Oregon Governor Vetoes Bipartisan Subsidy Cut

Published November 1, 2009

The Oregon state legislature passed a bill reducing runaway renewable energy subsidies in an effort to help balance the state budget, but Gov. Ted Kulongoski (D) killed the bill with a veto.

Now Oregon, which already faced a budget shortfall, may have to find an additional $50 million in its next two-year budget, according to state Sen. Ginny Burdick (D-Portland), who supported the cut in subsidies.

Out-of-Control Costs

The subsidies, handed out to wind farms, solar farms, and biofuel projects in the form of preferential tax credits, have totaled $60 million over the past two years.

Legislators did not envision so many subsidies being given under the tax credit provisions. In an effort to rein in the runaway subsidies, state legislators passed a bill reducing from $144 million to $120 million the amount of tax credits that could be awarded during the next two-year budget.

Legislature Sought Balance

That bipartisan effort was stymied when Kulongoski vetoed the bill.

“This was a bipartisan bill,” said Todd Wynn, climate change and energy policy director for Oregon’s Cascade Policy Institute. “We did have a huge budget crisis this last session, … and the governor’s veto is going to put us in a tight spot for the next few years.”

Tom Tanton, a senior fellow in environmental studies for the Pacific Research Institute, said the subsidies were instituted as a means of enticing businesses to focus on alternative energy development. They were never meant to become steady sources of income for these businesses.

“The subsidies were intended to spur technology and innovation,” Tanton said. “But they’re doing the exact opposite. … The subsidies were intended to create the market and drive the price down. But there’s been a 50 percent increase to the price in wind power, and the price of solar power has more than doubled.”

Economic Benefits Called Illusory

Wynn said while growth in alternative energies can create some jobs, many are short-lived and come at the expense of jobs destroyed in other sectors of the economy.

“Some of these renewable energies bring jobs to the state,” Wynn said. “But that’s a really hard sell to make, that a highly subsidized [field] equals economic boon. Wind farms, for example, may create some jobs, but many are only temporary.”

Cheryl K. Chumley ([email protected]) is a 2008-09 journalism fellow with The Phillips Foundation.