stable, long term economic growth and prosperity depend.

As all my predecessors did, I tried to manage Oregon two years at a time around a biennial budget. There was no long term plan. We too often argued about the wrong things -- and asked the wrong questions. Too often, we focused on how much we were spending -- rather than what outcomes we were getting for our dollars. We dwelled on what we spent last year -- rather than asking what we needed to invest today, to get the results we wanted tomorrow. We relied on existing structures and mechanisms to deliver services, not because we had carefully analyzed them and decided they were the best – but because we had always done so. It is time to change that.

During the last seven years in the private sector, focusing on system change in health care, energy and natural resource management I have come to realize that the root of our problem lies in the fact that almost all of our public “systems” – from education to health care to transportation -- were designed and put in place at the end of the 19th century and first half of the 20th century.

While these old systems made sense at the time they were created, they have not evolved to meet the changing environment around them and are no longer adequate to meet the very different and complex challenges of the 21st century world. As I learned the hard way during my terms as Governor, it is not enough just to change policies or policy makers. If Oregon wants a different future and a different set of outcomes, we need to change the systems through which public services are provided.

Why hasn’t this happened before? For most of my eight years as governor, Oregon had a strong economy with expanding state revenues. In that environment it was very difficult to get anyone interested in system change. It seemed that there was always more money. Today, however, Oregon’s revenue picture is much different than it was during the boom years of the 1990s. But precisely because extra money is no longer available to paper over these systemic, structural issues, we have an unprecedented opportunity for the kind of transformational change that was simply not possible a decade ago.

Successfully making this change requires three things. First, we must find the courage to challenge the structures and assumptions of some of our most cherished programs – in education, social services, public safety, environmental stewardship, energy and economic development as well.

Second, it requires jettisoning our current state budget process which is inadequate for the kind of transformational change we need; and replacing it with one based on transparent, long term performance-based investment allowing us to set clear priorities among the difficult fiscal choices which will define the next biennium.

Finally, because such a transformation cannot happen overnight or over the course of a single biennium, it will require a sustained and consistent effort over the next ten years. This effort must be built on such a solid foundation that it can be sustained and continue to move forward regardless of changes in the executive branch or in the make-up of the legislature.

That’s why it will be so important that our leaders and citizens alike can work together, not just to ensure we fully understand the past, but to enable us to then focus on the future. I believe, as Governor, I can bring to this generation-defining task that understanding, as well as the vision necessary to lead the transformational changes required to create for our state a more stable and prosperous future.

This is the first of a series of papers which will describe that vision as well and the practical steps -- and difficult decisions -- we will have to make to realize it.

John Kitzhaber