Energy Program Comes Under Fire

Every state wants to create green jobs. Oregon actually has done it. But a political consensus has emerged that the state has done it the wrong way.

The problem is a tax credit program that everyone calls "Betsy." The Business Energy Tax Credit (BETC) has been around for more than three decades. At the urging of Governor Ted Kulongoski, it was dramatically expanded in 2007. BETC helps finance everything from new wind farms to the construction of solar panels to the weatherization of office buildings.

You might think other places would be rushing to follow Oregon's lead. Earlier this year, a Pew Charitable Trusts report showed Oregon as the only state in the nation where more than 1 percent of jobs are in green industries. State officials credit BETC with dramatically reducing greenhouse-gas emissions. "BETC has been enormously productive over time," says Rachel Shimshak, director of the Renewable Northwest Project. "It's probably the success of the program that got people's attention."

In a sense, that's true. BETC has funded lots of green projects. But that's the trouble. There was no cap on the number of projects the program could fund or the total amount of money it could spend. Estimates place the cost in the current budget biennium at more than $160 million, which exceeds 1 percent of the entire state general fund.

Sticker shock prompted the legislature to pass a bill scaling back the program last year. Kulongoski vetoed it. He made the same case that governors across the country have made: Green jobs are the future of the economy, so it was a worthy investment.

Last fall, though, it became clear that the program wasn't just expensive. It also was poorly managed. A series of investigative reports in Portland's Oregonian newspaper showed that companies were splitting single projects in two, then claiming double the tax credit. The state was routinely paying for cost overruns. Projects that never materialized still received money. And documents suggested the governor's office had pressured budget analysts to reduce cost projections for the program to win legislative approval in 2007.

Kulongoski rejected the allegation of budget manipulation, but he did shift gears. With his support, the state Department of Energy issued temporary regulations in November to curtail the abuses. With the governor's support, new legislation scaling back the program is expected next year.