Oregon Inc. worries about budget cuts

Over the last five years, the Oregon Innovation Council, one of the state’s most heralded programs, has created or saved hundreds of high-paying jobs, created 14 companies and spurred nearly $150 million in public and private investments.

Yet even the successful programs overseen by Oregon Inc., as it's known for short, aren’t immune to the state’s ongoing budget problems.

Leaders fear the program will face cuts if the state’s economy remains sluggish and if voters reject two tax increases on the January ballot.

Oregon Inc. leaders will spend the early part of 2010 touting their job-creating efforts as a rare success in Oregon’s battered economy.

The program has succeeded despite working with an ever-decreasing pot of money.

Oregon Inc., which also creates tools that help businesses compete globally, received $16 million in state funding in the 2009-11 biennium, about 25 percent less than requested. The group received $28 million in the 2007-09 biennium.

Budget woes could thwart the council even further. If voters reject the tax increases and the state’s revenue forecast continues falling, state agencies could be forced to cut their budgets by as much as 10 percent.

Doing so would cost Oregon Inc. as much as $640,000, or enough to eliminate funding for one of its six sector initiatives (see chart).

“We realize there are fiscal realities for the state that could affect us, but we shouldn’t be short-sighted in the importance of producing jobs for the long term,” said David Chen, the council’s chairman. “We don’t think any cuts made to us will necessarily be draconian, but anything will be difficult to absorb.”

Chen said Oregon Inc.’s programs, which include creating technology and pharmaceutical laboratories and energy research facilities, will become more critical in what economists say will be a jobless recovery.

The Jan. 26 vote on two tax hikes puts Oregon Inc. in a tough spot.

Businesses oppose the hikes, which would uphold increases in corporate and personal income taxes and raise $733 million through July 2011.

Yet if the measures fail, Oregon Inc. could lose an undetermined amount of funding. The council’s board hasn’t taken a stand on the ballot measures.

Pat McCormick, spokesman for the opposition group Oregonians Against Job-Killing Taxes, said Oregon Inc. will fare just fine even if voters reject the taxes. He doesn’t think state-funded programs will absorb big hits if the measures fail.

The $733 million represents less than 2 percent of the state’s overall $51 billion budget, he said, a figure that includes federal and lottery funds.

“If Oregon Inc. continues to prove it can create high-paying jobs, then it’s smart for the state to put money into it,” he said. “The more people who are employed, the more income tax the state can collect, and that rebuilds the funds needed to rebuild state services.”

Oregon Inc. works to enhance research and roll out products in six Oregon industries: nanotechnology and microtechnology, drug development environmental and sustainable technologies, wave energy, food processing and seafood processing. Since 2007, the group’s efforts have created or retained 894 jobs and generated $148.7 million in public and private investments.

Each of the council’s six sectors offers different accomplishments. For instance, the 14 companies created through the Oregon Nanoscience and Microtechnologies Institute have generated $16 million in private investments. The institute also established labs in Eugene, Corvallis and Portland that allow 100 clients to perform otherwise unaffordable studies.

Oregon Inc. also funds labs that could help Oregon collect a chunk of the $10 billion in federal stimulus money distributed next year by the National Institutes of Health. The labs are overseen by the Oregon Translational Research and Drug Development Initiative.

The Oregon Wave Energy Trust is working with Pennington, N.J.-based Ocean Power Technologies Inc. on research facilities in Reedsport. The $4 million company hopes to pour $50 million into Reedsport and Coos Bay operations.