Southern Oregon Business Journal July 2020 Edition

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July 2020

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Oregon’s Marijuana Industry and Employment Trends - Page 6 Covid-19 and Cities: A very uneven pandemic - Page 10 Expanding benefits of energy efficiency: water reliability - Page 14 Special Insert - Education Audit - ODE Can Better Support Students Experiencing Disabilities - Page 22

The Journal for Business in Southern Oregon

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Contributors Joe Cortright Joe Cortright is President and principal economist of Impresa, a consulting firm specializing in regional economic analysis, innovation and industry clusters. Prior to starting Impresa, Joe served for 12 years as the Executive Officer of the Oregon Legislature’s Trade and Economic Development Committee. jcortright@cityobservatory.org

A Few Words from Jim It is officially summer (Although on the day I'm writing this it's only 65 degrees and I'm wearing a hoodie - Welcome to Oregon) and it has been 1 year since I became a partner with Greg on the Southern Oregon Business

Anna Johnson Senior Economic Analyst at the Oregon Employment Department anna.l.johnson@oregon.gov

Journal.

A lot has happened in that year. We completely rebooted the journals "Look and Feel" of the print publication as well as its online presence. Then there was The Global Pandemic, Bernie Sanders quietly dropped out of the Presidential Race, my daughter announced her pregnancy, rioting happened and Greg retired. Whew. What a year so far. We're only half way through.

Guy Tauer Regional Economist at the Oregon Employment Department guy.r.tauer@oregon.gov

I can't even tell you were June has gone. The state started opening up and I just stayed working from home doing about 5 "Zoom" meetings a day.

Luke Rogers is chief of the Census Bureau’s Population Estimates Branch. luke.rogers@census.gov Kristie Wilder is a demographer in the Population Estimates Branch.

Tim Duy Senior Director, Oregon Economic Forum, Professor of Practice Department of Economics, University of Oregon duy@uoregon.edu

Founder Greg Henderson ghenderson703@gmail.com Greg started the Southern Oregon Business Journal in 2015 and retired in 2020.

2 | Southern Oregon Business Journal July 2020

Someone asked if it's harder to work with my international clients now and I thought about it and told him that it isn't really any different, except that we are both at home. The real change has been with local clients and all the non-profits I serve. Where I used to drive to meetings, I just jump from one zoom to the next, always wishing I scheduled a bio-break in between and missing the drive time downtime.

Greg is retired, but he isn't gone. He and I had a couple of meetings via Zoom in June and he can't help but have his fingerprints all over this July issue. I'm not going to fight it. It's his baby and it's hard to give it up. I get it. I'm actually happy to have him hanging out and poking around.

As I move into Grandpa Mode (Baby is due July 15) I'll try to find time to be a good one. I'm working more than ever with side hustles and the future is uncertain, but I can't wait to meet him and when he grows up I'll tell him all about the year he was born. I hope he believes me, because it sounds too far fetched to be true.

Jim Teece Publisher of the Southern Oregon Business Journal Jim@SouthernOregonBusiness.com

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July 2020 - Table of Contents

Inside This Issue Shift in Working-Age Population Relative to Older and Younger Americans - Page 4 Oregon’s Marijuana Industry and Employment Trends - Page 6 Covid-19 and Cities: A very uneven pandemic - Page 10 Expanding benefits of energy efficiency: water reliability - Page 14 Department Cautions Against Further Groundwater Development in the Harney Basin as Data Indicate Groundwater is Being Depleted - Page 15

Cover photo of Crater Lake

by David Mark from Pixabay.

Keep Your Eye On The Ball - Page 16 Labor Underutilization and the Effects of COVID-19 - Page 18 Special Insert - Education Audit - ODE Can Better Support Students Experiencing Disabilities - Page 22

Find the latest news on SouthernOregonBusiness.com

The Southern Oregon Business Journal extends sincere thanks to the following companies for their continued presence as important cogs in the wheels of industry in southern Oregon.

CENSUS

By LUKE ROGERS AND KRISTIE WILDER Census Bureau’s Population Estimates Branch

Shift in Working-Age Population Relative to Older and Younger Americans than half the states had a median age greater than 38.4.

Every state in the Northeast had a median age higher than that of the nation.

Along with increased aging, there have been changes in the population’s age structure. Most notably: the growth of the 65-and-older population and the shrinking of the population aged 14 and under.

T

he surge in the number of Americans aged 65 and older this decade has outpaced the growth in the working-age population.

In counties across the United States, the dependency ratio has increased, according to U.S. Census Bureau population estimates released today.

Over the last decade, the growth of the non-working-age (dependent) population – ages 0 to 14 and 65 and older – has outpaced the growth of the working-age population.

A dependency ratio looks at the size of the population under the age of 15 4 | Southern Oregon Business Journal July 2020

(60,570,846 in 2019) and the 65-andolder population (54,058,263) and how their combined size compares to the population aged 15 to 64 (213,610,414).

America’s population is aging. Since 2010, there has been a sizable 34% increase in the 65-and-older population, a growth of approximately 13.8 million people.

During this period, the median age (the age at which half the population is younger and half is older) also increased from 37.2 to 38.4 years. In 2019, more

The aging of baby boomers, those born between 1946 and 1964, who were aged 55 to 73 in 2019, is partly driving the growth in the older population. The slow decline of the younger population, which has decreased by 657,000 people (1.1%) since 2010, is in part due to a general decrease in fertility, ongoing since 2007.

An interesting pattern emerges when comparing changes in the younger population, older population and the working-age population (those aged 15 to 64) between 2010 and 2019.

Over the last decade, the growth of the non-working-age (dependent)

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ADS population – those aged 0 to 14 and 65 and older – has outpaced the growth of the working-age population.

The non-working-age population grew by 13.1 million, a 12.9% increase, while the working-age population increased by a modest 6.4 million or 3.1%.

Two maps highlight this shift by showing the dependency ratio in counties across the nation.

A lower ratio means there are fewer dependent-age people relative to the size of the working-age population. In contrast, a higher ratio indicates there are more dependent-age people relative to those of working age.

In 2010, the dependency ratio for the nation as a whole was 49.0, meaning that for every 100 working-age people there were 49 dependent-age people. By 2019, this dependency ratio increased to 53.7, driven by the growth of the 65-and-older population.

The geographic patterns and magnitude of change in dependency ratios are varied. In 2010, the ratios were highest in the Great Plains and parts of Florida. Still, numerous counties in 2010 had dependency ratios lower than the 2019 national ratio.

By 2019, high dependency ratios were more widespread. Fewer counties had dependency ratios lower than that of the nation, and many of those counties were in or near metropolitan areas.

Dependency ratios offer a unique way of looking at the impact of the nation’s aging since 2010 and insights into how America will change in the future.

Luke Rogers is chief of the Census Bureau’s Population Estimates Branch.

17,000+ Business People get a chance to see your ad in the monthly Business Journal.

Send your ad copy to: Greg@SouthernOregonBusiness.com Greg Henderson, Co-Publisher

541-315-6127

Kristie Wilder is a demographer in the Population Estimates Branch.

Southern Oregon Business Journal July 2020 | 5

EMPLOYMENT

by Guy Tauer

R

Oregon’s Marijuana Industry and Employment Trends

ecreational marijuana sales hit a new record high of $89 million in April 2020 amid the single full month of stay-at-home orders related to COVID-19, a 45 percent increase over April 2019. In March, the second-highest month ever recorded, cannabis sales hit $84.5 million. The previous record of $79.4 million was set in August 2019, according to the Oregon Liquor Control Commission.

stockpiling consumers did after the sheltering in place policies were enacted, but have continued through April and early May. Some of the increases in sales of usable marijuana are in part due to rising prices, but underlying demand is up as well. The increase in sales for other marijuana products, like concentrates, edibles and the like, are due to significant gains in consumer demand as prices are flat or down.”

According to the recent Oregon Office of Economic Analysis Economic and Revenue Forecast June 2020, “These increases are not only related to the

Having grown up in the heart of the socalled “Emerald Triangle” of the once entirely illicit marijuana industry, I’ve observed remarkable changes both from

6 | Southern Oregon Business Journal July 2020

a legal and societal acceptance perspective in a relatively short time span. I would imagine that those who lived through the end of the alcohol prohibition era in 1933 witnessed a similar rapid change once the speakeasy gave way to legal bars, taverns and legal retail liquor sales. Oregon’s bumpy path toward legalized recreational marijuana sales may have germinated back in 1973 when the state became the first to decriminalize possession of less than once ounce of marijuana.

While not a “new” industry in the sense the seeds were sown by a new

in the state in April 2017. By late 2018, the Oregon Health Authority/Oregon Medical Marijuana Program database listed just five medical-only dispensary businesses remaining statewide. On the other hand, the Oregon Liquor Control Commission (OLCC), which oversees the recreational marijuana industry, listed 1,020 active licenses for retail dispensaries on 4-20-20.

technology, product or market, rather this is an industry that has been flowing through Oregon’s economy for decades.

This industry has a long-standing presence and is even more concentrated in the outdoor marijuana cultivationfriendly climate of the southwestern corner of the state, essentially for generations. The economy has been rife with cannabis activity, economic output, and income gains, mostly beneath the scope of any real data to measure that activity. The only real published figures were when law enforcement interdiction produced poundage and street-dollar value estimates of the formerly illegal seized cannabis products. Even now, federal statistics are by nature precluding any tally of employment, revenue and sales data for this budding industry sector. A few regional economies, including Oregon’s, are now pulling the curtains back on the scope of this older, but now legal industry as data on sales, revenue and employment

become available.

Transitioning to the Retail Dispensary Model One of the evolving changes in Oregon’s legal marijuana industry is the shift to retail dispensaries. As of January 1, 2017 sales are allowed at licensed recreational retailers. Previously, medical marijuana dispensaries were also allowed to sell to recreational customers – any adult over 21 years old.

Currently, recreational dispensaries may sell cannabis to both recreational and medical customers, with only recreational customers subject to taxes.

Now medical-only dispensaries are only allowed to sell cannabis to those with a medical marijuana card.

From a business perspective, these changes have ushered out the era of medical-only dispensaries. There were only 48 strictly medical dispensaries left

In addition to licensed retail dispensaries, the OLCC also publishes license-holders, by county and firm name, for marijuana processors, wholesalers and producers. The largest number in Oregon was for producers, with 2,099 marijuana business licenses approved. There were also licensed processers (496); wholesalers (330); and testing laboratories (34), according to the OLCC business license database.

Business names in this database are disclosed, but not any other data including sales or employment. The Rogue Valley in the Southwestern part of the state, also part of the “Emerald Triangle” – a prime area for marijuana cultivation – is home just over one-third of the licensed marijuana producers in Oregon.

Using Unemployment Insurance Payroll Employment to Count Marijuana Jobs From an employment perspective, the Oregon Employment Department has to play a bit of catch-up with these rapid changes. The Oregon Employment Department tracks employment and wages through the Unemployment Insurance (UI) program, which collects data from employers subject to UI law to Southern Oregon Business Journal July 2020 | 7

produce our Quarterly Census of Employment and Wages (QCEW).

In an effort to track payroll employment at marijuana-related businesses, the Oregon Employment Department has created a database of known marijuanarelated recreational and medical dispensaries. The Oregon QCEW unit designates an employer as being marijuana-related if the primary nature of the business is deemed to be marijuana-focused. This includes businesses involved in the growing, processing, and distribution of marijuana and marijuana products, and businesses that support those activities.

They use a variety of methods to make this determination, including reviewing information provided by the employer, referencing industry registries like the OLCC license registry, and reading information publicly available online.

But it’s not yet a perfect science. Because of marijuana still being illegal in the eyes of the federal government, some establishments are not forthcoming in proclaiming that they are selling marijuana. Dispensaries might have workers who are not counted in that industry. For example, if a dispensary uses a staffing agency to fill their job openings, those workers would be included in the professional and business services industry – where temporary help or employment 8 | Southern Oregon Business Journal July 2020

placement businesses are counted. A sole proprietor with no employees covered by unemployment insurance would also be excluded from the Oregon Employment Department figures. And the sheer number of new dispensaries create additional challenges.

Most recently, the Oregon Employment Department tallied about 310 dispensaries that had jobs covered by unemployment insurance. These are establishments that are in the marijuana industry, but due to imperfect data, and factors such as sole proprietors not required to have unemployment insurance coverage, are missing from our count of cannabis industry jobs. The database of OLCC retail dispensaries with a business license was about three times as many businesses (1,020). Of course every OLCC-licensed business may not be in operation yet, or someone may have a license with plans to open a dispensary in the future. So it’s not an exact comparison when comparing businesses who are licensed with the OLCC and those that we are tracking in our payroll statistics information.

Despite the differences, it’s safe to say there are far many more working at Oregon dispensaries than we are capturing in our payroll employment data.

To keep up with the changes in the medical/ recreational distribution of firms in the marijuana industry, we’ve been recoding where recreational dispensaries are counted. Beginning in the first quarter of 2017, we shifted some establishments that were previously counted in the medical dispensary category “business, professional, labor, political, and similar organizations,” a subset of “other services” to “all other miscellaneous store retailers,” which is in the retail trade sector.

According to our most recent information, there were about 300 recreational dispensary establishments with payroll employment in Oregon totaling 3,330 jobs. The broader category that also includes wholesale trade had about 3,500 jobs and average pay of $28,075 in the fourth quarter of 2019. The following graph shows the marijuana-related business totals by broad industry group, as reported by the Quarterly Census of Employment and Wages database.

Licenses and Permits as Indicators of Employment In other industries where some of the employment is not subject to unemployment insurance laws such as real estate brokers, we can use licensing or other records as an indicator of the level of employment.

Starting July 5, 2016 OLCC began accepting applications for worker

assumed indicates less consumer demand, all things being equal.”

permits. These are required of all workers in any marijuana-related fi rm including temporary and seasonal workers. There is a $100 fee payable upon approval. The permit is valid for fi ve years. As of 8:00 AM April 20, 2020, 86,201 applications had been submitted.

In addition, since the permits are valid for fi ve years, they do not capture turnover. People who quit, are laid off or otherwise not employed at a marijuanarelated business can still have a valid permit.

Of those submitted, 54,816 were active, meaning they were approved and paid for. Since the permits are valid for fi ve years, the number of active permits can only go up until they start needing to be renewed. It can be assumed that all applicants have some interest in employment at a marijuana-related business. After the deadline for compliance on April 28th 2017 however, if we assume that all workers are in compliance, the number of active licenses will overstate employment in recreational marijuana. Since permits include temporary and seasonal workers it is not likely that all permitted workers will be employed on any particular day.

According to the Offi ce of Economic Analysis, the recent euphoria over an upward trend in marijuana sales may burn out eventually. “As the impact of these programs (COVID-19-related executive orders, stay-at-home and certain business closures) fade in the months ahead, and bars and restaurants reopen to a larger degree, marijuana sales are expected to mellow. Over the extended forecast horizon, marijuana sales are reduced approximately fi ve percent relative to the previous forecast due to the lower economic outlook. A relatively smaller population indicates fewer potential customers and lower total personal income than previously

Conclusion

One of the goals of recreational marijuana legalization was to move marijuana sales from the illicit and black market category into the regulated, tested, tracked and measured market.

Despite Oregon legislators and regulators’ increasing unease with vast amounts of marijuana being produced, with an estimated 55 percent of total recreational marijuana demand now being met through legalized sales, the state has had success in capturing a majority share of sales through the medical and recreational programs now in place.

Oregon will continue to refi ne laws and rules regulating marijuana sales and production. In this fast-growing industry, constant change seems to be the order of the day for the near-term, with a gradual shift to more areas of the U.S. allowing recreational marijuana. It behooves other states to study Oregon’s example and experience in the path to a regulated recreational cannabis market, and begin their own efforts to track employment and impacts of this emerging and increasingly legal sector of the economy.

For more information: Oregon’s recreational marijuana industry, http:// www.oregon.gov/olcc/marijuana/pages/ default.aspx.

Southern Oregon Business Journal July 2020 | 9

COVID-19

By Joe Cortright

The Covid-19 pandemic has played out very differently in different metro areas; some have been devastated, others only lightly touched and these patterns have shifted over time.

Among US metro areas with a million or more population there is a more than 20-fold difference in cases per capita between the hardest hit and the least hard-hit The Northeast metros from Washington to Boston have been the “CovidCorridor” Some cities that avoided the pandemic early, were hard hit later; others who

10 | Southern Oregon Business Journal July 2020

Covid-19 and Cities: A very uneven pandemic

were hit early, managed to contain the spread of the pandemic. Minneapolis & Seattle represent cities on different trajectories.

Wide variation in prevalence across metropolitan areas The impact of the Covid-19 pandemic has been extremely uneven across the nation’s large metropolitan areas. The typical large metropolitan area had about 340 reported cases per 100,000 population through May 29. But that median masks wide variation among cities. The hardest hit areas, like the New York City metro area, have an incidence of Covid-19 cases (more than 2,400 per

100,000 population) that is about 20 time higher per capita than it is in the least affected large metros (Portland and Sacramento, 112 and 80 cases per 100,000, respectively). Put another way, if New York had experienced the pandemic the way these cities did, it would have had 95 percent fewer cases and deaths. In the case of metro New York, that would work out to more than 30,000 fewer lives lost—so far.

As we look across the country, there’s are a combination of clear patterns of more severe infection, as well as some isolated hotspots. The entire Northeast Corridor stands out as having the largest concentration of cases. Other cities have had severe outbreaks, with rates very different than the rest of their region. New Orleans with 1,400 cases per 100,000 residents has the second highest prevalence of the virus of any large metro area, but other metro areas in the South generally have rates that are below the

national average. Nearby Houston, for example, has a rate of just 240 per 100,000.

The Covid-Corridor While the New York City metropolitan area has been the epicenter of the pandemic, it is clear that the entire Northeast Corridor, from Washington to Boston, has borne the brunt of the disease. Six of the eight large metropolitan areas with the highest

Southern Oregon Business Journal July 2020 | 11

prevalence of reported cases are in the Corridor.

As Jed Kolko illustrated statistically, proximity to the New York metropolitan area is strongly correlated with the prevalence of Covid-19 cases in the local population. The closer you are to the New York City area, the higher your metro area’s rate of cases per capita.

Whether this is as a result of common factors influencing the spread of the 12 | Southern Oregon Business Journal July 2020

pandemic in these metro areas, or whether the disease literally spread outward through human contact from people traveling to and from New York to nearby metros is unclear. The data do show that the diaspora from New York in the wake of the pandemic flowed mostly to nearby areas.

Which cities did best in fighting the pandemic?

As we’ve traced the progress of the pandemic over the past three months,

we’ve focused on two key metrics of the severity of the outbreak in a given metropolitan area: the total prevalence of the disease (the number of reported cases per 100,000 population, cumulative), and the number of new cases reported in recent days, again adjusted to population. Our preferred method of displaying these data are in the form of a scatter-plot showing the cumulative prevalence of cases on the horizontal axis, and growth rate of new

cases in the past week on the vertical axis. Data through May 29 is shown in the chart below.

A city’s position on this chart clearly illustrates the overall spread and current growth of the virus. Cities in the upper right hand corner of the chart have high rates of cases and are experiencing larger daily increases in new cases.

Cities in the lower left hand corner of the chart, have both lower rates of cases and are seeing fewer new cases per day. In general, cities in the lower lower left hand corner have done the best job of avoiding or minimizing the pandemic; those in the upper right hand corner have been the most severely affected, and been least able to contain the pandemic.

The data also illustrates the progression of the pandemic. Some cities like New York, that were hit hard early on, and consequently have high rates of prevalence, have managed to lower the number of new cases, and have moved into the lower right hand quadrant.

At the end of May, Washington and Baltimore were in the upper right hand quadrant, with rates of growth of new cases and prevalence both above the average for all large metro areas. This suggests these metro areas are where the pandemic is bad, and continuing (relative to the rest of the nation) to worsen.

The cities that have done the best— relatively speaking—are in the lower left hand corner and include Sacramento, Portland, Tampa, San Antonio, Orlando and San Jose. These cities have low rates of growth of new cases, and have much lower prevalence than the typical US cities.

This chart is a snapshot of the pandemic at a particular time; cities can and do change positions as the pandemic waxes and wanes in different places.

Some of the shifts can be dramatic.

Seattle and Minneapolis: A tale of two cities Two months ago, in the early days of the pandemic, we looked at these same data to characterize the spread of the virus.

On April 4, the picture was very different. Seattle had the highest rate of reported cases per capita and a very fast rate of growth of new cases. Meanwhile the city with the best record (lowest incidence and slowest growth) was Minneapolis. We didn’t know why one city performed well and the other so poorly, but we speculated: “maybe its just that reserved Minnesotans have been perfecting the art of social distancing for decades.” That speculation was either premature, or simply wrong.

Data from the end of May show that Seattle and Minneapolis have been on very different trajectories over the past two months. Seattle’s successfully driven down the rate of new cases, to point where it now has 337 cases per 100,000, exactly equal to the median value for all large metro areas.

Meanwhile, the pandemic has grown aggressively in the Twin Cities: it now has 427 cases per 100,000–more than the median and more than Seattle. On May 29, Minneapolis-St. Paul had the fastest rate of growth of new cases of any large US metro area, up 3.6 percent daily, more than double the large metro median of 1.7 percent daily.

performance and another city’s much greater vulnerability to the virus. But what is clear is that the virus is playing out very differently over time in different places. At this point, we can only speculate, and hope that we’ve gathered enough data to be able, after the fact, to deduce what factors led the disease to spread in some places (Minneapolis) while it was being brought under control in others (Seattle).

Fifty different metropolitan pandemics?

While we often tend, as we should, to focus on the growing national toll of the pandemic (more than 1.x million cases and more than 100,000 dead) its important to note that the virus has spread very unevenly over time and space. Different metropolitan areas have had very different experiences of the pandemic. In some respects, it may be better to think of the pandemic as fifty (or more) different regional pandemics, and to use the tremendous geographic variation in the virus across these geographies to understand the nature of the disease, and how best to craft policies to fight it, and future contagions.

As in April, we don’t know the reasons for one city’s relatively good Southern Oregon Business Journal July 2020 | 13

WATER

Press Release

Energy Trust’s work to save energy and generate renewable energy is also helping improve the reliability of rural waterways.

In the West, agriculture can account for more than 90% of consumptive water use, which is water that is permanently withdrawn from its source, according to the U.S. Department of Agriculture.

(Non-consumptive use is water that can be treated and reused.) And in rural communities that rely on century-old infrastructure, up to 50% of water in open irrigation canals may be lost to 14 | Southern Oregon Business Journal July 2020

Expanding benefits of energy efficiency: water reliability

seepage or evaporation, depriving rivers, farmers and ranchers of the water they need.

Starting in 2015, Energy Trust partnered with Farmers Conservation Alliance on its Irrigation Modernization Program that replaces open irrigation systems with enclosed, pressurized pipes and adds small-scale hydropower generation systems where possible.

Piping irrigation systems does more than deliver water for irrigation. By getting rid of open canals, piped systems

allow more water to stay in the rivers and streams that irrigation systems pull from.

This is especially critical at times when stream water is less reliable due to drought or seasonal demand.

To see the success of irrigation modernization and water reliability in action, look no further than Whychus Creek in Central Oregon. For the first time since the late 1800s, summer flows recently returned to the creek, which Three Sisters Irrigation District draws from. Officials hope to see the return of salmon and steelhead in the coming years.

WATER

Press Release

T

he Oregon Water Resources Department is advising permit holders in the Harney Basin against increasing their groundwater use, even if they have a water right permit that allows for additional pumping to increase the amount of land being irrigated. Preliminary results from the Harney Basin Groundwater Study show that groundwater is being used faster than it can be replenished, meaning that the current volume of groundwater pumped each year is unsustainable.

“It is important for the community to understand that additional groundwater use will increase groundwater level declines. Given the preliminary findings of the study, we think it is important to signal that additional groundwater development, largely through bringing new lands into production, is unsustainable.

The Department would like to help set reasonable expectations for permit holders to make informed decisions so future investments are not jeopardized,” said Ivan Gall, Administrator for the Field Services Division.

Department Cautions Against Further Groundwater Development in the Harney Basin as Data Indicate Groundwater is Being Depleted With some exceptions, under Oregon Water Law, a person must apply for a water right permit in order to use water. If the application is approved, the Department issues a permit which authorizes construction of the water system and specifies a timeframe to put water to use. This is called “development” of the water right permit. If the permit holder cannot put all of the water to use by the specified date, the holder can apply for an extension. As a result, new development and increases in the use of water under an existing permit can occur years after the permit was first issued.

In October 2019, the Department notified permit holders that extensions for additional development were unlikely to be approved. In the coming weeks, permit holders will receive letters strongly cautioning against further development.

“The Department is notifying permit holders that additional development of groundwater will only make groundwater declines worse in the basin and may be subject to curtailment in the future as the Department and community implement

actions to reduce groundwater use and stabilize groundwater levels,” said Justin Iverson, Groundwater Section manager.

A public outreach event to share the findings of the Harney Basin Groundwater Study is expected later in 2020, at which time the Department will begin to meet with community members and landowners to discuss proposed next steps regarding voluntary and regulatory approaches to achieve reasonably stable groundwater levels. The Department is also working collaboratively to explore voluntary strategies to reduce groundwater use through a community-based water planning effort.

To receive future updates about Oregon Water Resources Department actions in the Harney Basin, please subscribe to the mailing list: https://mailchi.mp/ 06af95c5f6a8/ owrdharneybasin.

Southern Oregon Business Journal July 2020 | 15

ECONOMY

By Tim Duy, Senior Director, Oregon Economic Forum, Professor of Practice

A better than expected labor report supported another leg up for Wall Street as it was the latest piece of evidence that the worst of the downturn is behind us. While that is most likely true, note that there are crosscurrents in the economy that make it difficult to discern yet the extent of the damage wrought by the virus-related shutdowns. We will continue to struggle with the the levels versus differences problem for quite some time. The main trap to avoid is that while the “levels” people will be correct and the economy remains stuck in a sub-par growth path, 16 | Southern Oregon Business Journal July 2020

Keep Your Eye On The Ball

this observation will probably do little to quell the euphoria on Wall Street.

The employment report surprised massively on the upside as the economy added 2.5 million jobs rather than losing 7.5 million as Wall Street expected. The unemployment rate actually fell, with the U-3 headline number dropping from 14.7% to 13.3% and the broader U-6 number falling from 22.8% to 21.8%. Not great by any measure, but suggestive that we shouldn’t obsess over worse-case scenarios.

The jobs gain appears difficult to reconcile with the ongoing large scale layoffs reported via initial unemployment claims and the still high levels of continuing claims. I think the surprise jobs gains reflects the cross-currents in the economy. One current is the reversal of a portion of the initial job losses from the shutdown. Remember, that part of this recession was unlike previous recessions. We engineered a sudden stop in the economy and it was inevitable that when the economy began to reopen,

some jobs, many even, associated with that sudden stop would return quite quickly.

Of course, not all of those jobs will quickly return, or return at all. Any activity dependent on large, densely-packed crowds will need to learn to grow around the virus; that will require some time to accomplish. Some may initially come back as part-time rather than full-time. But many are coming back and can do so quickly.

Against this positive current, however, is an opposing force.

The hit to demand triggered more typical-recessionary dynamics. Firms not impacted directly by the initial shock still suffer secondary and tertiary impacts that show up as layoffs or hiring freezes that reduce the uptake of workers. Note that those subsequent impacts are of decreasing magnitude; if they weren’t, any initial shock to demand would drive the economy to zero.

What’s likely happening is that the initial impact is reversing in a big way even as the secondary and tertiary impacts are just getting started. It’s a tug of war in the labor markets and that initial reversal won in May. That’s good news! And it probably foreshadows other good news such as surging retail sales numbers, for

example, in the days ahead. But it doesn’t mean a Vshaped recovery overall is in the making. How these opposing forces sort themselves out won’t become evident until later in the year, probably the fourth quarter. But the ultimate level of the economy later this year is less important for financial markets than just being above the bottom. And that looks likely.

Of course, there are some risks to watch for. We need to avoid the W in the recovery; a setback does not appear to be priced into equities. One of those risks is the impending fiscal policy cliff when the enhanced unemployment benefits expire at the end of July. Congress can fix that risk easily should they not get overly optimistic about the recovery. It is easy to see that another round of fiscal support to cushion activity as the employment dynamics play out could push stocks to all time highs. It’s also easy to see stocks struggle if Congress waivers on another round of aid.

of the virus would trigger a fresh lockdown. I hesitate on that now. I don’t think it will be easy to push people back inside again. More likely is that any future responses will be more targeted – see Greg Ip at the Wall Street Journal. We didn’t defeat the virus with the initial lockdowns. Instead we bought some time to learn to live with it. Hopefully we learned enough.

Bottom Line: The economy is bouncing off the bottom and a lot of big numbers are going to be bouncing around with it.

It’s going to be like watching the ball in a pinball machine as it jerks from one direction to another. Sometimes its hard to keep your eye on the ball its moving so fast. Wall Street is probably going to be satisfied as long as the ball is moving in generally the right direction, which seems the most likely outcome and even more likely if fiscal policy is not abandoned quite yet. https://blogs.uoregon.edu/ timduyfedwatch/

Another risk is a surge in Covid-19 cases that pushes the economy into lockdown mode.

We see cases rising in parts of the nation and there is a concern that the ongoing protests will fuel further spread. In the past I was concerned that further spread Southern Oregon Business Journal July 2020 | 17

EMPLOYMENT

by Anna Johnson, Senior Economic Analyst, for Employment in Oregon

P

ublic health measures related to COVID-19 began in Oregon in midMarch. Social distancing practices and workplace and gathering changes have severely impacted business practices all around the state.

Employment data for the month of April gave a startling look the impact the pandemic has had on Oregon’s economy.

In April 2020, Oregon’s

18 | Southern Oregon Business Journal July 2020

Labor Underutilization and the Effects of COVID-19

unemployment rate was 14.2 percent, a record high with comparable data going back to 1976. Before, the highest unemployment rate Oregon had seen was 11.9 percent in November and December 1982 and May 2009. This high unemployment rate and record month-to-month jump do not capture all of the economic distress Oregonians are experiencing. To understand

more fully, we can look at other measures of labor underutilization.

The official definition of unemployment used by Bureau of Labor Statistics is all persons within the civilian noninstitutional population (CNP) who do not have a job, but are currently available for work and are actively searching for work. The CNP consists of

all persons age 16 years and over, excluding those on active duty in the U.S. Armed Forces and the institutional population (e.g., prison

inmates or those in homes for the aged). Unemployment is sometimes thought to include only those individuals who both qualify for and are receiving unemployment insurance benefits. However, many outside this group are considered to be unemployed based on the official definition used by BLS. Examples include those who have exhausted unemployment benefits, new

labor market entrants – including recent high school and college graduates – and those who are not covered by unemployment insurance,

such as the formerly selfemployed. These groups are considered unemployed as long as they are actively seeking work.

The official definition of unemployment also excludes certain groups who are sometimes thought of as being unemployed or “underemployed.” Those who would like to work and have

actively searched for work sometime in the last 12 months – so-called marginally attached and discouraged workers – are not counted in the official definition because they are not currently seeking work.

People working part time who would prefer full-time work are also not counted as unemployed because they are working – albeit fewer hours than they would like.

Finally, those who are not employed (i.e., did work for pay or profit) and do not fit the above definition of unemployed are classified as “not in the labor force.”

In recent years the “Alternative Measures of Labor Underutilization” published by the U.S. Bureau of Labor Statistics have grown in popularity as statistics for identifying slack in the labor market. These alternative measures, commonly identified by a “U” in front of a number from 1 to 6, provide both more narrowly (U-1 and U-2) and more broadly (U-4, U-5, and U-6) defined estimates of labor Southern Oregon Business Journal July 2020 | 19

underutilization than the official unemployment rate (identified as U-3). The various measures range from very narrow to very broad definitions of “underutilization,� relative to the official definition of unemployment.

The narrowest measure, U-1, tracks the number of persons unemployed 15 weeks or longer as a percent of the civilian labor force. By this measure, 1.0 percent of the 20 | Southern Oregon Business Journal July 2020

Oregon labor force met this criterion in April 2020. In Oregon, U-1 was within a range of 1.3 and 1.9 percent from 2006 through 2008, before peaking at 6.7 percent in 2010. Currently, this measure is now at a level comparable with the values immediately prior to the Great Recession. Because this measure tracks those unemployed 15 weeks or longer, we would not expect to see an immediate spike this early into the pandemic. It

remains to be seen what will happen with this measure as counties begin the process of opening up businesses and social distancing protocols are loosened.

The second measure, U-2, considers the percentage of job losers and persons who completed temporary jobs as a percentage of the civilian labor force. In April 2020, 10.4 percent of the Oregon labor force met this definition. In the prior month, the U-2 was only

1.6 percent, a record low.

During the Great Recession and its aftermath, the U-2 reached a high of 8.0 percent.

The broader measures begin by adding discouraged workers to the unemployed.

Discouraged workers are defined as those who want a job, are available for work and have searched for work in the prior year; however they are not currently looking for a job for reasons related to the jobmarket. If these workers are added, the measure results in only a modest increase relative to the official rate. In April 2020, the U-4 was 14.3 percent, up from a near record low of 3.5 percent in March 2020. Around the time of the Great Recession, this measure reached a high of 12.2 percent.

Measure U-5 includes not only discouraged workers but all “marginally attached workers.”

Marginally attached workers are defined as persons who are neither working nor currently looking for work but indicate that they want and are available for a job and have looked for a job sometime in the past year. This group includes those who are not currently looking for work for reasons such as lack of child care or transportation. Using this definition, 15.0 percent of the Oregon labor force plus

marginally attached workers meets these criteria in April 2020. This measure was at a record low in February and January of 2020, 3.9 percent, and at only 4.2 percent in March. During the Great Recession, this measure reached a high of 13.0 percent in May and June of 2009.

Finally, the broadest measure of labor underutilization, U-6, includes not only all unemployed and marginally attached persons, but also those employed part time for economic reasons. This latter group provides an objective measure of a portion of the underemployed (the so-called “involuntary part-time workers”). The BLS defines “part-time workers” as those who worked less than 35 hours during the reference week of the Current Population Survey.

To be classified as employed part time for economic reasons, an individual must also be working part time because of poor business conditions or because of the inability to find full-time work and must want and be available for full-time work.

Involuntary part-time employment does not capture all underemployed, such as those whose education may qualify them for a more highly skilled position. However, these types of underemployment are fairly

subjective and more difficult to quantify. Using the broadest measure of labor underutilization tracked by the BLS, U-6, 22.3 percent of the civilian labor force plus the marginally attached was either unemployed, marginally attached to the labor force, or underemployed in April 2020.

Oregon’s U-6 was at a record low of 7.4 percent in January 2020 and reached a previous high of 20.1 percent in April 2010.

All measures respond in a similar fashion to the business cycle. Regardless of which measure is deemed appropriate, rates of labor underutilization have generally moved up and down together.

While the rates for measure U-6 are high relative to the official definition of the unemployment rate (U-3), both U-3 and U-6 show very similar economic trends in Oregon’s labor market over time. All measures, except for the U-1, spiked to record highs in April 2020. It will be important to track these measures to see how Oregonians are being impacted by COVID-19. https://www.qualityinfo.org/ staff? staffid=johnsoa&companyid=1 0155

Southern Oregon Business Journal July 2020 | 21

EDUCATION

Special Insert - See the full 38 page audit including results at SouthernOregonBusiness.com

Education Audit - ODE Can Better Support Students Experiencing Disabilities

Oregon Department of Education

ODE Can Better Support Students Experiencing Disabilities Through Improved Coordination and Monitoring of Services June 2020 Report 2020-24

Secretary of State Bev Clarno Audits Division Director Kip Memmott

22 | Southern Oregon Business Journal July 2020

Oregon Department of Education Why This Audit is Important » For the 2018-19 school year, over 80,000 children in kindergarten through the 12th grade were identified by the Oregon Department of Education (ODE) as students experiencing disabilities. » Children who receive appropriate services for their disabilities, such as individualized instruction, have better academic and life outcomes. » ODE and school districts are subject to federal laws that prohibit discrimination on the basis of disability and protect the rights of students and their families. » The federal Individuals with Disabilities Education Act (IDEA) requires that students experiencing disabilities receive a free, appropriate public education in the least restrictive environment. » Disabilities covered under IDEA include developmental delays, hearing and visual impairments, emotional disturbance, orthopedic impairments, autism, traumatic brain injury, other health impairments, and specific learning disabilities.

ODE Can Better Support Students Experiencing Disabilities Through Improved Coordination and Monitoring of Services What We Found 1. From 2018 to 2019, only 33.4% of Oregon children eligible for special education through Early Intervention/Early Childhood Special Education (EI/ECSE) programs received an adequate level of services, as defined by ODE. For children eligible for ECSE services, only 61.6% of children with low needs, 6.2% with medium, and 0.7% with high needs received an adequate level of services. (pg. 8) 2. Oregon schools receive twice the standard per-student allocation of state funds for students experiencing disabilities, yet this only applies for up to 11% of a district’s student population. The number of students experiencing disabilities frequently surpasses this 11% cap, meaning the need for services exceeds existing resources. (pg. 7) 3. Local education agencies and ODE are anticipating increased resources with the enactment of the Student Success Act, although this will likely not be enough to fully fund special education in Oregon. (pg. 11) 4. Rural districts compete with larger, urban school districts for special education teachers and educational aides. Rural districts also have limited access to specialists and more severe shortages of primary care and child care providers, who assist with the identification of children experiencing disabilities. (pg. 10) 5. EI/ECSE programs benefit from the use of a statewide case management data system to coordinate services. No such data system exists for special education programs for school-age children in grades K-12. (pg. 12)

What We Recommend We made 13 recommendations to ODE about improving coordination and monitoring of services for students experiencing disabilities.

ODE agreed with six of our recommendations, partially agreed with three, and disagreed with four. Their response can be found at the end of the report.

The Oregon Secretary of State Audits Division is an independent, nonpartisan organization that conducts audits based on objective, reliable information to help state government operate more efficiently and effectively. The summary above should be considered in connection with a careful review of the full report.

Southern Oregon Business Journal July 2020 | 23

Introduction The federal Individuals with Disabilities Education Act (IDEA) was established on the principle that disability is a natural part of the human experience and in no way diminishes the right of an individual to participate in or contribute to society. IDEA states that all students experiencing disabilities have the right to receive a free, appropriate public education in the least restrictive environment. 1 Similarly, the mission of the Oregon Department of Education (ODE) is to foster equity and excellence for every learner, including students experiencing disabilities. Research has shown that when these students receive appropriate interventions through special education programs, they can achieve improved academic and life outcomes.

The purpose of this audit was to determine whether ODE and its Office of Enhancing Student Opportunities, which oversees special education throughout the state, can better support students experiencing disabilities, particularly as they transition from early childhood to schoolage programs.

Federal, state, and local government all play an important role in Oregon's special education system Improving special education requires coordinating among different layers of government and the numerous agencies responsible for different parts of the special education system. The federal government establishes national standards for special education and oversees state compliance with those standards. State educational agencies, such as ODE, set additional special education policies and oversee the contractors and local governments who provide services directly to students. In Oregon, these contractors and local government agencies include school districts, education service districts, grant-funded programs, and other regional and local special education service providers.

1 The term free, appropriate education refers to education provided at public expense that meets the standards of the state education agency and that is tailored to the individual needs of the student. The term least restrictive environment means that children with disabilities should spend as much time as possible with their peers who do not receive special education.

Oregon Secretary of State | Report 2020-24 | June 2020 | Page 1

24 | Southern Oregon Business Journal July 2020

The federal government sets special education standards and requirements for both state and local educational agencies The federal government plays a significant role in efforts to improve services for children experiencing disabilities through its anti-discrimination laws, large grants, and oversight of state education agencies. The Office of Special Education Programs (OSEP) within the U.S. Department of Education is the main body overseeing state special education programs.

IDEA, as amended in 2004, is the primary federal education law that regulates special education.

The act is designed to improve the identification of children experiencing disabilities. This includes requiring states to monitor local school districts to prevent the overidentification or disproportionate representation by race and ethnicity of children as children with disabilities.

The act also seeks to improve the delivery of services by local education agencies and providers, and the collection, analysis, and accurate reporting of data. One section of IDEA addresses early childhood special education services for children ages three through five, as well as services for school-age children in grades K-12. Another part addresses early intervention services for children from birth through age two.

IDEA also specifically addresses the coordination of special education services. The law requires states to have interagency agreements in place, as well as policies and procedures, with local public educational agencies to guarantee services are coordinated. For example, local educational agencies must ensure the linkage of records pertaining to migrant children for the purpose of electronically exchanging, among states, health and educational information. Schools are also required to take reasonable steps to promptly obtain, and respond to, requests for a child’s school records.

OSEP’s Monitoring and State Improvement Planning Division is responsible for ensuring states' compliance with IDEA, which requires states to submit the annual State Performance Plan/Annual Performance Report. OSEP uses these reports to ensure that states and other public agencies are implementing programs designed to improve results for infants, toddlers, children, and youth with disabilities.

Other federal acts related to disabilities include the Rehabilitation Act of 1973, which prohibits discrimination on the basis of disability in programs that receive federal financial assistance, and the Americans with Disabilities Act of 1990 (ADA), which prohibits discrimination on the basis of disability by all public programs.

Oregon state government sets policies and oversees provision of special education services The Governor, state legislators, and the State Board of Education set policies and agendas for education in Oregon, including special education and other services for students experiencing disabilities. The Governor is Oregon’s Superintendent of Public Instruction and appoints the Deputy Superintendent of Public Instruction to lead ODE. State legislators approve the state's education budget, among other fiscal duties related to education. Through the bills they pass and grants they approve, legislators also send important signals about what they expect from schools, districts, and state-level education officials regarding special education. The State Board of Education sets educational policies and standards for Oregon public schools. The board is made up of seven voting members appointed by the Governor and approved by the state Senate.

ODE administers and monitors contracts and grants, provides technical assistance to local education bodies, and plays an important statewide leadership role in education policy. The agency is also charged with ensuring that school districts comply with laws and rules, collecting and evaluating student performance information from districts and schools, and reporting Oregon Secretary of State | Report 2020-24 | June 2020 | Page 2

Southern Oregon Business Journal July 2020 | 25

outcomes to the public and the federal government. The offices within ODE primarily responsible for these functions in the areas of special education are the Office of Enhancing Student Opportunities and the Early Learning Division.

The Office of Enhancing Student Opportunities works to ensure that young children and students experiencing disabilities receive an appropriate education in the least restrictive environment. The primary liaisons between this office and the local education agencies that directly provide special education services are county contacts — ODE personnel who ensure compliance with laws, provide technical assistance, and fulfill other support roles for Oregon's districts.

The Early Learning Division administers preschool and other learning programs, and oversees child care provider licensing, subsidies, and training throughout the state.

Although administratively part of ODE, the Early Learning Division is governed by the Early Learning Council, which is charged with coordinating a unified and aligned system of early learning in Oregon for the purpose of ensuring that children, including those experiencing disabilities, enter school ready to learn. The council was created through Senate Bill 909 in 2011 and its nine members are appointed by the Governor.

School districts, Education Service Districts, and other local subcontractors provide special education services Oregon’s 197 school districts and their elected boards are responsible for governing their schools consistent with State Board of Education policies. Oregon’s 19 Education Service Districts (ESDs) and their elected boards assist local school districts in their designated regions with various efforts, especially specialized professional and administrative services that local districts might not have the capacity to provide on their own.

Figure 1: Every Oregon county is associated with one of 19 ESDs

Source: The Oregon Association of Education Service Districts

Oregon Secretary of State | Report 2020-24 | June 2020 | Page 3

26 | Southern Oregon Business Journal July 2020

School districts and ESDs provide local and regional special education services under ODE oversight. Districts and ESDs can subcontract with other service providers if they need additional special education staffing or expertise. Such subcontractors include community child care providers, teachers, and other professionals who specialize in providing interventions for specific disabilities, such as speech and language pathologists, audiologists, and psychologists.

Special education services in Oregon are delivered through three main types of programs for young children and for students in grades K-12 School-age programs serve students experiencing disabilities from age five to 21 years. These services are primarily provided by local K-12 public schools and districts, which are overseen by ODE in accordance with federal and state standards, including IDEA. By law, an Individualized Education Program (IEP) must be developed by teachers, parents or other legal guardians, and other school personnel for every student identified as experiencing a disability in one or more of several disability categories. An IEP is a written statement that presents the educational goals for the student and the services that will be provided to meet those goals.

Early Intervention (EI) programs, as the name suggests, provide both individually designed services for children from birth to three years of age as well as support for their families. These programs are intended to enhance the child’s physical, cognitive, communication, social, emotional, and adaptive development.

Much like the individual plan required for students in school-age programs, EI service providers are required to develop an Individualized Family Service Plan, which is a written statement that presents learning goals for a child and the services that child will receive to meet those goals.

These services are overseen by ODE, provided by regional contractors or their subcontractors, and delivered in a variety of settings such as classrooms, community child care, preschools, and in-home visits.

Early Childhood Special Education (ECSE) is instruction for children experiencing disabilities ages three to the age of public school eligibility in the areas of communication development, social or emotional development, physical development, including vision and hearing, adaptive development, and cognitive development. ECSE instruction is provided in hospitals, institutions, special schools, classrooms, and community child care or preschool settings, as well as through home visits.

As with school-age services, students identified for ECSE services are required by IDEA to have an IEP. However, as part of a seamless system of free services for young children, Oregon uses a single Individualized Family Service Plan that combines required federal content for both EI and ECSE programs.

ECSE services are provided by regional agencies that contract with ODE. These agencies are overseen by teams within ODE's Office of Enhancing Student Opportunities. In Oregon, both EI and ECSE services within a region are provided by the same contracting agency. As of 2019, these agencies consisted of eight ESDs and one school district. 2 Although they were not within the scope of this audit, several additional programs also serve Oregon's students experiencing disabilities. These include Regional Programs, which provide specialized services for children with low-incidence, high need disabilities, such as traumatic brain injury. These services include Braille and sign language instruction, assistive technology,

The nine EI/ECSE contractors in 2019 were NW Regional ESD, Clackamas ESD, Willamette ESD, Linn-Benton-Lincoln ESD, Lane ESD, David Douglas School District, InterMountain ESD, High Desert ESD, and Douglas ESD.

2

Oregon Secretary of State | Report 2020-24 | June 2020 | Page 4

Southern Oregon Business Journal July 2020 | 27

audiology, and physical therapy, all of which are generally not available through school districts or EI/ECSE programs.

Programs funded primarily by grants and legislatively mandated carve-outs from the State School Fund also play a role in the Oregon special education system. These include Early Head Start programs, Preschool Promise programs, and Oregon's 16 Early Learning Hubs, all of which are avenues through which children in need of special education services can be identified. Early Learning Hubs are monitored by ODE's Early Learning Division and serve primarily as coordinators of health care, social, education, and other regional public- and private-sector services. The hubs are tasked with producing better outcomes for children from birth to six years of age and increasing kindergarten readiness for at-risk children.

Oregon has a significant number of children experiencing disabilities Statewide, over 78,000 children in kindergarten through the 12th grade, or 13.5% of all Oregon K-12 students, were identified by local service providers as students experiencing disabilities for the 2017-18 school year. In 2018-19, this number grew to over 80,000 (13.8%) of all K-12 students. Among school districts with more than 10 students, the rate of students identified as students experiencing disabilities ranged from zero to 25%.

As shown in Figure 4, learning disabilities and communication disorders are the most common types of disabilities, with over 55% of Oregon's K-12 students who receive special education services falling in these categories. In 2017-18, 12,402 children received EI/ECSE services. Over 51% of these youth experienced developmental delays, while 34% received services for communication disorders.

Figure 4: A significant number of Oregon youth received K-12 special education and EI/ECSE services in the 2017-18 school year for different types of disabilities Category Number enrolled Percentage of total Total K-12 Special Education Students 78,220 13.5% Total K-12 Students 578,079 Learning Disability 25,229 32.3% Communication Disorder 18,250 23.3% Other Health Impairment 13,940 17.8% Autism Spectrum Disorder 9,687 12.4% Emotional Disturbance 4,954 6.3% Intellectual Disability 4,119 5.3% Other Physical Impairment 2,041 2.6% Children Receiving EI/ECSE Services Communication Disorder Developmental Delay, 0-2 Years Developmental Delay, 3-4 Years Autism Spectrum Disorder Other Impairment Hearing Impairment Orthopedic Impairment

12,402 4,257 3,744 2,643 789 382 356 231

34.3% 30.2% 21.3% 6.4% 3.1% 2.9% 1.9%

Source: ODE

Children experiencing disabilities in Oregon receive services in a variety of settings; see Figure 5.

Consistent with the principle embedded in IDEA that education should be provided in the least restrictive environment, over 74% of Oregon's K-12 students experiencing disabilities received 80% or more of their instruction in regular, general education classrooms in 2017-18. Similarly,

Oregon Secretary of State | Report 2020-24 | June 2020 | Page 5

28 | Southern Oregon Business Journal July 2020

43% of children receiving EI/ECSE services were placed in programs for typically developing children, and 37% received services at home from visiting specialists.

Figure 5: Oregon youth experiencing disabilities received K-12 special education and EI/ECSE services through different placements and instructional environments in the 2017-18 school year Category Number enrolled Percentage of total K-12 Special Education Students 78,220 Regular Classrooms 80%+ 58,187 74.4% Regular Classrooms 40%-79% 10,858 13.9% Regular Classrooms <40% 7,772 9.9% Other 1,403 1.8% Children Receiving EI/ECSE Services Program for Typically Developing Children Home Program for Children with Delay or Disability Service Provider Location Other Educational Environments and Residential Facilities

12,402 5,431 4,600 2,187 167 17

43.8% 37.1% 17.6% 1.3% 0.1%

Source: ODE

Robust stakeholder coordination is required to effectively identify children needing special education services and ensure the transition from early childhood to kindergarten Before a child receives EI/ECSE or school-age special education services, providers or other stakeholders must identify their need for those services. While service providers and other stakeholders often identify children in need, in Oregon, school districts are ultimately responsible for identifying both K-12 students and children below the age of compulsory school attendance who are not yet enrolled in public or private school programs.

Parents or guardians, relatives, and child care providers often initially recognize the need for special education services in young children and refer them for further evaluation. Preschool programs, such as Head Start and Preschool Promise, and primary care visits are also common avenues for referrals. Local referral and evaluation agencies are then responsible for determining whether the referred child is eligible for services. Once a child is found to be eligible for services, the providers and parents work together to develop an Individualized Family Service Plan to guide the services the child will receive.

The initial identification of children who are eligible to receive school-age special education services may occur in early childhood before they begin school, but it may also occur later, such as when the child begins kindergarten or at any time throughout their K-12 education. Once a child is identified, special education personnel, the child (as appropriate), and the childâ&#x20AC;&#x2122;s parents or guardians, among others, develop an IEP to guide the services the child will receive. This plan is re-evaluated annually until the child no longer needs, or ages out of, school-age services.

Over time, a child may lose or gain eligibility for special education services. That is, a childâ&#x20AC;&#x2122;s disability may resolve with interventions or their disability may manifest as they grow older and are introduced to new skills. Regardless of how they are originally identified, children who previously received services may, in some circumstances, need to be re-identified. This can occur, for example, if they move into a new school district and their previous Individualized Family Service Plan or IEP records were not available.

If a child who received EI/ECSE services needs to continue services once they enter kindergarten, state guidelines require the EI/ECSE contractor to work with the school district and personnel at the childâ&#x20AC;&#x2122;s school to facilitate the transition to school-age services. This process consists of at least one meeting between EI/ECSE providers and district personnel, and may Oregon Secretary of State | Report 2020-24 | June 2020 | Page 6

Southern Oregon Business Journal July 2020 | 29

begin over a year in advance of the child's entry into kindergarten. The school district may then provide services to the child directly, or the child may receive services from the ESD serving the region. In some cases, the ESD that served as the provider for the child's EI/ECSE services may not be the same that provides school-age services.

Special education funding is primarily provided through the State School Fund and is supplemented with state and federal grants In Oregon, general state support for school districts and ESDs comes from the State School Fund, which totaled $8.2 billion for the 2017-19 biennium. That figure includes $7.6 billion from the stateâ&#x20AC;&#x2122;s General Fund, which receives most of Oregonâ&#x20AC;&#x2122;s income tax revenue. Money for schools also comes from local property taxes, totaling about $3.84 billion in 2017-19, and from both federal and state grant funds. State grants were expected to total roughly $450 million in the 2017-19 biennium, while federal grants passed through ODE were projected to top $1.2 billion.

In addition to general school funding, special education services receive additional funds. For the 2017-19 school year, carve-outs from the State School Fund and state grants especially designated for special education services totaled more than $650 million. Despite this additional funding, K-12 special education in Oregon is still substantially funded by State School Fund monies and local revenue. Both special and general education funds are distributed to districts and ESDs through a formula based on student enrollment, where children with disabilities are counted double for the purpose of allocating the available funds. That is, schools receive twice the per-student allocation of funds for enrolled special education students.

There is a limit, however. The school funding formula's double-weight can only be applied to up to 11% of a districtâ&#x20AC;&#x2122;s student population. Yet more than 80% of Oregon's school districts have identified more than 11% of their students as eligible to receive special education services in each school year since at least 2011-12. These districts can apply to ODE for additional funds to offset a portion of the extra costs to serve their students. ODE has worked to make this "cap waiver" process easier for districts than it has been in the past. Despite the cap waiver, districts can be left to cover at least part of the difference, and may need to use their general education budget to do so.

Many special education services are provided by contractors who enter into legal agreements with ODE. Before the funds for services are released and paid to the providers, these legal agreements must be renewed by ODE. In recent years, this contract and grant agreement renewal process has been subject to delays, with impacts at the state, regional, and local levels of Oregon's education funding system.

A federal class-action lawsuit affected the audit scope In January 2019, a federal class-action lawsuit naming ODE as a co-defendant was filed in Oregon U.S. District Court. The lawsuit was filed by Disability Rights Oregon, families, and other disability advocates, who alleged that ODE and its co-defendants violated federal laws by improperly limiting instruction time for children with disabilities.

Although issues of instruction time are tangentially related to our audit, we took care to limit our scope and did not focus our analysis or recommendations on this issue to avoid a conflict with the lawsuit.

Oregon Secretary of State | Report 2020-24 | June 2020 | Page 7

30 | Southern Oregon Business Journal July 2020

The COVID-19 pandemic will have significant short- and long-term effects on Oregon's education system and ODEâ&#x20AC;&#x2122;s ability to address issues identified in this audit report Beginning in March 2020, the COVID-19 pandemic significantly impacted Oregon's education system at all levels. The Governor ordered the closure of all K-12 schools beginning March 16, consistent with mitigation strategies recommended by the Oregon Health Authority and the U.S. Centers for Disease Control and Prevention.

In addition to disruptions directly caused by school closures, other critical special and general education services for both school-age students and children birth through age five have been significantly impacted. These include child care services and the collection of education data.

The economic impacts of COVID-19 on the state and national economies are predicted to include significant reductions in the education budgets at the local, regional, and statewide levels in Oregon for the 2019-21 biennium and extending into the 2021-23 biennium.

The majority of our audit work was completed before school closures and other immediate impacts of COVID-19 began to take effect. However, the Audits Division recognizes the substantial challenges imposed by the pandemic on Oregon's education system and on ODE's ability to respond to this report's findings and recommendations. We also acknowledge the effects of the pandemic in Oregon continue to change rapidly and are not possible to predict with certainty at the time of this report. Although we did not take COVID-19 into consideration when performing our analysis and developing findings, we recognize that ODE's response to our recommendations will be influenced by the current circumstances.

Read the full 38 page audit including results at SouthernOregonBusiness.com

Oregon Secretary of State | Report 2020-24 | June 2020 | Page 8

Southern Oregon Business Journal July 2020 | 31

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Energy Efficiency from Page 14

Because of the multiple energy and non-energy benefits of irrigation modernization, the program has drawn a substantial public and private partnership from federal, state and regional entities eager to achieve a win-win for rural Oregon communities. Projects have brought in funding from 15 federal and state agencies totaling nearly $50 million as of 2019.

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“We started modernizing about 20 years ago,” Marc Thalacker, manager of the Three Sisters Irrigation District, told Energy Trust.

“Back then we had to do it all on our own. Thanks to this new, collaborative approach, things can really start to move much more quickly.”

A notable benefit of modernizing is the ability to add hydropower generation capability to farms and districts. By generating and selling clean power, districts gain a revenue source to offset the costs of the infrastructure improvements.

Thalacker’s district planned to install three hydropower projects, the largest of which generates about 3.1 million kilowatt hours of electricity annually, enough to power 275 average homes each year.

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We don’t spam and we do not sell your email address. We will send you an email at least once a month to let you know that our newest print version is out and available online.

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