State of the State Address
by Governor Theodore R. Kulongoski

City Club of Portland
Friday, February 21, 2003

Fellow citizens.

I start with this simple greeting because although I'm here to talk about the state of the state, what is most on my mind is the state of the people.

All the people of Oregon.

Today we are not honored guests and ordinary guests. We are not Democrats and Republicans. We are not the bright lights of urban Oregon and the bright stars over rural Oregon. We are not owners of the future and the captives of the past.

We are one community. We are Oregonians.

Anyone listening to me today waiting for a message of broken faith and diminished dreams is going to be disappointed. I believe in Oregon. I believe in its future. I believe that the timeless beauty of Mt. Hood, the high desert and our rocky coast are the true symbols of who we are and where we live - not the gusting but temporary wind of economic hardship.

Still, we cannot run from the reality that Oregon is at a crossroads. A flourishing economy and three percent unemployment have given way to a deep recession and seven percent unemployment. And a budget that in the 1990s could rescue thousands of Oregonians in need of health insurance, better schools and worker retraining is now in need of its own rescue.

Times like these are an invitation to look backward to yesterday's prosperity - and inward on a journey of self-doubt. This is an invitation that I have no use for. And I say without equivocation: The citizens of Oregon have no use for it either. We will survive the budget cuts. We will survive the wounded economy. We will survive the sacrifices and disappointments. As long as we believe in ourselves - and never forget that we are one people, living in one extraordinary place - we will not only survive, we'll thrive.

I've been an optimist all my life. I know that light always waits on the other side of a dark horizon. Fellow Oregonians - the voices of fear and lost heart are wrong. We have real and undeniable problems. But fundamentally, the state of our state is strong. And it will stay strong as long as we never lose pride in where we live - or faith in where we're headed.

Most of what I want to say today is about just that - where we're headed. Every state in this country is feeling the pain of an economy caught in the grip of recession. They are all struggling to balance their budgets - and so are we. They are all struggling to keep healthcare for the poor affordable and accessible - and so are we. They are struggling to do more with less for their children's education - and so are we.

But-even during these hard times, Oregon is closer to what the human spirit longs for than any other place. I would never trade the chance I've been given to live and raise a family in Oregon. And I can't imagine that anyone else would either. Again - I don't want to underestimate the challenges we face: Cutting hundreds of million dollars from the budget has created real hardship.

I know vulnerable seniors and others are hurting. That's why I'm determined to build an economy in Oregon powerful enough that we're never again forced to make the kind of cuts we've made this year and last.

I know that thousands of unemployed Oregonians are asking: "When will our lost jobs come back?" And employed Oregonians are asking: "How much longer can we count on having our jobs?"

I know that parents want the very best schools for their children - and workers want secure full-time jobs so they can raise their families.

I know that the federal government is not living up to its responsibilities. States have been left to fend for themselves. They're getting no help with crushing Medicaid costs and unfunded mandates for homeland security. And to make matters worse, proposed changes in the federal tax code will cost Oregon hundreds of millions more.

We all need to send a message to Washington that our highest priorities are protecting working families, educating children, and making sure that seniors have health care - not cutting the tax bill of people who are at the very top of the wealth chart. Tomorrow I leave for Washington, and I'm going to carry that message myself.

I know that words are little comfort to families caught between a weak economy - and a state government that has more needs to fill than money to fill them. But here is something else I know: If we take action now, the economy will recover. And when it does, Oregon will be well positioned to prosper and grow. We have skilled and productive workers that are keeping Oregon competitive - even in these tough economic times. We have a school system that is graduating students with SAT scores that are among the highest in the country. We have a quality of life that makes businesses - especially environmentally clean ones - want to move here, and tourists want to visit here. We have an engaged citizenry that cares about its neighbors. And we have leaders in government, business, and labor who are willing to make tough decisions today to guarantee a better tomorrow. We stand on the edge of the Pacific Rim, ready to sell Oregon and Oregon products to the global marketplace - and to recruit global businesses to Oregon.

I said in my Inaugural, that when opportunities arise to bring jobs and businesses to Oregon, I won't send a delegation - I'll lead one. Next month I go to China to let leaders of one of the world's fastest growing economies know that Oregon is open for business - and that our agriculture products are second to none. This trip is one piece of an economic development agenda that is off and running. What comes next, I'll explain shortly. But first let me tell you what we've already done.

In just the three months since I was elected, we've made real progress toward building a better economic future while managing the day-to-day problems caused by state's ever-shrinking 2001-2003 budget.

I've met with business leaders and citizens from across Oregon - reminding them that their determination and Oregon's strength are an unbeatable combination.

I've set down important principles of governance - principles I intend to stick with because they are in the best interests of the people of Oregon: We will live within our means. We will take care of children first. We will rebuild the Oregon economy. And we will end business as usual in state government.

My insistence that we live within our means is not the reason we've had to make cuts in human service programs. We've made them because the defeat of Measure 28 left us no choice. And while I understand the desire to find money - any money - that will delay some of the cuts for a short time, without a comprehensive strategy that looks to the long-term, any short-term solution will be illusory and only makes matters worse.

We're facing a shortfall in the current budget that could be as large as $300 million. What we need to do is manage this looming deficit - not make it worse. Responsible management is the best way to protect our most vulnerable citizens. That means doing what is right - not what is easy.

The time for accounting gimmicks and budgetary shell games has passed. If you walk the streets of Pendleton, Bend, Newport and other cities and towns - as I've been doing since November - you hear the common sense of Oregonians. They do not want patchwork solutions that avoid tough decisions. They want government to act responsibly and balance its books - just the way families have to.

We're going to make sure we can pay our bills. That's why I'm proposing that we set aside a reserve that will be used to close the potential gap in the 2001-2003 budget. It is also wise and prudent not to spend more money at this time without a detailed plan on how to balance the 2003-2005 budget. The federal government can get away with deficits. We can't. The Oregon Constitution requires a balanced budget - and we're going to have one. Once and for all, we are going to close the books on the 01-03 budget and then we're going to move on. And then we're going to use the 03-05 budget as an opportunity to bring about a more accountable government.

I sent the Legislature a balanced budget for 2003-2005. And to make sure that sacrifice starts at the top, I've frozen the salaries of all managerial positions, cut my own, and stopped special merit increases. I've also severely restricted in-state and out-of-state travel, and cut the Governor's Office budget by another $300,000 - as required by the defeat of Measure 28.

We're getting a handle on PERS. I've already signed one bill capping accounts at 8-percent per year. But that is just the beginning. There is a lot more work to do on PERS. Whatever the Legislature passes must meet the standards I set in January. I want a system that respects the valuable contributions of state employees and doesn't touch what has accrued in their accounts; but also protects taxpayers and doesn't bankrupt the state.

Let me say a word about the public service. The men and women who work in government are the frontline troops in this state's battle against poverty, child abuse, drug addiction, hunger and inadequate housing. Our schools, communities and natural resources would all be in far more jeopardy without them. They make Oregon a better place for all of us. We need them - and they need our support.

In the last 90 days I've met with almost every major business group in Oregon. Government and business are going to be partners - not adversaries. But our business leaders need more than a strong partnership. They need certainty and predictability: Policies that stay the same. Rules that are consistent and reasonable. Commitments that are made and kept. My economic development team - one the strongest this state has ever had - will do all of that. At the same time, I've redirected the mission of the Economic and Community Development Department toward business expansion, retention and recruitment.

Although we've devoted a lot of time and attention to putting the government's house in order and the state's economy on the road to recovery - we have not overlooked Oregon's workers and families.

My budget protects Healthy Start and Crisis Relief Nurseries - and, as part of my determination to protect Oregon workers and families, we are keeping in place the toughest worker protection laws in the country. As Governor, I am going to continue to vigorously enforce our environmental laws.

We're working with AARP to attract more volunteers to read one hour each week to young children. And most importantly, my budget halts the downward spiral of state support for K through 12 education.

I want to make a very important point about K through 12. I said that one of my principles of governance is to put children first. Creating a reliable funding system for Oregon schools is essential to our children - and the state's economic future. Unless we have a first rate school system - businesses will look right past Oregon to other states.

So nobody wants to find a stable source of funding for education more than I do. And I understand the urgency of this. We don't have forever, and we don't need another stack of studies to tell us there is a problem. But for state government to simply go back to the voters now and ask for more money is a fool's errand. As others have pointed out - the definition of insanity is doing the same thing over and over and expecting a different result.

The public will not be dictated to. But I believe that through a grassroots movement, the public will decide on its own that our schools need help. The leading voices for reform must come from parents, business leaders, clergy, teachers, local police, school boards, community colleges, universities and civic organizations. This kind of movement has already started, and it's going to pick up steam. I want to encourage it. I want to be part of it. But ultimately it must be driven by the people. Our schools will find their footing - but only when more and more Oregonians find their voice.

Of all the challenges we face, none is more troubling than the fact that thousands of Oregonians - many of them children- don't have enough to eat. Oregon has the highest hunger rate in the nation. This is not just a problem for the poorest of the poor. There are working families in this state who need food assistance. I will not rest until we solve this problem. I've asked our state employees and citizens to donate food and money to the Oregon Food Bank. Today, I ask again. And next week I'll be meeting with state, federal and local government leaders - and advocates for the hungry - to talk about where we go next to end the shame of hunger in Oregon.

No one in Oregon should ever be forced to choose between eating and other necessities. One of those other necessities is prescription drugs. I said throughout the campaign that as Governor I would work to lower the cost of prescription drugs. Last week we took the first step toward reaching that goal. I announced a plan to form a consortium with Idaho and Washington to pool our purchasing power - so we can buy drugs at a reasonable cost, not the inflated cost that drug companies charge to fatten their profits and pay for self-congratulatory ads.

I want to mention one other recent accomplishment. As promised - I have set a new tone in Salem. I'm talking and working with members of the Legislature - Republicans and Democrats - every day. We don't always agree. But we both understand that the prize of economic rebirth can only be purchased with conciliation and compromise.

Fellow Oregonians, our state is strong. We have an environment that is a magnet to the world. We have strong public schools that will weather and overcome the funding they have lost. We have a long tradition of tolerance and social justice - that nurtures the talents of all our citizens. And today I'm here to tell you that we're putting in place an economic development plan that is comprehensive, forward-looking, balanced and workable.

We're calling it GROW - the Governor's Recovery for Oregon Workers. We've handed out a detailed description of this plan. But I want to mention some of the highlights. Let me begin with the name. I've said for the last two years that only way to put Oregonians back to work is to grow the economy. Here is how I intend to do that.

We're going to take every step we can - as fast as we can. First, we're going to take important administrative actions. I've already signed an Executive Order that will create an Office of Regulatory Streamlining. The office will ease burdensome regulations and shorten the time it takes to get a permit. The Order also says that in the next six months, we'll have a website for one-stop information about what kinds of licenses and permits are required for different business activities.

I've signed a second Executive Order that directs state agencies to immediately take actions that will increase the availability of shovel-ready industrial land. This step is long overdue. Today Oregon competes against states where a company can pick from numerous 25-acre or larger industrial sites and get the necessary permits very quickly. The number of sites in Oregon that meet this market requirement is essentially zero. Also, administratively, we're going to redirect the focus of the Community Solutions Office. Its constituency will still be our rural cities and towns. But I want CSO to be an economic opportunity office that delivers on projects that create jobs. That's what Oregon families need right now.

The next part of our economic development plan is to increase investments in business, infrastructure and workforce development. I already mentioned that we're changing the direction of the Economic and Community Development Department toward business retention and recruitment. This is not just a matter of rewriting the mission statement. That is not enough. We must give the Department the tools it needs to attract and retain jobs and businesses. That means supporting workforce development, building infrastructure, and marketing Oregon.

We need to make long overdue investments in our infrastructure. Oregon's bridges and roads are in disrepair - and our economy is paying the price. Just this week ODOT announced that large trucks will have to be diverted around some I-5 bridges in Lane County. Today, five percent of Oregon bridges have weight restrictions. This will increase to 30-percent by 2010 if we don't start taking action now. That is why I'm working with our federal delegation to bring at least $2-billion in transportation funding to Oregon over the next 6 years. And that is why I support the Oregon Transportation Commission recommendation to repair or replace 450 bridges on I-5, I-84 and other state highways. I also want to invest more to maintain local roads - so we don't lose the benefit of money that has already been spent on this infrastructure. To help pay for these infrastructure improvements, I'm calling for a $15 increase in Oregon's vehicle registration fee. Our registration fee is currently the lowest in the nation. With even a modest increase in fees, we could repair or replace the 450 bridges, put tens of thousands of Oregonians to work, create opportunities for countless local construction and supply companies, and put over $1 billion back into Oregon's economy. We can afford to do this. And we can't afford not to.

Supporting our timber industry is another important way we can put Oregonians back to work. Urban Oregon did well in the 1990s by diversifying into high tech and other sustainable industries. We must continue that trend toward sustainability. But we need to remember that timber is one of the most sustainable and important industries in Oregon - and that many of our rural communities depend on timber for their survival. That means we need to protect the health of our forests to reduce fire risks - and work with the federal government to make sure that the Northwest Forest Plan is fully implemented. I will do that.

Investing in business and infrastructure is critical to our economy. But investing in people is even more critical. We are not going to be able to move the Oregon economy into high gear without the fuel that economies run on: Skilled workers. Yet, studies show a growing gap between the skills our workforce has - and the skills that Oregon industries need.

This gap has real consequences: Existing businesses find it hard to expand - and businesses outside Oregon find it hard to justify coming here. To make matters worse, many employers simply aren't aware of the training opportunities that are available from the state and our 17 community colleges. So I intend to make workforce training one of my top priorities. We're going to set up a Strategic Training Fund to help business clusters meet their workforce needs. We're also going to create regional teams to work with companies to quickly resolve training and workforce problems. This may be the first time in Oregon history that workforce training is specifically made part of a larger economic development strategy - focusing on job creation and retention.

I can't talk about workforce training without talking about higher education. I want our universities and community colleges to be second to none. That means keeping quality high and the cost of tuition within reach. If we fail to achieve these goals, we're going to lose our best and brightest to colleges outside Oregon - and then eventually to jobs outside Oregon.

To help make sure that doesn't happen, I'm proposing a new higher education endowment fund - that will include both public and private money - and will be used to increase access to our colleges and universities. Like most other state-funded services, higher education will be forced to face funding reductions. This is temporary. What is permanent is my commitment to Oregon colleges and universities. The reason is simple: Universities with top faculty and first-rate research facilities drive economic growth. They attract capital. They attract new businesses. And they attract the most creative students. They also produce the cutting edge ideas that can be turned into marketable products.

Which brings me to the next critical piece of GROW - marketing Oregon to the rest of the nation and the world. I already mentioned that I'm going to China. But international trade is only part of our marketing strategy. I want to make Oregon not just a great place to do business - but a one-word brand that means quality.

Oregon already does that for our quality of life. People everywhere associate the name "Oregon" with a clean and breathtaking environment. Our marketing strategy - which we're calling Brand Oregon - will do the same for this state's products, services, schools, workforce and "can do" attitude.

Marketing Oregon also means renewing Hollywood's interest in shooting feature films and commercials here. So we're looking at incentives that will help outside directors and producers - and our own Oregon-based filmmakers.

No marketing strategy for Oregon would be complete without focusing on tourism. Tourism is our third biggest industry. Yet the amount of money we devote to promoting tourism puts us in the bottom third of states. That makes no sense. We have some of the most beautiful scenery in the world. We have some of the best wine in the world. We have some of the most internationally renowned art and cultural institutions in the world. And we probably have the longest publicly owned and accessible coastline in the United States. For every dollar we invest in promoting these environmental and artist treasures - we get three dollars back. That is a good deal by anyone's definition. And that's why selling Oregon as a tourist destination is as important to me as selling Oregon as business destination.

I know that for many Oregonians this is a troubling - even painful - time. It is a time that requires steady and determined leadership. I will provide that. It is also a time that requires confident and optimistic leadership. I will provide that too.

Most of what we are hearing these days is about what we cannot do. My message is different. My message is about what we will do. I'm absolutely convinced that Oregon's best days are still ahead of us. We're short of dollars, but we're not short of determination. And determination has always been the currency that buys prosperity.

We are rich with hope. We are rich with love for Oregon. And together, we will find our way to an understanding - rich with certainty - that there is still no better place to live than right here.

Thank you.