Oregon governor calls for new tax credit, semiconductor incentives
(Oregon Capital Chronicle) Gov. Kate Brown wants the Legislature to act quickly next year to pass a new tax credit and other incentives to expand Oregon’s semiconductor industry.
During a state House committee meeting Wednesday, Brown laid out the broad strokes of a plan she worked on with business leaders and U.S. Sen. Ron Wyden, D-Oregon, to position the state to compete for $280 billion in new federal funding from the CHIPS and Science Act for semiconductor manufacturing and technological research that Congress passed in late July.
“We must act quickly,” Brown told the Economic Development and Small Business Committee. “We are in a 50-state competition for CHIPS funding, so it is critical that we seize the opportunities in front of us now in the highly-competitive semiconductor industry. The good news is, creating jobs, building a strong workforce, and supporting Oregon families are Oregon values.”
Oregon is a world leader in the semiconductor industry, thanks largely to Intel, which employs more than 20,000 Oregonians at its Hillsboro campus. Intel has suppliers from 15 other Oregon counties, said Duncan Wyse, president of the Oregon Business Council.
“If you look around the world and ask where are the centers of innovation in semiconductors, it’s really three places,” Wyse said. “Taiwan, South Korea, Oregon. We are the leading place in the world for advanced design and manufacturing of semiconductors.”
Oregon has 15% of the nation’s semiconductor workforce, and only California and Texas have more people working in the industry. If federal funding were distributed based on the size of the industry in each state, Oregon would receive $40 billion from the CHIPS Act, Wyse said.
Every $1 billion in capital investments would mean 7,000 new jobs, most of them temporary construction jobs, and $44 million in short-term state and local tax revenue, Wyse said. Down the line, the state could expect 2,000 permanent new jobs in the semiconductor industry, with another 4,000 jobs in related fields and about $56 million annually in tax revenue for local and state governments, he said.
Those jobs would be a mix of positions that require graduate-level degrees and jobs that only need high school diplomas and technical training. Nearly half of the workers in the semiconductor industry, particularly in manufacturing, have no formal education beyond a high school diploma or associate’s degree.
Brown’s pitch included a call for additional targeted funding for Oregon universities to increase the number of students graduating with degrees in fields like engineering and computer science, as well as using the $200 million Future Ready Oregon job training package approved this year to help train workers without degrees for careers in the industry. She did not specify how much money should be made available.
“My goal is for us to work together to have a viable package that the Legislature can work on on day one,” Brown said.
Part of that plan would include a new research and development tax credit. Oregon previously had such a tax credit, but it expired at the end of 2017.
Brown also announced Wednesday that she’s allocating $1 million from the Governor’s Strategic Reserve Fund, which she controls, to help local governments identify and prepare potential manufacturing sites. A shortage of industrial land has made it difficult for the state to entice current companies to expand in Oregon or draw new companies here, as shown by Intel’s decision last year to build a $20 billion campus in Ohio, not Oregon.
The Legislature should provide additional support next year, she told the committee. She’s also seeking to expedite environmental permits and is supporting a request before the Legislature’s Emergency Board this week to spend more than $350,000 so the Department of Environmental Quality can hire four new permanent employees to process applications and work on expanding access to industrial land.
Rahim Harji, the Hillsboro assistant city manager, said making more land available, especially in the Portland suburbs, is critical. Semiconductor manufacturers are looking for large, ready-to-build plots near cities or universities that can provide highly-skilled workers.
“If we do not have land to build on, nothing else matters,” Harji said.
State Rep. Janelle Bynum, a Clackamas Democrat and the chair of the economic development and business committee, pledged to introduce legislation next year based on the information Brown and business leaders shared.
“Oregon has long been an established leader in semiconductor manufacturing, and I look forward to supporting efforts that ensure we remain one,” Bynum said in a statement. “This means creating career pathways and investing in private and public incentives to help build out our workforce, create good paying jobs, and support innovation.”
Plan depends on future governor
Brown’s term expires in January, meaning Oregon’s next governor and Legislature will set policies and budgets. In statements to the Capital Chronicle, both Republican Christine Drazan and nonaffiliated candidate Betsy Johnson described Brown’s proposal as too little, too late.
“It’s too bad it took losing Intel investments to Ohio to wake Kate Brown up to the need for economic development in Oregon,” Johnson said in a statement. “This proposal is far too little investment spread out too far to get anything useful done. We need more investment under a more focused plan to be successful.
She added that Brown’s $1 million investment is far below the need, and that adding more employees to a “dysfunctional, ossified agency” will please public sector unions but not expedite permit applications.
Drazan said in a statement that Brown’s tax policies and business regulations drove businesses out of the state. Drazan said she was ready to work on other reforms, including reducing business taxes and ensuring businesses know what to expect from regulations. The $1 million Brown allocated is a “drop in the bucket” compared to what the state needs to address administrative hurdles that prevent growth, she said.
“Governor Brown ended Oregon’s R&D tax credit. Now she wants it back,” Drazan said. “She has had two terms to focus on growing Oregon industries, including the semiconductor industry, and instead has done everything in her power to drive out investment through higher taxes and excessive regulations.”
A spokeswoman for Democratic candidate Tina Kotek didn’t respond to an email Wednesday about Brown’s plan and what the state should do to expand its semiconductor industry.