Several years ago, a Washington legislator proposed splitting Oregon and Washington down the Cascades, creating two new states, one in the rural east and the other in the more urban west. While we didn't ask readers about this particular proposal in our most recent online forum, we're pretty sure it would have gotten a unanimous thumbs down. Readers embrace our imperfect Oregon, with its multiple rural and urban identities. They'd like state leaders to toss out provincialism and partisan posturing to tackle pressing issues such as school funding, economic development and land use.

DAY ONE
Moderator
The Oregon Legislature is politically divided. The House is controlled by Republicans and the Senate by Democrats. Furthermore, Republicans tend to represent rural districts and Democrats urban areas.

In what ways will this situation help or hinder the legislature's ability to fairly balance the interests of rural and urban Oregonians? How about the interests of rural and urban businesses?

Participant 1
I believe that both parties are too much under the belief that business can be 'planned'. The legislature needs to remove all parts of the rules and regulations that hinder development, to at least be no more restrictive than surrounding states. Then let nature take its course. It should be obvious after the last vote, the people of Oregon are tired of the public planning mentality that exists in the state.

Moderator
When you say, remove all parts of the rules and regulations that hinder development, would you expand a little about the type of development and rules you mean?

Participant 1
Oregon has no need for land use, pollution, building, plant-siting that are out of the norm for the general geographical area (Northwest). I'm not saying, 'remove all restrictions', simply stop being more restrictive than all our neighbors. In case nobody noticed, there isn't anybody living here. Having a viable business environment might allow for affordable services.

Participant 2
Oregon DOES indeed need to continue on the land use and planning path it has been going down. The passage of Measure 37 was a big mistake for the state, throwing away decades of limiting uncontrolled growth. Having lived in other larger metro areas around the country, I have seen firsthand the results of poor urban planning and uncontrolled growth. And it's not pretty!

Urban planning is not the issue hurting business. Business is hurt more by the state's inability to support business. It always amazes me to see the way the state spends tax dollars. My favorite form of waste is the Prevailing Wage Laws, followed closely by the state budgetary process.

Participant 3
The rural/urban divide in American politics is as old as the country itself, so I don't view this as a problem that cannot be overcome — we've been doing it for centuries. There are no quick-fix solutions to the challenges in Oregon. Simply knocking down all regulations, be they land-use, environmental, or otherwise, will not solve our long-term problems. They may create short-term boosts to the economy but if we don't grow in smart ways we'll simply leave larger economic and environmental problems for future generations to deal with.

We need to take a long, hard look at our priorities in Oregon and start making spending and taxation decisions accordingly. Our tax system is a mess and needs reform — we need to stop relying so heavily on the income tax and look at other means to raise revenue so we don't have such peaks and valleys in our revenue streams. We need to start looking at education and infrastructure development as investments and not mere expenses. That means fully funding K-12 and university education, in a way that is fair to both rural and urban communities. And we need infrastructure development that will create opportunities for business and industry that will provide jobs for generations.

In the short run we need a balanced and fair budget that emphasizes education over every other priority, and we need to continue the trend of streamlining government.

Participant 1
I think our taxing system is fine, there is no need to have duplicative taxation,(property, sales, income-personal, income-corporate, city gas tax....) and the fewer taxing methodologies there are the less will be spent in additional agencies to manage the tax programs. The problem with the State is that the State seems to have no ability to deal with the concept of 'cutting back' when times are tough. I have had to do it, while the State continues to think that excessive State wages, pensions and benefits are 'normal' and not to be dealt with.

Education in Oregon isn't under-funded, get on the US Government web site and you will find Oregon has the highest per student funding of 8 Western states I looked at, while having the 7th out of 8 states score. If you are a Graduate of an Oregon college you will also make less money than competing states, Most funding and next to last accomplishment. The State needs a drastic overhaul of the Education system, not more money. If the state doesn't make it possible for graduates to find decent jobs, possibly the state should get out of the college education business, I don't need to subsidize the college education of our neighboring states.

Participant 4
We continually try to find ways to finger-point and to be pit one against the other. It is often a north-south, east-west, rural-urban, etc. split. That attitude gets us nowhere.

Whether rural or urban we need to review zoning, land use, etc. rules and regulations and get rid of those that hinder business creation and retention. (That does not mean that we should disregard our environment.)

We also have to find ways to make our taxation system more friendly (reduce capital gains taxes for in-state businesses?) On the other hand, I do not believe that we should "give away the store" by providing excessive tax deferrals, exemptions, etc. In a long run, such tactics hurt local economies and pit one city/county/region against others.

We do need to beef up infrastructure, especially in rural areas. Most metropolitan areas have fairly decent infrastructure. Not so with such places as the Astoria-Warrenton area where roads leading to I-5 are inadequate, rail freight transport is impossible due the current state of the rail line, and there are severe water and sewer problems which make it almost impossible to bring new businesses into the area.

We must also find ways to deal with the Corps of Engineers, DEQ, DOE, DSL and all such agencies so that they work together to facilitate business development and retention rather than to discourage any such development.

Participant 1
Very true, many areas don't have the infrastructure to support businesses. If the State and communities looked at a taxing structure, for developing industrial areas, that only covered the additional police, fire and connection costs, and left to developers to cover the siting costs, possibly the resulting tax rate — site construction cost total would put Oregon in an enviable competitive position. With our emphasis on the Personal Income tax, which I think is fine, to cover State costs, we need more good paying jobs to up our tax revenue. We don't need to 'profit' / tax companies. No free ride, make companies pay for their additional direct cost, but have no corporate tax.

Participant 5
Finger-pointing is not useful....discussion and compromise may work to a greater degree.

Participant 6
The State has always been politically divided. It is a fact, and probably a good one. Think if we were all of the same mind; great if we are correct and terrible if we are on the wrong path. We have had poor leadership from the Governor's office for too many years. It is the office to bring the two parties together. We should remind each elected official that they cease to become Democrats and Republicans once elected and become representatives of the people. Both parties seem more concern about re-election than taking on the hard issues. The same can be said about the appointments to State Offices and Committees. With that behind me the problem is one of spending not revenue. If you look at all the budgets over the years you will see a large increase and we spent every dime of it. We need a rainy day fund and the 2% kicker is a good place to start. It will kick, perhaps in this Budget. It should be placed in the start of a rainy day fund. We have to control spending, with teachers getting cost of living plus steps every year and other State employees in a freeze a problem will occur. Some of us saw the PERS problem coming years ago and no one would listen.

Participant 5
It seems that little major legislation will get through.

Participant 2
It will continue to hinder the state's ability to balance the interests of both rural and urban Oregon. Our elected officials need to put away their partisanship beliefs and find consensus on the major issues facing the state. These issues include money for infrastructure development or maintenance, reduced taxation and education. These issues effect all areas of the states population and businesses.

Participant 7
I hold little hope that partisan politics will ever diminish significantly in Oregon, There is little historical precedent in any elected body, anywhere in the world. I see an already polarized Oregon becoming even more polarized. However, the continuing urbanization of Oregon likely will end the impasse in the legislature as liberal Lane County and the liberal Portland Metro area gain population and votes. I am highly fearful that this will lead to a version of a "Peoples Republic of Oregon" run buy the public employees unions that resembles the very worst elements of Massachusetts. Rural Oregon will be disfranchised. Today's problems will pale by comparison.

Participant 1
Having come from the East Coast (New York City metro area) I can only agree with the danger of continuing down the liberal road. I still hold out hope for Oregon though. At least we have the advantage of there being less of the State that is liberal and we can see some of the real down side to a government that believes that government knows best about everything.

Participant 8
Interestingly enough, there is potential in this situation to HELP rather than hinder the legislature's ability to balance the interests — both for businesses and for consumers. However, the current legislators do not have the leadership qualities or political incentives to compromise to find that balance. They are too beholden to their respective special interests to seek middle ground. The solution, if I may be so bold, is real campaign finance reform that limits the amount of contributions and expenditures (which unfortunately, in Oregon, will require a state constitutional amendment) or public financing (which, unfortunately and short-sightedly, is opposed by most affluent and politically motivated special interests). Bottom line: a country (or a state) usually gets the government it deserves. We have made some very bad choices in Oregon — choices that exacerbate the geographic and philosophical divides rather than heal them.

DAY TWO
Moderator
Urban areas contribute more to the state general fund in tax dollars for education than they get back to support urban schools. This policy helps level the playing field between urban and rural school districts, but some say it's unfair to students in urban schools. What do you say?

Participant 9
This system of funding for schools is fine. The larger goal should be that no matter WHERE in Oregon someone is educated, they should be receiving the highest level of education possible on a par with other areas of the State. Yes, this "leveling of the playing field" may be looked on by some as "unfair", but I honestly feel it is in the best interest of the State. This, of course, does not solve the overall funding issues/problems....

Participant 10
There are at least two reasons that the unfairness argument fails.

First, providing K-12 education of equal quality throughout the state is the right thing to do.

Second, even if it were not the right thing to do, it is the smart thing to do. Oregon is better positioned for today and for the future if it is providing quality K-12 education throughout the state. If school funding were distributed on a "fairness" basis, urban areas might receive a higher level of funding but there would not be a long-term benefit.

Moderator
I'm not clear on how you see long term benefits changing, or being different, depending on whether school funding were distributed on a "fairness" basis or not. Could you unpack that idea a little for me?

Participant 10
As I see it, we realize a better-educated workforce overall when we make sure that K-12 education receives appropriate funding on a statewide basis. There is no benefit to under-funding rural school districts.

As to the fairness argument, it begins with a somewhat unsupportable premise. Each household in an urban area does not contribute the same amount towards education; nevertheless, each K-12 student in a particular district, regardless of his/her household's contribution, enjoys the same educational benefit. If we were to follow the fairness argument, then each K-12 student in a particular district should enjoy an educational benefit proportionate to his/her household's contribution. Of course, no one (or almost no one) argues for that result. Apparently, what "fairness" adherents mean is that people from one geographical area should not have to support people from another geographical area. My point is that the geographical area that is significant in Oregon is Oregon, not Portland, or Beaverton, or Bend, or Burns.

Participant 1
Again I say funding, as much as funding makes a difference, needs to be distributed on a 'needs' basis NOT a fairness (what ever 'fairness' means).

I wasn't really kidding when I said there was a reverse correlation between per pupil cost and SAT scores. I have been finding over the past 12 years that the 8 western states I looked at, the SAT scores and per pupil cost were totally out of whack. Oregon was 7th lowest in SAT scores and spent more than ANY western state, per pupil. The real problem is a school system that doesn't spend its money well, not a school system that doesn't have enough money. All my statistics came from the company that runs the SAT and the Federal Dept of Education. I have already discovered that politicians and school board officials tell a 'part' of the truth.

Participant 4
The school funding system is broken. We have lost local control of our schools. One superintendent in Columbia County told me that the state may as well take over his school system so long as it controls the finances. I think we need to go back to a situation where local taxes pay most of our K-12 costs. We could always have a state supplementary fund to assist tax-base poor school districts.

Any increase in local funding should come with a reduction in taxation at the state level.

We also need to look at how we spend our education dollars. Do we need ESDs? Can't we consolidate school districts? Currently we have a multitude of school districts in one county. This cannot be efficient.

Can we not contract out services such as janitorial, security, transportation, etc? I think we need a REAL management audit of our education system at the state level.

Also, I think we need increased competition in our K-12 education system. (We do at the university level.) We need more alternative schools, more magnate schools, and, YES, vouchers for private schools. We do not tolerate monopolies in other areas, why should we tolerate monopolies in the vital "industry" of education?

Participant 1
I totally agree. We need 10-15 school districts not the 200+ we currently have. The overhead and lack of professional management wastes tax dollars and contributes nothing to education. The State already decides on the textbooks and class content, less duplication would help everybody and give the taxpayer a break. Privatization in all departments of State Government would also reap gigantic rewards in efficiency.

Participant 1
Since I have found a reverse correlation between spending and SAT scores, urban kids are probably lucky to be receiving less money.

All kidding aside, a version of No Child Left Behind that would direct extra resources (attention as well as money) to those places that don't do as well, might be better than any 'fixed' distribution method. Always giving extra resources to 'presumed' deficient areas is ripe for political manipulation that may have NO connection to the true need. Do what a good business should do; measure and fix those areas that NEED fixing, don't simply make a policy decision and then carry it out forever, without checking on progress against goals.

Participant 5
This seems unfair to urban students.

Participant 3
I disagree that the current system for funding education in Oregon is fine. We went from having a locally based funding system to a system that is dependent on the vagaries of the general fund — and all the politics that come with it. Education funding is now a political football — as evidenced by this week's implosion of budget negotiations in the legislature, which was driven by an inability of the two chambers to come to agreement on education funding. We need to revisit whether we really do have the right mechanisms in place for education funding.

As to the urban-rural issue, it really boils down to economies of scale. It's natural that the urban centers are going to generate more tax dollars — there are more jobs and more industry in concentration there. You can provide the same or better level of education in largely populated districts for less $$ per student than you can in rural districts. This is simply a basic principle of economics.

We have a moral — and some would say a constitutional — obligation to provide equal educational opportunities in all areas of the state. That necessarily means that there will be some inequities in terms of raw dollars. But there's not really any way around that if all areas of the state are going to be able to provide excellent educational opportunities to their respective residents. And that's without even getting into the No Child Left Behind unfunded (and ill-advised) mandates.

Participant 7
True, there are economies of scale at play with the urban areas having a higher concentration of commercial and industrial activities. These areas also have much higher concentrations of K-12 students. What these urban areas do not have is farm and forest tax deferrals. Perhaps it's time to review the fairness of these deferrals and their impact on rural tax revenues. There is wide spread deferral abused by affluent "Hobby Farmers". Is it time to level the playing field?

Participant 11
If ever there has been a valid argument for a level playing field it is in the area of providing quality and, as much as possible, equal education for our students. A similar argument is sometimes made that those who do not have children should not be obligated to pay for the education of other's children. The common good, and ultimately the well being of each of us, is best served when are children are well educated.

My observation is that the "tax revolt" in Oregon is less about taxes paid and more about the perception of government services received in return for those tax dollars. Education gets caught in the crossfire as a huge user of tax dollars.

Participant 1
As you can tell from my other posts concerning education, I think Participant 11 is correct. We need to worry about what we are getting for out money and if worry not at all about any 'increase'.

Participant 6
Equality should be a benchmark, all students should receive the same funding. I would say anything else is unfair to the ones receiving less education, we are one Oregon. I think we all subsidize mass transit in urban areas and we should. Once we get past the arguments that take so much time, when do we get to the real issues.

Participant 12
To me, here is why school funding is important. Oregon has over 11 thousand inmates housed in state prisons, costing in excess of 260 million dollars per year. ($260,000,000 if you like to see the zeros) The cost of jails is an additional 36 million dollars. The lion's share of these inmates is in prison for drug or drug related violations. (Burglary , robbery etc. to pay for drugs is still a drug offence.) These are 2002 stats easily obtained by a Google search for Oregon Prisons.

So as citizens, we can choose to pay for prisons or we can choose to pay for K-12 and higher education. For every three prison inmates, we could instead pay for a teacher that could mentor kids and teach them a better way to live. Our self-serving representatives in Salem obviously feel it is better to fund prisons, so that citizens must actually pay twice. First by the theft of personal property and then again by money wasted on the Department of Corrections. (I am not saying the Department of Corrections is a waste....what I am saying is the necessity of HAVING a huge Department of Corrections is a waste)

Money spent on schools is an investment in our future. Oregon's elected representatives seem to be more short term focused. As in where is their next free lunch.

Participant 1
I haven't seen a good statistic on education system and crime (good systems with high SAT's and low crime in the population) I think you may be confusing people that should be stopped from breeding (low intelligence is a predictor to crime), but I can't think of a way to implement a parent license scheme.

Participant 8
Until very recently, I was in agreement with this distribution plan (where urban areas were, in effect, subsidizing rural education). This has become more dramatic in recent years with the decrease in local option funding and the increase in state funding for education. However, the advent and increasing use of technology has changed all that. Because of such technological advances as Internet, cable television, and teleconferencing, rural areas are no longer so isolated culturally and tend to have the same access to educational quality as urban areas. At the same time, regrettably (and maybe partly because of the relative lack of state funding) the quality of urban education has been in decline. Therefore, a "rebalancing" of resource allocation is needed. However, this is politically untenable since rural interests have traditionally not been willing to support public education funding as much as urban legislators and therefore must be "bribed" to support adequate funding by over-funding their constituencies. I don't really see a solution.

Participant 7
Your point is valid. Rural interests have never held K-12 education as a very high priority if they had to fund it. It's only a priority when the funding shortfalls can be made up from West of the Cascades.

Participant 2
I don't take issue with this concept. The rural districts have fewer students and tax dollars to maintain the same level of education. The urban districts have more students and tax dollars and SHOULD realize numerous economies of scale in achieving education results. I don't believe the urban districts are managed well at all. Although it should also be noted that the parents seem to be just as much a part of the problem as the administrations. This was evidenced recently in Portland, when it was proposed to close certain underutilized schools, and the uproar that ensued because of a NIMBY attitude.

DAY THREE
Moderator
The economy of rural areas in Oregon has traditionally been based on agriculture and natural resources. Some say we should promote growth in these industries to stimulate jobs and the economy. Others say we should accept that times have changed and should focus on new industries. What do you say?

Participant 7
Times and economic realities changed long ago. Oregon, and particularly rural Oregon, has been exceeding slow in reacting and recognizing this. You cannot promote growth in industries that cannot now compete in a regional or world economy. The decline of these industries, forest products in particular, clearly demonstrates the loss of the ability to compete. We can argue why the competitive loss, but that changes nothing. Before losing any more time, let's focus on new industries that can compete.

Participant 12
Well, being as how we have pretty much chopped down most of our timber and shipped it out, it'd be a good idea to focus on some other way to make a buck. Problem is, industry generally requires a free ride tax-wise so the infrastructure to support them must be built with tax money from private citizens instead of the corporation that reaps the benefit. Personally, I would be much more in support of industry of their support was not coming out of my own pocket.

Participant 8
Again, technology provides the basis for expanding rural development from its agricultural and natural resources base. Obviously, a balance of development would be ideal. There have been several high tech companies proposing development in rural areas recently, Google in The Dalles, I believe, and something in Bend (not really a rural area anymore). These clean, labor intensive industries would benefit rural Oregon although the tax incentives that are usually required to attract these businesses may, in fact, make their development a net loss to tax revenues — especially where there is no guarantee of continued operation as in many high-tech sectors.

Participant 1
To say that State government should 'promote' growth in any area misses the entire point, government doesn't have the ability to run government, let alone lay out business strategy for the multitude of industries in the state. I believe the tax structure in State and local government should only levy enough in taxes to cover the incremental increase in Fire, Police and connection services to business. Then with an almost non-existent tax on business, the government would only need to stand aside and let business decide when and where it was in their best interest to locate and expand. As an example, Eugene, worked with Hyundai to build a plant here. The city council is still complaining that too much tax revenue was 'given up' to have the plant built. The simple fact was a company took x acres of land, built a factory (spending with local contractors) and then hired 500 -900 highly paid employees. The first point is, the city of Eugene wasn't getting any significant revenue from the unused land so there was nothing to loose. Finally if the city council really thinks that 500 highly paid people don't pay taxes, buy homes and benefit the economy of the area, the council really is incompetent.

Participant 13
Frankly, I don't think our government has done a good job of stimulating anything except spending. Seems to me that in a market economy, it is wise to invest in growing industries, not declining industries. Oregon has a whole lot of land (excepting the 50% or so the Feds. own) that is not producing much per acre and probably could be better used in other ways. Casinos come to mind, though I loathe the idea and subsidizing businesses to locate is a tremendous idea, as all the income tax-paying employees more than offset the property-tax abatements, adding to the vitality and long-term health of the State.

Participant 1
Very true and government needs to get its house in order and stop worrying about half-baked incentives.

Participant 2
Times have changed, and all industries need to change, regardless of location, or become just another dinosaur. I don't see spending tax dollars on promoting growth as a solution, unless the industry has the technology in place to compete on the world stage. Most industries that want to, and can, compete have done so on their own.

As times have changed, new industries and technologies have emerged from old industries. These emerging industries should be promoted and supported. Although this support should not be limited to any single industry, as we have all seen the dangers that lurk in putting all of ones' eggs in one basket.

Participant 4
We need to support what is left of our traditional natural resources economy at the same time as we encourage the establishment and growth of new industries.

At the Port of Astoria we are expanding our support of the fishing community even through the size of the fishing fleet is declining. We now have a boat haul-out facility, are expanding our fish processing capability and are establishing a centralized "one stop shopping" community for fishermen.

At the same time, we are doing much to grow the tourism industry through the establishment of a conference center and by bringing cruise ships to our docks.

We are working to prepare our airport industrial property in Warrenton so that it will support new industry -- hopefully light manufacturing and related businesses.

We cannot stand still, but there is no reason to abandon traditional business and jobs which can still provide a good income for families in our communities.

Participant 6
We should be most concerned about losing our agriculture base. Oregon has an abundance of natural resources that should be supported and protected. The removing of orchards and farms will be our biggest mistake in the next 100 years. Perhaps new property tax rates for farming would help preserve the land. Sometimes profit should not be the driving force, but long-term production of food and lumber will become more important. Let us remember our heritage and the necessity to produce products that are necessary for our survival. Controlled development is what has made our state what it is today, perhaps we should be glad so much of Oregon is protected because of State and Federal ownership. I will state again that our state has had a stable growth of revenue for a very long time.

*Research conducted by Conkling Fiskum & McCormick

Copyright 2005 Oregon Business magazine