Final Report Enterprising States Email

8/6/2019 Final Report Enterprising States Email

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enterprising statescreating jobs, economic development,

and prosperity in challenging times

a p f U.s. c f c n c F u


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CExecutive Summary

The Jobs Imperative: Power to the States

Needed: An American Approach to JobCreation

What is the Best Role for the FederalGovernment in Job Creation?

Innovation and Enterpreneurship Are theKey to Solving the Jobs Imperative

The Vital Role of Infrastructure and BasicIndustries

The Critical Role of States

Conclusion: The Power of States to Lead theJobs Imperative

The States and Economic Development

Measuring States: A List of the TopPerformers

Growing Jobs: How Do They Do It?

Entrepreneurship and Innovation

Exports and International Trade

Infrastructure

Workforce Development and Training

Taxes and Regulation

State Budget Crises

Measuring the States: The Metrics

State Performance

Pro les of the States and Territories

About the Report

The report was prepared by Praxis Strategy Group andJoel Kotkin. Authors from the Praxis team include DeloreZimmerman, Mark Schill, Doug McDonald, Matthew Leiphon,and Dave Roby. Bret Swanson authored parts of the report.Zina Klapper provided editing and additional research. PraxisStrategy Group is an economic research and developmentstrategy company that works with leaders and innovators inbusiness, education and government to create new economicopportunities. Joel Kotkin is an internationally recognizedauthority on global, economic, political and social trends. Hisbook The Next 100 Million: America in 2050 explores how thenation will evolve in the next four decades.

About the U.S. Chamber of Commerce

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

About the National Chamber FoundationThe National Chamber Foundation (NCF), a nonpro t af liateof the U.S. Chamber of Commerce, is dedicated to identifyingand fostering public debate on emerging critical issues. Weprovide business and government leaders with insight andresources to address tomorrows challenges.

About American Free Enterprise. Dream Big.

NCF has partnered with the American Free Enterprise.Dream Big. campaign to spur the creation of 20 million jobsover the next decade restoring the 7 million jobs lost tothe current recession, and creating the 13 million new jobsthat our growing nation will need in the next 10 years. Itis a comprehensive, multiyear campaign to support freeenterprise through national advertising; grassroots advocacy;citizen, community, and youth engagement; and researchand ideas leadership.

The opinions and conclusions expressed or implied inthe report are those of the research agency. They are notnecessarily those of the National Chamber Foundation andthe U.S. Chamber of Commerce.

enterprisingstatesCreating jobs, eConomiCdevelopment, and prosperityin Challenging times

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May 3, 2010

Dear Colleague,

The National Chamber Foundation has partnered with the American Free Enterprise. Dream Big. campaign to spurthe creation of 20 million jobs in the next decade restoring the 7 million jobs lost to the current recession, andcreating the 13 million new jobs that our growing nation will need in the next 10 years.

Each individual state will play a pivotal role in achieving this goal by creating the conditions for competition,innovation, and productivity through a focus on education and training, science and technology andinfrastructure. Enterprise-friendly policies at the state level can facilitate local job growth by championingentrepreneurship and mobilizing effective partnerships for improving the conditions for business and job growth.

Our study connects the success of free enterprise to our nations economy by correlating key policy inputs and bestpractices in state-driven economic development with job creation and other substantive economic outputs. Brief case studies of each state highlight policies and strategies that work. From the interviews we conducted for thesecase studies, it is clear that the states are making job creation a high priority, and are implementing meaningfulchanges in their approaches to job creation. While this varies by state, there is a renewed focus on creating morefavorable conditions for business growth.

As you will soon see, some common themes emerge such as the streamlining of regulatory and permittingprocesses, analysis of current tax policies, an increased attention on business creation and support for existing

companies, and a strong emphasis on incentivizing private sector investors primarily with tax credits. Science andtechnology- based economic development and clean-tech initiatives are proliferating in virtually all of the states.Productivity and competitiveness initiatives, while not necessarily job creating, are being used aggressively tostrengthen and retain strong companies who already anchor state economies. There is widespread support fordoubling exports but there are also states that have made signi cant headway using strategies for foreign directinvestment (FDI).

We hope youll nd this study to be interesting and useful in understanding what is going on at the state level tocreate jobs and economic growth. At the Chamber, we are more committed than ever to promoting jobs through freeenterprise and education. Learn more at FreeEnterprise.com.

Sincerely,

Margaret SpellingsExecutive Vice PresidentNational Chamber Foundation

a letter from our exeCutive viCe president


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exeCutive summary

The message of Enterprising States is that the 50 littleRepublics matter. State policies matter. Governors, statelegislators, and local of cials matter. Although the Federalgovernment has been driving stabilization policy duringthe recent recession, it is the states [and territories] thatwill lead a crucial new growth strategy in the next decade.The nation needs an economic revival suf ciently robustto create 20 million jobs over the next decaderestoringthe 7 million jobs lost to the current recession, and creatingthe 13 million new jobs that our growing nation will needin the next 10 years. And while the Federal governmentwill affect the situation on the ground in broad strokes andfrom a distance, Governors and state and local governmentwill drive the types of new, experimental, exible job-growth strategies that can match the speed of the globaleconomy and achieve this growth imperative.

Fiscal challenges can force important policy choices

about taxation and spending priorities, and states mustbalance those decisions against the need to retain andattract private enterprise. In fact, many states have shownthat scal prudence and bipartisan pragmatism are morelikely to be achieved outside of Washington. The ndingsof Enterprising States are likely to surprise and provepowerful examples for the next wave of state-level policyinnovation.

Consider: the State of North Dakota, perhaps anafterthought to some, was a national leader in job growthover the last decade. Montana, meanwhile, leads in manymeasures of entrepreneurship, Tennessee in severalmeasures of taxes and regulation, and Minnesota onworkforce development and training. Some states, likeTexas and Utah, are strong across the board in botheconomic policiesand economic results. And despite aMidwestern manufacturing meltdown, a State like Indianaremained a oat because of sensible tax, budget, andregulatory policies, proving it can be done.

America is a vast country made up of hundreds of diverseeconomies, writes study co-author Joel Kotkin. The

exibility to match local strengths with global needs willbe paramount. It is local knowledge and local energyamong local of cials and individual businesspeople andentrepreneursthat will make the difference. Washingtoncan focus on a few overriding national priorities, but mostof the new ideas, new companies, and new jobs will comefrom local initiative.

As Kotkin writes, This enterprising spirit re ects abroad, long-term American trend. U.S. employment hasbeen shifting not to mega corporations but to individualsand smaller units; between 1980 and 2000, the number of self-employed individuals expanded tenfold to comprise 16percent of the workforce.

In the coming decades, the U.S. will enjoy a demographicdividend of more immigration and higher birthratescompared to most developed nations. This dividend of

human capital could be a chief U.S. economic advantage ina global economy. But only if we match this demographicdividend with a jobs dividend.

Enterprising States nds:

States are much more active than the Federalgovernment on the job creation and economicdevelopment front. While the policies vary by statethere is renewed focus nationwide on creating morefavorable conditions for business growth.

State priorities vary considerably. Some are strongin innovation. Others in exports or workforcedevelopment. Some have weathered tough times withrelative success. Others were not prepared for anextended downturn. The recent recession, however,leaves a number of important lessons and gives allstates a chance to reassess, reboot, and adopt provenstrategies for the future.

High tax rates do not lead to either healthy economiesor budgets. On the contrary, many states with thehighest tax rates and most onerous regulatory regimes


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have experienced the worst budget crises. Taxpayersand businesses are leaving these states. States withmore favorable tax and regulatory climates did not

experience budget problems nearly as severe.Many states have implemented initiatives forstreamlining red tape to help businesses sort throughthe many layers of government regulation and haveincentivized private-sector investors primarily with taxcredits.

Targeted investments in infrastructure projects at thestate-level can create growth-friendly environments incommunities.

Science- and technology-based economic developmentand clean-tech initiatives are proliferating amongstvirtually all of the states.

Productivity and competitiveness initiatives, while notnecessarily job creating, are being used aggressivelyto strengthen and retain strong companies who alreadyanchor state economies.

There is widespread support for doubling exportsbut there are also states who have made signi cantheadway using strategies for foreign direct investment(FDI).

Cultivating people through workforce developmentand training will drive economic development at thestate-level.

Regional cultural variety could account fordifferences in entrepreneurial strength. For example,entrepreneurship is notably strong in the West andNortheast-Mid-Atlantic regions. Which begs thequestion: How might we translate this culture of entrepreneurship to other regions?

Enterprising States is a beginning, not an end. It isan in-depth look at the vast and complex network of economies we call the 50 states and ter ritories. It is anattempt to nd some of the most important regional andpolicy differences that can yield new information to localleaders and lawmakers. Studying the differences amongthe states should help them learn from one another. Whatworks? What doesnt? By sharing these success stories andlessons learned we hope to create a roadmap to economicresilience and an ongoing dialogue that makes every statestronger.


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the jobs imperative: power to the states

In the coming decades, the United States will enjoyan enormous demographic advantage over its primarycompetitors in both Europe and East Asia. As countries

such as Germany, France, Japan, South Korea and evenChina will experience declining workforce growth andrapid aging, by 2050 the pool of people aged 14 to 64 inthe United States is expected to grow by more than 40%,compared to what it was in 2000. In contrast, Chinasworkforce will fall by 15%, Europes will decline by 25%,and that of Japan will plunge by 44%. 1

This growth represents an unprecedented opportunityfor free enterprise in America, but it also poses atremendous challenge. What the United States doeswith its demographic dividendthat is, its relativelyyoung working-age populationwill largely depend onwhether or not the private sector can generate growth in

jobs and wealth to help meet the needs of a larger agingpopulation.

Government, tooparticularly at the state and local levelswill need to play a role with policies that spur the privatesector. Government can facilitate long-term job growth byestablishing smart approaches to education, immigration,health care, energy, infrastructure, and tax and regulatorypolicies.

A University of Kentucky report prepared for the U.S.Chamber of Commerce has calculated the total number

of new jobs needed to return the economy to our pre-recession level of employment and provide jobs for allthe expected new entrants. It concluded, The national

total is nearly 23 million workers. Almost forty percentof these additional jobs are concentrated in California,Florida, and Texas, three states that comprise 26 percentof the population as of 2008. Each of the three states thatare predicted to need fewer positions since the start of therecession has fewer than 850,000 people. In these states,North Dakota, South Dakota, and Wyoming, the numberof workers affected by the recession is more than offset byslower population growth projected by the Census. 2

And simply to keep pace with population growth in 2010,the New America Foundation estimates, the countryneeds to add more than 125,000 jobs a month. 3

The employment imperative is particularly critical today,with over fteen million unemployed. Even if we reach theadministrations goal of providing 95,000 jobs a month thisyear, 190,000 monthly next year, and 250,000 in 2012, ouroverall unemployment rate is expected to remain over 8%by 2012. According to estimates by the Economic PolicyInstitute, it could take until 2013 or even 2014 to get backto the unemployment levels of before the recession. 4

The most critical need is to create jobs for middle andworking class people, and for the young, with the teenunemployment rate now over 24% compared to under 15%

Europe, -25%

China, -10%

Japan, -44%

Korea, -30%

United States, 42%

-45%

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Growth of Population Age 15- 64

Figure 1. Source: U.S. Census International Database


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in 2007. 5

These groups have borne the brunt of the recessionparticularly in areas such as construction, whereemployment has contracted by two million jobs since 2006.The nature of the federal stimulus, which focused more onthe social safety net than on infrastructure, appears to have

largely missed this heavily male, blue collar segment.6

Many have been out of work for a long time. Nearly6.3 million Americans have been unemployed forover six months, the largest number since the federalgovernment started keeping track in 1948. The averageduration of unemployment28.5 weeksis the highestsince the end of the Second World War. According tothe labor department, r ight now there are roughly 6.1unemployed people for every job, four times the rate inDecember 2007.

n : a a c a c jCMore than a year after the passage of the federal stimulus,much more work needs to be done to strengthen of ourfree enterprise system. Some analysts suggest that we takeour lead from the example of European societies, and usetax dollars to stimulate and preserve employment as wellas expand social protections. Others argue that adoptingEuropean models of shorter hours and more leisure mightbene t the economy. 7 Yet these are not rational choices

for the United States, since virtually all these societies areaging rapidly, and few have been growing rapidly.

Indeed, many of these societies still have higher rates of youth unemployment than the United States. By the end of 2009, unemployment for those under the age of 25 stood at21% in the European Union (EU), with some countriesSweden (27%) and Spain (44%)at extraordinarily highlevels. 8

Overall, the core European countries have not grown asquickly as the United States over the past forty years,

and seem to be lagging in the current early stagesof the recovery. This is a long term trend. The coreEU fteen countries share of the world economy hasshrunk considerably, while that of the United States hasremained remarkably stable. For EU countries, expansivesocial protection has not been paired with rapid growth. 9

The United States will need to nd its own means toaddress its unique jobs imperative. Clearly, the expansionand preservation of government employment hasproven stimulative, but private sector employment

continues to be a struggle in most of America.

One third of the stimulus was directed to localgovernment, and public employment has barelydropped. Even so, there is increasing stress on stateand local government, due to the declines in the privatesector economy. The limited ef cacy of a government-centered approach can be seen in the stateswhich,after all, cannot print their own money to cover theirde citswith extremely stressed budgets and theinevitability of large cutbacks in public employment. 10

Another misplaced approach to job creation is the widelyembraced notionboth at the federal and the locallevelsthat government regulations tied to a greeneconomy could create a large new employment source.Various studies in countries that have created massive

incentives for such employmentSpain, Germany,Denmark nd that the employment-stimulating impactof such policies can be more than off-set by the negativeconsequences of resulting high energy prices. 11 Whencap and trade mandates raise energy taxes and the cost of doing business, they ultimately inhibit job growth. In thelong run new jobs in energy sectors will be created by thecreation and production of new technologies.

Expanding our production of all energy sources couldbe a major source of jobs. But the experience in some

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M i l l i o n s

United States Construc t onEmployment, 1993-2010

Figure 2. Source: U.S. Bureau of Labor Statistics, Current EmploymentSurvey.


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European countries makes clear that green jobs ontheir own cannot be a fundamental driver of future jobcreation. Indeed, literature suggests that much of the

job growth in green industries has occurred in China andother countries. To date, the actual impact of green jobsseems to be less than expected. 12

The one likely way to expand green jobs, notes a seriesof studies, would be through greater economic growth.Most new green jobs depend on the expansion of otherkey sectors, notably housing, manufacturing, warehousingand agriculture. As these industries expand, they will bethe prime markets for new, environmentally responsibletechnologies and techniques. 13

The only sustainable way for the United States to create jobs lies in a rapid expansion of the private sectoreconomy, including in the construction, manufacturing,and energy sectors. A green economy cannot becreated at the expense of the rest of the economy as awhole. Unreasonable constrictions on manufacturingand construction inhibit job growth. And roadblocksto energy developmentincluding to renewable energyprojectsfrom environmental legislation, as well as fromenvironmentalists and NIMBYs, are also harmful to jobgrowth. Improving the quality of the environment shouldbe a primary concern here, of course, as well. But withoutrobust economic growth, the United States simply willhave to accept a massive decline in living standards.

The growing divergence between advanced countriesshould not be viewed as a matter of right or wrong,better or worse. Rather, it signi es how societies of different heritages, faced with different prospects, copewith their evolving futures.

w i b r fg i j C ?The best role for the federal government is to fundnational priorities like energy, physical infrastructure, andthe national defense, and to set basic health and safetyregulatory guidelines that are carefully balanced againstthe need to maintain low barriers to entry into the market.But, for the most part, the primary mission for economicdevelopment went to the states, and, more importantly, theprivate sector economy. The mounting federal initiatives to wrest environmental,wage, and bene t concessions from private companies areexamples of a centralization of government power overboth states and private businesses that could take us inthe wrong direction. Although certain times do call forincreased federal activitylegitimate threats to nationalsecurity or economic emergencies, such as the GreatDepression or the recent nancial crisiswe may beapproaching a critical juncture where Washingtons powermay be reaching beyond its effectiveness.

The current impulse to create a high-employment economyby imposing federal restrictionssuch as the proposal thatprivate rms that do not raise wages will be bullied intodoing so by the manipulation of federal contract awardsmarks a departure from our free-market traditions.Similarly, possible federal control over local zoningdecisionsthrough such organizations as the EPAalsomark a crossing of the regulatory Rubicon.

States and localities are far better positioned than thefederal government to foster strategic investment,regulations, taxes and incentives that encourage privatesector prosperity. In large part, this is because they aremore responsive to local conditions. Many academicplanners, policy gurus, and national media have tendedto favor large government units as the best way toregulate and plan for the future. But central plannersconsistently seek to reduce the in uence exercised bythe plethora of villages, towns, and cities in the UnitedStates: well over 65,000 general-purpose governments.With so many small towns, the average local jurisdictionpopulation in the United States is 6,200, small enoughthat nonprofessional politicians can have a serious

United States

Latin America

EU 15

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Middle East/Africa

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Figure 3. Source: USSA Economic Research Service. World Bank WorldDevelopment Indicators, International Financial Statistics of the IMF,Global Insight, and Oxford Economic Forecasting, as well as estimatedand projected values developed by the Economic Research Service allconverted to a 2005 base year.


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impact on local issues. 14

The American preference for solving problems at the stateor local level should be central to the government role in

job creation. One size determined in Washington willnot t all. South Dakotans and Californians will prefer toaddress employment problems in different ways. Within

the limits of constitutional rights, we should let them trytheir hand, and let everyone else learn from their successor improve upon their policies.

Indeed, many Americans on both the right and left areinstinctive decentralists. Our economic evolution mirrorsthis trend. Americas entrepreneurial urge, in contrastto developments elsewhere, has actually strengthened.In 2008, 28% of Americans said they had consideredstarting a businessmore than twice the rate for Frenchor Germans. Self-employment, particularly amongyounger workers, has been growing at twice the rate of the mid-1990s. 15

For this reason, supporting new businessesand smalland medium-sized rmsby ensuring that they can getthe credit they need is an essential piece of the job-creationpicture. For jobs to grow, these businesses must thrive.

i e a K s j i

America will depend on its emerging population of younger workers to keep expanding its economy. In the1970s, when the coming-of-age of the boomers beganto impact the labor market, labor force growth createda period of higher unemployment. Now, we could see areoccurrence as the large millennial generation starts toseek employment. Yet now, as then, predictions of a long-term labor glut could well change as these workers nd anddevelop new opportunities.

This happened to the boomers in the late 1980s, whentalk of long-term high unemployment was replacedwith concerns over a labor shortage. The growth of new industries tied to the use of computers, and laterof the internet, created a surge in demand for skilledworkers. As boomers integrated into the workforce and

were replaced by less numerous generation X-ers atthe entry level, companies fretted increasingly about adiminishing pool of workers. 16

The opportunities for employment created by the riseof new industries, and by the innovative expansion of established businesses, cannot be underestimated. Suchinnovation has long been the source of new growth forthe American economy, although the exact nature of thatinnovation is impossible to predict. Much of the pioneering

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UtahNevada

WyomingHawaiiTexas

North DakotaAlaska

ArizonaNew MexicoWashington

IdahoFloridaMarylandMontana

OklahomaGeorgia

ColoradoNew Hampshire

South DakotaVirginia

Middle Class Job Growth, 2002-2009

Figure 4. Source: EMSI Complete Employment, 1st Quarter 2010. Middle class de ned by education level required. Includes: all jobs requiring longterm on the job training, related work experience, post secondary certi cate, or associates degree. Excludes real estate sales agents and brokers.


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will likely come from skilled immigrants, who areestimated to have started a quarter of all venture-backedpublic companies between 1990 and 2005. 17

This enterprising spirit re ects a broad, long-termAmerican trend. U.S. employment has been shifting notto mega corporations, but to individuals and smaller

units; between 1980 and 2000, the number of self-employed individuals expanded tenfold to comprise 16percent of the workforce.

The smallest businessesthe so-called microenterpriseshave enjoyed the fastest rate of growth. By 2006 therewere some twenty million such businesses, one for everysix private-sector worker. Hard economic times couldslow this trend, but historically, recessions have servedas incubators of innovation and entrepreneurship. Manyof the individuals starting new rms will be those whohave recently voluntarily left or been laid off by biggercompanies. 18

t v r i c b c iTo succeed in the mid-21st century, Americans alsowill need to pay more attention to the countrys basicindustries. Some assume that the American future canbe built around high-end creative jobs, without everreviving the industrial economy or rebuilding our physicalinfrastructure. In the America envisioned by advocates of

the creative economy, our productive facilities wouldserve mainly as tourist attractions, much as we now visitrestored pioneer villages. 19

Such an approach assumes that our rising competitors,notably China and India, will surrender high valueactivities such as media, nance and engineering. This isa dangerous and historically ill-considered assumption.In the 1980s, Japanese rms that were widely written off as copycats became primary innovators, particularlyin automobiles, semiconductors, and computer games.In the coming decades, Chinese, Indian, and Brazilian

companiesto name a fewwill seek to move fromlow-wage work to more specialized, innovative kinds of products. The enormous revenues generated from the lesstrumpeted activities will provide the funds to invest in theirmove into ever higher-end activities.

Americans can create a more prosperous future, but onlyif we focus on maintaining the physical infrastructurenecessary for basic production and transportation, aswell as on developing the intellectual prowess of ourcitizenry. Americas unique demographics require the

country to pay attention not only to high-tech industriesor nancial services, but also to the basics: construction,manufacturing, agriculture, and energy.

These critical industries underpin our prosperity andemploy our expanding blue-collar workforce. They canprovide new opportunities for the majority of workers who

do not possess four year or advanced college degrees. In2005, the National Association of Manufacturers, theManufacturing Institute, and Deloitte Consulting surveyedeight hundred U.S. manufacturing rms: More than80% reported that they were experiencing a shortage of quali ed workers overall. Nine in ten rms stated thatthey faced a moderate-to-severe shortfall of quali edtechnicians. By 2020 this shortage could grow to 13million workers. A resurgent manufacturing sector wouldalso boost the countrys technological workforce. By 2007,industry employed about a quarter of the nations scientistsand related technicians. 20

This revived focus on production would help largeswaths of the country. The Great Plains area, which isstill pro ting from industrial and agricultural expansion,would bene t, as would the Great Lakes, which hasweathered so many challenges in recent decades.Historically neglected regions such as Appalachia wouldalso pro t.

t C c r sAmerica is a vast country made up of hundreds of diverse economies. From early on, very differentindustries clustered in different places. There has beenwide divergence in the skills and abilities of localpopulations. Although federal intervention is necessary incertain areasfor example, in creating national researchinstitutions or interstate transportationit is often at thestate or local level that the best policies for a particularregion can be developed.

The need to tailor economic development to local needshas been a critical aspect of the success of our federal

system. By giving a state wide leeway to develop its ownsolutions to the jobs imperative, we would be providingthe other states with potential role modelsas well asa warning system of policies to avoidin their ownstrategies. The states are described in the famous opinionissued by Supreme Court Justice Louis Brandeis as placesthat serve as a laboratory where the nation can try novelsocial and economic experiments without risk to the rest of the country. 21

States have often been leaders in fashioning progressive


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approaches to economic development. Private andstate-sponsored development created the initialnetwork of roads, canals, and steamboats that knittogether regional economies. When President JamesMadison vetoed federal funding for the Erie Canal in1817, the New York legislature used its own tax and creditresources to complete the 363 mile system eight years

later. Eventually the canal helped assure the EmpireStates national preeminence. Other states, includingPennsylvania, Ohio, Indiana, Illinois, Maryland andVirginia, followed suit with their own canal-buildingprojects.

In the 1920s and 1930s statesand some municipalitiesalso invested heavily in wealth-creating infrastructure,including highways and water and power systems. Theseinvestments supplemented signi cant new underwritingof projects from private corporations. States continued tomake these investments throughout the 1950s. 22

At the time, no state was more successful at developingits economy than California. Under both Republicanand Democratic Governors, California developed whathas become a widely accepted model of local economicdevelopment based on the expansion of traditionalinfrastructureroads, bridges, water and energysystemsmatched by massive investments in humancapital, including a master plan for higher education thatspanned the elite universities to the community colleges. 23

Californias state investment and business promotionpolicies inspired other states, notably Texas and NorthCarolina. This state role was also embraced by the youngGovernor of Arkansas, Bill Clinton. Faced with the issuesof a poor, racially divided state, Clinton recognized that,given the deep divisions in Washington, There is noalternative to continued intense state efforts to deal withour most pressing domestic problems.

Although unemployment dropped, there remainedproblems relating to national competitiveness and decliningmiddle class wages, Clinton argued. But he continued tobelieve in the exercise of local power. In a country ascomplex and diverse as ours, in which most job growthis generated by small business, he noted, many of these[economic] issues will almost have to be dealt with at thestate level. 24

In David Osbornes landmark work, Laboratories of Democracy, he described how the late 1980s and early1990s saw the emergence of a whole host of innovativeGovernors. The rst agenda of these Governors, Osbornenoted, was creating economic growth, a notion Governor

Clinton later used effectively in his campaign for thePresidency. 25

In todays federal-level climate, states could potentiallyplay a more signi cant role than they did in the 80sand 90s. Chuck McCutcheon, co-editor of Politics inAmerica at CQ-Roll Call Group, suggests that continued

DC political gridlock makes the states better suited todeal with major policy issues. At the state and local levels,he suggests, politicians are more likely than their highlypolarized federal counterparts to get along with eachother. 26

C c : t p s l j iUltimately, states and localities are best quali ed to meetthe jobs imperative. As Alexis De Tocqueville observed,it is natural that citizens of a state or locality are moresolicitous about the increasing prosperity of his owndistrict, and this serves to stir men more readily thanthe general interests of the country and the glory of thenation. 27

As our country grows, reaching 400 million people by2050, the differences between our various states andcommunities will grow. We will have more diverseregional economies, demographics and cultures. We needto look at these local sourceswhat Thomas Jeffersoncalled our little Republicsto lead the jobs imperative.

It is an imperative upon which depends the future successof our entire nation.


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the states and eConomiC development

States throughout American history have done everythingthey can to cultivate, attract, retain, and grow thebusinesses that comprise the most fundamental building

blocks of their economy. Even in todays volatile globaleconomy states with severe unemployment and budgetwoes can point to policies, programs, and investments thatfoster new economic opportunities and create jobs.

Many state economic development organizations wereoriginally established with business recruitment andattraction as their primary focus. But todays mix of stateapproaches to economic development has moved wellbeyond earlier, sometimes singularly focused attempts tolure footloose businesses with huge nancial incentivesand/or by offering a business climate based on cheap labor,low taxes, and lenient regulations.

States, nonetheless, still compete with each other forcompanies in traded sectors and jobs in the globaleconomy, either directly or by virtue of unique assetsand resources, and this sometimes involves nancialincentives and tax abatements. But there is growingmomentum among governors and state legislatures togrow their economies from within by creating a new set of competitive advantages that include building human capitalthrough workforce development and training, harnessing

the power of science and technology assets, makingstrategic investments in infrastructure, reaching out toglobal markets, developing opportunities related to energyand the environment, and spurring entrepreneurship andinnovation.

Generally, state economic development efforts include aninterrelated array of policies, programs and investments,falling into three major categories: (1) an entrepreneurialapproach focusing on new business and technology-based development, oftentimes with a focus on bolsteringproductivity and innovation; (2) recruitment, expansion,

and retention strategies emphasizing nancial incentivesor investments and other programs, including internationaltrade and export promotion; and (3) fertile soil policies 28 that create the conditions for growth that will bene talmost any type of business by streamlining governmentalregulation, optimizing taxes, investing in infrastructure,and/or by providing a better-educated, more highly skilledwork force.

This study looks at ve speci c policy strategies that stateshave used and are using now to accelerate growth and

create jobs:

Entrepreneurship and Innovation,

Exports and International Trade,Infrastructure Investment,Workforce Development and Training, andTaxes and Regulation.

While it is up to state governors and legislators to setthe environment for development to ourish, ultimatelyeconomic development success is de ned by executionat the local and regional level. With well designed state-implemented development tools, effective workforcedevelopment and skills training systems, and strong

infrastructure, states can give local economic developersthe power to assist the growing businesses, to broker thekey partnerships, and to lead the key initiatives that createthe jobs needed to sustain our growing population.

Most of all, states must carefully weigh policy to refrainfrom constructing barriers to private enterprise growth.Many of the most effective economic developmentinitiatives start from grassroots efforts or private sectorbusiness leaders, so supporting these efforts from the statelevel is imperative.

m s : a l tpA primary goal of any state economic developmentprogram is not only to increase the number of jobs in thestate, but to improve the quality of jobs and the overallprosperity of the states residents.

This study combines metrics for each economicdevelopment policy area to measure overall highperformers in each policy topic area. States are

compared in each metric and top states are determinedby a composite comparison of all metrics in overallperformance and in each policy area. For a full descriptionof all metrics and results for each state, see the Metricssection on page 25.

To establish the overall best performers we combined:

Job growth rate since 2000 and since 2007Gross State Product (GSP) measures: real GSP growthsince 2000, GSP per job 2008, Growth in GSP per job


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2000-2008Income: per capita personal income growth 2000-2009and median four person family income adjusted forcost of living, 2009

t o g p

North Dakota1. While North Dakotas lowunemployment and recession resistance is oftenattributed to healthy agriculture and energy sectors, itsconstruction and manufacturing sectors are relativelyhealthy and the state has seen 42% job growth inprofessional and technical services and 36% inmanagement of companies since 2002. North Dakotais the top job performer since the 2007 peak and is

fth since 2000. The state also places rst in growthin GSP per job (productivity increase), second in GSPgrowth and third in per capita income growth. Recentinvestments in research and development (R&D)infrastructure are beginning to pay off as the state isthe fastest growing in science, technology, engineering,and mathematics (STEM) job growth.

Virginia2. Already a professional and technicalservices powerhouse in 2002, Virginia added another135,000 jobs in that sector since that time, fueledby 90,000 new jobs in computer systems design andmanagement and technical consulting services. Thestates high incomes and slightly below average costof living placed it rst on our cost of living adjustedfamily income measure.

South Dakota3. - South Dakota is a strong overallperformer, doing best in productivity and outputmeasures. Partly due to an enterprise-friendlyregulatory structure, the state has 30% more nanceindustry employment than the national norm and hasadded 18% growth in nance employment since 2002.The states manufacturing sector actually gained

jobs since 2002, led by growth in signs, chemicals,communications equipment, and constructionequipment, all averaging more than $43,000 in

earnings per worker.Maryland4. Maryland landed in the top 20 or betteron all seven performance metrics. Maryland sawstrong growth in technical consulting and computersystems design, but especially private scienti cresearch and design services, a sector more than 2.5times as concentrated in Maryland than the nation asa whole and paying nearly $95,000 in earnings perworker.

Wyoming5. Wyomings growth is powered by a

rapidly expanding energy cluster, which added morethan 18,000 jobs since 2002 and now holds 30% of all employment in the state. The energy growth hasspilled over into business services sectors such asenvironmental consulting, surveying and mapping,and testing laboratories. Its overall manufacturingsupersector also gained jobs, seeing the fabricated

metal and electrical equipment clusters begin toemerge.

New York6. While New York saw average job growththrough the beginning of the decade, it has weatheredthe recession better than most other states, and its highproductivity and productivity gains help place it amongour top performers. Accounting for about 8% of all

jobs in the state, the professional and technical servicessector added more than 115,000 jobs for 15% growth.

Texas7. Texas has seen strong job growth this decade

and has weathered the recession well, fueled by 20%expansion of a now 1.1 million job energy cluster.Recently machinery manufacturing and transportationequipment manufacturing clusters are emerging, bothgrowing to more than 90,000 jobs. This has helpedstimulate a 15% expansion in transportation andlogistics including warehousing and storage and manyfreight and specialized trucking sectors.

Iowa8. A solid performer across most of our metricsIowas strength is perhaps in its stability. Thestates largest cluster, agribusiness, food processing

and technology, grew at a 1% rate since 2002,signi cantly better performing than the samegroup of industries nationally. Iowas other mostcompetitive clusters include machinery manufacturing(farm and construction equipment, refrigeration andheating systems, and other commercial equipment)transportation and logistics, and advanced materials(search and navigation equipment and machine shops).

Nebraska9. Nebraska has added 15,000 jobs to itsbusiness and nancial services cluster since 2002, ledby management and technical consulting, management

of enterprises, and credit intermediation, all addingat least 3,000 jobs and averaging $55,000 to $90,000in earnings per worker. The states railroads andsupport industries and freight trucking support a strongtransportation and warehousing cluster, and the statehas seen a boom in marketing consulting and marketresearch sectors.

Montana10. While Montanas energy and miningclusters added a combined 8,400 high-paying jobsto the state since 2002, Montanas greatest sourceof national dominance came from the collection of


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arts, entertainment, recreation, and visitor industries,perhaps a sign that the rest of the nation is beginningto discover the Big Sky country. Montana is alsobeginning to see the emergence of smaller clusters inchemicals, apparel and textiles, and fabricated metalproducts.

g j : h d t d i ?A review of which states are high performing showsa diverse groupsome big, some small; some rural,some urban; some inland, some coastalbut a closerexamination shows a shared pattern of policies by thesehigh performers.

There is no such thing as single a silver bullet strategyfor job creation. Among our top ten performers, all tenhave seen at least 4% job growth since 2002 in mid-level jobs requiring at least long term on-the-job training

but less than a four-year degree. Five of the ten statesincreased those jobs more than 10%. At the same timeall ten increased science, technology, engineering, andmathematics (STEM) jobs by at least 4% over the sameperiod, with 7 of 10 growing STEM jobs at least 14%. 29

An assessment of top performing states, regardlessof by what measure, eventually gets down to a statesability to execute successful initiatives. Aside fromminding the basics of primary education and supportiveinfrastructure, success begins with an understanding of astates economy and demographics, including its strongpoints and its gaps. States that can mobilize the relevantpartners to put together the strategic networks to buildupon those strengths while addressing the weaknesseswill be winners in the long run.

Adequately nancing any initiative is paramount toits success. Top performing states have come up withwinning formulas often based on combining statefunding with federal programs and private sources. Asregional workforce skills gaps become more acute, non-governmental agencies and private enterprises more arewilling to join new collaborative development projects.

Programs such as Kentuckys Bucks for Brains whichrequires universities to match state funds with donationsfrom philanthropists, corporations, foundations, andother non-pro t agencies, or Floridas use of AmericanRecovery and Reinvestment Act (ARRA) funding incombination with existing state funds to tackle majorinfrastructure programs illustrate unique solutions tosuf ciently nancing winning initiatives.

Examples of strong partnerships featuring open

communication are especially evident in high performingexport states. Export programs are based upon effectivecommunication between the importing country, theexporting manufacturer or business, and the stateprogram helping to facilitate the connection.

The TexasOne program creates promotional materials

to market the state and its manufacturers to importingcountries and leads trade missions to importing countriesand hosts reverse trade missions to the state. Nevadaworks with a network of trade representatives intargeted markets throughout Asia, North America andEurope, focused on cultivating distribution channels andfacilitating opportunities for foreign direct investment inNevada enterprises.

Many high performing states offer an array of corporate,manufacturing, and land tax programs. So too, manystates are shying away from direct subsidies forpromised job growth in favor of highly targeted taxcredit programs that require direct investment bythe rm or venture investors wherein the tax bene tsare only realized after new jobs are in place. Othercredit programs target historically underdevelopedgeographical regions.

Other states such as North Dakota, Florida, andMississippi have turned to comprehensive tort reformas another key element enterprise-friendliness. Whetherthese reforms are speci c to a particular industry or issue,

they ultimately help businesses, large and small, remaincompetitive and free of excessive burdens from excessivelitigation.

Private sector and academic collaboration is oneof the most readily identi able attributes of highperforming states across all measures. Whether it issuccessful innovation and entrepreneur programssuch as Montanas TechRanch, Oregons InnovationCouncil, Rhode Islands Center for Innovation andEntrepreneurship, or job creation and economicdevelopment initiatives such as Momentum Mississippi,these private and academic partners are providingcritical input, oversight, and resources to bolster theeffectiveness of state efforts.

Many states are locating business incubators adjacentto universities in partnership with the schools whileothers are building laboratory spaces and otherspecialized infrastructure to offer to growing companieson an a la carte basis. In either case, this business andscienti c infrastructure can reduce start-up costs fornew enterprises and provide students the chance for


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experiential learning while earning their degrees.

While there are obviously other policies or initiativesthat high performing states share there are somecommonalities: building on momentum; deliveringadequate funding for initiatives; developing strongrelationships and communication strategies; enterprise-

friendly tax and regulation systems; and vigorouscollaboration between business, government, and educationinstitutions.

e iEntrepreneurial and innovation policies intend to stimulatethe creation and expansion of businesses. Several non-mutually exclusive approaches are being implemented bystates that involve working with individual businesses aswell as working with industry clusters and networks thatinvolve business, government and education.

New Business Development1. by providing nancial,technical and managerial assistance and training toindividual businesses 30; incubators are often used tohelp start-up companies get traction in the early stagesof the business lifecycle.

Technology-based Development2. focuses on creatingan environment where businesses can constantlyinnovate and maximize the use of technology 31 basedon the following key elements:

An intellectual infrastructure, i.e. universities andpublic or private research laboratories that generatenew knowledge and discoveries;Mechanisms for transferring knowledge from oneindividual to another or from one company toanother;Physical infrastructure that includes high qualitytelecommunications systems and affordable highspeed Internet connections;Highly skilled technical workforce; andSources of risk capital.

Industry-cluster Development3. focusing ongeographical concentrations of similar, related orcomplementary businesses with active channels forbusiness transactions, communications and dialogue.Clusters share specialized infrastructure, labor marketsand services, and are faced with common opportunitiesand threats. 32

State research and development (R&D) expenditures variedfrom $618 per million GSP to $9 per million GSP in 2007,indicating wide variation in approach to each states rolein funding R&D. However, state investments tended to be

highest in traditionally underperforming research states(as designated by the federal Experimental Program toStimulate Competitive Research program), indicatingstrong state-level initiatives to complement federal researchsupport. 33

t e ipMeasurements of innovation and entrepreneurshipinclude growth and concentration of science, technology,engineering and mathematics (STEM) jobs; total researchand development activity in the state; state investmentsin research and development; and two measures of entrepreneurial activity: high-tech business starts and theKauffman index of entrepreneurial activity.

Montana1. the state places rst in overall businessstart-up activity led by Bozeman-based TechRanch,an organization formed uniquely by private businessleaders to coordinate entrepreneur support activitiesin the state. Montana places in the top in stateinvestment in R&D, built upon the states Board of Research and Commercialization Technology, createdby the legislature in 1999 to provide a stable andpredictable funding source for research activities.

Maryland2. The state is home to 50 federal facilitiesand major research universities, Maryland scores inthe top 10 in concentration of science, technology,engineering, and mathematics (STEM) jobs andintensity of R&D in the economy. A STEM taskforce commissioned by state leaders recentlyreleased a plan to improve technology transfer andenhance STEM education programs to ensure thestates education system can meet future demandsof the R&D activities in the state. The MarylandTechnology Enterprise Institute (Mtech) focuses onthree primary goals: educating the next generationof technology entrepreneurs, creating successfultechnology ventures, and connecting state companieswith university resources to help them succeed.

Mtech offers programs, courses, workshops, andcompetitions to help aspiring entrepreneurs learn howto commercialize their ideas and products.

Washington3. Washington is the number 4 state inconcentrations of STEM jobs and R&D activity, butstill places in the top 10 in STEM job growth. Mostof the states STEM job growth since 2002 has comefrom the private sector. The state added more than22,000 STEM jobs in software publishing, computersystems design, engineering services, computerfacilities management, and scienti c research sectors.


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Alaska4. Alaska placed in the top ten in overallentrepreneurship activity and high-tech businessstarts. While research is not yet a major part of thestates economy, leaders have turned to state funds to

stimulate activityincluding a proposed $109 millionUniversity of Alaska sheries and biology researchcenterand the state has the sixth highest STEM

job growth rate. Alaskas Technology Research andDevelopment Center provides small businesses supportin pursuing Small Business Innovation Research(SBIR) awards to aid their development of innovativenew products and services, providing phase zerogrants and application support. Since programadoption, application success rates in Alaska haveincreased.

New Mexico5. Partly due to the presence of federalresearch labs, R&D activities account for more of the New Mexico economy than any other state andthe state houses a high concentration of STEM jobsto support this activity. In order to better capitalizeon these activities, the legislature passed a ResearchApplications act to establish a research center to morereadily move technologies developed at the statesfederal labs into the marketplace. The New MexicoPrivate Equity Program invests the states severancetax permanent fund in qualifying private equity andventure capital rms, who then invest in New Mexicos

innovative companies. The state investment requiresa private match to the state allocation, allowing NewMexico to leverage its resources while providingprivate capital access to innovative local rms.

Arizona6. The state and several counties in southernArizona have led the charge to leverage federalresources to strengthen the states innovation economy,creating Innovation Frontier Arizona, a science,technology, engineering, and mathematics (STEM)focused workforce training initiative. The ScienceFoundation Arizona has also focused efforts oncreating a highly trained workforce to aid innovationin the state using its STEM education initiatives andgrant programs.

California7. The iHub initiative modernizes the statesnational and global competitiveness by stimulatingpartnerships, economic development, and job creationaround speci c research clusters through State-designated iHubs. The iHubs leverage assets such asresearch parks, technology incubators, universities,and federal laboratories to provide an innovationplatform for startup companies, economic developmentorganizations, business groups, and venture capitalists.

Utah8. - In order to better facilitate technology transferfrom the states universities to the private sector, Utah

0 1

Virginia

Massachusetts

Washington

Maryland

Colorado

Delaware

California

New Jersey

New Mexico

Connecticut

Michigan

Minnesota

Utah

New Hampshire

Alaska

Oregon

Texas

Concentration of Science, Technology,Engineering, and Mathematics Jobs, 2009

31%

24%

23%

23%

20%

19%

18%

16%

16%

16%

15%

14%

14%

14%

13%

13%

12%

North Dakota

Wyoming

Nevada

Utah

Virginia

Alaska

Hawaii

New Mexico

Texas

Washington

South Carolina

Maryland

Montana

South Dakota

Alabama

Arkansas

North Carolina

Growth in Science, Technology,Engineering, and Mathematics Jobs,2002-2009

Figure 5. Source: EMSI Complete Employment, 1st Quarter 2010. STEM jobs include technical or associates degree level technicians and above.

Figure 6. Source: EMSI Complete Employment, 1st Quarter 2010.STEM jobs include technical or associates degree level technicians andabove. Measure is a location quotient, or the states share of all jobsin STEM occupations divided by the nations share of all jobs in STEMoccupations. 1.0 is the national norm level.


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has implemented a system of licensee grants throughits Centers of Excellence program. Since 2007,private sector businesses, including startups, havereceived grants from the state to aid them in bringingtechnology developed at the states universities tomarket, creating new products, companies, andspurring job creation in the technology sector. The

state has rolled out aggressive tax credits focusing onreducing risk for investments in research and start-upcompanies.

Colorado -9. A major focus of Colorados innovationagenda has been the development of a New EnergyEconomyto spur research innovation, Coloradohas adopted an Innovation Investment Tax Credit pilotprogram that provides an income tax credit of up to15% for quali ed investments in small businessesinvolved in research and development.

Virginia -10. The Virginia Innovation Program (VIP) isa $2 million innovation program launched by the stateto fund translational research. The Commonwealthprovides $1 million in funding with the additional $1million representing the funds or assets each institutioncommits to each speci c project in a 1-1 match. Theintent is to increase licensing opportunities and toencourage corporate partnerships and sponsoredresearch opportunities.

e i t

More than 50 million American workers are employed bybusinesses that export, according to the U.S. Department of the Treasury. One in four manufacturing jobs depends onexports, and one in every three acres on American farmsis planted for export markets. Whether businesses are largeor small, studies show that rms that export tend to growfaster, hire more, and pay better wages than those that donot.

Our neighbors in the AmericasCanada, Latin America,and the Caribbeanpurchase over 42 percent of U.S.exports, and Europe and East Asia each account for a 25percent share. Capital goods have historically been thelargest category of U.S exports, including automobiles,engines, parts, and industrial equipment. Exports to Chinaof management, consulting, and public relations servicesincreased by 36 fold from 2002 to 2008. Our exportsto India in construction, architectural, and engineeringservices increased 39 fold over the same period. 34

More than a quarter million of Americas small businessesexport, and they account for nearly a third of U.S.merchandise exports, but thats just one of every 100

companies. There is ample opportunity to create new jobsby helping Americas small businesses start exportingby providing some of the tools, training, nancing, andcontacts they need to sell overseas.

Most states promote the expansion of exports eitherthrough an independent trade of ce or as part of an

in-house component of their economic developmentagency. The focus of these state initiatives is to facilitateaccessing the global marketplace by providing training andassistance, building international trade relationships, andadvocating the importance of international trade among thebusiness community.

t e pExport measurements track manufactured exports inthe state of shipment origin, excluding bulk commodityexports usually attributed to the state of port location. High

performing states are based upon the value of exports asa share of total economic output, change in export valueas a share of economic output, change in a states share of the nations total exports, and overall export growth 2002-2009.

Louisiana1. Louisiana placed in the top eight statesfor all four export measures. Exports spiked alongwith growth in the energy economy, including smallmanufacturers producing industrial equipment. Thestates exports to China totaled $5.4 billion in 2009, upmore than 50% over 2008.

South Carolina2. To enhance exports, the state hasdeveloped a Port Volume Increase Credit that providesa discretionary tax credit for certain industries thatincrease use of South Carolina ports. The PortVolume Increase Credit is available to manufacturers,warehousers, and distributors that use South Carolinaport facilities and increase base port cargo volume by5% over base-year totals.

Utah3. Utah places in the top ten for all four exportmetrics. With over 2400 businesses engaged ininternational trade, the state has been among ahandful of states leading the way in export growth.The World Trade Center Utah, in partnership withthe Salt Lake Chamber of Commerce and theInternational Trade and Diplomacy Of ce, acts asa support organization, connecting companies inUtah to international markets, providing training,identifying opportunities, and establishing networkingopportunities through the Utah International TradeHub.


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Texas4. Texas export total for 2008 was $192.2billion, higher than any other state. Between 2004and 2008 the export total from Texas rose 64%, or$74.8 billion - which was the largest dollar gain of all50 states. In terms of markets, 32% of Texas exports($62.1 billion in 2008) went to Mexico. To maximizethe states presence in international markets, the state

developed a strategy to market the states assets on aninternational scale for both export and foreign directinvestment opportunities. This included creating andimplementing an effective advertising campaign toposition Texas globally as a premier business locationand establishing international recruitment of ces.

Mississippi5. Mississippi has worked to increase thenumber of rms involved in exporting and importing,to promote the states transportation and distributioncapabilities, and to enhance the states brand in theglobal marketplace as a source for quality products

and services. Partly due to investments in keytransportation, shipping, and logistical infrastructurewithin the state, Mississippi has seen exports increaseas a share of its total economic output and the state is aleader in export growth.

Delaware6. Delaware is part of a cooperative effortof regional banks to assist exporters in submittingapplications for export working capital nancingthrough the Export-Import Bank of the UnitedStates (Ex-Im Bank). This enables Ex-Im Bank torespond to nancing requests more promptly. The

state has fostered the development of the WorldTrade Center Institute Delaware (WTCI), a non-pro torganization that provides international trade servicescomplementing and supporting existing services of private and government agencies, working closely withthe Department of State, International Trade Section toachieve global trade objectives.

Iowa7. With trade of ces in China, Germany, Japanand Mexico, the International Trade Of ce offersindividualized assistance and counseling for Iowacompanies looking to tap international markets,and the states Export Trade Assistance Programsupports the effort with nancial assistance to attendinternational trade missions. Efforts are paying off asthe state places fourth in growth of exports as a shareof gross state product.

Kentucky8. To help foster growth in exports,Kentucky has developed The Kentucky World TradeCenter (KWTC) to help companies import, export,and establish overseas operations. The KentuckyWorld Trade Center offers counseling, market research

services, translation assistance, trade educationseminars, international events and programs, cross-cultural training, trade missions, and referrals to localinternational service providers.

Kansas9. To accelerate ongoing trade initiatives,the Kansas Export Finance Program (an export loanguarantee program) was established to help companiesobtain nancing to participate in export transactions.The state issues loan guarantees, encouraging lendinginstitutions to provide nancing for small companies toparticipate in export orders.

Nevada10. Nevada led the nation in our overall exportgrowth between 2002 and 2009. Looking to buildon its strength, the state has signed a memorandumof understanding with China focused on expandingtrade and private investment activities between Nevadaand China. The state works with a network of trade

representatives in targeted markets throughout Asia,North America and Europe, focused on cultivatingdistribution channels and facilitating opportunities forforeign direct investment in Nevada enterprises.

i cInfrastructure plays a critical role in economicdevelopment and states have taken a lead role in workingwith local, regional and national governments to put it inplace. The basic infrastructure package of the economy

includes highways, airports, harbors, utility distributionsystems, railways, water and sewer systems, andcommunications networks.

In the ever-changing network-centric, innovationdriven economy infrastructure also includes universityand lab facilities, technology and training centers,export processing facilities, and research parks. Theseinfrasystemsintegrations of facilities, technology andadvanced socio-technical capabilitieshave emerged askey drivers of innovation and the locus of future higher-value industries and higher-paying jobs.

State expenditures on infrastructure include highways, airtransport facilities, and port facilities. Most states haveprograms in place for funding public works in industrialor research parks and for infrastructure associated withindividual business developments. States use their bondingauthority to nance infrastructure and a few states havedeveloped infrastructure banks.

Broadband telecommunication infrastructure is at theforefront of many state public policy initiatives and is


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viewed as indispensable to economic and communitydevelopment. The effect of broadband on job creation,particularly in high tech and other industries dependenton high-speed, highly interactive communications, iswell understood as a way to boost productivity, developnew products and services or create new businessmodels. Some states, e.g. California, also expect

expanded broadband deployment to lead to increasedtelecommuting and environmental bene ts.

t i c pStates are measured based upon three broadband measures:share of lines that are high-speed, share of zip codeswith at least ve high-speed providers, and residentialhigh-speed penetration rate. Other measures include statefunding investments in air and sea ports and measures of bridge and road conditions.

Florida1. Florida is the nexus of the WesternHemispheres transportation links. The Floridatransportation infrastructure is multi-modal andincludes highways, railways, seaports, airports and aspaceport that enable companies to gain quicker accessto markets and reduce bottom-line costs. The states2010-11 budget recommendations include $6.7 billionto build and maintain the roads, bridges, intercitypassenger rail, and other public transportation facilitiesthat grow Floridas economy and improve the qualityof life for its citizens.

Nevada2. Nevada is making efforts to expand thedevelopment of its readily available energy resources,

particularly focusing on renewable energy. The statehas worked to streamline permitting processes for newrenewable energy projects and created a transmissioncommittee to identify options available to expandaccess to the grid and enable increased energy exports.The state has also implemented tax abatements focuseddirectly on promoting private sector investment in

renewable energy infrastructure, including facilities forthe transmission of renewable and geothermal energyproduced in the state.

Colorado3. Home to the Department of EnergysNational Renewable Energy Laboratory (NREL) andother national labs and major research universities(Colorados Collaboratory initiative), the state isfocusing on renewable energy and climate research.In collaboration with funding from the stimulus billthe state working to expand specialized researchinfrastructure and capacity to take advantage of its in-

state research institutions.

Utah4. The Utah Science Technology and Researchinitiative (USTAR) is a long-term, state-fundedinvestment to strengthen Utahs knowledge economy.This initiative invests in innovation teams andresearch facilities at the University of Utah andUtah State University. The state in collaborationwith the University of Utah and private industryhas put together over $100 million (fundedprimarily with USTAR monies) to develop theNeuroscience Biomedical Technology Building.

The interdisciplinary research facility includesa nanofabrication facility, wet and dry labs, corefacilities, conference center facilities, and of ce spacefor research investigators.

Arizona5. The state and its academic partner, theUniversity of Arizona, have a developed a newbiosciences park designed especially for companiesworking in biosciences, biotechnology, life sciencesand pharmaceuticals, major industry subsectors in thestate. The state utilized academic funding sources incollaboration with federal American Recovery andReinvestment Act monies to develop the facility.

Georgia6. Four of the top 10 warehouse providersin North America are headquartered in Georgia and90 percent of the top 25 global third party logisticsproviders have operations in Georgia. Nearly 21,000companies throughout all 50 states rely on thedeepwater ports in Savannah and Brunswick andexport to 153 out of 195 countries across the globethese efforts are supported by nine general-purposeForeign Trade Zones across the state. The industry-

INFRASTRUCTURE & INFRASYSTEMSInfrastructure investments can drive growth

Public Works&Utilities

InteroperabilityEssentialCommunityFacilities

Transactional Innovation

Roadways

Water

WasteTreatment

Energy

Connectivity ->telecommunications

Mobility ->transit, transport,shipping

Distribution ->water and energy

Hospitals &

clinics

Schools &libraries

Fire & lawenforcementstations

Export

processingzones &facilities

Logisticscenters

SpecializedFacilities ->R&D labs, techparks, skills trainingcenters, high-performancecomputing

Advancedinfratechandservices for connectivity,energy,environment

Infrastructure Infrasystems

Source: Delore Zimmerman and Joel Kotkin. Financing the ProductiveEconomy: The Heartland Development Bank. New America Foundation.Washington, DC. 2008.

Infrastructure as a Driver of Economic Growth andJob Creation


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focused Georgia Center of Innovation for Logistics isthe States leading resource for fueling logisticscompetitiveness.

Illinois7. To maintain and expand its status as aglobal logistics hub, Illinois is addressing pressingrenovations and repairs to state roads and bridges,expanding passenger rail and easing freight congestionthroughout the Chicago region, and increasingaccess to broadband opportunities for unservedand underserved communities, by combining stateinvestments with funding made available through theAmerican Recovery and Reinvestment Act (ARRA).The state is increasing intermodal capacity to alleviateregional freight congestion and to foster new economicdevelopment.

Washington8. The state is utilizing gas tax andrecovery act funds to address critical safety and

congestion problems in the transportation system,helping to improve the movement of goods tomarket with a strong focus on rail and containerport initiativescoupled with robust informationtechnology programsto bolster export ready businessand industry.

Oregon9. Oregons Infrastructure Finance Authority(IFA) assists communities to build infrastructurecapacity to address public health safety andcompliance issues as well as support their ability toattract, retain and expand businesses. The IFA also

works with municipalities, state agencies and propertyowners to prepare industrial land for certi cation. Sitesare certi ed as project ready (providing assurancethat a site can be developed in 180 days or less) forspeci c industry pro les thereby saving prospectivecompanies signi cant cost, time and risk.

North Carolina10. The Research Triangle Park(RTP) was founded in January 1959 by a committeeof government, university, and business leaders asa model for research, innovation, and economicdevelopment. The vision was to provide a ready

physical infrastructure that would attract researchoriented companies. More than 42,000 full-timeequivalent employees work in RTP with an estimated10,000 contract workers. These employees havecombined annual salaries of over $2.7 billion.

w k c d tWorkforce development and skills training are now at theepicenter of a new paradigm for economic development.In states across America, higher education systems,

universities, and community colleges are working to helptheir regions and states advance in the new knowledgeeconomy. They are marshalling each of their coreresponsibilitieseducation, innovation, knowledgetransfer, and community engagementin ways designed tospur economic development. 35

As companies become more reliant on competent, high-skilled workers and access to advanced know-how,workforce development becomes an essential ingredient of innovation-driven business ecosystems. Gaining access tothe capabilities, expertise, and facilities at universities andcolleges is an increasingly critical asset. 36

Many, if not most, states have now embraced and provideresources to further the mission of universities as economicengines and have come to expect that universities will takesteps to facilitate access to higher education resources.Universities are encouraged to be entrepreneurial andcollaborative with partners in business and governmentthe triple helixin order to facilitate building theirresearch enterprise and bringing ideas and inventions tothe marketplace. Research and development is now aprominent item on many state budgets and comprehensiveprograms to transfer technologies from the university tocommercial interests are commonplace.

Work force training is also a key element of state initiativesdirected at job creation. In particular, customizedtraining programs oriented to the needs of employers

and/or emerging industries with high potential, e.g.nanotechnology, are carried out in partnership withcolleges and in many cases the individual businessesthemselves.

There is growing concern that our nation is not preparinga suf cient number of students for careers in science,technology, engineering, and mathematics (STEM). Thefailure of our citizenry to reach pro ciency in math andscience is considered one of the greatest threats to ournations long-term competitiveness and prosperity. Whileonly one-third of the recent bachelors degrees awarded inthe United States are in science and engineering more than

fty percent are awarded in China and over forty percentin South Korea.

States invest in education as well as programs forworkforce training and development. Innovative internshipprograms link high school and college students withbusinesses while customized training programs enablebusinesses to deploy a work force that meets their mostpressing needs.


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While much has been written about student achievementand K-12 education reform, this study is focused onworkforce development issues related to postsecondaryeducation and training programs for people who are activein the labor force.

t p w k c d t s

Our workforce development and training metrics combinemeasures of educational attainment, higher educationoutput and ef ciency, and the state workforce developmentsystem performance:

Share of public high school students taking advancedplacement exams;Educational attainment: Bachelors degree attainmentof 25-44 year olds;Higher education output: rate of bachelors degreesconferred per 18-24 year old population;Affordability: undergraduate charge as a share of disposable personal income;Total charge (state and tuition funds) per degree orcerti cate conferred; andWorkforce development system performance: Jobretention rate of adult workforce system customerscompared to agreed placement rate goals.

Colorado1. The Colorado Promise (2006) outlinedan education agenda for the state with three mainobjectives, including 1) to close achievement gapsin schools, 2) to double the number of degrees andcerti cates earned by Colorado students and 3) tocut the high school dropout rate in half. Workforcetraining and development in the state is modeledaround an employer driven, locally led structure,consulting with regional economic developers andeducators. Initiatives include the Education andLifelong Learning Simulation (WELLS) Center, whichoffers specialized diagnostic and clinical skills trainingto the states healthcare workforce, and the Business

and Education Talent Readiness (BETR) Projectis a program focused on developing the science,technology, engineering, and math (STEM) skills of the Colorado workforce to better meet the demands of industry.

Florida2. The Expanded Postsecondary ReadinessAssessment (EPRA) focuses on expanding the deliveryof the Florida College Entry-Level Placement Test(College Placement Test (CPT) or ACCUPLACER)to more high school students. The goal is to identifythose 11th graders who demonstrate readiness and

those who may need additional preparation in highschool to ensure they are ready for postsecondary andcareer success after high school graduation. EmployFlorida links all of Floridas state and local workforceservices and resources. The partners are WorkforceFlorida, the state policy and oversight board, and theAgency for Workforce Innovation, the state agency,

which administers workforce funds. At the locallevel, there are 24 regional workforce boards thatadminister more than 80 one-stop centers. FloridaReady to Work is an employee credentialing programthat testsand scoresjob skills. It gives jobseekersa competitive edge, a credential that proves toemployers that they have the right skills for the job. Foremployers, it takes the guesswork out of hiring, savingtime and money.

New York3. The EMPIRE Promise WorkforceDevelopment Strategy is designed to prepare students

for occupations that address workforce shortages. Theprogram includes statewide college recruitment andadmissions strategies and a scholarship program forgraduating students pursuing higher education andpathways into entry-level careers. Critical elementsof the program include a strong alliance with businessand industry and expanded recruitment of underservedpopulations and male students. The Department of Labor (DoL), Division of Employment, and WorkforceSolutions of ces provide convenient one-stopshopping for employment-related needs. They offermany DoL programs in a single location, includingcareer-related assistance and services for employers.Some of ces are located in One-Stop Career Centers,where the Department of Labor works in tandem withcounty and local workforce agencies.

Massachusetts4. The state is a top performer in thepercentage of rst-time, full-time college studentswho complete a bachelors degree within six yearsof enrolling in college (67%). In addition, a verylarge proportion of students complete certi catesand degrees relative to the number enrolled. TheMassachusetts Life Sciences Center promotes,coordinates, and invests in life sciences initiatives inthe state. The center oversees a life sciences internshipprogram that offers stipends for 12-week internships atlife sciences companies of less than 100 employees inthe state.

Connecticut5. The state is a national leader inbachelor degree educational attainment, developedthe Connecticut Accountability for Learning Initiative(CALI). The goal of CALI is to provide a model of state support for districts and schools to support the


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process of continuous school and district improvementand to accelerate the closing of Connecticutsachievement gaps and promote lifelong learning.The initiative has prompted a higher level of studentsto complete degreed studies at the 45 colleges anduniversities, ranging from Ivy League to communitycolleges within the state.

Washington6. The states Strategic Master Planfor Higher Education calls for signi cant increasesin degree production at Washington colleges anduniversities in the coming years to keep pace withprojected demand for college-educated workers inthe state economy. The Education Legacy TrustFund provides nancing for lower class sizes inpublic schools, academic help for struggling students,additional enrollments in higher education, and

nancial aid for low and moderate-income studentsin higher education. The Education Legacy Trust

also funds science, technology, engineering, andmathematics (STEM) programs including coachingprograms, teacher training funds, and leadershipprograms.

Minnesota7. Fifty WorkForce Centers throughout thestate help job seekers nd employment, help businesses

nd workers, and help anyone at any stage exploreand plan careers. Business development specialists aredeployed at the centers to help publicize job openingsand provide access to the right training. WorkforceIndustry Specialists work closely with a statewide

network of partners to help businesses in key industriesmeet their employee recruitment, training and retentionneeds.

Kansas8. The state makes an effort to provideaffordable training to all sizes of business withinthe state. Funded by state lottery proceeds, KansasIndustrial Training (KIT) and Kansas IndustrialRetraining (KIR) Programs facilitate and assist in

job creation and retention for Kansas businesses. KITfocuses on training for newly created jobs, while KIRis oriented towards skills upgrade training. Investmentsin Major Projects and Comprehensive Training(IMPACT) assist primarily large companies in projectsthat create new jobs.

South Dakota9. The Board of Regents indicates thatSouth Dakotas Uni ed System spends less per full-time student in all categories compared to institutionsin the region and across the nation. To get to theaverage amount, South Dakota would need $52 millionin the base budget to perform the same functions.Compared to institutions in regional states, South

Dakotas public universities do the same with less.South Dakota spends relative more on instruction, lesson administration (institutional support), and more of its budget on academic support functions (i.e. librariesand computing) than its regional counterparts.

Utah10. The Utah Educational Savings Plan (UESP)has reached more than $3 billion in assets, showing agrowing commitment by families to nancially preparefor the future cost of a higher education for their childor grandchild. UtahFutures.org is a comprehensiveone-stop career information website for students, jobseekers and businesses. Individuals can use the site toaccess and organize training, education, and careerinformation online. The education and career portfolioclients build on UtahFutures.org travels with themfrom job to job. An application is available for mobilesmart phones.

t rTaxes and regulations impact the decisions and competitiveposition of businesses both large and small. Thecombined burden of excessive taxes and onerous regulationcan not only inhibit new job creation but also jeopardizeexisting jobs. On the other hand, a reasonable tax codeand regulatory environment can reward achievement,encourage investment, and enable a level playing eld forbusinesses that now compete in a global economy on adaily basis.

The competitiveness of a states business climatedepends on numerous factors including the cost of doing business, taxes, environmental regulations, andlabor laws. Other factors affecting business climate areentirely outside the control of states and communitiesincluding natural resources and amenities or location-related advantages such as proximity to waterways.

As noted by the Tax Foundation the most competitivetax systems create the fewest economic distortions byenforcing the most simple, pro-growth tax systemscharacterized by broad bases and low rates. 37 Consequently a relatively higher overall tax burden forbusiness in one state is not necessarily less competitivewhen compared to another state structuring tax lawsin a less enterprise-friendly manner and not providingequivalent public services. Taxes levied must deliverequivalent services valuable to the business community.

Tax competition among the states of course is a reality.Many states have used tax incentives in conjunction withsubsidies over the years to attract companies, sometimeswith mixed results. Tax abatements or tax-reduced


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zones are frequently established by states to encourageinvestment and job creation in economically distressedcommunities.

Many states use tax credits applied against a businesssstate tax liability to target certain kinds of preferredbusiness activities. Most recently tax credits for research

and development (R&D) and for private sector individual(angel) investors have come to the forefront. Theexpectation is that tax credits will lead to job creation andthe boosting of innovation, productivity, GSP growth andstate tax revenues, thus laying the groundwork for longer-term prosperity. 38

States are focusing tax credits on R&D and for investorsin technology-driven businesses because many of the

direct and indirect research jobs are created in industriesthat employ high-skilled high-wage workers, includingscientists, technicians and production jobs in equipmentmanufacturing. These kinds of jobs and careers arehighly sought after by the states and local communitieswishing to be competitive in the knowledge-based,innovation-driven economy.

Targeted tax credits are often viewed as more effectivethan direct economic development incentives since a taxcredit requires a speci c direct investment in a businessto trigger the incentive. It is these direct investmentsin growing, innovative private enterprise that are thefoundations for long term regional growth. Because taxcredits leverage direct outside investment in in-statecompanies, these investment credits are rapidly replacing

s b CThe crisis in state government nances sheds newlight on the issue of taxation. By some estimates, statebudget shortfalls in 2009-10 reached $291 billion, andthe crunch will continue for years to come.

California had to close its near $60 billion shortfallin 2009 using, in part, the issuance of IOUs. Someexperts project annual budget de cits of $20 billion inCalifornia through 2014.

States with very high tax rates on personal andcorporate income were among those with the mostsevere budget crises.

Documents

Final Report Enterprising States Email