State economic development agency out of focus

PORTLAND — The two main halves of Oregon's economic development agency are headed for a split.

The commission that oversees the state's Economic and Community Development department is recommending that the agency focus on luring new companies and jobs to the state, helping small businesses and promoting Oregon products.

Meanwhile, the half of the department that deals with public works projects like sewage system overhauls would be transferred to another agency, yet to be determined.

The changes come after years of complaints by lawmakers that the agency was muddied in its mission. Funding requests from the agency have often been stymied as a result.

"These have been two cultures that should not live under one roof, a Legislature that tries to see them as one piece, and everything goes downhill from there," said Nancy Hamilton, deputy chief of staff to Gov. Ted Kulongoski.

It's not clear yet what agency might absorb the public works portion, but Gov. Ted Kulongoski said he won't create a new, separate state agency to house it.

Since Oregon recovered from the crippling recession of 2002 and 2003, the state's economy has largely been on the upswing, and a parade of new businesses have arrived in the state, from biotechnology company Genentech in Hillsboro to SolarWorld's decision to put North America's largest solar cell manufacturing site in Washington County.

The state has tried to position itself ahead in the race for "green collar" jobs, partly via a wildly popular new tax credit for businesses that invest in energy conservation, recycling and renewable energy.

But there have been setbacks, too, including criticisms over the lack of development-ready industrial land, and Oregon's perceived lack of aggressiveness in overseas trade, particularly when compared with neighboring Washington. And although Oregon hasn't been hit as hard as the rest of the country by the housing slump, state economists have predicted far more sluggish job growth over the next few months.

Under Kulongoski, the economic development agency has also gone through several directors, but problems with the department predate his tenure, said state Sen. Betsy Johnson, D-Scappoose, who has served in the Oregon Legislature since 2001.

"I think that over time, the agency has been seen as a cash register to which people bring their problems," she said.

When asked to fund the agency's priorities, legislators have always zeroed in on how many new jobs might be won with the funding, she said.

But for public works projects — for which rural communities particularly look to the state for financial and technical help — the major goal isn't to create jobs, but instead to provide potable, plentiful water, or to clean up brown fields, she said.

As a result, she said, such projects often lost out entirely, or left local public works directors contorting themselves to draw connections to job creation.

Kulongoski said the split would help economic development officials focus on emerging initiatives, like the state's $37.2 million investment in its Engineering and Technology Industry Council, or the Corvallis-based Oregon Nanoscience and Microtechnologies Institute.

And he said the changes would allow officials to better pinpoint what kinds of skills employers need from workers. Currently, responsibility for such work force development programs are spread out across a handful of state agencies.

Major changes to the agency's structure will have to be approved by the state Legislature. Rep. David Edwards, D-Hillsboro, who is working with the commission to promote the changes, said he's been reaching out to Republicans on the topic, and they've been supportive so far.

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