Tech Industry Considers its Future in Oregon

Why tech has a low public profile in the state and how that may change in 2017.

by Mike Rogoway, The Oregonian, Portland, Ore. / January 23, 2017

(TNS) — Oregon's tech industry awoke last fall, roused from its preoccupation with microprocessors, cloud computing and social networking to oppose a ballot initiative that would have shouldered businesses with billions in new taxes.

The techies got their way — voters soundly defeated Measure 97 on Nov. 8, preserving the status quo in a state that has some of the lowest business taxes in the nation. The same election, though, left Oregon's schools among the worst funded in the United States.

That was something the tech industry acknowledged and suggested it would address last fall, if only Measure 97 would go away. With the Legislature convening in Salem for the start of its session, though, there's little sign Oregon's largest and most vital industry will follow through.

"Now the tech community has a choice. People know where we stand on this," said Bill Lynch, co-founder of Jive Software, now a vice president at Portland startup Cloudability. "But are we going to collectively do what we probably implied we would do?"

Tech and policy

There are at least three main reasons why tech has such a low public profile in Oregon:

It's fragmented: The hardware manufacturers out on the Sunset Highway in Washington County have little interaction with the software and web services startups in downtown Portland. Though Intel is the state's largest private employer, the chipmaker's work is highly specialized and there's little cross-pollination with other Oregon tech companies.

Outposts dominate Oregon tech: Oregon has no big tech companies of its own. Intel, Hewlett-Packard, Amazon, Google and many others have substantial outposts here, but their headquarters take little interest in the politics around their satellites. And they don't encourage regional managers to engage in local politics.

It's new: New residents and young people don't know how the game is played, and how much impact they can have.

Some other Oregon industries dismiss the notion of higher business taxes, arguing instead that the state needs to address Oregon's public pension crisis. Even without Public Employee Retirement System's $22 billion unfunded liability, though, the state's schools would be some of the nation's poorest.

It's not that tech doesn't care, said Diane Fraiman, a partner with Voyager Capital, the investment firm most active in Portland's startup scene.

"They're too busy, heads down, they never really realized anyone was going to listen to them," Fraiman said. Many have moved to Oregon from bigger cities, she said, and underestimate the influence they could have here.

Like many others in the Oregon's tech sector, Fraiman accepts the need for more public revenue — along with pension reform. She said the tech community as a whole doesn't recognize it has a role in the conversation unfolding across the state.

"The beauty of being in a state this size is you can effect change," she said. "You can have a voice, if you choose to stand up and do the work."

Beyond lobbying for tax breaks, Oregon tech has rarely engaged in broad public policy discussions. It's a young, fragmented industry dominated by large, out-of-state companies and a growing cluster of startups.

In many ways, the sector is essentially cut off from the rest of the state, more oriented toward the Silicon Valley than the Silicon Forest.

Even so, tech is Oregon's single most important industry, nearly as crucial to the state's economy now as wood products were in its peak four decades ago. Tech provides nearly 12 percent of all the state's wages, according to data from the Oregon Employment Department.

The timber industry is tied to Oregon education through the Common School Fund, state lands managed to benefit schools. Tech has not sought to cultivate its own connection to the schools, though it relies heavily on education to attract workers and their families to the state and to train new generations of skilled employees.

Tech Donations Opposing Measure 97

As of early November, opponents had raised $25.9 million to fight Measure 97, while supporters raised $16.4 million.

Tech companies contributed just over $1 million to the campaign against the tax initiative; no big Oregon tech names donated to the campaign to win passage.

Comcast: $465,000
Amazon.com: $175,000
CenturyLink: $100,000
Jive Software: $100,000
Intel: $50,000
Act-On Software: $35,000
Navex Global: $20,000
Consumer Cellular: $10,000
SureID: $10,000
Jay Haladay (former CEO of Viewpoint Construction Software): $5,000
Frontier Communications: $5,000
New Relic: $5,000
Smarsh: $2,500
Cloudability: $2,500
Voyager Capital: $500

While Oregon's economy is growing rapidly — and the tech sector is booming — the funding picture for the state's schools is actually getting worse.

Ballooning health care and pension costs, coupled with relatively slow growth in tax revenue, mean Oregon is facing a $1.8 billion deficit in the coming two-year budget cycle.

In December, more than 100 civic and business leaders convened at the annual Oregon Leadership Summit, hashing out the state's looming budget shortfall and growing pension crisis. The tech sector had just one representative — a vice president from online security company Tripwire. He spoke on a panel on public-private partnerships, a narrow topic unrelated to the big issues facing the state.

Intel, Oregon's largest private employer, rarely talks about the state's broader issues and declined comment for this article. The company depends heavily on higher education to support its Oregon work force, though. Intel relies on Portland Community College to train the technicians who run its Hillsboro factories, and sends hundreds of employees to Portland State University for continuing education programs.

Meanwhile, the chipmaker enjoys property tax breaks worth more than $100 million a year in Washington County, where it employed 19,500 before a series of job cuts began last spring. (Intel won't say how many work there now.)

Intel used to boast of its Oregon corporate tax bill, which averaged more than $50 million a year at the turn of the century. After helping push through a change in the state tax formula that likely eliminated nearly all of its Oregon corporate taxes, Intel stopped talking about its income taxes.

Intel notwithstanding, Oregon tech leaders say they aren't necessarily opposed to new taxes on their businesses.

"Our general philosophy is that the state could use more revenue dollars," said Jim Gochee, chief product officer for New Relic, a San Francisco online analytics company that employs more than 300 at its engineering office in downtown Portland.

New Relic opposed Measure 97 and donated to the "No" campaign, but Gochee said the company would gladly pay higher Oregon taxes in a less severe structure than last fall's initiative, which would have raised $3 billion a year in new taxes.

"Tech is very forward thinking," Gochee said. "We need highly educated people and the schools need to be very solid."

Still, Gochee said New Relic won't lead the fight on education or any other public policy matter: "If someone invited us to collaborate and participate we would do it."

That's a common thread among Oregon technologists: they want something done about the schools, but won't take charge of the discussion.

A 2015 analysis by The Oregonian/OregonLive found the state ranks No. 38 nationally in educational achievement, plagued by a low graduation rate and by student spending that falls 16 percent below the national average.

"There is more revenue needed," said Skip Newberry, president of the Technology Association of Oregon, which opposed Measure 97.

That was the first time in memory TAO (or its predecessor, the Software Association of Oregon) had taken a position on a statewide issue. It was silent in 2010 on Oregon Measures 66 and 67, which raised taxes to stabilize public coffers after the Great Recession.

Ahead of the legislative session, TAO is preparing a document to compare Oregon's taxes and spending with similar states. The organization won't be leading the conversation on revenue and spending, Newberry said, but does hope to take part in the discussion by comparing Oregon to other states.

"A part of what we'll be focusing on is what are the states that are doing well as far as funding, with stable sources, their school systems," he said.

Lynch, Jive's co-founder, stood out during the Measure 97 campaign for speaking out in favor of the initiative. He agrees with colleagues who argued that it was a flawed proposal, but said he backed it in hopes of more schools funding — and possible legislative fixes.

Even in failure, though, Lynch said the initiative was unusually effective in capturing the tech community's attention. That could pay off, he said, if it triggers more involvement.

"That's why I think the 97 defeat was such a turning point," Lynch said. "OK. That was done. A lot of passion. Now, can we leverage any of that stuff into some good outcome?"

©2017 The Oregonian (Portland, Ore.). Visit The Oregonian (Portland, Ore.) at www.oregonian.com. Distributed by Tribune Content Agency, LLC.
 
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