VOTE 2022: Next governor will face soaring inflation, uneven recovery

Oregon’s job recovery has been uneven — favoring high tech, professional and technical services, and almost anything relating to homes and housing. The weakest rebound has been in health care, education and hospitality. Yachats News photo by Quinton Smith
October 19, 2022

Drazen, Kotek, Johnson share steps they’d take to improve Oregon economy

By Mike McInally, Yachats News

The governor of Oregon doesn’t have much control over the larger economic forces that determine whether the state’s economy is going to boom — or bust.

“Mahonia Hall doesn’t set monetary policy,” said Betsy Johnson, one of the candidates who could move into the governor’s official residence after November’s election.

That’s true enough. But the policies a governor can enact can help Oregon and its 4.2 million people weather economic storms — or let them take full advantage of good times. State government, and the governor, have tools that can help local businesses and provide essential services to struggling residents.

A coalition of Oregon news organizations asked gubernatorial candidates for their views on the state’s economy — and what specific steps they would take as governor to improve it. This story is part of a six-part series about the biggest issues facing Oregon.

Taking a longer view

A governor serves a four-year term in office — eight if she seeks and wins re-election to a second term. A leading Oregon economic consultant thinks that could be enough time for the next governor to look beyond the peaks and valleys of the business cycle and work to position the state for long-term prosperity.

John Tapogna is a senior policy adviser at the Portland-based independent economic consulting firm ECONorthwest. He said Oregon’s next governor will need to keep an eye on trends that could fundamentally change the state’s economy, for better or worse, for generations to come.

Votes on the economy

SB 139 (2021 regular session), passed. Eliminated the tax break for pass-through businesses with over $5 million in annual profits. Pass-through businesses do not pay corporate tax but rather are taxed under the individual income tax

Drazan — No

Johnson — No

Kotek — Yes

HB 3389 (2021 regular session), passed. Provided businesses affected by tax increases from layoffs during the pandemic with deferral or forgiveness of some taxes from 2021.

Drazan — Yes

Johnson — Yes

Kotek — Yes (regular sponsor)

HB 2975 (2019 regular session), passed. Reduced Oregon’s kicker tax rebate by $108 million. The kicker tax rebate happens when state tax revenues exceed forecasts by more than 2% and the state must return money to the taxpayers.

Drazan — No

Johnson — Yes

Kotek — Yes

Compiled by Alexis Weisend from the Catalyst Journalism Project at the University of Oregon

Fundamental change isn’t anything new for Oregon’s economy. Over the past three decades the state has moved from a natural resource base to embracing manufacturing and marketing, with an emphasis on high technology — particularly in the three urban counties in the Portland metro area.

But the state’s more rural counties — still strongly tied to agriculture and natural resources such as timber — haven’t always received their share of the economic boom.

Unaffiliated candidate Johnson and Democrat Tina Kotek agreed to be interviewed. The third candidate, Republican Christine Drazan, declined. Her views on the economy are drawn from her statements and her record.

But first, let’s set the stage. What’s happened with the Oregon economy over the past quarter-century  — and what new challenges is the state’s next governor likely to face?

Trade-heavy Oregon economy sensitive to swings

Oregon’s economy is still closely tied to the global and U.S. economies. Oregon is one of the most trade-dependent of all U.S. states — to both Pacific Rim nations and other states. That helps explain why, during a national or worldwide recession, Oregon can be particularly vulnerable.

“When we go down, we go down a lot,” Tapogna said. “When we go up, we grow faster.” 

It took Oregon 30 months to recover the total number of jobs it had before the pandemic hit in early 2019. The current national and Oregon unemployment rate is 3.7%, down from 13.3% at the height of the pandemic.

But the job recovery has been uneven — favoring high tech, professional and technical services, and almost anything relating to homes and housing. The weakest rebound has been in health care, education and hospitality.

As usual, job recovery has landed on either side of Oregon’s urban-rural divide. The fastest job growth the past year has been in the five-county Portland area, central Oregon and the Willamette Valley, according to the Oregon Employment Department. Lagging was job growth on the coast and southern and eastern Oregon.

And, as the United States copes with a surge in inflation, state economists think it’s a 50-50 chance that the U.S. could fall into a mild recession — and that would certainly impact Oregon.   

New challenges

Tapogna is watching other trends that could signal big changes for Oregon’s economy.

One, he said, is that Oregon is experiencing more deaths than births, so if the state’s population is to grow it will be through people choosing to move to Oregon. 

“The governor really needs to step back and say, ‘What is either aiding or hurting the attractiveness of this state?’ ” 

The top of Tapogna’s list is dealing with unaffordable housing “and the associated homelessness crisis that has come with it.” Over two terms, he said, a governor “could do an awful lot in terms of tone and setting policy” in terms of housing.

The next governor could work to extend broadband internet coverage throughout Oregon — especially to its rural areas, Tapogna said. Services such as telemedicine can play a big role in allowing rural residents the ability to age in place, confident in their ability to get adequate health care. And businesses in every part of the state require fast and reliable internet service.

Another factor in determining whether Oregon can attract newcomers is the quality of its schools. Tapogna believes the next governor will have to focus on students, schools and teachers, “who, like health care workers, are on the front lines and dealing with an awful lot of stress.”

Another trend — Oregon has moved from the middle to the top quarter of U.S. states in overall taxation. That doesn’t necessarily turn off newcomers, Tapogna said, especially if those taxes are paying for popular and well-delivered government services. 

That sets the stage. How would Oregon’s leading candidates for governor act upon it? Here’s what they say:

Christine Drazan, Republican

(Editor’s note: Tina Kotek and Betsy Johnson readily agreed to be interviewed separately by the six reporters who contributed to this project. Christine Drazan, however, declined. This section is based on her statements and her record.)

Christine Drazan is the Republican candidate for governor. Campaign photo

GOP nominee Christine Drazan told The Oregonian/OregonLive that she would block future tax increases and blames the state’s gas tax and its new corporate activity tax for pushing prices higher in the state. 

Answering questions from the Oregon Capital Chronicle, Drazan said that Oregon’s corporate activity tax has “made businesses large and small less competitive in global and regional markets, and it has forced consumers to pay higher prices for everyday goods and services.” She voted against the tax in the Legislature and says she would have vetoed the bill.

In a questionnaire she filled out for The Oregonian, she wrote that she was “committed to vetoing new tax increases and to eliminating overburdensome government regulations and mandates that have further driven up costs for Oregonians. My election as governor eliminates the single-party control that has worsened our state’s affordability crisis over the past decade.”

Drazan has said her administration would “support natural resource-based industries, like the timber industry in rural Oregon, making this economic engine a part of our state’s future, not just the past. That means recognizing that many of the policies being passed in Salem are directly related to the decline in rural Oregon.” She cites the recent legislation mandating overtime wages to certain agricultural workers as an example and said she would have vetoed that bill.

In the Capital Chronicle questionnaire, Drazan said “Oregon’s reputation as an anti-business state is well earned. Our taxes are too high, (and) our regulatory environment is increasingly complex and difficult to navigate.” 

Tina Kotek is the Democratic candidate for governor. Campaign photo
Tina Kotek, Democrat

In her interview, Kotek said she would address the workforce shortages that have hobbled employers across the state — and one way to do that is to work with community colleges on job-training programs. Community colleges too often have been an “afterthought” when it comes to state funding, she said, but added: “I’m going to put them at the top of the list, because we know what community colleges mean for Oregon communities, both rural, urban and suburban, and I want to support them 110 percent.”

Kotek said the shortage of affordable housing for workers also is an economic issue: “It’s a drag on our ability to grow economically when people don’t have places to live.” On the first day of her term, she has said, she would issue an executive order to increase the pace and scale of housing development statewide. 

Lawmakers have set aside reserves that should help the state weather a potential recession, she said. But she added it’s important that the state has effective programs to help Oregonians make ends meet despite inflation and a possible recession: “Making sure people have access to rent assistance, making sure people have access to food assistance, making sure people can get help with their child care. … Those programs we have, they have to work well.” Expanding childcare is vital, she said: “I think that’s going to help employers who want people to come back to work. It’s really hard if someone can’t find child care.”

Kotek said the next governor will need to pay attention to all sectors of the state’s economy, in urban and rural areas alike. She said expanding broadband internet service to rural Oregon is a key to economic growth there.

She vowed to work with the state’s natural-resource industries, so important to rural Oregon: “The biggest issue there is making sure we’re doing what we can to help the natural-resource sector to be resilient in the face of climate change,” she said.

Betsy Johnson is running as an unaffiliated candidate for governor. Campaign photo
Betsy Johnson, unaffiliated

In her interview, Johnson said she would be a “cheerleader” for economic development.  

Johnson said she would work to make Business Oregon, the Oregon state business-development agency, more responsive to the needs of businesses and the local agencies that also work with economic-development issues. 

She said state government has a reputation as being anti-business. “I have talked to many companies lately that have fled the state of Oregon, because they just can’t stand how difficult it is” to do business here, she said. “And I have witnessed firsthand at the Legislature the antagonism toward business.” 

She said her goal would be to make state government “a welcoming place” to business. She said it’s important that state government and the Legislature “create a stable business environment, because the one thing that business needs more than anything else is dependability and predictability.”

Johnson said the next governor must work to ensure that the state agencies that work with businesses are “nimble and responsive. I don’t care whether you make wood chips, silicon chips, potato chips or fish and chips. We have different economies. And they all face specific challenges.”

In addition to being more welcoming to business, state government also should help emerging economic sectors, such as craft brewing and distilling, she said. “I just don’t think the state has been responsive, welcoming and optimistic in the retention as well as the recruitment of business.”

Johnson said her record bears out her economic-development credentials: “I have, I believe, a formidable track record of accomplishment in doing economic development and creating jobs and opportunity for the people that I’ve been privileged to represent.”

Johnson also advocated fiscal discipline for the state, especially if the national economy falls into a recession and said lawmakers had been wise to establish rainy-day funds. She said she would advocate for increasing the state’s reserve funds, “particularly with the low drumbeat of a looming recession.

This story is part of a newsroom collaboration for the governor’s race, with six newsrooms each tackling where Republican Christine Drazan, nonaffiliated candidate Betsy Johnson and Democrat  Tina Kotek, stand on a key topic. The Albany Herald-Democrat wrote about wildfires and drought; Ashland.news covered health care, including mental health; the Mail Tribune wrote about abortion, the Oregon Capital Chronicle covered housing, the Salem Reporter covered education and Yachats News wrote about the economy.  

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Bert Etling

Bert Etling

Bert Etling is the executive editor of Ashland.news. Email him at betling@ashland.news.


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