Enterprising States 2012 Web

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ContentsExecutive Summary

Beating Expectations: How States Defy the NewNormal

Understanding the Geography of Growth

Back to Basics: The Enduring Importance ofthe Agricultural Economy

The New Energy Boom

The Revival of Manufacturing

The Techno-cultural Edge

The Demographic Edge

The Role of Foreign Investment

Growth and Americas Moment

Enterprising States: Policies that Produce

Growth, Productivity, and Livability: The TopPerformers

Exports and International Trade

Entrepreneurship and Innovation

Taxes and Regulation

Talent Pipeline

Infrastructure

Growth Measures: Rating the States

State Performance Graphic

The Next Boom States

Proles of the States

About the ReportThe report was prepared by Praxis Strategy Groupand Joel Kotkin. Authors from the Praxis team includeDelore Zimmerman, Mark Schill, Matthew Leiphon,and Ryan Aasheim. Zina Klapper provided editingand additional research. Praxis Strategy Group isan economic research and community strategycompany that works with leaders and innovators inbusiness, education, and government to create neweconomic opportunities. Joel Kotkin is an internationallyrecognized authority on global, economic, political andsocial trends.

About the U.S. Chamber of Commerce

The U.S. Chamber of Commerce is the worlds largestbusiness federation representing the interests ofmore than 3 million businesses of all sizes, sectors,and regions, as well as state and local chambers andindustry associations.

About the National Chamber Foundation

The National Chamber Foundation (NCF), a nonprotafliate of the U.S. Chamber of Commerce, is dedicatedto identifying and fostering public debate on emergingcritical issues. We provide business and governmentleaders with insight and resources to addresstomorrows challenges.

About the Campaign for Free Enterprise

The Campaign for Free Enterprise (CFE) is theU.S. Chamber of Commerces comprehensive,multiyear campaign to support free enterprise andentrepreneurship through national advertising;grassroots advocacy; citizen, community, and youthengagement; and research and ideas leadership.

The opinions and conclusions expressed or impliedin the report are those of the research agency. Theyare not necessarily those of the National ChamberFoundation and the U.S. Chamber of Commerce.

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June 13, 2012

Dear Colleague,

As the U.S. Chamber of Commerce celebrates its 100th anniversary, the National Chamber Foundation, along withthe Campaign for Free Enterprise, is reafrming our commitment to free enterprise, historys premier economicsystem and an important aspect of Americas greatness. As part of that commitment, we are releasing thethird edition of our study, Enterprising States, which takes a comprehensive look at how states are creating anenvironment in which the private sector can thrive.

The nations top priority continues to be our economy, and as you will soon read, our study focuses on whatstates are doing to address this challenge, invest in the future and create jobs. The ability to implement forward-

looking economic policies that allow the private sector to expand is vital to this countrys future, and each state istasked with doing so to achieve growth.

In addition to updating the data for the overall economic performance along with the ve specic policy domainsfor each state, this years Enterprising States has a section highlighting the states that are most likely to grow,create jobs and prosper in the coming ve to 10 years. A key component to growth is providing the tools,support, and tax and regulatory environment to allow businesses to innovate and be competitive.

As in the past, we hope that you nd this study to be interesting and useful in understanding the important rolethat states serve in our nations economic future and success. The U.S. Chamber of Commerce looks forward tothe next hundred years of standing up for free enterprise and encouraging an environment in which businesses

and entrepreneurs can prosper.

Sincerely,

Margaret Spellings

President

U.S. Forum for Policy Innovation


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Beating Expectations: How States Defy the New

Normal

Troubled by economic stagnancy and highunemployment, many pundits and policy makers

are referring to the U.S. economic malaise as thenew normal, claiming that we have reached bothtechnological and economic plateaus. To be sure, therelative weakness of the current recovery arguablythe weakest in contemporary history does supportthe new normal thesis.1

Not everyone, or every state, accepts the notion ofinevitable, slow growth and gradual decline. Fromthe onset of the recession, some states have largelyavoided the downturn. By the end of 2011, six states North Dakota, Wyoming, Alaska, Utah, Texas, and

Montana showed more than 8% job growth over thepast decade. Another 22 had shown some, althoughless robust, employment increases compared to 2001.

More important still, nearly every state enjoyed someoverall private-sector job growth between January2011 and January 2012. Most critically, growth hasspread to many states hardest hit by the recession,including Michigan, California, and Florida. Thestrongest job growth continued to take place in otherstates, notably Louisiana, Oklahoma, Texas, Utah, andNorth Dakota.

The new geography of growth reects many of theintrinsic strengths of the U.S. economy often missedby many policymakers and commentators. After abrief lapse, the country is already outperforming allits traditional high-income rivals in Europe, as wellas Japan, as it has done for most of the past twodecades.2 Key U.S. assets include surging agriculturaland energy production, the general rebound in U.S.-based manufacturing, and unparalleled technologicalsupremacy. The country remains attractive to both

foreign investors and skilled immigrants.

For the U.S. to be successful, this new geographyof growth needs to extend across the 50 states andexpand for long enough to signicantly lower the highrate of unemployment. This will require somethingmore than a single-sector focus. Attention must bepaid to both basic and advanced industries sinceinnovation and technology growth alone cannot turnaround most regions and states.

More than anything, governments and businessleaders need to appreciate how these sectors interactwith each other. To be effective across all geographies,innovation must be applied to a broad array ofindustries, including but not limited to computers,

media, and the Internet. Innovation and newtechnologies are also a means to unlock the productivepotential of both mundane traditional industries and theservice sector.

States striving to do well in this environment face manybarriers to fostering economic growth and creating

jobs. These barriers include the high level of debt inmany states; a growing skills mismatch between theworkforce and the jobs available within a state; andoutdated regulations and taxes that serve as barriers

to free enterprise.

Policies that Produce

In the ebb and ow of the global economy, states canno longer rely solely on strategies of keeping costslow and providing incentives to attract footloose,commodity-based branch plants or ofces. Instead,states must create the right business climate thatallows companies and entrepreneurs to create 21stcentury jobs.

Dramatic changes in the scope and scale of theglobal economy have signicantly altered the natureof foreign competition. Jobs are the new currency forleaders across the globe, and those who can creategood jobs will own the future.3 With 95% of the worldscustomers now living outside our borders, trade withother countries is a key part of our economy that willcontinue to be important long into the future.

Businesses need a highly skilled workforce whichincludes many workers with certicates or two-yeardegrees that is able to per form the jobs of a 21st

century economy. States that are able to get studentsinvolved in the STEM elds science, technology,engineering, and math will be the most competitive.

Innovation, now the essential driving force for creatingand sustaining economic opportunities, is muchmore multidisciplinary and global in scope than everbefore. Innovation and market cycle times are muchshorter and continue to accelerate. This makes itmore important than ever that states provide thetools, support, and tax and regulatory environments

Executive Summary


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for companies to continuously innovate withoutonerous delays and burdensome costs that puttheir entrepreneurs and businesses at a competitivedisadvantage.

Enterprising States 2012 takes an in-depth look at

the specic priorities, policies and programs of the 50states and Puerto Rico. Generally, the states fosteringeconomic growth and creating jobs today and thosemost likely to grow in the next decade are dened bythe following broad policy approaches:

Parlaying their natural resources and historicallycompetitive industry sectors into 21st century job-creating opportunities

Paying attention to and addressing their

competitive weaknesses

Supporting their companies businessdevelopment efforts to reach an expanding globalmarketplace

Creating a fertile environment and workforce for atechnology-based and innovation-driven economy

Investing in infrastructure digitally andphysically engineered that meets the operatingrequirements of business and connects businesses

to markets and customers

Getting government, academia, and the privatesector to collaborate effectively to make sure thatmore new ideas developed by companies and inresearch labs scale up into industries

Taking steps to make existing rms moreproductive and innovative, creating an environmentin which new rms can emerge and thrive

Maintaining an affordable cost of living for middle-skilled and middle-class employees

Promoting education, workforce developmentand entrepreneurial mentoring to continually ll thetalent pipeline

Fostering an enterprise-friendly businessenvironment by cleaning up the DURT (delays,uncertainty, regulations, and taxes), modernizing

government, and xing deciencies in themarket that inhibit private-sector investment andentrepreneurial activity.

State policies and programs that most effectivelypromote job creation are rooted in market reality.

This means building on the existing core industriesand technological advantages of a state whilepursuing opportunities in growing and emergingsectors. Building on and sustaining existing economicmomentum remains a key means of guaranteeingsuccess in the future.

Huge increases in food exports, domestic energyinvestment, a revived manufacturing sector, aburgeoning tech sector, vital demographics, andincreased investment from abroad create a strong

base for long-term secular recovery of the U.S.economy. Rather than facing a dismal future of the newnormal, we may actually be on the cusp of a recoverythat could become one of Americas nest moments.

The key to making this work, for the states and thenation, lies in policies that promote broad-based, long-term economic growth.


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Resource growth, notably in energy and food, helpedpropel the strongest states to defy the new normal oflow employment and income growth. Texas, the statesof the Great Plains and parts of the Intermountain Westnever suffered from either the housing bubble or fromhigh unemployment. The 2012 Forbes Best Cities for

Jobs list is largely dominated by metropolitan areas inthese regions, including ve of the top 10 fast-growinglarge regions and seven of the top 10 overall. Small citiein the Great Plains have done particularly well. Five ofthe six best cities for starting over in 2012, according TheStreet.com, were located in the Dakotas, Iowa andNebraska.5

This reects the reality that, since the onset of the newcentury, much of the sustained growth in the world hastaken place in regions that produce basic commodities

like energy and food, rather than in the nancial orinformation capitals. In the high-income world, theconsistently best performing countries since 2008 havealso tended to be resource-rich ones such as Norway,

Australia and Canada.6

The key here lies in commodity and energy markets thaare increasingly global and driven by expanding marketin the major developing countries. This also has helpedkeep energy prices high, particularly for oil. Texas alonehas added nearly 200,000 jobs in its oil and gas sectorover the past decade while Oklahoma has added some

45,000. These jobs have been an outstanding driverof high-wage employment, with an average salary ofupwards of $75,000.7

More recently, the momentum of prosperity has spreadto the manufacturing sector. In the last two years thenation has added more than 400,000 manufacturing

jobs, led by states traditionally strong in the industry,yet hit hardest by the recession. Though these gainsare small compared to the losses earlier in the decade,the growth is encouraging. In a stunning reversal,Midwestern employers have seen the fastest jump of anregion of the country some 18.5% in planned hiringof college graduates. Unemployment there now standsbelow the national average.8

Finally, after a long period of stagnant job growth, thecountrys tech sector has also begun a rapid expansionNot surprisingly, much of this is occurring in hot bedssuch as Californias Silicon Valley, and in Washingtonstate, Utah and Massachusetts. But when we takea broader measure of STEM (science, technology,engineering and mathematics) job creation covering

Since the nancial panic of 2008, the new normal hasbecome the phrase of choice to depict the future of the

American economy. Coined by Mohamed El-Erian atPIMCO, the phrase has been used to describe our worldas one of muted western growth, high unemploymentand relatively orderly delivering,1 by Bill Gross, the

companys managing director.

This notion of reduced expectations has been widelyaccepted by economists on both the left and theright. Libertarian writer Tyler Cowen, in his landmarkwork The Great Stagnation, makes many of the samepoints, claiming that the U.S. frontier, has closedtechnologically as well as in terms of human capitaland resources. He maintains that we already haveharvested the low-hanging fruit and we now rest on atechnological plateau, so any future economic progress

will be difcult to achieve.2

To be sure, the relative weakness of the current recovery arguably the weakest in contemporary history doessupport the new normal thesis.3 But not everyone, orevery state, accepts the notion of inevitable, slow growthand gradual decline. From the onset of the recession,some states have largely avoided the downturn. Bythe end of 2011, six states North Dakota, Wyoming,

Alaska, Utah, Texas and Montana showed morethan 8% job growth over the past decade. Another 22had shown some, although less robust, employment

increases compared to 2001.

More important still, nearly every state enjoyed someoverall private-sector job growth between January 2011and January 2012. Most critically, growth has spreadto many states hardest hit by the recession, includingMichigan, California, and Florida. But the strongest jobgrowth continued to take place in other states, notablyLouisiana, Oklahoma, Texas, Utah, and North Dakota.

Understanding the Geography of Growth

The new geography of growth reects many of theintrinsic strengths of the U.S. economy that manycommentators on either side of the spectrum often miss.

After a brief lapse, the country is already outperformingall its traditional high-income rivals in Europe as wellas Japan, as it has done for most of the past twodecades.4 Key U.S. assets include surging agriculturaland energy production, the general rebound in U.S.-based manufacturing, and unparalleled technologicalsupremacy. The country remains attractive to bothforeign investors and skilled immigrants.

Beating Expectations: How States Defy the New Normal


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entrepreneurs with broader-based innovation throughothe overall economy. The primary driver for this processmust lay in the appeal the country still has to its currentresidents, as well as to companies and ambitious peopfrom around the globe. Despite the setbacks of recentyears, the United States remains the ultimate locus ofopportunity and innovation on the planet.

Back to Basics: The Enduring Importance of the

Agricultural Economy

With the rise of the information age, many have arguedthat countries rich in brains expressed in the abilityto manipulate abstract concepts, images and media would establish dominion over the brawn of producers raw materials. Ironically, Taichi Sakaiya, the best-sellingJapanese author and futurist, argued that his countrysgreatest advantage stems from its lack of naturalresources.11 Thomas Friedman cites the experienceof east Asian countries such as Taiwan and Japan,and of Scandinavian countries as suggesting that alack of natural resources actually sparks innovationand economic health, while too great a concentrationgenerally hinders progress.12

This approach misses the fundamental point that theprimary advantage of the U.S. lies in its combinedrichness in both resources and technological prowess.Unlike most high-income nations, the United Statesremains extraordinarily resource-rich; its ability, forexample, to feed both itself and the world remains one

its critical competitive advantages. The U.S. is resourcerich and talent-rich at the same time.

technically skilled workers in all industries the mostdramatic growth over the past two years has takenplace in states with strong manufacturing and energyeconomies, including Michigan, South Carolina, NorthDakota, Texas, Alaska and Ohio.

For the U.S. to be successful, this new geography of

growth needs to extend across the 50 states, andexpand for long enough to signicantly lower the highrate of unemployment. This will require something morethan a single-sector focus. Attention must be paid toboth basic and advanced industries. Technology growthalone cannotturn around most regions and states. Forexample, Silicon Valleys social media boom may havepropelled it once again into the ranks of the fastest-growing employment centers, but the nearby Oaklandarea lags near the bottom, as do most California metros.9

More than anything, governments and business

leaders need to appreciate how these sectors interactwith each other. To be effective across a broad arrayof geographies, technology needs to be applied to abroad array of industries, including but not limited tocomputers, media and the Internet. These technologiesare also a means to unlock the productive potential ofboth mundane traditional industries and the servicesector. Technology, as the French sociologist MarcelMauss once put it, is a traditional action madeeffective.10

Americas great advantage in overcoming the newnormal, then, lies in melding the power of creative

8.4%

6.6%

6.4%

5.6%

5.4%

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4.5%

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4.0%

3.8%

3.7%

Vermont

Michigan

Washington

Utah

North Dakota

Massachusetts

Nebraska

South Carolina

Georgia

Alaska

Wyoming

West Virginia

Oregon

Texas

Ohio

Virginia

Fastest Growing States for Science, Technology,

Engineering, and Mathematics Jobs, 2009-2011

Today, countries with largeagricultural surpluses Australia,Canada, and Brazil, as well as theU.S. possess intrinsic economicadvantages. Globally the businessof agriculture is booming. TheInternational Food Policy ResearchInstitute (IFPRI) reports foreigninvestors sought or secured betwe

37 million and 49 million acres offarmland in the developing worldbetween 2006 and mid-2009.Investors, including hedge fundsand overseas companies, are alsoinvesting heavily in U.S. cropland.13

Of course, having a strong foodresource base does not guaranteea strong overall economy; witness

Argentina over the last century. ButSource: EMSI Complete Employment, 2012.1. Includes technicial-level jobs requiring a two-year degree or certication.


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Such predictions seem particularly overwrought givenrecent shifts in energy discoveries. Due in part to newor improved technologies such as hydraulic fracturing fracking and horizontal drilling, estimates of North

Americas energy resources have skyrocketed. By2020 these new sources from shale will represent anestimated two-thirds of U.S. oil and gas production.

By then, according to the consultancy PFC Energy, theUnited States will surpass Russia and Saudi Arabia asthe worlds leading oil and gas producer.

A westward shift in energy development is on, withNorth America emerging as the lead player. In 2011,the United States became a net exporter of petroleumproducts for the rst time in 62 years. Americanimports of raw petroleum have fallen from a high of60% of total to less than 46%.19

Overall, according to Amy Myers Jaffe, Director of the

Energy Forum at Rice Universitys Baker Institute, U.S.oil reserves now stand at more than two trillion barrels;Canadas reserve is slightly more. Together, thisconstitutes more than three times the total estimatedreserves of the Middle East and North Africa.20Observers such as the New America FoundationsMichael Lind believe that new discoveries, particularlyof natural gas, mean that we might actually be livingin an era of peak renewables, and at the onset of avery long age of fossil fuels.21

The energy boom has supercharged the economiesof the states that have welcomed this growth,including Texas, Oklahoma, Louisiana, North Dakota,Wyoming, and Alaska. These states have producedmore jobs, and enjoyed generally the best GDP andincome growth over both the past decade and lasttwo years. Ohio and Pennsylvania, where there havebeen signicant new nds of shale oil and gas, hopeto use this production to spur the growth of their moretraditional industrial economies.

The Revival of Manufacturing

Many media members and pundits believe thatAmericas industrial base will continue to atrophy overtime. Some even hold that manufacturing constitutes,as John Naisbitt observed two decades ago, adeclining sport. To be sure, over the past twelve yearsthe country lost 5.5 million manufacturing jobs, nearlyone-third of the manufacturing workforce.

Yet this decline has not made industry less important.Manufacturing gains now take place primarily in high

it does give a leg up to those countries that employtheir agricultural surplus as a base for wider economicgrowth.14

This process is accelerating. In 2010, the U.S.achieved a record for the number of acres plantedwith soybeans nationwide, with the states of Kansas,

Nebraska, North Dakota, and South Dakota seeingsome of the biggest year-over-year increases. In 2012,growers planted a 75-year-high in corn acreage, led byincreases in Iowa, Idaho, Minnesota, and the Dakotas.15

This expansion has been led by a boom in agricultureexports: In 2011, the U.S. exported a record $135billion, with a net balance of $47 billion, the highest innominal dollars since the 1980s.16

Much of this growth has been paced by demand fromChina,17 which accounts for the consumption of almost60% of the worlds soybean exports and 40% of its

cotton. China, simply put, lacks the water and landresources to feed its people, much less its awesomeindustrial machine. It has effectively dropped the oldMaoist goal of self-sufciency, and now seems readyto rely more on food and ber imports from leadingagricultural countries like the U.S.

The ability to meet this growing demand from Chinaand other developing countries is tied directly tothe high technological level and productivity of theU.S. farm sector. American farms do more with less.

Among crops measured by the federal governmentsince 1866, 20 record national yields-per-acre havebeen set since 2007, particularly in 2009 and 2010.Given strong global demand, the agricultural economynever really fully felt the Great Recession. Agriculturesnew normal has been overwhelmingly positive. Farmstates notably the Dakotas, Nebraska, and Iowa rank among those places with the nations fastest-rising incomes, best new job growth, and lowestunemployment rates.

The New Energy Boom

In the last half of the 20th century, America devolvedinto a major importer of raw materials, especially oil. Apersistent negative balance in energy has accountedat times for close to half of U.S. imports. Rising pricesdevastated the economy, while providing little spur toenergy employment here. Some of the more histrionicpundits, such as James Howard Kunstler, predicteda coming catastrophe due to depleted resources andever-rising prices that would usher in an end to thelargely suburban American way of life.18


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$73,000 on average in 2011, $20,000 more than theaverage job.27

Economic output generated by the nationsmanufacturing sector has remained strong eventhrough job losses. Since 1988, value addedby manufacturing has more than doubled, andmanufacturing output is up sevenfold since 1947. TheUnited States remains the worlds largest manufactureraccounting for one fth of the worlds value added inmanufacturing, more than China, India, Brazil, and

Russia combined.29

American industry is now growing faster than that ofmost of its major competitors, including Germany,Japan, and even China.30 Part of this upturn can betraced to the energy boom, which has generated anincreased demand for pipes and other equipment,sparking the growth of new factories even in suchlong-hard-hit places as Youngstown, Ohio. Amplesupplies and low natural gas prices have ledpetrochemical companies to undertake major newexpansions. It is no surprise that the biggest backers o

shale gas exploration are prominent CEOs of industrialrms.31 A recent study by PwC suggests that shale gascould lead to the development of one million industrial

jobs.32

Industrial growth is a critical component in upendingthe new normal. Mark Perry from the University ofMichigan-Flint, a Chamber Foundation fellow, hasdemonstrated how manufacturing in the last yearhas expanded by three times the rate of overall GDP.

About 425,000 jobs have been added, outpacing the

value-added sectors, making them more integratedwith the technical economy and more critical to theoverall competitiveness of the country. As a recentreport from the Breakthrough Institute puts it:

The reality is that manufacturing isnt dying itschanging. Even as manufacturing has undergone

a relative decline, it has actually become moreimportant to the health of the U.S. economy. Thesector is transitioning from low-tech, labor-intensiveindustries toward a manufacturing sector that istechnology-intensive, high-productivity, and at theheart of our nations innovation system. With a widearray of breakthroughs in technology, productivity, andmanagement, a new manufacturing has taken hold.

This new, or advanced, manufacturing hasseveral hallmarks that distinguish it from the low-skilled enterprise that still holds sway over popular

conceptions of American manufacturing. Todaysmodern factory is heavily reliant on technology thatallows manufacturers to engage in more precise andincreasingly productive work.22

Manufacturings role in promoting job and incomegrowth is often understated, the report continues.

This is particularly true in traditionally manufacturing-oriented locations. As University of Washingtondemographer Richard Morrill points out, communitieswith strong manufacturing economies tend to have

more equal economies and better opportunity for theworking class.23

Most critically, manufacturing activity drives growthin other sectors of the economy. About one in six ofall private-sector jobs depend on the manufacturingsector, and every dollar of sales of manufacturedproducts generates $1.40 in output from othersectors, the highest of any industry.24 The sectorfunds two-thirds of the nations private research anddevelopment, and employs 64% of its scientists andengineers.25

The role of manufacturing in boosting state economieshas been growing in recent years. Althoughmanufacturing employment overall has dropped, thepercentage of higher-wage, skilled industrial jobs hasbeen climbing over the last decades, and wages forthese workers have increased. Overall, the average

American factory worker now produces $180,000worth of goods a year, three times (in todays dollars)what was produced by his or her counterpart in 1978.26

Workers in the nations manufacturing sector earned

47%

49%

51%

53%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

High-wage Production Jobs as a Share of Total

U.S. Production Occupations

Source: EMSI Complete Employment, 2012.1. Production occupations include allthose classied under the U.S. Bureau of Labor Standard Occupational Classicationsystem as production (SOC 51) along with production-related engineers and manag-ers. Jobs grouped by median wage into three equal-sized groups according to 2001employemnt.


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retirees. By 2050, barely one in ve Americans will beover 60, while the proportion in Japan, Germany andKorea will be closer to two in ve.49

Americas demographic exceptionalism, as Eberstadtputs it, represents an enormous advantage for the

coming decades.50 This will be particularly criticalin terms of the innovation economy. Youth, tworesearchers recently observed, brings more than abase of workers or taxpayers; it brings the ineluctableenergy that propels everything.51

Much of this useful energy will come from abroad.American universities continue to attract the mostforeign students.52 More than half of all skilled workerimmigrants globally come to the United States.53

Although its likely that many of these students will

be returning to their booming homelands,54

many willnot. At Tsinghua University, Chinas MIT, estimates arethat about 50% of those who study abroad never gohome.55

Perhaps the greatest impact of immigrants onstate economies will be in the all-importantentrepreneurial sphere. Immigrants by nature tendto be entrepreneurial, as most come to America tond a better life for themselves and their families.

The immigrant role in creating new businesses hasbeen particularly critical during the current recession.

According to a recent Kauffman Foundation report,the foreign-born were the one bright spot in thecountrys otherwise shell-shocked entrepreneurialsector. Overall, according to Kauffman, the share ofnew entrepreneurs that are immigrants has risen from13.4% in 1996 to nearly 30% this year.56

These businesses can be found in a broad array ofindustries, including food, retailing, manufacturing,and technology.57 Perhaps most remarkable has beenthe movement of Asians into the technology industry.

Between 1990 and 2005, immigrants, mostly fromthe Chinese diaspora and from India, started one ofevery four U.S. venture-backed public companies. InCalifornia, they account for a majority of such rms.

It would be a mistake, however, to see immigrantentrepreneurs as relevant largely to traditionaltechnology hubs and big cities. Beginning in the1990s, immigrants rapidly moved into regions onceconsidered inhospitable to newcomers, particularlynon-whites: exurbs, the Southeast, and the GreatPlains.58 Immigration has declined in virtually every

These cultural exports are not limited to English-speaking or high-income countries. In 2010, box ofcerevenues were at in the U.S. and Canada, but grew25% in Latin America, while the Asia Pacic regionincreased by 21%, with China alone accounting for40% of that regions box ofce take. The American

predominance could also be seen in the musicbusiness, with American artists dominating the best-selling lists. This pattern has alarmed many Europeansfor years, and recently led Chinas President Hu Jintaoto seek measures defending the countrys cultureagainst American and other western inuence.42

The Demographic Edge

Even though immigration has slowed in recentyears, it remains a major source of new workersand innovation. The United States record of healthy

and sustained immigration marks a major strategiccompetitive advantage. Due largely to immigrantsand their offspring, the U.S. is the only major high-income country with a birthrate above replacement; itscurrently at 2.1%.43

In contrast, many of our major competitors face afuture of rapid aging and slowly growing or evendeclining population. Close to half the worldspopulation, notes demographer Nicholas Eberstadt,lives in countries with birth rates below replacementlevel. Rather than out-of-control baby making,the world, he suggests, is experiencing a fertilityimplosion.44 Population stagnation and even decline has become commonplace in much of Europeand throughout Asia. Eastern Europes populationis dropping; western Europes is stagnant. In Japan,since 2010 the total number of people has declined,and by 2015 there will be fewer births than deaths.45

Even fast-rising countries in East Asia such as Korea,Taiwan, Singapore, and China face slow and evennegative population growth. In all these countries, rapid

aging, dramatically reduced marriage46

rates, and lowbirth rates are now the norm.47 This will have a bigeffect on workforces and markets. Between 2000 and2050, for example, the U.S. workforce is projected togrow by 37%, while that of China will shrink by 10%,the EU will decrease by 21% and, most remarkably,Japans workforce will fall almost 40%.48

Demography could prove ruinous to these economiesin terms of consumption and growth, and, perhapsmore importantly, in terms of their ability to support


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In addition to technology and trophy real estate, theinvestment boom encompasses more basic industriesthat are best suited to our large, resource-rich country.Investment in the burgeoning energy sector more thantripled to $20 billion between 2009 and 2010. Theshale revolution, in particular, has attracted foreign

interest. Energy rms from China, France, and Spainall have made major investments in the shale eldsof Ohio, Colorado, and Michigan. French giant Totalrecently paid $2.3 billion for minority stakes in the vastoil and gas holdings of Chesapeake Energy.62

Perhaps even more important has been a surgein industrial investment, which rose $30 billion justbetween 2009 and 2010. Much of this growth isconcentrated in the chemical industry, as well as inautomobiles, steel, and other transportation sectors.

Investment is heavily focused on the southeasternU.S. states and Texas; not coincidentally, mostsurveys reveal these locations have the countrysmost hospitable business climates. The states of theold Confederacy, according to a recent study by SiteSelection magazine, boast all of the top ve businessclimates, and ten of the top twelve.63

Foreigners, particularly from large global corporations,seem destined to play an active role in the nationsindustrial revival. This trend has certainly beenillustrated by companies such as Mercedes, whose

largest U.S. plant is in Tuscaloosa, Alabama. Last yearthe company invested $350 million in the facility.64

Mercedes is certainly not alone, however. Arch-competitor Volkswagen last year announced that itplans to build a new assembly plant in Chattanooga,

TN. Nissan, Toyota, Rolls-Royce, and Kia all haveannounced major new plant openings or expansionsover the past three years throughout the region.

These investments are not inconsequential. With the

average cost of building these facilities at more than $1billion, and the higher-paying manufacturing jobs theyrepresent, such plants constitute major employmentgenerators themselves. They also bring with themparts suppliers and other industries related to automanufacturing. Alabama, for example, has seen majorsteel mill investments, including $4.6 billion fromGermanys ThyssenKrupp.

Over the next decade, these investments couldtransform the nations industrial structure. Alabamaand Kentucky already produce almost as many cars

state since the recession, but some unlikely stateshave performed best in maintaining immigration rates,including Mississippi, Wyoming, West Virginia, NorthDakota, Kentucky, and Montana.

Fostering immigration makes economic sense in

the long term, particularly efforts targeted at skilledand working age people. The reasons for coming to

America remain compelling: the generally high qualityof life (particularly housing) available here, politicalfreedoms, and, over time, a stronger economy.59 Thisexplains why many of Chinas new crop of billionairesseeks to emigrate to the United States: to protectproperty, to have a second child or to live a freer life.Indeed, among the 20,000 Chinese with incomesover 100 million Yuan ($15 million), 27% have alreadyemigrated and another 47% reported that they are

considering it.60

The Role of Foreign Investment

Many of these same factors favorable demographics,natural resources, and a strong constitutional order also attract rms from abroad. Long the world leaderas a destination for overseas investment, the U.S. isextending its lead as the favored land for overseascapital.

Since 2008, foreign direct investment into Germany,France, Japan and Korea has stagnated. In 2009,overall investment in the European Union dropped36%. In contrast, foreign investment in the U.S. rose49% in 2010, mostly coming from Canada, Europe,and Japan. Foreign investment now stands at thefourth-highest level in history.61

The transformative role of foreign investment inAmerica is nothing new. After all, the country started asa colony of England, and for much of the 19 th centuryremained dependent on European investors for thebuilding of everything from canals to railroads. Without

European capital, the settlement of the west and therise of cities such as New York would have been farslower.

Now foreign rms are rediscovering Americasintrinsic advantages. In particular, our relativelyvibrant demographics contrast strongly with such keycountries as Japan, Korea and Germany, all of whichare aging far more rapidly than is U.S. Many investors,meantime, are reluctant to put their money in China,given the countrys authoritative political system.


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has done little to improve conditions in nearbyOakland, much less in the rest of California.

Ultimately, only growth can overcome the new normal.Some states, such as Texas, Oklahoma, and NorthDakota, appear to have already achieved this result.In large part, this has occurred by taking advantage

of the energy and commodity boom as well as byexpanding both manufacturing and technology-related jobs. In contrast, the growth of green jobshas remained far less than expected, suggesting thatmore traditional forms of energy production will remainparamount in the decade ahead.69

How to leverage these sectors marks a major concernfor both state and national governments. Potentialenvironmental problems associated with energy andmanufacturing growth need to be balanced with aconcern for the role of these sectors in engendering a

broad economic recovery. Almost all of the fast-growthstates have been those that have managed to expandnot only tech, but also manufacturing, energy, andbusiness services.70

Successful job growth strategies focus largely onthe fact that most new jobs come from new andexpanding businesses, not relocations. Places will haveto generate more of their own opportunities. Statesalso need to concentrate on attracting skilled andeducated workers, many of whom work in the 1099

economy of self-employed professionals.71

Particularly critical will be an increased focus onfostering workers scientic and technical skills. Theseelds tend to offer far better employment prospectsthan the humanities and social sciences.72 Many stateshave taken aggressive steps to augment migrationgains with programs to train local workers for middle-and higher-wage jobs associated with such things ashigh-end manufacturing.73 States with lower populationgrowth, in contrast, have often been forced to cut backtheir educational and training programs.74

Below, we will discuss the ways that states havelooked for policies that lead to growth. Strategies dif fer,and often work better in some places than they do inothers. Yet in the end, states that succeed will be thosethat focus on achieving the high rate of economicgrowth necessary to overcome the bitter scenario laid

out in the new normal.

as does Michigan. According to the U.S. Departmentof Labor, Michigan still leads the country in autoemployment with 181,000 jobs, followed by Indiana.But the next three states are Kentucky, Tennessee,and Alabama.

Battle tested in world markets, foreign manufacturing

companies are often both sturdy competitors andreliable employers. Overall, according to the U.S.Department of Commerce, foreign manufacturingrms, in autos and other areas, have proven far lesssusceptible to layoffs than their domestic competitors.

They also tend to offer higher salaries on average thanU.S.-based rms.65

Growth and Americas Moment

Huge increases in food exports, domestic energyinvestment, a revived manufacturing sector, a

burgeoning tech sector, vital demographics, andincreased investment from abroad establish a strongbase for long-term secular recovery of the U.S.economy. Rather than facing a dismal future of the newnormal, we may actually be on the cusp of a recoverythat could become one of Americas nest moments.66

The key to making this work, for the states and thenation, lies in promoting broad-based, long-termeconomic growth. Economist and National ChamberFoundation fellow Bret Swanson has found that thereis absolutely no way the country or the states

can avoid ever greater, debilitating decits withouteconomic growth. Many states must contend withgrowing unfunded pension obligations that providea serious threat to maintaining adequate levels ofinvestment in education, infrastructure, and other jobcreation efforts. State pension plans were funded atan estimated 78% in 2009, creating a total unfundedliability of $3 trillion.67

In the past decade, the nations GDP growth ratewas a measly 1.67%, roughly half that enjoyed in thepreceding three decades. Growth of three percent,or even four, would generate another trillion dollars intax revenues a year by 2030. Low growth, even withhigh taxes, will bring ever-greater decits, while fastergrowth with lower taxes keeps the decit largely undercontrol, Swanson concludes.68

To achieve growth of this scale, states have to targetnot one industry, but a broad array of endeavors.Expansion of one sector, such as high-tech, cannotgenerate enough jobs by itself to overcome laggingsectors; the impact of Silicon Valleys recent expansion


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science, technology, and professional services growth,driven in part by the strong performance of the entireWashington, DC region.

The top performing states are determined by acombination of the following measures:

Long-term job growth

Short-term job growth

Overall expansion of gross state product

Productivity: state output per job

Productivity growth: growth in output per job

Income growth: growth in per capita personalincome

Livability: median income of four-personhouseholds adjusted for state cost of living

Top Performing States:

1. North Dakota North Dakota was propelledto the top by a top-10 nish in six of the sevenperformance-ranking categories. The state is rst infour growth categories: short-term jobs, long-term

jobs, gross state product (GSP), and per capitapersonal income. It places second in productivity

growth. While the states metropolitan areas havebeaten the nation in job growth for a decade, thePeace Garden States economic prospects tookoff with the energy boom in western North Dakotain the past three years. Notably, the state has seen34% growth in nance, 39% in professional andtechnical services, and nine consecutive years ofgrowth in construction employment.

2. Wyoming Another energy state, Wyomingnishes in the top 25 in all seven performance

measures and is among the top ve states in vemeasures. The state is second in long-term jobgrowth and GSP growth, and is third in productivitygrowth and income growth. Up 61% since 2001,the states mining industry is 11 times moreconcentrated than the national average. The statessmall manufacturing sector producing chemicalproducts, metals and equipment remained stableover the past decade, avoiding large job lossesseen in other states.

The Enterprising States studies for 2010, 2011 andnow 2012 measure overall economic performancealong with ve specic policy domains wherein statescan proactively and meaningfully impact and stimulatenew economic opportunities, create jobs, and therebyadvance improvements in the quality of life and

prosperity for their residents.

The economic performance measurement categorycovers elements of job growth and growth ofeconomic output, economic productivity, incomegrowth, and family income adjusted for affordability.

The ve major policy areas include:




Talent Pipeline

Infrastructure

This study combines metrics for each economicdevelopment policy area to measure performancein each policy topic area. The policy areas are notmutually exclusive. Tax incentives can be used tostimulate entrepreneurship and innovation, whileinfrastructure, such as ports, is essential for exports.States were ranked in each metric. Top states weredetermined by a composite ranking of all metrics inoverall performance as well as in each policy area.

Metrics in this years analysis are consistent withprevious years, except where updated data isunavailable or where improved measures becomeavailable. For a full description of all metrics and resultsfor each state see the Rating the States section onpage 25.

Growth, Productivity, and Livability: The TopPerformers

Now two years past the low point in the national jobscrisis, nearly every state in the nation is beginning toreturn to private-sector job growth. The resource-richstates of the Great Plains and Intermountain West leadthe way, fueled by the rapid expansion of the energyeconomy and recent stability of agriculture.

At the same time, Virginia and Maryland in the Mid-Atlantic have outperformed the nation with strong

Enterprising States: Policies that Produce


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sector since 2001. The state has seen signicantgrowth in chemicals, machinery, fabricated metals,and transportation equipment. At the same time,the Mount Rushmore State added more than5,000 jobs in professional services for 35% growth

The state is moving toward higher-value, moreproductive industries, as shown by its fourth-place

rankings in growth in GSP-per-job and per capitapersonal income.

8. Washington Led by the software industry,Washington is one of the few states with agrowing information sector. Washington movedup ve places into the top 10 largely due to itsrapid short-term job growth over the past twoyears. The states manufacturing sector ledby aircraft and other transportation equipmentbuilding signicantly outperformed the national

manufacturing industry since 2001. The EvergreenState added another 65,000 jobs in professional,scientic and technical services; 19,000 insecurities and commodity contracts and 12,000 inelectronic wholesale markets.

9. Iowa Iowa is rapidly increasing the value ofits economy, placing fth in growth in economicproductivity, sixth in per-capita income growth andeleventh in GSP growth. The states nance andinsurance sector has seen 28% growth, led by10,500 new jobs in commercial banking. The stateis expanding its presence as a center for businessand commerce, doubling its jobs in managementofces and adding 7,800 new jobs in transportationand warehousing (11% growth).

10. New York The Empire States large, complexeconomy performed well across all measures,placing in the top 25 in six of seven. The statemoved up 11 spots in this years performancerankings due to rapid GSP expansion and per-capita personal income growth. New York is fourth

in GSP per job and ninth in per-capita personalincome growth in the past decade. Much of thisgrowth has been driven by the rebound in varioushigh-value nance sectors. The states privatecolleges and universities also expanded rapidly,adding nearly 55,000 jobs for a rate of growth of30%.

3. Virginia Virginia has the highest income in thenation for a family of four after adjusting for cost ofliving, making it perhaps the most livable state.

The Old Dominion State is a strong performeroverall, placing in the top 25 in all seven measures,including seventh in productivity growth andtenth in GSP growth. Already a major center for

professional-services jobs, Virginia added another135,000 jobs in these high-end services the pastdecade, with 36,000 new jobs in managementconsulting and 48,000 in computer-systemsdesign.

4. Alaska Alaska is second in overall productivity,fourth in long-term job growth, and eighth in GSPgrowth over the past decade. Employment in thestates mining sector grew at 48% since 2001,helping to drive demand in locally oriented health

care, nance, retail, accommodation and food-service sectors.

5. Maryland Maryland places fth overall with top-25 rankings in all seven performance measures.

The Old Line State is fth overall in adjustedincome for a family of four and ninth in productivitygrowth. Benetting from the recent economicstability provided by the nations capital, Marylandis one of the nations high-tech centers. Its mostproductive sector over the past decade has beenprofessional, business, and technical services,particularly computer-systems design. Over thesame time period, the state doubled its jobs incorporate headquarters and management ofces.

6. Texas The Lone Star States strongestcategories are short- and long-term job growth(second and fth) and GSP expansion (ninth),though it appears in the top 25 in six of sevenmeasures. The energy economy and affordabilityhelp fuel widespread growth across nearly everysuper-sector of the state. Even so, the state is

increasingly becoming a center for high-endservices and business management; it has nearlydoubled its management, scientic, and technicalconsulting jobs and nearly tripled its employmentin corporate and business management ofces togo with another 200,000 jobs in mining, and oil andgas extraction since 2002.

7. South Dakota South Dakota is known as acenter on the Plains for back-ofce nance, butmanufacturing has been its most competitive


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3. South Carolina Fast becoming an industrialhub in the southeast, South Carolina is nowthe second-highest state for export intensity.

The states exporting sectors continue to becompetitive; it ranks sixth in growth of its share ofthe nations total exports. Nearly 28% of the statesexport output is in large passenger vehicles, a

category that has increased 150% since 2008.South Carolina is also a major exporter of gasturbines, and parts and tires. Sixteen percent of itsgoods are exported to Germany, 15% to Canadaand 12% to China.

4. Texas The Lone Star State is the nations topexporter in terms of activity as a share of thetotal state economy. Texas is a major exporterof oil and its derivatives, but its broad-basedeconomy is a major source of other productsincluding boring machinery; electronic parts and

telecommunications equipment; chemicals; civilianaircraft; and, increasingly, automotive componentsand large vehicles. More than a third of the goodsleaving the country from Texas are destined forMexico.

5. Mississippi Mississippi is the fth-fastestgrowing state for overall gross exports and forgrowth in exports as a share of GSP. Muchof the states exporting is based upon oil andother chemicals and pigments, but the state has

seen rapid growth in the past year in exports ofpassenger vehicles and automotive parts. Thestates top three trading partners are Canada (16%of exports), Panama (14%), and Mexico (10.5%).

6. Delaware Delaware is the nations 16th-rankedstate for export intensity and the ninth-ranked statein gross export growth since 2002. In 2011, thestate exported more than $2 billion in medicationand pharmaceuticals, a jump of more than 75%since 2008. More than 44% of the states exportsare destined for two countries: Canada (27%) and

the United Kingdom (17%).

7. Georgia The Peach State nishes in the top 25in all four exporting measurements, but is growingits share of the nations total exports faster than allbut four other states. Georgia exported $5 billion incivilian aircraft, engines, and parts in 2011, up 63%from 2008. Over the same time period, Georgiasexports of automobiles tripled to 917 million in2011. Other major products include wood pulp, gasturbines, and frozen chicken.


Boosting exports by Americas businesses is anessential element of a meaningful agenda for creating

jobs in the next decade and beyond. Exports areexpected to be increasingly important to the nationsbusinesses in the years ahead because up to 85%

of the worlds economic growth in the next veyears is projected to take place outside the UnitedStates. Consequently, every state is now investingin strengthening the export acumen of businesses,both large and small, to reach international marketsthat are aligned with their most competitive sectors,manufacturing and service.

In 2012, the top-10-performing export states weredetermined by ranking states across four measures ofexport activity:

Export Intensity: export activity as a share of grossstate product

Growth in export intensity

Change in a states share of total national exports

Growth in overall gross exports since 2002

Only manufactured exports are included in themetrics, excluding bulk commodities that are oftenattributed to the state of the port location instead of theoriginating state.

Top Export States

1. Louisiana Louisiana is the top export state,ranking no worse than fourth on all four metrics;it is also increasing its share of the nations exportactivity faster than all but one state. Oil is thestates top export, along with other agricultural andenergy commodities. Twenty percent of the statesexports go to China and Japan, with another 10%exported to Mexico.

2. Utah Utah is a top-ve performer on all fourexport metrics and is the second-fastest growingexport state overall. The states exporting of non-monetary gold has nearly tripled since 2008 andaccounts for a majority of the states exports byvalue. Other important exports from the BeehiveState include electronic memory circuits, aircraftparts, vehicle airbag systems, and x-ray equipmentand tubes. Utahs biggest trading partners are theUnited Kingdom, at 35%, and Hong Kong at 20%of total exports.


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produced in other states, shipped abroad fromLouisianas ports, and recorded as Louisiana exportsbecause of Department of the Census standards usedto calculate exports.

Louisiana Economic Developments InternationalServices ofce works with the states goods and

services companies to export and assist companiesfrom around the world to identify strategic partners andlocations for business development in the state. TheInternational Services ofce works cooperatively withother economic development agencies, and the World

Trade Center in New Orleans to help grow companiesthrough international trade.

Utahs exports grew by 37% from 2010-2011,surpassing the national export growth rate of 16%. Thetop items being exported out of Utah include gold andsilver, computer and electronic products, chemicals

and transportation equipment. Utahs Department ofWorkforce Services estimates that of the 1.2 million

jobs in Utah, around 360,000 or about 30% areexport-related.

The Utah International Trade Hub consists of the WorldTrade Center Utah, the U.S. Commercial Service andthe Governors Ofce of Economic Development -International Trade and Diplomacy Ofce (ITDO). Thetrade hub partners help companies assess their exportpotential and then connect with the most relevant

global partners, contacts, service providers andgovernment agencies. The trade hub partners worktogether to assist companies in developing markets fortheir products and services throughout the world.

Internationally, ITDO recruits foreign investors,connects Utah businesses to global partners, toutsUtahs economic sectors and educates foreignaudiences about Utahs technological opportunities.ITDO also serves as the states diplomacy advisorand leverages diplomatic contacts to develop andexpand foreign markets for Utah. ITDO hosts dozens of

foreign trade visitors as well as many foreign businessrepresentatives each year.

The agency maintains international traderepresentatives in Chile, Mexico, Japan, France,Germany, China and South Korea.

8. Nevada While exports still comprise a smallershare of the states economy, Nevada makes thetop 10 because its the fastest-growing exportstate and is increasing the share of exports in itseconomy the fastest. Gold accounts for 45% of thestates total exports, followed by copper ore, coin-operated games, and non-industrial diamonds.

Exports of integrated electronic circuits have morethan doubled since 2008.

9. Tennessee Tennessees top exported productin 2011 was surgical and medical instruments,followed by civilian aircraft and parts, and digital-data-processing machinery. The state exported$721 million in large piston engines in 2011, upfrom just $30 million in 2008. Forty percent of the

Volunteer States goods are destined for Canadaand Mexico, with another 12% headed to Chinaand Japan.

10. Iowa Iowas agricultural prowess is reected inits major exports. Corn and pork products accountfor 15% of the states output, with another 13% intractors, front-end loaders and other equipment.

The state placed no worse than 17th in any exportmeasure, and is the ninthfastest-growing state foroverall export value.

Export Programs that Produce

Top-ranked Louisiana has the nations farthest inland

port for sea-going ships, Baton Rouge, and Americasonly port capable of handling super ships, theSuperport. Louisiana has six onshore deep-water portsand one offshore deep-water super port that handleonly oil and gas. In addition, Louisiana has 4,500 milesof navigable inland waterways, advanced road and railfacilities, and international air service. More than 25%of the nations waterborne exports are shipped throughthe states ports.

Louisianas 2011 worldwide merchandise exportsincreased by 33.3% over 2010, breaking the previoussingle-year record set in 2008, according to a reportreleased by the World Trade Center of New Orleans.For the year, Louisiana exports totaled $55.12 billion,compared with $41.35 billion in 2010 and far exceedingthe previous record of $41.9 billion. Oil accounted for25% of Louisianas exports in 2011, a 68% increasefrom 2010.

Louisianas export numbers include both Louisiana-originating products and some major commingledbulk commodities, such as grain and coal that are


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high-tech services in the Washington, DC region.Those high concentrations of technology workersand technology companies are a sign the state isexcelling at translating its academic research to theprivate sector.

2. Colorado Colorado is the number-twostate for high-tech business, number three forbusiness birth rate, number four on the KauffmanFoundation Index of Entrepreneurial Activityand is f th in concentration of STEM jobs.Important high-tech industries in Colorado includetelecommunications, electro-medical devices,software publishers, engineering services andcomputer-systems design.

3. Utah Utah ranked no worse than 23rd in anyinnovation and entrepreneurship measure,

highlighted by its second-place ranking in businessbirth rate, evidence the state is fertile ground forentrepreneurs. Utah is an emerging technologyhub as the fourth-fastest-growing state for STEMoccupations in the nation. The state has expandedits tech economy by 14% over the past decadeand shows twice the national concentration of dataprocessing, software and Internet publishing andweb services.

4. Texas Texas is a bastion of start-up business,ranking near the top in both measures of business

creation: second in the Kauffman Index and sixthin business birth rate. Not all new jobs generated inthe state are due simply to population growth, asthe state ranks 13th in tech business concentration,17th in STEM job concentration and 12th in STEM

job growth. The state added 30,000 computer andinformation technology jobs to its workforce since2001, with a median hourly pay of $32.

5. Arizona Arizona places fth this year riding thewave of its entrepreneurial economy. The state

is rst in the Kauffman Entrepreneurial Index andfth in business start rate. Arizonas high-techeconomy is also above average; it is 12th in high-tech business concentration and 20th in STEM

job concentration. Arizona is home to a highconcentration of high-tech manufacturing, notablysemiconductors, search and guidance instrumentsand environmental controls.

6. Alaska Alaska is strong in entrepreneurshipand in technical jobs. The states energy- and


Innovation is the key to driving growth and prosperity.Economists estimate that up to 50% of U.S. annualGDP growth can be attributed to increases ininnovation. There is widespread agreement that newcompanies are a potent force for creating jobs in thenation. For this reason, states are increasing theirinvestments in entrepreneurship and small businessprograms. Often, states are directing their efforts andresources to emerging-growth companies (EGCs) orhigh-growth rms that account for a disproportionateshare of net job creation. Similarly, states are givingincreased attention to economic gardening initiativesthat work with successful companies that haveexpansion potential.

States play a pivotal role in creating the platform forentrepreneurship and innovation through investmentsin postsecondary education, providing resources,

capital and expertise to entrepreneurs and fosteringand coordinating partnerships between businesses,universities and government.

Six measures are used to determine topentrepreneurship and innovation states:

Science, technology, engineering, andmathematics (STEM) occupation concentration

STEM job growth

High-technology businesses as a share of all

businesses

Academic research and development activity

Birth rate of business establishments

Kauffman Foundation Index of EntrepreneurialActivity

In 2012, the top 10 states for entrepreneurship andinnovation include:

1. Maryland Maryland is this years top all-aroundperformer in innovation and entrepreneurship,landing in the top 25 states in all six metricsand in the top three on three metrics. The stateplaces rst on the innovation list due to its highconcentrations of high-tech activity and research.Maryland is the number-one state for academicresearch and development; and is the third beststate in science, technology, engineering andmathematics (STEM) jobs and in the concentrationof high-tech business locations. Maryland is ina prime location to serve growing demand for


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(TEDCO), created by the state legislature in 1998, is anational leader in bringing innovations from universitiesand federal labs into the states economy. It doesso by facilitating the transfer of technology to theprivate sector and by providing emerging technologycompanies and university researchers with vital seedfunding and specialized technical assistance. Intestimony before the state legislature in 2009, TEDCO

reported leverage of $38 of other funding for every $1of TEDCO funds invested.

To chart a path for the future, the Maryland EconomicDevelopment Commission (MEDC) recently releaseda ve-year strategic economic development plan,Charting Marylands Economic Path: Discovery,

Diversity & Opportunity.

Focused on four core strategies, the plan outlines aframework to position Maryland for growth; to build on

the states leading economic drivers, like life sciences,cyber security and federal and military operations; toembrace regional and economic diversity in tourism,manufacturing and agriculture; and to make it easier todo business in the state.

InvestMaryland is Governor Martin OMalleys keyeconomic development initiative. It is aimed atinvesting at least $70 million in startup and early-stagecompanies in Maryland to help create thousands ofnew jobs with the potential to spur billions in follow-on capital. The funding for InvestMaryland will come

from the auction of premium tax credits to insurancecompanies. Revenues will be invested by privateventure-capital rms selected by an independent thirdparty and the Maryland Venture Fund, the states 15-year venture capital fund. Recently, Maryland raised$84 million more than what had been expected inan auction of insurance tax credits to fund startup andearly-stage companies.

Colorado has established a capable andhighly developed research, technology transfer,commercialization and nance ecosystem over theyears in energy, bioscience and aerospace.

To build on this strong foundation, Governor JohnHickenlooper launched The Colorado Blueprint, abottom-up approach to economic development thatengaged every county in Colorado in nding waysto bolster economic development. The Blueprintprovides a framework to build a comprehensiveeconomic development plan that aligns existing effortsand identies opportunities for growth and focusedinvestments.

natural resources-driven economy is driving theneed for engineers and technicians, propellingto fth in STEM job growth and ninth in STEM

job concentration. The most prominent STEMjobs in Alaska include life scientists, life sciencetechnicians, physical scientists and engineers.

7. New Mexico New Mexico is one of the nations

strongest academic and federal research centers,ranking fourth in academic research and eighth inSTEM job concentration. Home to Sandia and Los

Alamos National Labs, state leaders work activelyto help transfer research innovations in to privatesector business ventures and jobs in the state.

8. Virginia At the state level, Virginia is the numberone state for high-tech concentration, rankingrst in STEM job concentration and rst in high-tech business concentration. Impressively, while

the state already has the highest STEM jobconcentration, its adding STEM jobs at a rateahead of all but two other states. Virginia has thesecond-highest concentration of mathematicalscientists of any state and has added 23,000computer specialists and 7,000 engineers to itsworkforce since 2001.

9. North Carolina Known for its ResearchTriangle Region, North Carolina ranks fth overallin academic research activity. A strong performeroverall, the Tar Heel State lands no worse than 26 th

in any Innovation and Entrepreneurship measure.The fastest-growing STEM job categories in thestate are life scientists (43%), social scientists (37%)and mathematical scientists (21%).

10. Georgia Georgia has seen signicantentrepreneurial activity in recent years, rankingtenth in business starts and 14th in entrepreneurialactivity. The state is the ninth-most-concentratedhigh-tech business environment in the nation, dueto its high concentrations in computer facilitiesmanagement, software, custom programming andsystems design.

Entrepreneurship and Innovation Policies thatProduce

Maryland has received high marks in recentyears for its human capital investment, researchand development inputs, technology and scienceworkforce, and technology concentration.

The Maryland Technology Development Corporation


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jobs. States do not enact tax or regulatory changesin a vacuum and every change will affect a statescompetitive position relative to its neighbors and tolocations around the world.

Most states have taken a comprehensive look at theirtaxes and regulations in recent years by establishingspecial commissions or legislative committees to

identify and implement reforms that will foster ratherthan thwart business development. In a growingnumber of states, impact studies are now requiredwhenever a new regulation, a new rule or a newtax is proposed to determine the consequences forbusiness growth and job creation. Overall, governorsand legislatures now recognize that being enterprise-friendly is necessary in a global economy that offersbusinesses and individuals more choices than everbefore.

A combination of six metrics determines the top statesfor taxes and regulation states:

Closure rate of business establishments

Tax environment for mature rms (Tax Foundation)

Tax environment for new rms (Tax Foundation)

Overall business tax climate index according to theTax Foundation

The Small Business Survival Index produced by theCouncil for Small Business and Entrepreneurship

Cost of living

The following states are the top 10 performers for2012:

1. South Dakota Long known for its positivebusiness climate, especially for nance rms, SouthDakota ranks in the top ve in four categories:business closure rate, tax environment for maturerms, overall tax environment for business, and thesmall business survival index. The state launched

a Better Government initiative in 2011 to reviewits regulatory climate and to streamline stateinteractions with businesses.

2. Wyoming Wyoming is a top-10 state in fourbusiness-climate metrics, including rst inoverall state business-tax climate and rst in taxenvironment for mature rms. The state also ranksninth in tax environment for new rms, making itone of the most advantageous overall for business.

To cultivate innovation and technology the Blueprintidenties four key steps, including:

Improve telecommunications technologies andaccess across Colorado.

Establish cluster-focused Information TechnologyEconomic Development Advisory Council.

Implement the Governors Innovation Initiative andInnovation Network.

Export Colorados innovation-based services andproducts.

The Colorado Innovation Network (COIN) is a networkdesigned to mobilize stakeholders from business,government, nonprots and academia to developand implement strategic action plans that create new

jobs to grow the economy through innovation. COINsobjectives are to build a business environment to

foster innovation; retain jobs and support growth in keyindustry clusters; pursue capital for project funding;establish Colorados reputation as the most innovativestate; create a workforce with the right talent and jobskills; and develop innovation-oriented performancemetrics to demonstrate COINs economic growthimpact.

Colorado is the birthplace of economic gardening, anentrepreneurial approach to economic developmentthat seeks to grow the local economy from within. Firstpioneered in Littleton, Colorado in 1989, the practiceis now gaining traction in many other states. Basedupon the premise that local entrepreneurs createthe companies that bring new wealth and economicgrowth to a region, it focuses on growing and nurturingthese local businesses rather than hunting for biggame outside the area. What differentiates economicgardening from other entrepreneurship-developmentstrategies is its focus on providing market research andhigh-level technical assistance to small growth-orientedcompanies.


A reasonable tax code and a sensible, predictableregulatory environment can encourage investmentand business expansion by enabling entrepreneursand managers to look forward with condence and toplan for the future. The combined burden of excessivedelays, uncertainty, regulations, and taxes (DURT)can inhibit new job creation and jeopardize existing


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9. Utah Utah lands in this years top ten by placingtenth or better on ve of the six business climatemeasures, led by a sixth-place ranking in taxenvironment for mature rms and the sixth-lowestcost of living in the nation. The state is tenth in twotax measures, overall business climate and climatefor new rms.

10. Louisiana Louisiana nishes tenth on thestrength of its job creating tax climate. The stateis second in tax climate for new rms and tenth intax environment for established rms. Louisianahas the seventh-lowest business closure rate in thenation, an indication that the state is fertile groundfor business.

Tax and Regulation Policies That Produce

South Dakota has long made positive business

climate a critical part of its economic growth strategy,dating back three decades to its attraction of thenancial services industry. Today the state ranks rst inthe Small Business Survival Index, second in overall taxclimate for business and second for its tax environmenfor mature rms, both according to the Tax Foundation.

This positive environment translates directly to the fth-lowest rate of business establishment closure in theU.S.

The state has no corporate income tax, no personalincome tax, and no tax on business inventories,

greatly lowering tax burdens on companies in thestate. The state has also eliminated inheritance taxes,cutting down on potential tax challenges for family-runbusinesses. The state also allows the use of propertytax abatements for up to ve years on new andexpanded business facilities, supporting expansionand job creation by South Dakota companies.

In addition to pledging to hold the line on taxes,Governor Dennis Daugaard had made regulatoryreform one of his key initiatives focused on improvingSouth Dakotas business climate. The governorsBetter Government initiative, launched in 2011,identied over 1100 rules and 400 sections of lawfor potential elimination by the 2012 legislativesession. The initiative is focused on streamlining stateregulation, and making sure that input from regulatedbusinesses is considered in the rulemaking process.

Wyoming offers a data-center sales-tax exemption.Combined with other benets including no corporateor personal state-income tax and workforce-development-training funds, Wyoming has a

3. Ohio Ohio ranks in the top 15 in ve of the sixtax-and-regulation measures. The state fares wellin the Tax Foundations study of business-taxenvironments, ranking fth for mature rms andthird for new rms. The Buckeye State is seventhin the small business survival index, has the 13th-lowest rate of business closure, and the 15th-lowest

cost of living in the nation.

4. Kentucky The Bluegrass State ranks no worsethan 22nd on any business-climate measureand is a top-ve state in tax environment for newrms and cost of living. Governor Steve Beshearcreated a Governors Blue Ribbon Commissionon Tax Reform by executive order in 2012, aspecial commission to hold public hearings and tomake recommendations on improving the statesbusiness climate.

5. Oklahoma Efforts to improve the Sooner Statesbusiness climate are paying off, as evidenced bythe states elevation into the top 10 of this yearsrankings, a climb of eight spots. The state has thelowest cost of living in the nation and is the fth-best tax environment for startup rms. In 2011, thelegislature passed a series of aggressive reforms toimprove the states legal environment for businessand reduce frivolous lawsuits.

6. Nebraska Nebraska lands at sixth in this years

Taxes and Regulation rankings by placing 11th

orbetter in ve of the six metrics. The state has thetop tax environment for startup rms, the ninth-best tax environment for mature rms, the third-lowest business closure rate in the nation, and the11th lowest cost of living.

7. Texas One of the secrets to Texas success isits low cost of living, the third lowest in the nation.

Texas ranked 23rd or better on ve of six businessclimate measures, yet it recently passed tort reformlegislation including a loser pays provision to help

discourage frivolous lawsuits.

8. Alabama Alabama ranks 22nd or better on allsix metrics, including sixth on the small-businesssurvival index. Looking to make dealing with taxesa simpler process for businesses in Alabama, thestate has been considering the adoption of newstreamlined business-tax-ling legislation. Theproposed law would create a ONE SPOT systemallowing businesses to le several different classesof taxes through one system


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For a more in-depth analysis of the performance ofstate public postsecondary education systems, theU.S. Chambers Institute for a Competitive Workforcepublishes Leaders and Laggards: A State-by-StateReport Card on Public Postsecondary Education.

Leaders and Laggards provides more detailed state-by-state analysis of specic policy, practices and

funding decisions directly related to postsecondaryeducation.

Top talent pipeline states are determined using sixmeasures:

Higher education degree production

State spending per degree awarded

Total student cost at a four-year research institutionas a share of state disposable income

Share of residents age 25 to 44 with at least a two-year degree

Share of high school seniors taking AdvancedPlacement Courses

Attainment of goals for placing adults in open jobsby the state workforce development system

In 2012, the top-10 performing talent pipeline statesare:

1. Florida Florida ranks in the top eight in four ofthe six workforce and training measures. It ranksrst in higher education efciency and share ofhigh school seniors taking advanced placementexams.The state ranks fourth for the efciencyof its workforce placement system and eighth incollege affordability.

2. Massachusetts Massachusetts ranks in thetop seven in four workforce metrics. The state hasthe nations most educated young workforce, thethird-highest output of college degrees, and the

third-best ranking for its state workforce systemefciency.

3. New York New York places in the top 20 inve of six workforce measures. The Empire Statereceives high marks for its college-educatedpopulation, advanced-student achievement, andits output of college degrees, ranking seventh orhigher in all three metrics.

4. Utah Utah holds a top-10 position or betterin three rankings, including higher education

compelling cost-reduction incentive package thatis appealing to the data-center industry. In addition,Wyoming has abundant affordable energy, a naturallycool climate, and a data-center recruitment fundused at the sole discretion of the governor. It is acombination that is just the thing to bring high-payingdata-center jobs to the state.

Microsoft recently announced that it is opening adata center near Cheyenne, Wyoming. It joins otherdata centers in Wyoming including those operated byEchoStar, Ptolemy Data Systems, T3Media (formerly

Thought Equity Motion), and Green House Data.

Wyoming ranks rst in the Tax Foundations 2012State Business Tax Climate Index and is one of onlyfour states that collect no personal income taxes andno corporate income taxes. The ranking is consistentwith Governor Matt Meads fundamental formula

to encourage, not discourage, entrepreneurs andbusinesses, on the belief that when they are doing well,everyone benets.

Talent Pipeline

Talented human capital is one of the most criticalfactors related to the growth and success ofcompanies and the prosperity of communities andstates. Today, even as unemployment remains high,thousands of jobs throughout America cannot be lled

because of a growing skills gap. States play a majorrole in education and training and are on the frontlinesof developing the workforce of today and tomorrow.

The most successful state initiatives are those thatdevelop and deliver training programs with input frombusiness.

Almost every state is implementing programs todevelop a labor force with more science, technology,engineering and math (STEM) capabilities. Anincreasing number of states are paying attention tobuilding a workforce to ll middle-skill jobs that requiresome training beyond high school, but not a four-yeardegree.

In order to gauge the overall environment for workforceactivities in each state, the metrics cover some areasof higher education efciency and attainment, the rigorof high school coursework, and the performance ofthe state job assistance system. Enterprising Statesprovides a top-line review of the talent within eachstate based on general measures of secondary andhigher education and workforce training systems.


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10. Connecticut A strong all-around workforceperformer, Connecticut ranks in the top 24 inve and the top 19 in three workforce measures.

The state has the seventh-most educated youngworkforce and the sixth-most efcient workforceplacement system.

Talent Pipeline Policies that ProduceFloridas Workforce Florida, Inc. program serves asa catalyst for creating world-class talent at every skilllevel. It is focused on getting Floridians back to workwhile emphasizing the states most promising futureopportunities.

Employ Florida Banner Centers are a statewide,industry-driven initiative focused on buildingpartnerships among stakeholders in workforce,education, industry and economic development. The

states 11 current and planned Banner Centers focuson developing and coordinating educational andtraining resources to boost the competitiveness oftargeted industries that diversify Floridas economy.Each of Floridas 11 Banner Centers aims to:

Become the statewide nexus for industryknowledge related to workforce needs of atargeted industry.

Support the pipeline development needs of keyFlorida industries from entry-level to advancedworkers.

Deliver workforce development products, services,training and access to certications valued byindustry.

The Employ Florida Marketplace, online atEmployFlorida.com, offers job seekers access tothousands of employment listings, and businessesaccess to thousands of job seekers looking for entry-level to executive positions.

EmployFlorida.com microportals include Employ

Florida Silver Edition, a career resource for the 50+demographic and Employ Florida Vets, Floridas onlinesource for veterans employment and employer-recruitment information.

In Massachusetts, Ofce of Labor and WorkforceDevelopment operates 34 One-Stop Career Centersin every major city of the state, with branch ofces inadditional communities. The One-Stop Career Centersare administered locally by Workforce InvestmentBoards comprised of leaders from business,

spending per credential granted (3rd), undergradtuition as a share of disposable income (6 th), anddegrees awarded per resident aged 18 to 24 (10th).Utahs highly educated talent pool is a strongattraction for a growing number of technologycompanies and for the nancial services sector.

5. South Dakota South Dakota is a leader ininvestment in higher education efciency, tuitionaffordability, and job placement performance. TheSouth Dakota Workforce Initiatives (SD WINS)program is a 20-point plan launched to expandworkforce training opportunities and attractskilled workers to the state, supporting businessexpansion.

6. Virginia Ranked ninth for its high percentage ofcitizens with college degrees, the state is workingto increase the number of high school graduates

attending college with its Top Jobs Act. Theprogram aims to help 100,000 more Virginians getcollege degrees over 15 years. Virginia ranks betterthan 22nd in four workforce metrics and no worsethan 33rd in any measure.

7. Maryland Maryland is home to the nations10th most educated young workforce and itranks second for sending high school studentsto advanced-placement exams. The state ispositioned well to increase its already high level of

educational attainment with the nations 11th

mostaffordable higher education system.

8. Colorado Colorado holds the number-eight rankin two key talent pipeline measures including thepercent of 25- to 44-year-olds with an associatesdegree or higher and the share of high schoolseniors taking advanced-placement exams. TheColorado Blueprint aims to capitalize on thishighly educated populace to achieve its aims ofmaking Colorado an epicenter of innovation andtechnology in the 21st century.

9. North Dakota North Dakota is highly rated for itstuition rates and percentage of individuals with anassociates degree or higher, ranking second. Thestate produces the 17th-most college graduatesfor its size, and its job-placement system is the16th most efcient. To support the overwhelmingdemand for oil and gas workers, the state haslaunched a Petroleum Safety and TechnologyCenter to provide workforce training to meet theindustrys massive demand for workers.


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maintain everything from roads to airport terminals.In many states, specic types of infrastructure arebeing prioritized and incentivized to build or attracthighly desirable economic opportunities such as datacenters.

The top infrastructure states are determined by a

combination of four metrics:

Broadband capacity: share of households with10-megabit download speed available

Broadband availability: share of households withthree or more providers available

Road quality

Share of bridges determined to be decient orobsolete

The following states are ranked as the top-10-performing infrastructure states for 2012:

1. Florida Florida is a clear standout as determinedby all of the infrastructure measures used in therankings. The state ranks no worse than seventh inany infrastructure measure, led by the second-bestroad quality and the fourth-best availability of high-speed broadband.

2. Nevada Nevadas bridge infrastructure is amongthe best in the nation. The highly urbanized state

ranks very highly in broadband accessibility, with97% of its residents having access. The NevadaBroadband Task Force and Connect Nevadaare taking steps to increase access for ruralpopulations and Hispanics.

3. Utah Utahs inux of technology companiesand workers has created increasing demandfor bandwidth and storage. The state ranksninth in households with access to at least threebroadband providers and fth in bridge quality.

Documents

Enterprising States 2012 Web