Description
The National Chamber Foundation continues its partnership with the Campaign for Free Enterprise.
ENTERPRISING
STATES
RECOVERY AND RENEWAL FOR
THE 21ST CENTURY
A Project of the U.S. Chamber of Commerce
and the National Chamber Foundation
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Contents
Executive Summary
Restoring Growth and Upward Mobility: A Call
to the States
Hard Choices Now, Hard Work Ahead: State
Strategies to Renew Growth and Create Jobs
A New Era of Leadership by the States?
Job-Centric States are Redesigning
Government and Investing in Opportunity
Investing in Opportunity
Redesigning Government
Measuring States: A List of the Top Performers
Top Growth Performers
Entrepreneurship and Innovation
Exports
Taxes and Regulation
Workforce and Training
Infrastructure
Rating the States: The Metrics
State Performance Graphic
Profles of the States
About the Report
The report was prepared by Praxis Strategy Group and
Joel Kotkin. Authors from the Praxis team include Delore
Zimmerman, Mark Schill, Doug McDonald, and Matthew
Leiphon. Zina Klapper and Marcel LaFlamme provided
editing and additional research. Praxis Strategy Group is an
economic research and community strategy company that
works with leaders and innovators in business, education
and government to create new economic opportunities. Joel
Kotkin is an internationally recognized authority on global,
economic, political and social trends. His book The Next 100
Million: America in 2050 explores how the nation will evolve
in the next four decades.
About the U.S. Chamber of Commerce
The U.S. Chamber of Commerce is the world’s largest
business federation representing the interests of more than 3
million businesses of all sizes, sectors, and regions, as well
as state and local chambers and industry associations.
About the National Chamber Foundation
The National Chamber Foundation (NCF), a nonproft affliate
of the U.S. Chamber of Commerce, is dedicated to identifying
and fostering public debate on emerging critical issues. We
provide business and government leaders with insight and
resources to address tomorrow’s challenges.
About American Free Enterprise. Dream Big.
The Campaign for Free Enterprise is the U.S. Chamber of
Commerce’s comprehensive, multiyear campaign to support
free enterprise and entrepreneurship through national
advertising; grassroots advocacy; citizen, community, and
youth engagement; and research and ideas leadership.
The opinions and conclusions expressed or implied in
the report are those of the research agency. They are not
necessarily those of the National Chamber Foundation and
the U.S. Chamber of Commerce.
ENTERPRISING
STATES 2011
RECOVERY AND RENEWAL
FOR THE 21ST CENTURY
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A LETTER FROM OUR EXECUTIVE VICE PRESIDENT
June 20, 2011
Dear Colleague,
The National Chamber Foundation continues its partnership with the Campaign for Free Enterprise to help restore
the more than 7 million jobs lost during the recession and create the 13 million new jobs that our growing nation will
need in this decade.
The entire country has felt the economic impact of the Great Recession and, as a result, each state has new issues to
tackle resulting in tough choices for policymakers. Federal resources are limited; as the federal government contends
with its own budget issues, states must look for ways to champion economic growth.
To help remedy their budget shortfalls states are making job creation a high priority and are implementing
meaningful changes in their approaches to job creation. While each state’s approach varies, there is a renewed focus
on creating more favorable conditions for business growth. States must restore confdence in their economies by
creating a friendly business climate and job creation and retention is necessary for states and our country’s long-term
economic growth.
Our study, Enterprising States, focuses on what makes certain states attractive places to locate, relocate and expand
in this uncertain economy; the unintended consequences of cutting certain items from a state budget; and what types
of investments the public and private sectors can make now to improve the economy in the future. States are looking
to maximize their resources to address growth and employment without increasing spending and dealing with the
increased demand in services caused by this recession.
We hope that you fnd this study to be interesting and useful in understanding what is going on at the state level to
create jobs and spur economic growth in the face of mounting state budget defcits. The U.S. Chamber of Commerce
and the more than 3 million businesses that it represents understand the urgency of addressing this jobs challenge
and ensuring a strong and growing private sector in the economic recovery.
Sincerely,
Margaret Spellings
Executive Vice President
National Chamber Foundation
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EXECUTIVE SUMMARY
for growth, but it has become clear that outdated state tax
systems can undercut economic vitality. Any state with
a budget tilting towards insolvency is in a weak position
to make and maintain investments in its workforce and
economic infrastructure.
Determining where to cut and where to invest is the central
challenge of the day. States must carry out short-term
strategies to jumpstart and/or sustain an as of yet lackluster
recovery and cut costs to make state government more
effcient and to avoid fnancial calamity. Simultaneously,
though, they must craft and invest in innovations and
structural solutions that will foster long-term economic
growth while reining in taxes and regulations that stife job
creation.
“Ultimately, there is only one route to sustainable state
economies, and that is through broad-based economic
growth,“ writes study co-author Joel Kotkin. “The road to
that objective can vary by state, but the fundamental goal
needs to be kept in mind if we wish to see a restoration of
hope and American optimism about the future.”
The 2011 Enterprising States study highlights state-driven
initiatives to 1) redesign government, including measures
to deal with excessive debt levels that inhibit economic
growth and job creation and 2) implement forward-
looking, enterprise-friendly initiatives with a primary
goal of creating the conditions for job creation and future
prosperity.
How States are Modernizing
Government
Enterprising States fnds that states are engaged in a
variety of initiatives that change the way government
operates:
Government Redesign:
Consolidation, reorganization, or elimination of •
agencies, boards and commissions.
Regionalization of governance to decentralize •
decision-making and to customize and align service
delivery with local circumstances.
Streamlining and modernizing bureaucratic processes •
to increase productivity and improve service delivery,
often by deploying services online.
Over a year and a half into the recovery, the condition
of the American economy is far from satisfactory.
Unemployment remains high, job creation meager,
and American workforce participation has dropped to
near record depths — the lowest rate in a quarter of a
century. The U.S. will need to create 20 million jobs in
this decade to recover from the 7 million lost in the Great
Recession and 13 million needed for the country’s growing
population.
Since the frst Enterprising States study in 2010, 29 new
governors have started their terms. Governors of every
state, along with their legislative counterparts, are taking
steps to grow their states’ economies, create jobs and
compete globally. They want to help businesses prosper, to
produce an educated and skilled workforce, and to provide
other essential services and infrastructure that foster the
entrepreneurship and innovation that will lead to greater
productivity and competitiveness.
In the past, states could look to Washington for assistance.
Now, whatever the intentions or real achievements of the
stimulus package, future increases in federal spending
seem likely to be meager at best. This presents a new,
and perhaps unprecedented, challenge for the states. With
Washington effectively forced to the sidelines, states will
now have to address fundamental economic issues relating
to growth and employment on their own. Most will have to
do so without signifcantly increasing their own spending.
For many states the short-term prognosis is dire.
Altogether, 44 states and the District of Columbia are
projecting budget shortfalls for 2012 amounting to $112
billion. The upcoming fscal year, according to the Center
on Budget and Policy Priorities, will be “one of the states’
most diffcult budget years on record. Retiree benefts
for state employees add yet another strain, with the states
facing a $1.26 trillion shortfall.”
Most states have already taken actions to streamline and
downsize government to meet the new economic realities
and this has proven to be challenging given the increased
demand for state services during the national recession.
Surely more redesign, streamlining and reforms are on
the way. To recoup lost revenue, states have taken such
actions as eliminating tax exemptions, broadening the tax
base, and in some cases increasing rates as well as raising
fees. Low tax rates by themselves are not a silver bullet
4
Experimentation with charter agencies that commit •
to producing measurable benefts and to saving
money—either by reducing expenditures or increasing
revenues— in exchange for greater authority and
fexibility.
Public-private partnerships and privatization initiatives •
for the delivery of programs and services including,
for example, medical benefts, correctional food and
pharmaceutical services, road maintenance, highway
design engineering, and vehicle feet management and
maintenance.
Steps to Curb Spending:
States with the most serious fscal problems are •
laying off workers, imposing hiring freezes, reducing
spending for education and health care, and ending or
curtailing social services.
Aid to local governments has been cut. •
For many states, current obligations for public pension •
funds and health insurance costs are unaffordable
and future obligations represent a looming fnancial
disaster. Cuts, concessions and larger contributions
from employees are now a part of balancing the state’s
checkbook.
Taxation and Tax Policies:
To make up for lost revenues, most states have taken •
such actions as eliminating tax exemptions, broadening
tax bases, and in some cases increasing rates as well as
raising a number of fees. Other states are rolling back
tax credits.
States have enacted increases in all of the major taxes •
they levy including personal income taxes, general
sales taxes, business taxes, and excise taxes.
Many of the states have reduced business taxes with •
new credits or expanded existing credits to encourage
investment and growth in targeted industries.
Regulation:
Corporate managers and business owners cite consistent
policies and regulations that allow them to plan as
key factors in choosing when and where to grow their
companies. Uncertainty is the ultimate antagonist of
growth, investment, and job creation. States are taking
action to eliminate onerous DURT (delays, uncertainty,
regulations and taxes), which put them in peril of placing
the heaviest burdens on new and small businesses and on
entrepreneurs, the real job creators in a growing economy.
States are adopting a fast-track approach to achieving a •
better balance between requirements of regulation and
the need for new jobs and industry, so that results have
a higher priority than rules.
Regulatory impact statements are being required in •
some states to estimate the cost of business of any new
regulations.
A jobs impact statement now accompanies proposed •
rules and regulations in some states.
Special offces and commissions have been established •
in some states to identify rules, regulations and statutes
that are costly, outdated and ineffective.
How States are Fostering Opportunity
The states that have fared best in creating middle-class
jobs have been either those close to the expanding federal
government, a major benefciary of the stimulus, or
those that have attended to more basic industries, such as
energy production, agriculture and manufacturing. State
investment in education and training is correlated with
a higher-performing economy, as is investment in new
infrastructure such as ports, airports, roads and improved
transit. But the other common denominator is that these
states have simply tended to create a business-friendly
atmosphere for companies of all sorts.
Investments in Public Universities and Colleges:
Investing in higher education to create the future talent •
pool, and fostering collaboration in key economic
sectors between business, education and government
on science and technology, technology transfer and
entrepreneurial programs.
Using performance-based funding to align colleges •
and universities as partners in workforce preparation
and sources of opportunity, growth, and competitive
advantage.
Starting and Expanding Businesses:
Targeted investments and initiatives that focus on high- •
growth start-ups, which are the best generators of new
jobs.
Efforts to help companies scale up and grow in order •
to capture growing domestic and international markets.
Establishment or expansion of seed and growth-stage •
fnancing funds.
Economic gardening programs deliberately designed to •
focus on expanding existing second-stage companies
that have viable growth opportunities.
Tax credits for angel investors and state-backed •
venture capital funds to fx defciencies in the
market that inhibit private-sector investment and
entrepreneurial activity.
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“To simply proclaim
an enterprise-friendly
environment is no
longer adequate. A
story must be backed
up by actions.”
Programs to help companies expand into global •
markets by assisting in the development of a
customized international growth plan.
Public-Private Partnerships and Privatization
Initiatives:
The implementation of privatization tools and •
outsourcing strategies to deliver economic development
programs and services.
Building funds and bonding programs that tap private •
sector investors to construct specialized facilities for
research, demonstration, and technology transfer in
key economic sectors.
Workforce Training and Development:
Flexible, affordable training programs for workers, •
designed with business input to equip workers with
skills needed by local companies.
People-focused approaches that help workers in •
navigating their careers, provide assistance for
entrepreneurs, make lifelong learning loans, and offer
wage insurance plans.
Hard Choices Now – Hard Work Ahead
Enterprising States 2011 confrms that states are the
fulcrum of change and opportunity in key areas of
education, infrastructure, energy, innovation, and skills
training. States and localities are far better positioned
than the federal government to foster strategic investment,
regulations, taxes and incentives that encourage business
creation and private sector prosperity.
A state, however, can neither cut nor tax itself into
prosperity. The evidence regarding job creation among the
states shows that fscal probity is an essential ingredient,
but states can deal with the fundamental problems they
face only by spurring growth and upward mobility.
In the fnal analysis, to simply proclaim an enterprise-
friendly environment is no longer adequate. States that
are doing it right today are responsive and are taking on a
cooperative and supportive approach to dealing with new
and existing companies.
Enterprising states are making the hard choices today by
trimming costs and prioritizing investments that establish
the conditions for business creation and expansion.
Enterprising states are getting ready for the hard work
ahead in a globally competitive economy by modernizing
government and focusing on creating and sustaining high-
growth, higher-wage, 21st century industries.
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reform, the state of Utah, for example, would have seen
its contributions to government workers’ pensions rise
by about $420 million a year, an amount equivalent to
roughly 10 percent of Utah’s spending from its general
and education funds.
5
The states often must deal with
declining revenues at a time when the demand for services
caused by the recession has increased. And, unlike the
federal government, states can neither print their own
money nor buy their own bonds.
In the past, states could look to Washington for assistance.
Now, whatever the intentions or real achievements of the
stimulus package, future increases in federal spending
seem likely to be meager at best. The 2010 election
effectively ended the nation’s experiment with massive
fscal stimulus from Washington. Indeed, leaders of both
parties, President Obama, and perhaps most importantly
the capital markets, now acknowledge that defcit reduction
will be a priority in the coming years.
This presents a new, and perhaps unprecedented, challenge
for the states. With Washington effectively forced to the
sidelines, states will now have to address fundamental
Over a year and a half into the recovery, the condition of
the American economy is far from satisfactory. For the
vast majority of Americans, conditions have improved
only marginally since the onset of the Great Recession.
Unemployment remains high, job creation meager, and
American workforce participation has dropped to near
record depths — the lowest rate in a quarter of a century.
1
Not surprisingly, this spring’s Washington Post-ABC poll
revealed that far more Americans feel the economy is
getting worse than getting better.
2
There seems to be what
the New York Times described as “a darkening mood”
among Americans about the future. Confdence in the
Federal Reserve’s policies on the money supply has eroded
among economists, as few benefts have accrued to smaller
businesses and middle-class households.
3
Times are
particularly tough for entry level workers, including those
with educations, and have been worsening since at least the
mid-2000s.
4
This stress is felt keenly by state and local offcials, even
in areas that aren’t suffering from the highest rates of
indebtedness or pension liabilities. Without pension
Figure 1. Source: Center for Budget and Policy Priorities. Number indicates projected revenue shortfalls as a percent of a state’s current cost of
services.
RESTORING GROWTH AND UPWARD MOBILITY:
A CALL TO THE STATES
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economic issues relating to growth and employment on
their own. Most will have to do so without signifcantly
increasing their own spending.
For many states, the short-term prognosis is dire.
Altogether, 44 states and the District of Columbia are
projecting budget shortfalls for 2012 amounting to $112
billion. The upcoming fscal year, according to the Center
on Budget and Policy Priorities, will be “one of the states’
most diffcult budget years on record. Retiree benefts
for state employees add yet another strain, with the states
facing a $1.26 trillion shortfall.”
6
As a result, states and localities increasingly fnd
themselves forced to impose tough, even draconian cuts in
spending. This affects not only newly minted conservative
Republicans, but new liberal Democratic governors such as
California’s Jerry Brown and New York’s Andrew Cuomo.
The only real debate now is how much to rely on taxes and
how much on cuts in spending to address the fscal issues
ahead. One casualty: infrastructure spending, which was
boosted by the stimulus, now seems to be winding down as
well.
7
and have suffered a strong out-migration of middle class
citizens and jobs for decades.
Now, faced with enormous defcits, there is a temptation to
reduce those very “crown jewels,” such as the California
public university system, into what University of California
President Mark Yudof describes as “tatters.” In trying to
balance their budgets, states run the risk of undermining
their own long-term recoveries.
8
The great danger that looms here, in our estimation, is not
bankruptcy. Rather, it is long-term stagnation, in which
growing demands for social services, combined with weak
revenues. foster pressure for more taxes, reduced services
or a deadly combination of both. This represents something
of an existential problem in a country where the prospect
for a better future has long been a hallmark.
The founders of the republic understood the critical
importance of maintaining this aspiration, and European
observers were struck by the remarkable social mobility
in America’s cities. In the 19th century, American factory
workers and their offspring had a far better chance of
Figure 2. Growth in jobs for “middle” education levels, including long term on-the-job training, up to associate’s
degree or other post-secondary credential for states above the national average growth rate. Source: EMSI
Complete Employment 1st Quarter, 2011.
This report will try to
address the nature of this
dilemma and suggest
ways to best deal with
it. Although we agree
with the notion of fscal
probity, ultimately,
states can deal with the
fundamental problems
only by spurring growth
and upward mobility. This
will not only create new
revenues, but also dampen
the demand for social
services.
A state can neither
cut nor tax itself into
prosperity. Weak public
infrastructure combined
with low taxes has failed
through history to create
strong state economies,
as was long the case in
the Southeast. But at the
same time many large
states—California, New
York, Illinois—have
raised taxes and spending
8
entering the middle or upper classes than their European
counterparts.
9
In politics and in daily life, expansion
of opportunity was seen as essential to the American
experiment. Writing in 1837, one Whig lawyer in
Pittsburgh suggested, “If you deny the poor man the means
to better his condition . . . you have destroyed republican
principles in their very germ.”
10
Today, this traditional faith is being sorely tested in much
of the country. Although both stock prices and corporate
profts have rebounded, little has been done that has
stimulated employment. Large companies may be sitting
on large caches of cash, in part due to low interest rates
and a buoyant stock market, but capital remains scarce for
the small businesses that create most of America’s new
jobs. Indeed, entrepreneurial growth, as the Kauffman
Foundation recently found, has now slowed down among
most segments of the population.
Of course, there have been remarkable stories of wealth
creation and success despite these hard times. But even
in Silicon Valley—home to such high-fiers as Google,
Apple and Facebook—the overall impact on jobs has
been minimal. Of the nation’s 51 largest metropolitan
regions, San Jose, the Valley’s heartland, has suffered the
largest net loss of jobs over the past decade of any major
metropolitan region outside Detroit. The San Francisco
area suffered job losses only slightly lower, on a percentage
basis, than hard-hit Cleveland.
11
Due in part to fnancial
controls, investment in promising new companies has
become ever more undemocratic, with the bulk of new
money pouring into frms like Facebook coming not
from public markets, but from a small, well-heeled
cadre of private investors. Venture-backed technology
companies, notes Intel co-founder Andy Grove, now fnd
it expensive to “scale” their operations and add employees
in California or even the United States. As a result, he
suggests, companies tend to indulge in “an undervaluing
of manufacturing” that erodes employment. This contrasts
with, for example, China, where job creation is considered
“the number one objective of state economic policy.”
12
Much the same can be said of New York, where the paper
economy has been boosted by Fed policy but the creation
of middle-income jobs continues to lag. New York City’s
current fnancial boom—Wall Street pay hit a new record
in 2011
13
—simply reinforces a level of income inequality
that is the highest in the nation. Unemployment in the
Figure 3. Job growth in Science, Technology, Engineering and Mathematics (STEM) jobs for states above the national growth rate. Includes two-year
degree technician level jobs and higher. Source: EMSI Complete Employment, 1st Quarter 2011.
9
toniest Manhattan precincts reaches barely fve percent,
while it’s 20 percent in working-class Brooklyn. Not
surprisingly, the city’s distribution of wealth is now twice
as unequal as in the rest of the nation. It may seem a model
recovery on Wall Street, but it is less so on the streets of
the nation’s premier city.
14
In contrast, the states that have fared best in creating
middle-class jobs have been either those close to the
expanding federal government, another major benefciary
of the stimulus, or those that have attended to more basic
industries, such as energy production, agriculture and
manufacturing. These industries have propelled widespread
expansions in the Great Plains, parts of the Intermountain
West, Alaska and Texas.
More interestingly, many of these states have also
experienced a surge in STEM—science, technology,
engineering and mathematics—related employment. In
some states, this has come as a result of continuing state
investment in education and training; in most cases, these
states have simply tended to create a business-friendly
atmosphere for companies of all sorts. They have also
generally kept housing costs low, something critical to
young families.
Perhaps the best way to look at our evolving economy
is not so much from the point of view of companies or
industries, but of individuals. States often focus on their
largest employers, but those companies have been cutting
jobs for the past decade. Since 2000, large corporations—
which employ roughly one-ffth of American workers—
have stopped hiring, as they did in the previous decade,
and actually reduced their payrolls by nearly three million
while adding 2.4 million jobs abroad.
15
Andrei Cherny, an Arizona Democrat writing in the
journal Democracy, suggests that “both progressives and
conservatives have offered little in the way of new answers
as their long-held orthodoxies run headlong into new
realities.” Cherny admits that the stimulus and the Fed’s
strategy of loose money—what he calls “government by
hot check”—failed to address the needs of the nation’s
large class of small entrepreneurs.
16
Left out of the equation are the small businesses that,
according to the Bureau of Labor Statistics, employ half of
all workers and create 65 percent of all new jobs. Most of
these frms are small, under-capitalized, and run by single
proprietors or families.
In this environment, notes economist Ying Lowery,
Figure 4. Concentration of Science, Technology, Engineering and Mathematics (STEM) jobs for states above the national level. Includes two-
year degree technician level jobs and higher. Measure charted is location quotient, the state employment concentration divided by the national
employment concentration. Source: EMSI Complete Employment, 1st Quarter 2011.
10
“Business creation is job creation.”
17
The states that
will do best are those that create the conditions to lure
and retain those who start companies or who are self-
employed. Policies that target managers of hedge funds,
venture frms, or large corporations have their place, but
the real action—particularly in a world of ever-changing
technology and declining long term employment—lies in
the movement of individuals.
Under these conditions, where individuals migrate or
decide to settle will have a critical impact on which states
or regions grow. Three dynamic population segments—
educated workers, immigrants and downshifting
boomers—illustrate the factors that drive their migration
patterns. In many ways they represent the “canaries in the
coal mine”; where they go is generally where the air is
good for entrepreneurship.
The movement of educated workers has become a much
discussed topic among pundits and economic developers
in recent years. One common assumption is that “the best”
migrants tend to move to “hip and cool” locales, generally
on one of the coasts. These workers then form the core of
growing industries and, more importantly, new ones.
Yet the evidence tells a somewhat different, perhaps
surprising, story. An analysis of recent Census data on the
migration of educated workers fnds that the biggest net
growth has taken place not in New York, San Francisco
and Boston, but in places like Nashville, Houston, Dallas,
Austin, and Kansas City. Indeed, many of the leading
“creative class” states, notably California, Massachusetts
and New York, fared considerably worse than regions in
states such as Missouri, Kansas, Texas and Tennessee in
terms of net migration numbers.
18
These location choices have to do with how individuals
make decisions: people move primarily for reasons related
to jobs, family, and housing.
19
An analysis of the migration
of educated workers, for example, reveals that, for the
most part, these workers are moving away from expensive,
dense regions to more affordable, generally less dense
places. This migration also tends to parallel moves to those
states that generally impose fewer regulatory burdens on
business.
Perhaps even more surprisingly, we see a similar pattern
in minority and immigrant entrepreneurship. These groups
now constitute a growing percentage of business startups.
Overall, according to the Kauffman Foundation, foreign-
born immigrants in 2010 constituted nearly 30 percent
of all new businesses owners, up from 13.4 percent in
1996. This has also been the one outstanding segment of
the population whose entrepreneurship rate has grown
throughout the current recession.
20
As with the case of educated migrants, minority
entrepreneurs tend to establish themselves in less
expensive, more business-friendly, and generally less
heavily regulated metropolitan regions. A recent survey
of minority migration and self employment by Forbes
21
found that the best conditions for non-white entrepreneurs
were in metropolitan areas in Georgia (Greater Atlanta),
Tennessee (Nashville), Arizona (Phoenix), Oklahoma
(Oklahoma City), and several Texas cities (Houston,
Dallas, San Antonio and Austin). In contrast, most regions
in California and the Northeast, outside of the Washington,
D.C. metropolitan area, did quite poorly.
Jonathan Bowles, president of the New York-based Center
for an Urban Future, has traced this poor performance to a
myriad of factors including sky-high business rents, which
stymie would-be entrepreneurs in minority communities.
“[Entrepreneurs] face incredible burdens here when they
start and try to grow a business,” Bowles suggests. “Many
go out of business quickly due to the cost of real estate and
things like high electricity costs. It’s an expensive city to
do business in without a lot of cash.”
Boomers are unique compared to traditional senior
populations. According to the Kauffman Foundation, they
tend to be more likely to start businesses than are younger
age groups. In 1996, people between 55 and 64 years of
age accounted for 14 percent of entrepreneurs; in 2010 they
represented 23 percent.
22
Less is known about the migration of aging boomers,
a large segment of the population, but evidence so
far suggests that they, too, are moving to such states.
According to AARP, most boomers prefer to stay close
to where they live—mostly in suburbs—or where their
children tend to move, that is, to the low-regulation states
of the South and West.
23
States can draw on these migration patterns in developing
their economic policies. Generally, people migrate to
states with jobs, and states with population gains generally
produce more employment than those with slower growth.
Indeed, despite the great disruptions of the mortgage crisis,
regions such as Orlando, San Bernardino-Riverside and
Las Vegas all recorded double-digit employment gains over
the last decade.
More recent developments suggest that future growth may
depend on several critical factors. It is clear, for example,
that investments in education—for example in Austin,
Raleigh-Durham and parts of the Great Plains—have
11
This is not to say that California, or any other state, should
draw its economic policy from another state. Those states
that attempt to use tax incentives to “lure” industries
with no overwhelming need to relocate — as shown in
recent fndings about Illinois incentives to movie-makers
— are often disappointed. In many cases, the incentive
game becomes a classic “race to the bottom,” in which
the benefts of new jobs often prove transitory.
28
Since
the 1990s, just two percent of job growth and decline has
been due to businesses relocating across state borders, yet
the costly practice of using unfocused tax expenditures to
poach companies continues.
29
Nor can states reliably predict which industries will need
more workers over the long term. In the 1990s, economist
Michael Mandell predicted that cutting-edge industries
like high-tech would create 2.8 million new jobs; in
reality, notes a 2010 New America Foundation report, they
actually shed 68,000.
30
Each state and each region has its own peculiar economic
DNA. States with exportable products—for example
the Great Plains or the Upper Midwest—may need to
focus on ways to get their output effciently to market.
Already affordable, they may also choose to increase
their attractiveness to high value-added companies and
educated individuals by boosting their education systems
and making their metropolitan regions more congenial to
well-educated migrants.
In other states such as New York or Massachusetts, the
economy is focused on intangible exports like fnancial
services and software. Making themselves more affordable
for both individuals and companies may be the best way
for states to improve competitiveness. Over the long term,
no state economy can sustain its people if it only focuses
on the “luxury” sectors; the large number of unemployed
and underemployed workers will drain state resources.
As those state resources become more limited, decisions
about how to structure tax incentives or where to place
education and infrastructure investments must be based
upon a deep understanding of this economic DNA.
Strategic investments will limit wasteful spending and
maximize impact in the economic sectors where a state is
most likely to grow.
Ultimately, there is only one route to sustainable state
economies, and that is through broad-based economic
growth. The road to that objective can vary by state, but
the fundamental goal needs to be kept in mind if we wish
to see a restoration of hope and American optimism about
the future.
paid off by attracting both individuals and industries, and
have made these areas among the healthiest employment
markets in the country. Some of these states have suffered
less fscal distress than states elsewhere in the nation, and
have benefted from their educational investment through
hard times. Investments in community colleges may prove
to be particularly essential, since their role in providing
skilled workers has been critical in many states.
States that have invested in new infrastructure such as
ports, airports, roads and improved transit tend to have a
leg up on others that have failed to do so. Even relatively
low-tax states such as Texas have invested heavily in
recent years in roads and port facilities, which are critical
to industries locating there.
24
Even during the recession,
many industries—from manufacturing and environmental
frms to health care and information technology—have
had trouble hiring skilled workers. States are responding
by creating job-oriented training programs in states like
Ohio, New York, Tennessee, Washington and Wisconsin,
which have all established technical institutions separate
from community colleges. Tennessee alone has 27 such
“technical centers” offering one-year certifcates for
certain jobs.
25
Overall, as Delaware Governor Jack Markell has pointed
out, businesses generally do not want to eliminate
government, but rather want it to be useful for economic
growth. Markell, who has done some considerable budget-
cutting himself, believes that the focus needs to be on
expanding the economy, which will requires improvements
not only in schools, but in transportation infrastructure that
will make the free market work better.
26
Perhaps even more important has been creating a favorable
business climate. California, for example, possesses
the greatest basic economic attributes of any state: a
mild climate, location on the Pacifc Rim, a world-class
university system, and a legacy of strong infrastructure
investment. Yet today, despite the presence of leading
global industrial zones such as Hollywood and Silicon
Valley, as well as the country’s richest agricultural sector,
California’s unemployment remains well above the national
average and job growth has remained relatively tepid.
After many years in denial, even some of the state’s most
progressive politicians realize that something is amiss.
In a remarkable development, for example, California
leaders including Lieutenant Governor Gavin Newsom
recently visited Texas to learn from the large state that has
fared best during the long recessionary period. Given the
political gap between Californians like Newsom, a former
mayor of San Francisco, and Texas Governor Rick Perry,
this represents something of a “Nixon in China” moment.
27
12
America has the world’s largest economy, the world’s
leading universities, the most robust entrepreneurial culture
and many of its biggest companies—yet many see this as
a diminishing advantage.
31
Stagnation, many predict, will
extend into the foreseeable future because the economy’s
low-hanging fruit has disappeared and so the pace of
innovation has slowed; by this argument we are now on
a “technological plateau” that will make further growth
challenging.
32
The United States remains a leader in
global innovation, but better-funded, higher-performing
hubs of innovation are emerging among determined
competitors, notably China.
33
In contrast, we believe America’s prospects for competing
with other countries are better than commonly assumed,
and we are convinced that our strategy for the future
is unlikely to be found elsewhere. Unlike our major
competitors, we enjoy a huge base of natural resources—
such as food and energy—which are likely to become
ever more in demand as countries like China and India
grow their economies. Most important of all, the United
States, particularly in contrast with Europe and East Asia,
enjoys relatively youthful demographics, promising an
expanding workforce, new consumers and a new food of
entrepreneurs.
Yet our demographics and resources require intelligent
policies that ft our particular situations. As a young
country, we will have to fnd employment for an additional
20 million Americans in this decade. Slow growth,
which could be accommodated in rapidly aging Japan or
Germany, is not an option for the United States. We will
also need to harness all forms of energy, from renewables
to fossil fuels. Today, half of our trade defcit consists of
energy, and yet we have the oil and gas resources to supply
the vast majority of our needs. As we invest in renewables
for the long run, the country needs to use the resources that
are readily available in order to reduce the defcit and spark
job growth.
Our ability to compete, particularly on the state level,
could be compromised by an inability to address our
budgetary challenges. According to the Center on Budget
and Policy Priorities, states are struggling with budget
shortfalls for fscal 2012 that add up to $112 billion.
The most recent Fiscal Survey of the States
34
anticipates
considerably more fnancial stress in the states as the
substantial funding made available by the American
Recovery and Reinvestment Act of 2009 will no longer be
available.
Most states have already taken actions to streamline and
downsize government to meet the new economic realities.
This has proven to be challenging given the increased
demand for state services during the national recession.
Surely, more redesign, streamlining and reform is on
the way. To recoup lost revenue, states have taken such
actions as eliminating tax exemptions, broadening the
tax base, and in some cases increasing rates as well as
raising a number of fees. Low tax rates by themselves are
not a silver bullet for growth, but it has become clear that
outdated state tax systems can undercut economic vitality.
35
States are the fulcrum of change in key areas of education,
infrastructure, energy, innovation and skills training—
something that was confrmed on many fronts in the frst
Enterprising States study. States and localities are far
better positioned than the federal government to foster
strategic investment, regulations, taxes and incentives that
encourage private sector prosperity. In large part, this is
because they are more responsive to local conditions.
Equally important, a diversifed portfolio of opportunity
agendas implemented by the individual states will go a
long way toward renewing growth and prosperity in the
national economy.
A New Era of Leadership by the States?
As the 2010 Enterprising States study was being
completed, the states were implementing sweeping
changes to deal with a growing number of challenges.
Since then twenty-nine new governors have started
their terms. Governors of every state, along with their
legislative counterparts, are taking steps to grow their
states’ economies, create jobs and compete globally. They
want to help businesses prosper, to produce an educated
and skilled workforce, and to provide other essential
services and infrastructure that foster the entrepreneurship
and innovation that will lead to greater productivity and
competitiveness.
The dramatic shortage of job opportunities has driven up
the unemployment rate, pushed a large number of workers
into part-time jobs, increased underemployment problems,
and reduced the number of people who were expected to
be active participants in the labor force. There is universal
agreement that we need policies and programs that create
jobs now, alongside investments to lay the foundations
for long-term economic growth. “To keep the American
dream of widely shared prosperity alive,” one commentator
has argued, “we need to choose entrepreneurship and
competition over the vested interests of the status quo.”
36
HARD CHOICES NOW, HARD WORK AHEAD:
STATE STRATEGIES TO RENEW GROWTH AND CREATE JOBS
13
Job-Centric States Are Redesigning
Government and Investing in
Opportunity
Determining where to cut and where to invest
40
is the
central challenge of the day. States must carry out
short-term strategies to jump-start and/or sustain an
as-of-yet lackluster recovery, and cut costs to make state
government more effcient and to avoid fnancial calamity.
Simultaneously, though, they must craft and invest in
innovations and structural solutions that will foster
long-term economic growth while reining in taxes and
regulations that stife job creation.
In most states, revenues remain stubbornly down from
where they were before the recession, and job growth
is proving to be more elusive than in most previous
recoveries. The strategies now being planned or undertaken
by each state are based on their unique sets of interests,
resources and capabilities, aligned with the opportunities
that they see on the horizon and believe are conceivably
within their grasp. Yet all states “will likely need a new
network of market-oriented, private-sector-leveraging,
performance-driven institutions”
41
to restore and revitalize
their economies.
The 2011 Enterprising States study highlights state-
driven initiatives to 1) redesign government, including
measures to deal with excessive debt levels that inhibit
economic growth and job creation, and 2) forward-looking,
enterprise-friendly initiatives whose primary goal is to
create the conditions for job creation and future prosperity.
The policy initiatives and programmatic efforts are related
to the fve policy areas that were included in the original
Enterprising States report.
Entrepreneurship and Innovation •
Exports, International Trade and Foreign Direct •
Investment
Workforce Development and Training •
Infrastructure •
Taxes and Regulation •
What’s different in 2011 and for the foreseeable future is
that for many states the imperative for change is real. The
choice is simple. To remain a job-creating, fscally robust
economy, states will either change on their own or change
will continue to be forced upon them.
42
Investing In Opportunity
States are taking a hard look at making investments in and
implementing initiatives to create and sustain high-growth,
Restoring confdence in the economy by creating a
meaningful and compelling plan for moving forward is
a top priority for elected offcials as well as leaders from
business, education, and labor groups throughout the
country.
There is also a stark recognition among the states that
solving their fscal problems is directly connected to
creating an economic climate that will foster job creation.
Any state with a budget tilting towards insolvency is in
a weak position to make and maintain investments in its
workforce and economic infrastructure. A state’s fscal
health also has immediate consequences by affecting its
credit rating and, thereby, the cost of borrowing money.
Unfunded pension obligations, viewed historically as soft
debt, are now being considered together with the total
value of state bonds to come up with a credit rating.
Many governors and state legislatures are attempting
to strike a balance between budget cuts that could hold
back the recovery by putting more people out of work,
and spending cuts and government reforms that would
create a more business-friendly environment, leading to
greater business confdence, private-sector investment
and job creation. How this balance is achieved depends
on each state’s unique set of circumstances and available
assets. Moreover, at their core, these debates refect the
fundamental tensions between the two major visions
of American progress,
37
namely: creating equality
of condition by boosting wages, improving working
conditions, and guaranteeing basic services, and creating
equality of opportunity, by creating the conditions whereby
individuals can elevate themselves through industry,
perseverance, talent, and righteous behavior.
As noted in The Economist,
38
private capital is mobile
and it goes where government works. So while political
considerations and ideological rationalizations certainly
do infuence the mix of austerity measures and public
investments, the real opportunity today is for states to
redesign government for the 21st century. That means
cutting programs that do not spur economic growth and
shifting resources, where possible, to those existing or
planned programs that will.
39
While spending cuts will help control defcient budgets, so
will increased revenue brought by economic growth. As
states enact budget austerity measures, what job creation
initiatives are surviving or receiving increased investment?
What are the new priorities for job creation? How are states
balancing cuts with critical job-creating initiatives that will
stimulate innovation, build infrastructure, provide skills
training, and unleash the dynamism of small business?
14
higher-wage, 21st century industries.
States play a key role in the higher education landscape,
so there is considerable support for and investment in
programs that educate the future talent pool and foster
collaboration between business, education and government
on science and technology, technology transfer and
entrepreneurial programs. As states evaluate their return
on investment, performance-based funding has become
a best practice for aligning colleges and universities
as partners in workforce preparation and sources of
opportunity, growth, and competitive advantage.
43
High-growth start-ups are the best generators of new jobs,
accounting for nearly all net job creation in America in the
last twenty-plus years. They are also the frms most likely
to raise productivity, a basis for economic growth. They
also create jobs that did not previously exist, and solve
problems in a way that makes a difference in people’s lives.
States have stepped up their efforts to help companies
scale up and grow in order to capture growing domestic
and international markets. A number of states have
established or expanded seed and growth-stage fnancing
funds. Some have implemented economic gardening
programs deliberately designed to focus on expanding
existing second-stage companies that have viable growth
opportunities. Several states have undertaken initiatives
to fx defciencies in the market that inhibit private-sector
investment and entrepreneurial activity. Tax credits for
angel investors and state-backed venture capital funds are
just two examples.
Companies with a global reach that bring together multiple
technologies or complex expertise—such as advanced
manufacturing, investment banking, construction and
engineering, and natural resources—are likely to drive the
nation’s global competitiveness in the next few years, along
with more focused technology companies that are part of
complex virtual networks.
44
For that reason, several states
are implementing, and having considerable success with,
programs to help companies expand into global markets by
assisting in the development of a customized international
growth plan. And, some states have made signifcant
headway using focused and purposeful strategies to attract
foreign direct investment.
Public-private partnerships and privatization initiatives for
economic development and the provision of infrastructure
are proliferating throughout the states. Building funds and
bonding programs that involve private-sector investors
are now widely used to construct specialized facilities for
research, demonstration, and technology transfer in key
economic sectors. Building on the lessons of the past,
states have become considerably more adept at avoiding
what Robert Fogel has called “hothouse capitalism,” in
which government assumes much of the risk while private
contractors and fnanciers take the proft.
While unemployment remains high, many currently
available jobs go unflled. America faces a shortfall of
almost two million technical and analytical workers in the
coming years, a situation that stands to thwart economic
growth.
45
Painfully cognizant of this dilemma, many
states are establishing workforce training and development
programs that address structural unemployment problems
and the mismatch between available jobs and the skills of
the existing workforce. The goal is to align training and
academic programs with in-demand regional occupations,
and to add greater fexibility to workforce training
programs that have left some re-trainable individuals
slipping through the cracks.
Forward-looking states are modernizing their education
and workforce training initiatives by developing
people-focused approaches that help and train workers
in navigating their careers, provide assistance for
entrepreneurs, make lifelong learning loans, and offer
wage insurance plans. The goal is to empower people
to fnd better jobs and/or to create new ones. Plainly,
making America more globally competitive is vital, but
the increasingly obvious gap in our economic discussions
is an agenda for making Americans more personally
competitive. In this view, forging a new economics for
the Individual Age will require rethinking our economy
from the bottom up in order to realize future growth and
prosperity.
46
Finally, because energy issues, both current and future,
have become such critical factors in business and for
economic growth, states are getting serious about policies,
initiatives and investments to provide clean, secure,
safe and affordable energy tailored to regional, state
and local resources. These include renewable energy
standards, investments in research, development and
commercialization of energy technologies and processes,
and the establishment of new fnancing authorities to build
the infrastructure that will extract and transport energy to
the places where it will fuel new growth.
Redesigning Government
The fscal situation of many states has caused them to
reconsider the level of services they are providing and,
certainly, the way that they deliver them. According to
the Government Accountability Offce, “Because most
state and local governments are required to balance their
15
looming fnancial disaster. Cuts, concessions and larger
contributions from employees are now a necessary part of
balancing the state’s checkbook.
Taxes and tax policies vary considerably among the states.
To make up for lost revenues, most states have taken such
actions as eliminating tax exemptions, broadening tax
bases, and in some cases increasing rates as well as raising
a number of fees. States have enacted increases in all
of the major taxes they levy, including personal income
taxes, general sales taxes, business taxes, and excise
taxes. However, many states did reduce business taxes
with new credits or expanded existing credits to encourage
investment and growth in targeted industries.
Uncertainty, above all, is the antagonist of growth,
investment, and job creation. States that cannot rid
themselves of onerous DURT
49
(delays, uncertainty,
regulations and taxes) are in peril of putting the heaviest
burdens on new and small businesses and on entrepreneurs,
the real job creators in a growing economy. In a tight
economy these considerations become more stringent for
entrepreneurs and companies that are making economic
decisions simply because the levels of uncertainty and
the stakes are so much higher. Eliminating employment
regulations and time-consuming processes that place
unreasonable burdens on business can have a signifcant
impact on job creation.
50
Moreover, the competitive identity of a state today relies
increasingly on the degree to which the actions of the
private, public and civic sectors are aligned with and
corroborate the identity claimed or brand promise. A
story must be backed up by actions: to simply proclaim an
enterprise-friendly environment is no longer adequate.
States that are doing it right today are responsive and are
taking a cooperative, supportive approach to dealing with
new and existing companies. Their attitude and operating
systems are customer-centric and their emphasis is on
streamlining processes for obtaining permits, licenses, and
titles.
Many state governments across the country are adopting a
fast-track approach to achieving a better balance between
the requirements of regulation and the need for new jobs
and industry, so that that results have a higher priority than
rules. This is the mindset that must guide the interface
between government and business.
operating budgets, the declining fscal conditions shown in
our simulations suggest the fscal pressures the sector faces
and foreshadow the extent to which these governments will
need to make substantial policy changes to avoid growing
fscal imbalances.”
47
In The Price of Government: Getting the Results We Need
in an Age of Permanent Fiscal Crisis, David Osborne and
Peter Hutchinson contend that Industrial Age government
is just not up to the tasks and challenges at hand.
Centralized bureaucracies, hierarchical management, rules
and regulations, standardized services, command-and-
control methods, and public monopolies are simply not
aligned to Information Age realities. Today, government
must be restructured and prepared for rapid change, global
competition, the pervasive use of information technologies,
and a public that expects quality and has lots of choices.
The keys, according to Osborne and Hutchinson, are
to 1) get rid of low-value spending, 2) move money into
higher-value, more cost-effective strategies and programs
and 3) motivate all managers to fnd better, cheaper ways
to deliver results. In sum, government needs to provide
incentives, expect accountability, and allow the freedom to
innovate.
48
Government redesign efforts that are now underway or
in the planning stages often follow the simple guidelines
outlined above. Yet various approaches are now being
used by state governments, including:
Consolidation, reorganization, or elimination of •
agencies, boards and commissions.
Regionalization of governance to decentralize •
decision-making and to customize and align service
delivery with local circumstances.
Streamlining and modernizing bureaucratic processes •
to increase productivity and improve service delivery,
often by deploying services online.
Experimenting with charter agencies that commit •
to producing measurable benefts and to saving
money—either by reducing expenditures or increasing
revenues—in exchange for greater authority and
fexibility.
Steps to curb spending and reform taxation in the
states have varied widely. States with the most serious
fscal problems are laying off workers, imposing hiring
freezes, reducing spending for education and health care
and ending or curtailing social services. Aid to local
governments has been cut. For many states, current
obligations for public pension funds and health insurance
costs are unaffordable and future obligations represent a
16
A primary goal of any state economic development
program is not only to increase the number of jobs in the
state, but to improve the quality of jobs and the overall
prosperity of the state’s residents. States and regions must
balance increases in productivity driven by innovation and
technology with the need to maintain overall employment
for citizens.
This study combines metrics for each economic
development policy area to measure performance in each
policy topic area. States were ranked in each metric and
top states were determined by a composite ranking of all
metrics in overall performance and in each policy area.
For a full description of all metrics and results for each
state, see the Rating the States section on page 27.
To identify the overall best performers, we combined:
Ten-year and two-year job growth. •
Gross State Product measures: real GSP growth since •
2000, GSP per job in 2009 (measuring productivity
of industries), and growth in GSP per job 2000-2009
(measuring productivity increases).
Income: per capita personal income growth 2000-2010 •
and median four person family income adjusted for
cost of living in 2009.
Top Growth Performers
1. Alaska—Alaska places in the top 10 in six of seven
economic performance rankings, trailing only in
adjusted family income. Its rapid gross state product
increase propelled it to the top spot in this year’s
rankings. The state has seen job growth in the past
decade in every industry super-sector, and is home
to high-value energy and natural resources industries
whose growth has fueled large gains in gross state
product and productivity. Since 2002, Alaska has
added more than 6,600 jobs in oil and gas extraction,
metal ore mining, and related support activities, as
well as another 3,800 in the seafood products industry
and 1,700 in new management, science, and technical
consulting.
2. North Dakota—North Dakota is a top fve state
in short- and long-term job growth, GSP growth,
productivity growth, and per capita personal income
growth. Alaska’s rapid ascension nudged North
Dakota from the No. 1 spot. The energy boom has
created 15,000 jobs in the state in the last decade and
the state has added another 9,400 in business and
fnancial services. North Dakota avoided the housing
market collapse, and its construction employment is up
29 percent since 2002. Its manufacturing sector has
not seen the decline occurring in other states.
3. Wyoming—Wyoming moves up two spots this year
to third. The state places frst in four of our seven
performance measures: long term job growth, GSP
growth, productivity growth, and per capita personal
income growth. But the state’s job losses in the last
two years (more than just two other states) kept it from
the top two spots. Employment in the state’s energy
cluster has grown by 47 percent since 2001, adding
nearly 19,000 jobs. The business and fnancial services
cluster saw similar growth, adding 9,800 jobs for 46
percent growth.
4. South Dakota—South Dakota falls one spot to fourth
in 2011, placing in the top 10 in job growth measures,
GSP and productivity growth, and per capita personal
income growth. South Dakota’s manufacturing
industry (especially machinery manufacturing) has
remained more stable than most states, while the
construction industry added nearly 2,700 jobs since
2001. The state added nearly 5,300 professional and
technical services jobs over the same period, led by
computer systems design, programming, engineering
services, and various other scientifc and technical
consulting services.
5. Maryland—Maryland is a center for high-end
professional and technical services and 60,000
new jobs in that sector make it a strong all-around
performer. It places ffth this year, down one spot from
2010. The state places in the top 15 in every measure,
and ffth in median family income adjusted for cost
of living. Highly competitive clusters in Maryland
include information technology, defense and security,
business and fnance, and advanced materials.
6. Virginia—Virginia is strong in most performance
measures, highlighted by tenth place in both
productivity and productivity growth. The infuence
of the nation’s capital is refected in strong growth
since 2002 in business and fnance (158,000 new
jobs), defense and security (60,000), biomedical and
biotechnical (58,000), and information technology and
telecommunications (25,000) clusters.
7. Oklahoma—Oklahoma moves into the top ten this
year after placing 14th in 2010, most notably due to an
increase in gross state product. The state placed fourth
MEASURING THE STATES: A LIST OF THE TOP
PERFORMERS
17
security, and transportation and logistics.
Entrepreneurship and Innovation
Gone are the days of economic development organizations
spending the majority of their time luring factories from
other states. Businesses built from within a region are
more likely to stay for the long term and to be integrated
into the local economy, supporting more jobs. Recent
research suggests that not only do small companies create
the majority of jobs in the nation, younger small companies
do. For this reason, states are rapidly increasing their
investments in entrepreneurship and small business
programs.
Most states are creating small business incubators
and entrepreneurship programs, often integrated with
university entrepreneurship curricula and designed to
serve companies commercializing academic research from
nearby universities. Incubators are now being linked into
statewide networks to pool resources. Many have created
facilities with specialized infrastructure, such as lab space
available on an à la carte basis for start-up science and
technology ventures. Others are instituting economic
gardening programs to assist small businesses with market
research or product evaluation.
States are working to increase the impact of federal
and academic research on their local economies by
coordinating connections between business and academic
researchers, and streamlining the process of licensing
university-produced technologies. Economic developers
are identifying industry clusters where their state holds
a competitive advantage and are adjusting assistance
programs, infrastructure, and funding for public-private
partnerships to focus on these clusters.
Measurements of innovation and entrepreneurship include:
Growth and concentration of science, technology, •
engineering and mathematics (STEM) jobs.
Academic research and development intensity in the •
state.
The share of all businesses involved in high •
technology.
A measure of small business fnance activity. •
Two measures of entrepreneurial activity: net business •
birth rate and the Kauffman Foundation index of
entrepreneurial activity.
in GSP growth and fourth in productivity growth.
It also enjoyed a sixth place ranking in per capita
personal income. Like many states in this year’s top
ten, Oklahoma’s energy cluster saw huge growth in its
energy cluster, which added 86,000 jobs for 60 percent
growth since 2002. The state also benefts from a
competitive advantage in other productive economy
clusters, such as machinery manufacturing, forest and
wood products, advanced materials, and chemical
products.
8. Texas—Texas is the best performing large state in
terms of job growth, ranking fourth in both long
term and short term employment growth, and also
shows solid overall economic expansion (13th in GSP
growth and 14th in GSP per job). Since 2002 the
state’s business and fnance, energy, and biomedical/
biotechnical clusters have each expanded more than
30 percent, adding more than 960,000 jobs to the
Texas economy. Of the major industry sectors, only
manufacturing and information have lost jobs since
2002 — yet manufacturing still outperformed the
national manufacturing economy by a signifcant
margin.
9. Nebraska — Nebraska keeps its position at number
nine in economic performance this year. Nebraska
places in the top 25 in six of seven performance
metrics, and is seventh in short term job growth. The
state has a healthy construction sector along with
strong growth in transportation and warehousing
(4,400 jobs since 2002); professional, scientifc
and technical services (11,500); and management
of companies and enterprises (4,200). The state’s
most nationally competitive industry clusters include
transportation and logistics, advanced materials,
energy, printing and publishing, and chemical
products.
10. Iowa — Iowa’s sixth-place ranking in productivity
growth helped place it 10th this year, down two spots
from last year. The state shows balance across the
board, with fve more top 25 performance rankings
and no ranking lower than 33rd. Iowa remains a
strong, productive economy. Its agribusiness, food
processing and technology cluster remain the largest
cluster in the state, encompassing 190,000 jobs. While
employment in this cluster remains essentially fat
since 2002, it is signifcantly better than in the rest
of the nation, making agribusiness one of the state’s
most competitive industries. Other important clusters
in the state include machinery manufacturing, which
has gained 2,000 jobs since 2002, advanced materials,
computer and electronics manufacturing, defense and
18
entrepreneurial activity and small business lending.
7. Maryland—Maryland remains a center for STEM
jobs and high technology companies, ranking tenth
in STEM job growth, second in STEM job intensity,
and third in high-tech business concentration. The
state is also a national leader in biotech product
manufacturing, biotechnology and general scientifc
R&D, guidance instruments, and computer systems
design.
8. Virginia—Virginia has the highest concentration of
high-tech businesses in the nation and holds the third
highest concentration of STEM jobs. Since 2002, the
state has added more than 43,000 high-tech jobs, led
by 46,000 jobs in computer systems design services;
9,100 in physical, engineering, and life sciences
research; 8,100 in engineering services; and 7,900 in
other scientifc and technical consulting services.
9. Idaho—Home to the Idaho National Laboratory, Idaho
moves up three spots to make the top 10 in innovation
and entrepreneurship this year, led by second place
rankings in establishment birth rate and small business
lending and a 10th place ranking in entrepreneurial
activity.
10. California—California remains the nation’s center for
research, ranking number one in federal and academic
research intensity. To help harness this innovative
spirit, the Golden State launched the Innovation Hub
(iHub) initiative to stimulate partnerships, economic
development, and job creation around specifc regional
research clusters. These six new iHubs link and
leverage assets such as research parks, technology
incubators, universities, and federal laboratories to
provide an innovation platform for startup companies,
economic development organizations, business groups,
and venture capitalists.
10. Washington—Innovation and technology-based
economic development efforts are a central part of
Washington’s job creation agenda. The state’s high
technology business and occupation tax credit is
available to businesses in the advanced computing,
advanced materials, biotech, electronic device, and
environmental tech industries that conduct research
and development (R&D) activities in the state.
Companies in the same industry set also have access to
a sales and use tax deferral program for qualifed R&D
and initial manufacturing activity expenses. Biotech
and medical devices companies also receive sales and
use tax breaks on qualifed equipment purchases used
in expansion and job creation.
Top Entrepreneurship and Innovation
States
1. New Mexico—New Mexico places no lower than
21st in any of our innovation and entrepreneurship
rankings. Home to Sandia and Los Alamos National
Labs, the state is already a center for STEM jobs, and
its strength is increasing. The state ranks ninth in
STEM job concentration, eighth in STEM job growth,
and tenth in entrepreneurial activity. The state is
also home to the New Mexico Technology Ventures
Corporation, one of the longest running and most
successful research commercialization enterprises.
2. Colorado—Colorado moves up seven places to second
in innovation and entrepreneurship this year. The
Rocky Mountain state is frst in small business loan
activity, second in research and development (R&D)
activity, second in high-tech business concentration,
third in entrepreneurship activity and ffth in STEM
job growth.
3. Utah—Utah’s top ranking in net business birth rate
helps it move up fve places to third in innovation and
entrepreneurship this year. The state ranks no worse
than 18th in any metric and is sixth in small business
lending activity, ninth in STEM job concentration and
ninth in high-tech business concentration. Utah is
making investments in research commercialization
infrastructure with its Utah Science, Technology and
Research Initiative and offers an outreach and business
assistance program for technology companies.
4. Montana—Montana ranks seventh or better in fve
innovation and entrepreneurship measures including
STEM job growth (fourth), business birth rate
(sixth), R&D intensity (seventh), entrepreneurship
activity (second), and small business lending activity
(ffth). Since 2002, the state has added 3,200 STEM
jobs to its economy, led by growth in engineering
services, computer systems design, custom computer
programming, and energy industries.
5. Texas—While Texas is known for its energy
industry, it is a strong performer in innovation and
entrepreneurship, ranking 16th or better in every
category but research intensity. The Lone Star State
moved up twelve places over last year’s ranking, due
in part to its increase in entrepreneurial activity and
above average rankings in small business lending and
business birth rate.
6. Arizona—Arizona is a top 25 performer in each
innovation and entrepreneurship metric, landing in
the top ten in R&D intensity, business birth rate,
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and growth in the share of the nation’s exports.
The non-proft South Carolina Export Consortium
offers client specifc market research, training,
and customized marketing materials, allowing the
organization to assist businesses at various stages of
the market development process.
4. Mississippi—Mississippi remains in this year’s
exports top 10 as the ffth fastest-growing state
exporter. The Magnolia State is also rapidly increasing
exports to South and Central American countries,
including Panama, Brazil, Honduras, Columbia, and
Guatemala.
5. Delaware—Delaware exported $5 billion in
merchandise in 2010, with 44 percent of that going
to Canada and the United Kingdom. Nearly half
of the $5 billion was in chemicals, with other top
merchandise exports computers and electronic
products, transportation equipment, machinery, and
plastics and rubber products.
6. Texas—Of the more than 26,000 businesses exporting
from Texas, 92 percent were small and medium-sized
enterprises, the fourth highest total of any state. Of
its $206 billion in exports in 2010, $72.4 billion was
exported to Mexico, and its top exported merchandise
categories including computers and electronic products
($39.1 billion), chemicals ($38.9 billion), and petroleum
and coal products ($32.9 billion).
7. Nevada—Nevada is the nation’s fastest growing export
state, as well as the fastest in growing export value as
a share of its total economy. The value of the Silver
State’s manufactured exports has more than tripled
since 2002. Its primary exports are mineral deposits,
coin-operated games, and various electronics.
8. Iowa—Iowa is the tenth fastest growing export state,
with nearly half of its exports bound for Canada or
Mexico. Much of the goods coming from Iowa are
processed foods and agricultural products (totaling
$3.5 billion) followed by machinery. To help the
agribusiness sector access international markets,
the Greater Des Moines Partnership economic
development agency formed the Iowa Agribusiness
Export Partnership with Iowa State University to
help address a range of trade topics important to
agriculture.
9. Georgia—Georgia moved up six places to ninth in
this year’s export rankings due to its growth in export
intensity and its increasing share of the nation’s total
export market. The state’s largest merchandise export
category is transportation equipment, which accounted
for $6 billion of Georgia’s total merchandise exports
Exports
One out of three manufacturing jobs in the U.S. is a
consequence of foreign exports. In some states, exports of
manufactured goods have outpaced domestic sales. Exports
are not solely the province of big companies, with 97
percent of the U.S.-manufactured exports emanating from
factories operated by small and mid-sized manufacturers.
More than a quarter million of America’s small businesses
export products, and they account for nearly a third of U.S.
merchandise exports. Still, that’s just one of every 100
companies. Many new international markets are emerging
as incomes increase around the world. There is ample
opportunity to create new jobs by helping America’s small
businesses start exporting and providing some of the tools,
training, fnancing, and contacts these businesses need to
sell overseas. Most states promote the expansion of exports
either through an independent trade offce or as part of
an in-house component of their economic development
agency.
Export measurements track manufactured exports in the
state of origin, excluding bulk commodity exports usually
attributed to the state of port location. High performing
states are based upon:
The value of exports as a share of total economic •
output and change in that value.
Change in a state’s share of the nation’s total exports. •
Overall export growth since 2002. •
Top Export States
1. Louisiana—The multi-port state of Louisiana remains
at the top of our exports list this year. The state ranks
in the top fve in all four export measures. Much of the
state’s exports are related to the agriculture and energy
economies, but manufactured exports include various
chemicals and machinery. Its primary trading partners
are China, Japan, and Mexico.
2. Utah—Utah continues to be a leader in export
measures, with exports up 45 percent since 2009.
The state’s International Trade and Diplomacy Offce
serves as an intermediary between Utah companies
and international markets, promoting the state’s
products and helping companies prepare themselves to
operate globally. The Governor’s Offce of Economic
Development also partners with the World Trade
Center Utah to promote increased exports.
3. South Carolina—South Carolina is the third largest
exporter for its size in the nation, and the Palmetto
State ranks in the top 10 in growth of export intensity
20
than direct economic development incentives, since a tax
credit requires a specifc direct investment in a business
to trigger the incentive. Many states are reforming their
tax credit programs towards smaller awards in specifc
industries and performing cost-beneft analysis on a per
job basis to ensure that new revenue generated by the
job exceeds the expense of the incentive. Because tax
credits leverage direct outside investment by in-state
companies, these investment credits are rapidly replacing
direct taxpayer subsidies for business recruitment and are
shifting the focus toward stimulating businesses already
in the state. Other states are eliminating tax breaks and
targeted incentives entirely in favor of more broad-based
tax reductions for small businesses.
State tax and regulation rankings include broad-based tax,
business environment, and cost measures:
Taxes: Overall state and local tax burden and a state •
corporate tax index.
A small business survival index: a broad measure of •
36 government-imposed or related costs impacting
small business and entrepreneurs.
Size of anticipated state budget gap in fscal year 2012. •
Overall cost of living index. •
Top Taxes and Regulation States
1. Tennessee—Tennessee’s low cost of living, fourth
lowest state and local tax burden and manageable
budget gap place it frst in this year’s tax and regulation
rankings, up two places from 2010. The home state
of country music and Elvis’ Graceland has long been
known for its business-friendly legislature and for how
its Commissioners of Economic Development and
Revenue work together to make this “No Surprises”
regulatory policy possible.
2. South Dakota—South Dakota has the nation’s most
favorable business tax climate and third lowest overall
state and local tax burden. It also has no corporate
income tax, personal income tax, personal property
tax, business inventory tax, or inheritance tax. While
the state does have sales, use, and excise taxes, South
Dakota has established a tax refund program offering
targeted refunds in these tax classes to qualifed
business-building projects.
3. Wyoming—Wyoming is a top fve state for state
budget gap, state and local tax burden, and business
tax climate. Governor Matt Mead’s administration
has made streamlining government functions a focus,
proposing department mergers and reviewing and
repealing executive orders seen as unnecessary.
in 2010. Other top merchandise exports are chemicals
($3.6 billion), machinery ($3.5 billion), paper products
($3.1 billion), and computers and electronic products
($2.4 billion).
9. Indiana—Indiana’s seventh-highest state export
intensity and its increasing national market share
of all exports place it in a tie for ninth on our list of
export states. The Peach State shipped $28.7 billion
in exports in 2010 of which $8.0 billion was in
transportation equipment and $7.6 billion in chemicals.
Taxes and Regulation
Taxes and regulations impact the decisions and competitive
position of both large and small businesses. The
combined burden of excessive DURT—delays, uncertainty,
regulations and taxes
51
—inhibit new job creation but can
also jeopardize existing jobs. States are reducing delays
by consolidating redundant operations and creating “one-
stop” customer service contacts to help assist businesses,
as well as drafting new legislation allowing projects to
be governed by the regulations in place when a project is
initiated. Other states are including private-sector leaders
on committees formed to identify sources of unresponsive
government and unreasonable regulations.
Many governors now recognize that an air of uncertainty
in state leadership and legislative bodies can stife private-
sector investment as businesses wait for clarity or, worse,
look to expand in other states. This recognition is leading
to a more open assessment of business climates in many
states and to greater bipartisan and governor-legislature
cooperation in the most successful states.
A reasonable tax code and regulatory environment can
reward achievement, encourage investment, and enable a
level playing feld for businesses that now compete in a
global economy on a daily basis. Fostering private-sector
economic growth is even more important as state budgets
remain in the red, with a shrinking economy eroding
the tax base and threatening investments in education,
infrastructure, and basic services.
As noted by the Tax Foundation,
52
“the most competitive
tax systems create the fewest economic distortions by
enforcing the most simple, pro-growth tax systems
characterized by broad bases and low rates.” At the same
time, tax levies must be used to deliver a proportionate
level of services that are valuable to the business
community.
Targeted tax credits are often viewed as more effective
21
Comprised of public and private sector experts, the
committee made over 50 recommendations, including
calling for review of regulatory processes that impact
businesses in the state. Greater coordination between
regulatory agencies was identifed as a way to maintain
a business friendly environment and avoid harmful
duplication of services and unneeded red-tape.
Workforce and Training
It has been estimated that by 2018, 63 percent of the
nation’s jobs will require some type of post-high school
training credential. In some states, that number is over
70 percent.
53
This has placed education and training of
workers at the center of a new paradigm for economic
growth. State leaders are realizing that education and
training programs must be aligned with the jobs open
within the state. This alignment can only occur with
explicit cooperation between education, government, and
the business community.
As companies become more reliant on competent, highly
skilled workers and access to advanced knowhow become
essential ingredients of innovation-driven business
ecosystems, access to the capabilities, expertise and
facilities at colleges and universities is an increasingly
critical asset.
54
Workforce training is also a key element of state initiatives
directed at job creation. Customized training programs
oriented to the needs of employers and emerging industries
are delivered in partnership with colleges and, in many
cases, with the individual businesses themselves. Many
states are now augmenting federal workforce training
funds with more fexible and focused funding that better
meets the needs of small businesses and displaced workers.
Our education and training metrics combine measures
of educational attainment, higher education output and
effciency, and the state workforce development system
performance:
Educational attainment: associate’s degree (and higher) •
attainment of 25-44 year olds.
Higher education output: rate of bachelor’s degrees •
conferred per 18-24 year old population.
Affordability: undergraduate public university charge •
as a share of disposable personal income.
Higher education productivity: total charge (state and •
tuition funds) per degree or certifcate conferred.
Share of public high school seniors taking advanced •
placement exams.
Workforce development system job placement •
4. Alaska—Alaska’s closing of its budget gap and its top
state and local tax and business tax climates propelled
it onto the top ten list this year. The Last Frontier
State has almost $12 billion in savings—excluding the
Permanent Fund savings—enough for about two years
of state funding for operating and capital budgets to
insulate it from fuctuating energy prices.
5. Indiana—After bordering on insolvency in past
years, the Hoosier State has turned around its budget
situation with a series of state government reforms to
reduce redundancy and improve effciency. Indiana’s
latest biannual budget includes a $1 billion surplus, a
corporate income tax reduction and provisions for an
automatic taxpayer refund should revenue reach certain
benchmarks.
6. Texas—The Lone Star State is a low tax and low
cost of living state, as well as an enterprise friendly
climate that’s paying off as it is adding jobs at a much
faster rate than other large states. To go along with
its lack of personal income tax, Texas does not tax
property used for pollution control, goods in transit, or
machinery and equipment used in manufacturing.
7. Missouri—The Show Me State remains at seventh
this year on the tax and regulation list. It ranks better
than 20th on all fve measures, topping out eighth in
cost of living. In recent years, Missouri has enacted
comprehensive reforms in its workers’ compensation
system and enacted strong tort reform laws.
8. Kentucky—Kentucky’s lowest cost of living in the
nation helps move it into this year’s top 10. In order
to further streamline business interactions with state
government, the state recently passed legislation that
will lead to the creation of a business “One-Stop”
web site. The online interface will simplify business
flings and cut down on the need for business owners to
complete multiple forms.
9. North Dakota—North Dakota largely avoided
extended job losses during the recession, and its
booming energy industry has led to a sizeable budget
surplus. The Peace Garden State recently passed a
ballot-initiated measure changing the state constitution
to create a long-term savings Legacy Fund for oil
extraction tax revenue, while other oil tax revenues
were diverted to fund road improvements in heavy
drilling areas and to property tax relief.
10. Utah—Utah ranks in the top 17 in four of our fve
tax and regulation measures, landing it in 10th
place. The Beehive State recently launched an
advisory committee to optimize its state government.
22
address shortages of skilled workers and to recruit new
residents to the state.
6. Minnesota—The North Star State is deploying FIRST
Grants—Framework for Integrated Regional Strategies
— requiring K-12 education, post-secondary education,
economic development, workforce development
and business to defne their regional economies
and develop strategies that will align each agency’s
resources to accomplish the vision for the region. The
essential piece of the strategy is that they must be
business-led. In its Job Skills Partnership Program, the
state is pursuing industry cluster strategies by awarding
multiple grants within regional industries to maximize
investment in training within each industry sector.
7. Colorado—Colorado places in the top 25 in fve of six
workforce and training measures, including in the top
ten for educated workforce and high school advanced
placement courses. The Rocky Mountain State offers
workforce development and training services to
rural residents free of charge with its Colorado Rural
Workforce Consortium, which oversees 11 sub-regions
and 35 local offces.
7. New Hampshire—Governor John Lynch has called
for continued and steady state investment in workforce
training programs as a means to help provide a
channel of skilled workers that will support economic
expansion. The state’s New Hampshire Working
program supports companies undergoing economic
stress with workforce support services, and it also
maintains a Rapid Response Team, tasked with
offering workforce support services on an expedited
schedule to businesses facing economic diffculty.
7. Utah—Utah ranks in the top 10 in higher education
productivity and affordability, and 25th in educational
attainment of its young workforce. In order to help
drive innovation and attract high-tech frms to the
state, Governor Gary Herbert’s administration has set
a goal to expand the number of citizens with degrees
and professional certifcations to 66 percent of adults
by 2020. The governor has also called for an increased
focus on science, engineering, and math careers in the
state’s educational system.
10. Connecticut — The Constitution State emphasizes
that employee productivity is at an all-time high,
with output per worker more than 33 percent above
the national average. In addition, a highly trained
and educated workforce is a major selling point for
business attraction and retention efforts. Thirty-six
percent of the state’s population aged 25 and older has
a college degree. The state boasts over 45 colleges and
performance.
Top Workforce & Training States
1. Florida—The Sunshine State moves into the top
spot in our workforce and training rankings due to
its effcient job placement system, high share of high
school students in advanced placement courses, and
affordable and effcient higher education system. The
state places in the top three in all four measures. The
Quick Response Training Program is an employer-
driven training program designed to assist new
value-added businesses and provide existing Florida
businesses the necessary training for expansion.
2. Massachusetts—The Bay State has the most educated
young workforce in the nation, along with a high-
output higher education system and a job placement
system that met its goals last year better than 48 other
states. The state’s workforce development system
comprises 16 regional workforce development boards
coordinated by state association, with members from
business associations, labor, education, and economic
development.
3. New York—The Empire State has the fourth most
educated young workforce and a highly productive
higher education system, producing the sixth most
graduates per college-aged resident in the state.
Funded by state and federal dollars, the Workforce
Development Institute (WDI) offers funding for
training programs for workers and businesses when
no other funding sources are available. The WDI also
produces labor market intelligence and works to bring
together business, labor, government, environmental
groups to fnd solutions to grow the manufacturing
industry in New York.
4. Maryland—The state recently created the
Skills2Compete program, a workforce development
and skills partnership among many workforce and
training organizations, focused on promoting the need
for and increasing access to middle and high skill jobs
training programs. The Old Line State has already
seen the ninth highest growth rate of middle-skill jobs
in the past decade.
5. North Dakota—North Dakota ranks third in
associate-degree-and-above educational attainment
of its 25-44 year old population, and fourth in college
degree affordability. Unemployment rates have held
very low, even through the recession, so the state
Department of Commerce and Job Service North
Dakota are working diligently with businesses to
23
universities, ranging from Ivy League to community
colleges offering two-year degrees and job training
programs.
Infrastructure
Infrastructure plays a critical role in economic
development, and states work with local, regional and
national governments to put it in place. The basic
infrastructure package for a sustainable economy includes
highways, airports, harbors, utility distribution systems,
railways, water and sewer systems, and communications
networks. As high-value services become more important
to state economies, the value of high-quality passenger air
service and broadband increases as well.
Investments that improve performance of transportation
infrastructure provide positive long-term value for the
U.S. economy.
55
State expenditures on transportation
infrastructure include investments in highways, air
transport facilities, and port facilities. Most states have
programs in place for funding public works in industrial
or research parks and for infrastructure associated with
individual business developments. States can use their
bonding authority to fnance infrastructure, and a few
states have developed infrastructure banks.
Broadband telecommunication infrastructure is at the
forefront of many state public policy initiatives and is
viewed as indispensable to economic and community
development. The share of employees working from
home has increased 31 percent since 2000, and if current
trends continue, telecommuting could overtake transit
for work trips by 2017.
56
Many states, especially those
with large rural regions, have created specifc broadband
infrastructure investment and incentive programs.
States are ranked based upon two broadband measures
and one comprehensive measure of transportation
infrastructure performance:
Share of internet telecommunication lines that are •
high-speed.
Share Census tracts with high broadband penetration. •
The U.S. Chamber of Commerce’s state transportation •
infrastructure performance index.
Top Infrastructure States
1. Maine—The Pine Tree State is in the top ten of
all three infrastructure measures, including the
nation’s highest share of broadband connections
over three megabits per second. A coalition of
state and university offcials and private companies
created the Three Ring Binder project, a dark fber
network designed to provide the “middle-mile”
telecommunications infrastructure needed to serve the
state’s business, academic, and telemedicine needs.
The network is funded with both federal and private
sources.
2. Vermont—Already a top ten state in broadband
access, the Green Mountain State has made
improvement of its rural technology infrastructure a
point of emphasis. Governor Peter Shumlin recently
launched ConnectVT, a coordinated effort to expand
broadband and wireless communications access
to all parts of the state by 2013, in an attempt to
support rural business job creation. The initiative
also convened experts to identify areas of need, and
examine ways to coordinate ongoing public and private
efforts.
3. North Dakota—The Peace Garden State ranks frst
in the U.S. Chamber of Commerce’s transportation
performance index. The state’s recently passed budget
diverts oil extraction and mining revenues to fund
needed road improvements in the western half of the
state, to improve transportation infrastructure needed
by booming drilling activities.
4. Iowa—The Hawkeye State combines a top 10 rank in
transportation infrastructure performance with another
in high speed broadband infrastructure quality. The
state’s primary infrastructure funding mechanism is
the Rebuild Iowa Infrastructure fund (RIIF). This
year’s legislature set aside nearly $274 million from
the RIIF, Technology Reinvestment Fund and revenue
bonds. Much of that will go to projects in local
communities to build or repair new buildings, roads,
bridges and other infrastructure including for disaster
relief infrastructure projects.
5. South Dakota—Ranking second in transportation
infrastructure performance, the Mount Rushmore
State is making investments in specialized economic
development infrastructure, such as South Dakota
University’s Innovation Campus, with almost 125 acres
of space available to support construction of research
facilities focused on agriculture, energy, infectious
diseases, and medical biotechnology, among other
target industries.
6. Nebraska—Like South Dakota, the Cornhusker
State is investing in specifc infrastructure to
better leverage the knowledge at its universities
with Nebraska Innovation Campus adjacent to the
University of Nebraska-Lincoln’s city campus. This
24
249-acre space is designed to serve as a “public/
private research and technology development center.”
Companies located in the new campus will be able take
advantage of their proximity to the university in order
to work collaboratively with university researchers,
directly recruit interns and employees among recent
university graduates, and access university facilities and
infrastructure, such as UNL’s supercomputing facility.
Infrastructure development at the site is ongoing, and
Governor Heineman has made increasing funding for
the new campus one of his job-creation and education
priorities.
7. Minnesota—The North Star State is addressing
specialized industry infrastructure with the Bioscience
Business Development Public Infrastructure (BBDPI)
program focused on job creation and retention through
the growth of new and emerging bioscience businesses
and organizations. The BBDPI provides competitive
grants to local governmental for up to 50 percent of
the capital cost of the public infrastructure necessary
to expand or retain jobs. The projects must be of
publicly owned infrastructure related to a development
project, including wastewater collection and treatment,
drinking water, storm sewers, utility extensions,
telecommunications infrastructure, roads, bridges,
parking ramps, facilities that support basic science and
clinical research, research infrastructure and streets
which support an eligible project.
7. New Hampshire—Upgrading the Granite State’s roads
and other basic infrastructure is a priority for Governor
John Lynch’s Administration, which has supported
implementation of a comprehensive 10-year highway
plan. In order to further upgrade the state’s transport
infrastructure, Governor Lynch has proposed creation
of a State Infrastructure Bank, which would give local
communities throughout the state access to a revolving-
loan fund to fnance infrastructure improvements.
7. Virginia—The Old Dominion State ranks in the top 20
in all three metrics, with the 12th best score in the U.S.
Chamber of Commerce’s transportation performance
infrastructure index. Virginia lawmakers signed off
on a $4 billion transportation funding plan to fund
900 projects, of which 16 are “mega-transportation
projects.” The largest transportation funding infusion
in Virginia since 1986, the bill includes at least $282
million for a Virginia Infrastructure Bank to provide
grants to local governments and loans to private entities
for infrastructure projects.
10. Oregon—In 2009 the state legislature created the
Oregon Infrastructure Finance Authority (IFA)
to develop goals and policies to meet the state’s
infrastructure needs and to serve as a fnancing
clearinghouse for public works projects. The IFA helps
coordinate state and federal partners to streamline
funding and approval processes for local entities, and
works with localities to develop strategic responses to
infrastructure needs using limited resources.
RATING THE STATES: THE
METRICS
For this study we assembled 33 measures of overall
economic performance, grouping them in fve key policy
areas tied to job growth. Data for each measure was
tabulated for each state and states were ranked according
to performance.
The heat map matrix on the following page displays each
state’s performance for each of the 37 metrics. Dark
red squares indicate a top 10 ranking in that metric and
light red squares indicate an 11-25 ranking in a particular
metric. To gauge a state’s performance, read across the
page for each state or region. Groupings of red highlights
indicate better performance in a particular policy area.
States are grouped by region and metrics by policy area for
easy visual comparison to other neighboring states. For
instance, the New England region proves to be a poorer
performer in tax and regulation, as shown by large blocks
of white, while the Rocky Mountain region scores well in
the innovation and entrepreneurship measures, as shown by
the concentration of light and dark red.
Metric Defnitions
Economic Performance
Long-term Job Growth. Job Growth, 2001-2011.
Percent job growth between the November 2000-January
2001 average fgure and the November 2010-January 2011
average fgure. U.S. Bureau of Labor Statistics Current
Employment Survey.
Short-term Job Growth. Job Growth, 2007-2009.
Percent job growth between November 2008-January 2009
fgure and the November 2010-January 2011 fgure. U.S.
Bureau of Labor Statistics Current Employment Survey.
Measures recent job shifts.
Gross State Product Growth. Real Gross State Product
Growth, 2000-2009. 2005 Chained Dollars. U.S. Bureau
25
of Economic Analysis.
Economic Output Per Job. Gross State Product
Output per job, 2009. Total economic output per job, a
measure of a state economy’s productivity. U.S. Bureau of
Economic Analysis.
Productivity Growth. Growth in Gross State Product
Output per job, 2000-2009. Percent change in total
economic output per job between 2000 and 2008. An
indication of a state’s shift towards higher value jobs and
industries. U.S. Bureau of Economic Analysis.
Per Capita Income Growth. Per capita personal income
growth, 2000-2010. Change in real income per person,
2000-2009. U.S. Bureau of Economic Analysis.
Adjusted Median Family Income. Median Income for
a Family of Four Adjusted for Cost of Living, 2007-
2009 average in 2009 dollars. U.S. Census American
Community Survey, Missouri Economic Research and
Information Center, using data from the Council of
Community and Economic Research.
Exports
Export Intensity. Dollar value of manufactured exports
per dollar of gross state product, 2009. Value of
exports equalized for the relative size of state economies.
Measures the importance of exports to a state’s economy.
Covers manufactured exports, not including bulk
commodities that tend to be credited to the state where
an exporting port is located. U.S. Census Foreign Trade
Division, U.S. Bureau of Economic Analysis.
Export Intensity Growth. Change in dollar value of
manufactured exports per dollar of gross state product,
2002-2009. Measures increasing or decreasing role of
exports in a state’s economy. Manufactured exports. U.S.
Census Foreign Trade Division, U.S. Bureau of Economic
Analysis.
Growth in Share of National Exports. Percentage point
change in state share of total national exports, 2002-
2010. Measures a state’s export performance relative
to other states, and accounts for overall national export
growth or decline. Manufactured exports. U.S. Census
Foreign Trade Division.
Export Growth. Growth in gross manufactured
exports, 2002-2010. U.S. Census Foreign Trade Division.
Innovation and Entrepreneurship
STEM Job Growth. Growth in science, technology,
engineering, and mathematics jobs, 2001-2010. Growth
in computer specialists; mathematical science; engineers;
engineering technicians; life scientists; physical scientists;
social scientists; and life, physical, and social science
technicians. EMSI Complete Employment, First Quarter
2011.
STEM Job Concentration. Concentration science,
technology, engineering, and mathematics (STEM)
jobs, 2001-2010. Measures concentration of STEM jobs
in a state versus the nation. Location Quotient: share
of STEM jobs in state divided by share of STEM jobs in
nation. EMSI Complete Employment, First Quarter 2011.
High-tech Share of All Businesses. High Technology
share of all establishments, 2010. Concentration of
establishments in 79 high-tech six digit NAICS industry
sectors within the state. EMSI Complete Employment,
First Quarter 2011.
Business Birth Rate. Net establishment birth rate,
2006-2007. U.S. Census Bureau, 1989-2007 Business
Information Tracking Series.
Academic R&D Intensity. Academic Research and
Development as a share of Gross State Product, 2008.
Measures the extent to which academic R&D plays a
role in the state economy. Funding could come from
industry, state or federal government, or other agency.
National Science Foundation and U.S. Bureau of Economic
Analysis.
Entrepreneurial Activity. Kauffman Index of
Entrepreneurial Activity, 2006-2008. Measure of
monthly new business starts derived from the Current
Population Survey. Kauffman Foundation.
Small Business Lending. Small Business Loans per
1,000 Employees in small businesses, 2009. Measure of
availability of small business fnancing. County Business
Patterns; U.S. Small Business Administration, Offce of
Advocacy, Community Reinvestment Act.
Taxes and Regulation
Budget Gap. Estimated State Budget Gap, FY2012.
Center on Budget and Policy Priorities, The Josiah Bartlett
Center for Public Policy, Bill Haslam State of the State
Address.
26
State and local tax burden, 2009. Composite measure of
overall state and local tax burden expressed as a share of
income. Tax Foundation.
Business Tax Climate. State business tax climate
index, FY 2011. Index of taxes affecting business. Tax
Foundation.
Small Business Survival Index, 2010. An index
combining 36 measures of government-imposed or
government-related business cost measures affecting
a wide variety of industries and business types. Small
Business & Entrepreneurship Council.
State cost of living index, 2010. Missouri Economic
Research and Information Center, using data from Council
of Community and Economic Research.
Workforce and Training
Higher-ed Degree Output. Bachelor’s degrees conferred
per 1,000 18- to 24-year-olds, 2008-2009. Measures
degree output of the state higher education system. U.S.
Department of Education, National Center for Education
Statistics, 2008-09 Integrated Postsecondary Education
Data System (IPEDS), Fall 2009, U.S Census American
Community Survey 2009.
Higher-ed Effciency. Higher Education Spending Per
Degree Awarded at Public Research Institutions. A
measure of higher education system productivity. Delta
Project on Postsecondary Education Costs, Productivity,
and Accountability IPEDS database.
College Affordability. Average undergraduate charge
at public four-year institutions as a share of disposable
personal income, 2010. Measure of degree affordability
adjusted for state income levels. National Center for
Education Statistics, U.S. Bureau of Economic Analysis.
Educational Attainment. Share of 25- to 44-year-old
population holding Associate’s degree or higher, 2009.
U.S Census American Community Survey 2009.
High School Advanced Placement Intensity. Share of
public high school seniors taking Advanced Placement
Exams, 2010. Measures the extent to which rigorous
curriculum is available in secondary schools. College
Board, Advanced Placement Report to the Nation.
Job Placement Effciency. Adult entered employment
rate goal attainment, 2009. Ratio of workforce
development system adult customers still employed
after exit from state job training and placement services
compared to agreed-upon goal rate. Measure of
performance of a state’s workforce assistance system
performance. U.S. Department of Labor Employment and
Training Administration.
Infrastructure
High Speed Broadband Intensity. Share of fxed
connections of at least 3Mbs downstream speed, 2010.
Measure of broadband capacity. FCC.
High Speed Broadband Availability. Share of Census
tracts with at least 60 percent high speed internet
penetration, 2010. FCC.
Transportation Infrastructure Performance. State
Infrastructure Performance Index, 2007. Comprises
50 percent of overall state infrastructure ranking. U.S.
Chamber of Commerce Let’s Rebuild America Project.
About the state profle cluster data, pages 29-129:
Most competitive cluster jobs number is the change due to
“competitive effect” of a shift share analysis, an indicator
of how the cluster performed relative to national factors
of expansion or contraction for period of 2002-2010. The
cluster may have lost jobs overall due to these national
factors. Most concentrated cluster number is a national
location quotient in 2010. Data includes non-covered
employees. Cluster defnitions developed by Purdue Center
for Regional Development. Data Source: EMSI Complete
Employment - 2011.2.
27
STATE PERFORMANCE
28
Alabama’s Place in the Rankings
4th Academic R&D intensity
4th Broadband Availability
7th Small Business Survival Index
10th High Speed Broadband Intensity
11th State and Local Tax Burden
11th Cost of Living
14th Export Intensity
17th Per Capita Income Growth
17th Business Birth Rate
18th STEM Job Growth
20th Entrepreneurial Activity
21st Productivity Growth
23rd Small Business Lending
25th Higher-ed Degree Output
25th GDP Growth
ALABAMA
Early in 2011, Governor Bentley signed Executive
Order Number Five, establishing the Alabama Rural
Development Offce. The purpose of the new offce
is to improve and advance education, healthcare, and
economic development in the rural areas of Alabama.
The Executive Order requires the Director to work with
existing department heads, commissioners and directors to
coordinate their organizations’ efforts in rural Alabama.
The fscal agency of the Alabama Rural Development
Offce is the Alabama Department of Economic and
Community Affairs.
Alabama is heavily invested in aerospace, education,
health care, banking, and various heavy industries,
including automobile manufacturing, mineral extraction,
steel production and fabrication. The state has a history
of successfully recruiting and growing out-of-state
companies—and will continue to do so—but it is also
realizing growth and opportunities in its own backyard.
Most jobs are created by businesses already in the state.
According to Governor Bentley, “They are the backbone of
our economy and it is important for our workforce training
system to help them prosper and grow.”
Streamlining Workforce Training and
Economic Development
With a strong automobile and aerospace manufacturing
presence, the state has been successful in recruiting and
growing out-of-state business and industry that, according
to Governor Bentley, “gets our picture and our name in
magazines across the country, but they don’t create most
of the jobs. Most of the jobs are created by companies
that are already here.” To address this challenge, the state
has focused on helping local and regional businesses be
more competitive and better trained by utilizing workforce
training programs in place at the two-year college
systems. These programs, including Alabama Industrial
Development Training and the Alabama Technology
Network, offer job-specifc and technical training for
technology and manufacturing companies of all sizes.
Along with better utilizing existing workforce training
efforts, the state is streamlining economic development
efforts by creating a blueprint for the roles and
responsibilities of the state’s lead agency and others
involved in economic development. These efforts include
aligning economic development assets through written
agreements between the Alabama Development Offce
and the state, local, and private agencies engaged in
economic development. This realignment and renewed
cooperation will strengthen Alabama’s ability to recruit,
retain and grow companies that are important to the
state’s economic future. The articulation agreements will
formalize ties between the Alabama Development Offce
and strategically important organizations, including the
Economic Development Partnership of Alabama, electric
power producers, the Alabama community college system,
Alabama universities and private research entities, and
local economic development offcials.
29
Education for the 21st Century Economy
For the state to continue to compete in the global economy,
Alabama’s workforce needs the skills to work in the
state’s growing high-tech manufacturing industries. To
accomplish this, the state is conducting a systemic change
in its education and training system to produce graduates
with the science, technology, education, and math (STEM)
knowledge and skills they need to compete for new jobs.
Alabama’s skilled workforce program goals include:
Increasing the percentage of students demonstrating •
profciency in STEM-related skill areas.
Continuing the development of an integrated, effcient •
distance-learning program to provide educational
offerings for all Alabama public high school students.
Increasing the number of students taking Advanced •
Placement courses and those scoring 3–5 on AP
Exams by 15 percent by 2012.
Increasing access to workforce training and •
postsecondary educational programs for Adult
Education clients.
These efforts to increase profciency levels in STEM and to
improve workforce-related training are paying dividends.
The state saw a 9.6 percent increase in STEM-related job
growth from 2001 to 2010 (18th best in the nation) and a
4.8 percent increase in middle-skill jobs over the the same
period.
Industry Strengths—Building on
Existing Capacity and Competitive
Advantages
Alabama has a long and storied history in aerospace,
aviation and defense industries. The state is home to
hundreds of aerospace companies working in space and
defense, aviation, and maintenance, refurbishment and
overhaul (MRO). These companies have created more
than 73,000 direct jobs for Alabamians, with a combined
annual payroll of more than $3 billion. The Alabama
aerospace industry is composed of four primary business
sectors: manufacturers of aerospace, aviation and defense
hardware, software and equipment; MRO of existing
assets; parts manufacturers and suppliers for the aerospace
industry; and companies providing business and technical
services and support to the industry.
Many well-respected automobile companies have
realized that the state is well positioned for automotive
manufacturing and have set up shop there. Others have
also located in Alabama to build engines and other auto-
related parts and services. Today, there are over 300
automotive-related companies, a 286 percent increase since
1991, including an extensive supplier network.
The state has made key investments and pledged a strong
commitment to research and biotechnology projects. More
than 90 biotechnology-related companies are either doing
business or have headquarters in Alabama. The Hudson-
Alpha Institute for Biotechnology, located in Huntsville,
is anticipated to bring 900 new scientists to the area.
The institute’s genomics research will complement the
University of Alabama at Birmingham’s clinical research
base. The University of Alabama is conducting more
than $450 million in externally funded research annually,
mostly in the biosciences.
Auburn University, the University of Alabama, University
of South Alabama and the University of Alabama in
Huntsville all have strong specialized bioscience research
programs. This research activity places Alabama fourth
among all states in federal and academic research intensity.
In addition to this research capacity, the state boasts
several communities—including Birmingham, Huntsville,
Auburn and Mobile—with outstanding research and
industrial parks and incubator programs available for
relocation or spin-outs of new enterprises organized around
products based on local research.
Clusters in Alabama
Largest Cluster: Business & Financial Services,
224,768 jobs
Largest Growth Cluster: Business & Financial
Services, 47,876 new jobs since 2002
Most Competitive Cluster: Transporatation
Equipment Manufacturing, 18,444 new or retained jobs
due to state competitive advantage
Most Concentrated Cluster: Primary Metal
Manufacturing, 3.11 times the national concentration
level
30
Alaska has capitalized on the traditional engines of
its economy, including logging, mining, oil and gas
exploration, and seafood, to maintain and grow the state’s
economy during rough national economic times. The state
is working to expand critical infrastructure to support its
natural resource-based industries. These efforts have paid
dividends; the state currently ranks second nationally in
job growth from 2009 to 2011.
Spending Discipline and a Strong
Economy
Alaska has worked diligently to create a climate for
investment and economic growth. In an effort to boost
private sector jobs and economic development, Governor
Parnell introduced legislation to provide Alaskans with tax
relief for individuals, invest in new energy opportunities,
and create incentives for companies that invest in job
creation, workforce development, and construction of
critical infrastructure. The focus of the state’s ongoing
efforts has been on keeping taxes low, expanding access to
energy resources, and initiating development efforts around
undeveloped resources and regions.
State efforts to expand new energy opportunities with
focused infrastructure investments mirror the Alaskan
Chamber of Commerce’s priorities, which call for review
and reform of oil tax policies to encourage new oil
production, concise and predictable permitting, and the
creation of an Alaska Transportation Infrastructure Fund
that will invest in Alaska’s economy and mobility. These
priorities are intended to encourage more investment in
new oil production and foster economic vitality throughout
the state.
Nearly 60 percent of the state’s FY2012 budget goes to
communities, organizations, and individuals through
grants, contracts, and capital spending, much of which
ends up in the private sector. Over 21 percent of the budget
is devoted to goods and services, contracts, equipment
and travel, some going to the private sector, with the
remaining 20 percent paying for state employees’ salaries
and benefts.
Besides a balanced budget, Alaska has almost $12
billion in savings, excluding the Permanent Fund. That
is essentially enough for two years of state funding for
operating and capital budgets, should anything catastrophic
happen to oil markets or the state’s ability to transport
oil to market. Strong spending discipline and willingness
to invest is helping to secure Alaska’s future, as refected
in the state’s upgraded AAA bond rating. The fnancial
community recognizes Alaska’s sound fnancial footing,
and the AAA rating lowers the cost of debt for the state.
ALASKA
Alaska’s Place in the Rankings
1st Budget Gap
1st State and Local Tax Burden
2nd Business Tax Climate
2nd Short-term Job Growth
2nd Economic Output Per Job
3rd Long-term Job Growth
3rd Small Business Lending
3rd High Speed Broadband Intensity
5th Academic R&D Intensity
5th College Affordability
6th Gross State Product Growth
6th STEM Job Growth
8th Productivity Growth
10th Per Capita Income Growth
12th Job Placement Effciency
13th STEM Job Concentration
15th Small Business Survival Index
24th Business Birth Rate
30
31
Investing in Energy, Infrastructure and
Knowledge
To enhance its ability to capitalize on its extensive
natural resources, the state has embarked on a signifcant
infrastructure development program called Roads to
Resources. In 2010, Alaska funded more than 300
infrastructure projects that directly employed its citizens
while supporting industry growth. The Roads to Resources
Initiative increases access for communities and continued
responsible development of the state’s fsh, timber, mineral,
and petroleum reserves.
The goals of this infrastructure program include road
construction, permitting and environmental work along
a 90-mile transportation and pipeline corridor aimed at
increasing access to gas and high-quality oil reserves. The
budget also includes about $175 million to continue efforts
to develop Alaska’s natural gas resources, including the
Alaska Natural Gas Pipeline project and the in-state gas
line project team.
Through the Alaska Performance Scholarship
program, the state has placed a priority on providing
transformational education to all students by helping to
prepare them for post-secondary education and good
jobs within the state. Every student willing to accept the
challenge of a more rigorous curriculum can earn these
scholarships. The program’s goal in the next three years
is to provide these opportunities for up to 30,000 Alaska
high school students. As part of this program, the state has
renovated entire schools and added gyms, classrooms, and
space for vocational education all across the state.
The Economy
Alaska is one of two states that have added private sector
jobs over the past year, and its unemployment rate stands
almost a full point-and-a-half better than the national
average. This stability is supported by the state’s balanced
budget, tax cuts and the decision to pay off debt that once
exceeded $5 billion.
Nine features comprise Alaska’s economic growth and
well-being strategy:
Individual tax relief with a two-year suspension of the •
motor fuel tax.
Energy initiatives including in-state gas and •
commercialization of North Slope natural gas.
Increased oil production and job growth with tax •
incentives for oil and gas exploration and production.
Increasing the number of visitors to the state with •
critical investment in Alaska’s tourism industry.
Creation of private sector jobs by building roads to •
natural resources.
New construction, including a Public Safety Crime •
Lab and University Life Sciences Research Facility.
Promoting business development with a micro-loan •
program for small businesses.
The Alaska Performance Scholarships intended to •
position the state’s economy for workforce growth.
These initiatives and the state’s focus on its strengths in the
productive economy have already paid dividends with the
state ranking sixth in science, technology, engineering and
math (STEM) job growth and fourth in growth of middle-
skill jobs over the past decade.
Alaska is also considering funding a strategic assessment
to determine what steps are needed to capitalize on the
state’s vast storehouse of resource wealth. The state has
huge reserves of oil and gas: at least 43 billion barrels
of oil and 250 trillion cubic feet of natural gas have yet
to be developed. In addition, there are rich deposits of
minerals on more than 40 million acres of state lands.
New opportunities include rare-earth minerals that are of
increasing importance in the world economy. These rare-
earth elements are used in almost every piece of electronic
equipment including fat screen TVs, iPods, cell phones,
aircraft radar systems, and more. The state is poised, once
again, to help meet America’s resource needs.
31
Clusters in Alaska
Largest Cluster: Energy (Fossil & Renewable),
36,539 jobs
Largest Growth Cluster: Energy (Fossil &
Renewable), 8,265 new jobs since 2002
Most Competitive Cluster: Energy (Fossil &
Renewable), 5,581 new or retained jobs due to state
competitive advantage
Most Concentrated Cluster: Mining, 3.79 times
the national concentration level
32
ARIZONA
Arizona’s Place in the Rankings
1st Higher-ed Degree Output
3rd Academic R&D Intensity
5th Business Birth Rate
7th Entrepreneurial Activity
7th Gross State Product Growth
10th Small Business Lending
12th Long-term Job Growth
13th State and Local Tax Burden
13th Small Business Survival Index
13th Productivity Growth
13th Job Placement Effciency
13th High Speed Broadband Intensity
14th Higher-ed Effciency
15th High-tech Share of All
Businesses
19th Economic Output Per Job
19th STEM Job Concentration
24th High Speed Broadband
Availability
25th STEM Job Growth
32
Home to well-established aerospace, electronics and
semiconductor manufacturing sectors, Arizona parlayed
these industry strengths into what had been one of the
strongest economic and population growth rates in the
nation. Those heady days have come to a standstill.
However, while confronted with job and population
losses and a defated housing market, the state still hosts
emerging environmental, life and bioscience industry frms
that hold the potential to reinvigorate the economy and
provide quality jobs for Arizonans.
Streamlining Services and Education
Faced with a $3.2 billion defcit and ongoing budget
concerns, Arizona passed a budget of $8.3 billion without
new borrowing. The state’s plan calls for $1 billion in cuts
to avoid borrowing and to balance what remains of this
year’s budget, as well as the budget for FY2012. The state
must also replace approximately $800 million in revenue
gained from a voter-approved sales tax set to expire this
year. The main benefactor of the sales tax funding has
been the K-12 education system.
The steepest cuts will be to education, where universities
face the loss of $198 million in state funding and K-12
education faces reductions of $183 million (with $35
million backflled by the federal government). State aid to
community colleges will be reduced by half. In addition
to these cuts, the Senate has proposed eliminating the
Arizona Financial Aid Trust, a state-supported student
loan program.
The budget cuts $500 million from state Medicaid
programs (pending federal approval), $50 million from
the state’s safety net programs, and $53 million from the
Department of Health Services. The budget also shifts
some highway and prison-related costs to counties.
In addressing these fscal issues and obstacles, the state has
made signifcant budget reductions that total 31 percent of
unprotected funds. As part of these reductions, the state
has reduced its workforce by 10 percent since 2008, not
including universities. As Arizona works to counter the
devastating impact of the recession, it continues to look for
opportunities and growth in the future.
Targeted Business Incentives and Tax
Reforms
To recapture the momentum that helped propel the state to
new heights in job creation, Arizona has embarked on an
initiative that it hopes will serve as a magnet for business
relocation, formation and growth; capital formation and
investment; employment and personal income growth and
prosperity for all the state’s businesses and citizens. The
Four Cornerstones of Reform initiative includes a mix of
business incentives and broad tax reforms designed to spur
the Arizona economy.
33 33
Economic competitiveness in the global marketplace is
the frst of the Four Cornerstones of Reform. Realizing
that government can serve as an obstacle to new business
growth, the state is working to remove unnecessary
barriers that impede economic growth and to provide a
stable, predictable, business-friendly environment in which
private employers can grow. One element of this effort is
the elimination of the Arizona Commerce Department and
its replacement with the Arizona Commerce Authority.
The single focus of the Authority will now be the retention
and recruitment of quality jobs for Arizona. It will be
overseen by a public-private board composed of Arizona
leaders in business and policy that will have access to
a $25 million deal-closing fund for added fexibility in
negotiations.
Other specifc elements of this initiative include the
creation of a Quality Jobs Program, with corporate tax
credits of up to $9,000 for each qualifying new job ($3,000
per job per year, with a 400-job cap), and an increase in
the electable state corporate income tax sales factor to 100
percent, up from the current 80 percent. Knowing that a
trained workforce is key to job development, the state is
proposing the reauthorization of the Arizona Job Training
Program, providing job-specifc, reimbursable grants to
train employees for new careers.
The appropriate use of tax dollars and subsequent credits
is critical for job creation. To meet the needs of business
and industry, the state has called for a four-year, phased-in
reduction of the state’s corporate income tax to 4.9 percent,
beginning in January 2014. This will give the state the
nation’s ffth most competitive corporate income tax rate.
Additionally, the state is ready to provide a 10 percent
increase in the research and development tax credit,
encouraging further collaboration between Arizona’s
research universities and the private sector, and a 5 percent
acceleration of the depreciation schedule for business
personal property, which is forecast to spur purchases of
new equipment and other capital investments.
Education and training are another component of the Four
Cornerstone initiative. Employers need a skilled workforce,
and employees want a good school system for their
children. To meet this goal, Arizona has developed a path
to achieve specifc benchmarks by 2020. These include
raising the high school graduation rate by 18 points to 93
percent, increasing the number of third graders who meet
reading standards by 25 points to 94 percent, and doubling
the number of college students who complete their studies
and receive a four-year degree.
The state has also worked to develop a series of reforms in
budgeting and operations. These include budget reforms
that encourage private-sector job growth, economic
vitality, higher state revenues, and improved opportunities
for the state to provide appropriate support for its core
functions: public safety, education, and assistance for the
truly needy. Beyond budget reforms, the state is working to
become more business-friendly by reviewing right-to-work
laws, as well as reforms to the health care and retirement
system.
Targeting High Tech, High Innovation
The state has worked to address economic development
in a broad sense by providing support and incentives to
businesses across the board. Arizona also recognizes
its strengths and capacities, and has targeted aerospace/
defense, semiconductor/electronics, advanced
manufacturing, communications, green energy (including
solar), IT and optics industry sectors as those holding the
most promise and highest potential return on investment.
These industries capitalize on the state’s robust high-tech
capacity and infrastructure, skilled workforce and the
ability to garner both public and private support in moving
these industries forward.
Clusters in Arizona
Largest Cluster: Business & Financial Services,
416,361 jobs
Largest Growth Cluster: Business & Financial
Services, 93,524 since 2002
Most Competitive Cluster: Biomedical/
Biotechnical (Life Sciences), 40,023 new or retained
jobs due to state competitive advantage
Most Concentrated Cluster: Mining, 1.86 times
the national concentration level
34
ARKANSAS
Arkansas’ Place in the Rankings
1st Budget Gap
3rd Entrepreneurial Activity
4th Cost of Living
6th Higher-ed Effciency
6th High School Advanced Placement
Intensity
6th Academic R&D Intensity
9th Short-term Job Growth
9th Productivity Growth
9th Per Capita Income Growth
10th Export Intensity Growth
17th STEM Job Growth
17th Job Placement Effciency
18th Gross State Product Growth
19th Long-term Job Growth
22nd Small Business Lending
24th Small Business Survival Index
24th College Affordability
25th Business Birth Rate
34
education, job training and lifelong learning programs.
The Quick Action Closing Fund comes from $50 million
in the General Improvement Fund specifcally directed at
economic development. This program’s fexible structure
and performance-based incentives allow the state to focus
Home to national food and retail giants, Arkansas
has capitalized on the stability and growth of its food
and fber manufacturers to ride out the worst of the
national recession and realize job growth (ranked ninth
nationally) from 2009 to 2011. The state’s success is built
on conservative budgeting and cautious spending, along
with fast and fexible economic development incentive
tools that attract and close deals quickly and effectively.
Coupled with a broad array of incentives and active
cooperation between entities at the local, regional and state
level, Arkansas is an enterprise-friendly environment that
provides signifcant opportunities for growth.
Conservative Budgeting and Cautious
Spending
With Arkansas one of only four states in the U.S. to
enter FY2011 without an offcial defcit, Governor Mike
Beebe has said that “conservative budgeting and cautious
spending have put Arkansas in an advantageous position.”
Over the past fve years, Arkansas state government grew
by an average of about 7 percent, with the biggest year of
growth in FY2005, when the state budget grew by 10.88
percent. The state met its $4.4 billion budget for FY2010
with $23.7 million left over, according to the state’s fscal
offce, doing so by tapping its newly established “rainy
day” fund, using unspent educational facilities funds, and
making $206 million in budget cuts.
The governor cut the state budget twice: by $100 million
in October 2009 and by $106 million in January 2010,
due to a shortfall in revenues. However, the state did
not lay off employees or reduce services for FY2010.
The Arkansas economy has been less affected by the
national recession than most other states because of its
concentration on the thriving agricultural sector, leading to
the state outperforming others in gross state product and
employment growth. In 2010, the unemployment rate was
7.9 percent, compared to the U.S. unemployment rate of 9.6
percent.
Doing Business at the Speed of
Business
Arkansas’ Quick Action Closing Fund has brought more
than 26,000 jobs to Arkansas, offsetting some of the
thousands lost in the recession. The fund’s nonpartisan
board formulates long-term economic development
strategies and integrates economic development with
35 35
in the state. The ARCMF invests in technology-based
enterprises in the early stages of development and not
yet able to attract adequate private sources of traditional
venture or investor-backed fnancing. A portion of this
fund will be used to validate early-stage technology before
other investments can be made.
Target Industries
Natural and cultivated resources are the basis for many
of the state’s industries. The leading industry is food
manufacturing of chicken. Rice, soybeans and cotton
are also processed in Arkansas. Major national food
manufacturing companies are headquartered in Arkansas,
as well as major retailers. Metal, lumber and paper
products are also important to the state’s economy, as
well as agriculture and manufacturing. Other targeted
business opportunities for the state stand to help transition
the state’s economy to one supported by higher-paying,
knowledge-based jobs. These target industries are seen
as niche opportunities based on existing strengths and
competitive advantages. The state’s targeted opportunities
include advanced manufacturing, information technology,
and green energy.
on businesses’ specifc needs, giving Arkansas the ability
to design incentive packages tailored to projects in specifc
high-value industries within the state. These programs,
which are based on payroll instead of jobs, provide a
clear metric requiring investment in high-wage jobs by
recipients.
Discretionary incentives for start-ups in emerging and
research-based industries include the refund of sales and
use taxes for building materials, machinery, and equipment
for approved projects, a transferable income tax credit
equal to 10 percent of payroll for up to fve years, and
a transferable income tax credit equal to 33 percent of
eligible research and development expenditures.
The state has several research and development (R&D)
incentive programs to provide incentives for university-
based research, in-house research, and R&D in start-up
technology-based enterprises. The University Based
Research and Development program focuses on eligible
businesses that contract with one or more Arkansas
colleges or universities to perform research. These
companies may qualify for a 33 percent income tax credit
for qualifed research expenditures.
Another R&D tax credit program targets new and existing
businesses conducting “in-house” research that qualifes
for federal R&D tax credits. These projects may qualify
for income tax credits of up to 20 percent of new and
incremental expansions of research for a period of up to
three years. The income tax credit earned for in-house
research and development may be used to offset 100
percent of the frm’s state income tax liability. Any unused
credit may be carried forward for a period of nine years.
The Strategic Value Research and Development
incentives are for qualifying businesses that invest in in-
house research in an area of strategic value or a research
and development project sponsored by the Arkansas
Science and Technology Authority. The “strategic value”
research areas are in felds with long-term economic
or commercial value to the state, as identifed in an
Arkansas Science and Technology Authority research and
development plan.
Another key program within the state, targeted at early-
stage businesses, is the Arkansas Risk Capital Matching
Fund (ARCMF), which works to strengthen the fnancial
infrastructure supporting technology-based enterprises
Clusters in Arkansas
Largest Cluster: Agribusiness, Food Processing &
Technology, 118,277 jobs
Largest Growth Cluster: Business & Financial
Services, 25,810 new jobs since 2002
Most Competitive Cluster: Business & Financial
Services, 7,481 new or retained jobs due to state
competitive advantage
Most Concentrated Cluster: Agribusiness,
Food Processing & Technology, 2.57 times the
national concentration level
36
California boasts the eighth largest economy in the
world; the state’s 2009 Gross State Product (GSP) was
approximately $1.88 trillion. California’s strengths lie in
the size, diversity, and adaptability of its economy, as well
as in the talent and range of its population. Despite the loss
of more than a million jobs during the recession, California
remains a center of venture capital and the entrepreneurial
spirit.
To help address some of the issues facing the state,
Governor Jerry Brown and other Golden State leaders
have developed a list of priority issues to be resolved in
order to address California’s budget shortfall and move
the state forward. These priorities include creating jobs for
California’s future, improving education, addressing the
budget, tackling pension reform, and developing a plan for
the creation of clean energy jobs.
Addressing the Budget
The recent recession and housing market bust have left
California with a serious projected budget defcit for
FY2012, greater than just three other states. Governor
Brown began his budget restructuring effort with revenue
projections viewed as much more reasonable than those
used for previous budgets. While conservative forecasts
may increase the projected defcit, the governor’s
assumptions have provided a realistic budget framework
within which to make tough decisions.
Brown’s budget plan relies equally on tax increases
and signifcant cuts to state programs. The governor
is reviewing the extension of previously enacted tax
increases, including increases in income taxes, sales
taxes, and vehicle license fees, as well as major spending
reductions.
While California’s university system—with over two
million students enrolled at nearly 300 colleges and
universities and over 270,000 graduates each year—has
been considered one of the foundations of the state’s
success in the innovation economy, the system could
suffer under the state’s current budget situation. Governor
Brown has proposed reducing funding for the state’s two
university systems by $1 billion. This would bring nominal
spending for the University of California system down to
the FY1999 level, a time when the system had 31 percent
fewer students than it does today. However, the governor’s
current plan exempts cuts to the K-12 education system.
Additional budget cutting initiatives include reducing
funding for the Medi-Cal (Medicaid) program by $1.7
billion. The governor’s budget would limit the use of
Medicaid services by setting an annual dollar limit on
the amount the state will pay for certain services such as
hearing aids and durable medical equipment, reducing
prescriptions (except for life-saving drugs) to six per year,
and limiting doctor visits to ten per year. The governor
also would eliminate a program that helps elderly residents
at risk of being placed in a nursing home to remain in
their communities, and would cut long-term care provider
payments by 10 percent. Governor Brown also proposes
scaling back the state’s Healthy Families (children’s
health insurance) program by eliminating vision benefts,
increasing premiums for families with incomes between
150 and 250 percent of poverty, and increasing co-
payments.
CALIFORNIA
California’s Place in the Rankings
1st Academic R&D Intensity
7th Productivity Growth
7th Economic Output Per Job
7th STEM Job Concentration
7th Small Business Lending
8th High School Advanced Placement
Intensity
11th High Speed Broadband Availability
13th Entrepreneurial Activity
19th Gross State Product Growth
21st High-tech Share of All Businesses
23rd Business Birth Rate
36
37
Globally Connected and High-Tech
California remains one of the largest economies in
the world, due in part to its world-class transportation
infrastructure and seaports. The state’s export shipments
of merchandise totaled $142.3 billion in 2010, a 16
percent increase from 2009. The state is home to 12 cargo
airports and 11 cargo seaports, as well as 18 foreign trade
zones and 42 enterprise zones that provide access to a
global clientele, especially from the Pacifc Rim. To help
maintain this competitive advantage, the state created the
California Infrastructure and Economic Development
Bank (I-Bank) which was intended to promote economic
revitalization, enable future development, and encourage
a healthy climate for jobs in California. The I-Bank has
broad authority to issue tax-exempt and taxable revenue
bonds, provide fnancing to public agencies, provide credit
enhancements, acquire or lease facilities, and leverage state
and federal funds focused on industrial development and
infrastructure.
California continues to be one of the nation’s leading
high-tech states, ranking in the top 10 in concentration of
science, technology, engineering and mathematics (STEM)
workers. Historically, California has been the leading
high-tech export state with $41.3 billion in exports in
2009, almost $6 billion more than the next closest state.
California is home to 40 federal laboratories. In 2009, over
23,000 patents originated in California, far more than any
other state. This represented one quarter of all U.S. patents
issued in 2009.
To help harness and enhance California’s innovative
spirit, the state launched the forward-thinking Innovation
Hub (iHub) initiative. The iHub initiative improves the
state’s national and global competitiveness by stimulating
partnerships, economic development, and job creation
around specifc regional research clusters. These iHubs
link and leverage assets such as research parks, technology
incubators, universities, and federal laboratories to provide
an innovation platform for startup companies, economic
development organizations, business groups, and venture
capitalists. The state designated six initial iHub regions in
early 2010.
Access to capital is key to starting and growing new
companies, and California remains a center for venture
capital (VC) investment. In 2010, California companies
received more than $11 billion, or 47.8 percent of all VC
invested in the U.S. Top sectors receiving VC funding
were software, biotechnology, energy, medical devices and
telecommunications. California is No. 1 in our rankings
of federal and academic research and development (R&D)
intensity. The state is home to 40 federal labs and 30
percent of the nation’s NASA centers. The University of
California Technology Transfer Program is frst in the
number of patents and the number of inventions reaching
the market. To help spur investments in the private sector,
the state offers a 15–24 percent R&D tax credit to
businesses.
A recent survey conducted by the California Employment
Development Department found that the state is leading
the nation in the percentage of the labor force working
in green jobs; indeed, green-oriented jobs have grown
faster than other sectors of employment in the state since
1995. The governor’s green jobs plan calls for building
12,000 megawatts of localized electricity generation,
building 8,000 megawatts of large-scale renewables (and
the necessary transmission lines), and developing more
cogeneration projects to increase combined heat and power
production by 6,500 megawatts.
37
Clusters in California
Largest Cluster: Business & Financial Services,
2,646,918 jobs
Largest Growth Cluster: Business & Financial
Services, 424,029 new jobs since 2002
Most Competitive Cluster: Energy (Fossil &
Renewable), 33,233 new or retained jobs due to state
competitive advantage
Most Concentrated Cluster: Computer &
Electronic Product Manufacturing, 2.15 times the
national concentration level
38
With a strong core of energy-related assets and capacities,
Colorado has pushed to make green and renewable energy
a contender for development opportunities within the state.
Working to capitalize on the National Renewable Energy
Laboratory (NREL), which is located in the state, Colorado
launched the Colorado Renewable Energy Collaboratory,
which is backed by the NREL and the state’s three leading
research universities. These institutions are working with
private-sector partners to develop advanced renewable-
energy and energy-effciency solutions that are ready for
the marketplace.
Controlling Spending Key to Addressing
Budget
Facing an estimated $1 billion defcit, the state is working
to control spending through cuts in spending on education
and Medicaid, as well as increasing state employees’ salary
contributions to beneft plans. These reductions have led to
cutbacks at state institutions; for example, the University
of Colorado system laid off 79 employees in FY2011 and
has increased employee workloads. This year’s defcit
was cut in half when a spring forecast improved revenue
projections.
With this year’s $18 billion spending plan, the state has
reduced public school spending by $250 million, a 5
percent decline from the previous year. This cut amounts
to more than $400 per student. The budget also closes a
prison in the state, consolidates the Division of Wildlife
with the Colorado state park system, and increases state
workers’ pension contributions while limiting raises.
As outlined above, the budget enacted by Governor
John Hickenlooper entails $36 million in cuts to higher
education, a 6.5 percent reduction. On top of the cuts made
necessary by the more conservative economic forecast
for the next fscal year, Governor Hickenlooper has also
proposed raising the amount of the general fund kept in
reserve from 2 to 4 percent. The increased reserve will
need to be offset by an additional $141.5 million in cuts.
The Governor has suggested he will not raise taxes to
offset the cuts. Colorado also repealed sales taxes of online
software sales and agricultural products.
COLORADO
Colorado’s Place in the Rankings
1st Small Business Lending
2nd High-tech Share of All Businesses
2nd Academic R&D Intensity
3rd Entrepreneurial Activity
5th STEM Job Concentration
7th High School Advanced Placement
Intensity
8th Median Family Income
10th Small Business Survival Index
10th Educational Attainment
12th State and Local Tax Burden
14th Business Birth Rate
15th Business Tax Climate
15th Higher-ed Degree Output
15th Productivity Growth
16th High Speed Broadband Availability
17th Gross State Product Growth
18th Economic Output Per Job
19th Transportation Infrastructure
Performance
22nd Higher-ed Effciency
24th Long-term Job Growth
25th College Affordability
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39
A Bottom-up Approach to Economic
Development
Colorado is making a concerted effort to cut red tape and
create new jobs through a community-based, “bottom-
up” initiative that is driven by local and regional
priorities. The intent is to create sustainable jobs driven
by the private sector, with the state playing a supportive
role. This approach is designed to identify and defne the
needs, priorities, strengths, and weaknesses of each of the
state’s counties, and incorporate them into 64 economic
development plans tailored to each county. These plans
will roll up into fourteen regional plans that will comprise
a comprehensive statewide economic development plan.
Again, the intention is to coordinate and catalyze job
creation and attract investment.
The bottom-up initiative team traveled over 20,000 miles
completing three state-wide tours and regional input
sessions to synthesize summaries from each county
and to reach consensus on top regional priorities. The
14 regional plans and county summaries were placed
online for a rigorous public review and comment period.
The resulting state-wide plan will address many of the
common denominators throughout the state while allowing
for local competitive advantages and strengths to show
through. This approach will allow each of the various
regions of Colorado – including urban, suburban and
rural constituencies, and a vast geography of mountains,
plains and plateaus – to develop a cohesive economic
development approach that will work for them.
Colorado relies on several key incentives and tax credits
to bolster businesses’ ability to create jobs. Key programs
include the Investment Tax Credit, which allows
businesses that invest in equipment used exclusively in an
enterprise zone to claim a credit against their Colorado
income taxes equal to 3 percent of the amount of the
investment, subject to limitations on the amount that can
be claimed in any one year.
Other programs targeted at new business facilities include
the New Business Facility (NBF) Jobs Credit, which
provides businesses hiring new employees in connection
with a new facility located in an enterprise zone a tax
credit against state income taxes of $500 per employee.
The New Business Facility (NBF) Agricultural
Processing Jobs Credit provides an additional credit
of $500 per new facility employee adding value to
agricultural commodities through manufacturing or
processing. With the New Business Facility (NBF)
Health Insurance Credit, a taxpayer with a qualifying
new facility is allowed a two-year $200 tax credit for each
new facility employee who is insured under a qualifying
employer-sponsored health insurance program.
Workforce is Key
Colorado places in the top 25 in fve of six workforce and
training measures, including in the top 10 for its educated
workforce and high school Advanced Placement courses.
The state offers workforce development and training
services to rural residents free of charge with its Colorado
Rural Workforce Consortium, which serves some 52
rural counties. This attention to workforce training and
development is further augmented by programs like the
Colorado Business and Education Talent Readiness Project
(BETR) and the Work, Education and Lifelong Learning
Simulation Center (WELLS).
The Colorado BETR Project, a science, technology,
engineering and mathematics (STEM) collaboration
between business, education and industry, has been
created to facilitate the promotion of STEM education and
workforce readiness to meet the needs of both job seekers
and employers. The WELLS Center, for its part, offers
a complete array of state-of-the-art patient simulation
tools and curricula for building clinical knowledge.
Students, faculty, nurses and physicians from throughout
the state can enhance their diagnostic and clinical skills
at the WELLS Center, either on site or at their healthcare
facility or academic institution. Program elements
include computer-based mannequins that can simulate
virtually any type of clinical experience, as well as faculty
development workshops, critical care nursing training, and
consulting services.
39
Clusters in Colorado
Largest Cluster: Business & Financial Services,
473,876 jobs
Largest Growth Cluster: Business & Financial
Services, 98,587 new jobs since 2002
Most Competitive Cluster: Energy (Fossil &
Renewable), 20,747 new or retained jobs due to state
competitive advantage
Most Concentrated Cluster: Information
Technology & Telecommunications, 1.39 times the
national concentration level
40
With a strong foundation of high-tech industries such
as aerospace, bioscience, medical technology and
defense, Connecticut is well positioned to compete in
the 21st century economy. The state has been heralded
as a research and development hub, and a leader in
emerging fuel cell technologies, alternative energy and
nanotechnology. Connecticut is home to many of the
leading insurance companies, earning it the nickname
“Insurance Capital of the World,” and the state’s fnancial
services sector is often recognized for its workforce talent
and innovation.
State Priorities—Jobs, Making
Government More Effcient
Governor Dannel Malloy has proposed cutting state
spending, while at the same time working to create new
jobs and retain and grow existing businesses to increase
revenue coming into the state. Governor Malloy’s
administration is making key cuts in spending to address
budget concerns and to get its fscal house in order, making
state government less costly and more effcient. There is a
concerted effort to restructure state government to provide
services to Connecticut residents at a substantially lower
cost to taxpayers.
Alongside these efforts to rein in spending, the state has
proposed increasing income tax rates for many flers,
expanding the sales tax base to include more services,
increasing the sales tax rate, eliminating select property
tax credits, and instituting a rule that would make it harder
for corporations to avoid income taxes.
Connecticut is projecting $2 billion in personnel-related
savings over the biennium to be negotiated with the state’s
public employee unions. Savings will be achieved by
freezing state employee wages, moving state employees to
a health plan similar to that provided to federal workers,
extending furloughs of three days a year until the end of
the biennium, and raising the retirement age.
Governor Malloy has also identifed an additional $1.5
billion in new revenue, 81 percent of which is to be paid for
by individuals, and 19 percent of which is to be paid for by
businesses. For flers who qualify for the federal Earned
Income Tax Credit (EITC), a new state EITC at 30 percent
of the federal level will help reduce the overall tax burden
incurred through other state taxes.
To help repair and refurbish the state’s aging transportation
infrastructure, Governor Malloy is proposing over $1
billion in capital investments, as well as an additional $130
million for affordable housing and $15 million for tourism
marketing to help attract visitors to the state.
The governor is proposing an additional $758 million
in spending reductions, including the elimination of the
CONNECTICUT
Connecticut’s Place in the Rankings
2nd High Speed Broadband Availability
3rd Productivity Growth
5th Educational Attainment
5th Entrepreneurial Activity
10th High School Advanced Placement
Intensity
12th Median Family Income
14th STEM Job Concentration
16th Export Intensity Growth
16th High-tech Share of All Businesses
17th College Affordability
17th Growth in Share of National Exports
19th Export Intensity
20th Academic R&D Intensity
21st Job Placement Effciency
23rd Higher-ed Degree Output
24th High Speed Broadband Intensity
25th Export Growth
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41
government unit that regulates charitable gaming and
the elimination of outside management contracts for CT
Transit. In addition, risk reduction credits for inmates will
help save the state $3.8 million.
Jump-Starting the Economy
To help attract business relocations and new business start-
ups, the state has implemented the First Five Program.
Governor Malloy has proposed signifcant expansions
of the Reinvestment Tax Credit, the Manufacturing
Assistance Act and the Job Creation Tax Credit; removed
caps on credits for companies meeting job creation
targets and allowed the credit programs to be combined
in order to increase the benefts to businesses. These
programs are structured to reward the “frst fve” new or
existing companies adding 200 new full-time jobs within
Connecticut in the next two years. Businesses adding 200
jobs over fve years are required to make a $25 million
investment in the state to access the incentives.
To make the case for Connecticut to expanding companies,
state leaders emphasize that employee productivity is at
an all-time high, with output per worker more than 33
percent above the national average. In addition, a highly
trained and educated workforce is a major selling point for
business attraction and retention efforts. Thirty-six percent
of the state’s population aged 25 and older has a college
degree. Connecticut is ranked 10th in our Enterprising
States workforce rankings and third in employee
productivity. The state boasts over 45 colleges and
universities, ranging from Ivy League research institutions
to community colleges offering two-year degrees and job
training programs. Connecticut is a top 25 state for college
affordability and for the number of degrees produced.
The state also has a wide array of incentives aimed at
helping businesses to strengthen their competitive edge.
Whether the area of need is equity investment, fxed-asset
purchases of land, working capital, or buildings, machinery
and equipment, fnancing programs are available to
support both large and small businesses. State programs
include direct funding from the Department of Economic
and Community Development (DECD), Connecticut
Development Authority, and Connecticut Innovations,
a program offering assistance and funding to high-tech
entrepreneurs. In addition, the state maintains a network of
local and regional revolving loan funds to assist businesses
with their fnancing needs.
Industry Cluster Initiative
Connecticut’s cluster-based economic development
initiative is built around the idea that nurturing the state’s
key industries improves the competitiveness of businesses
within those industries, in turn boosting the state’s
economy as a whole.
The state is focusing on several key clusters, including
biosciences, aerospace and information technology. The
bioscience cluster is overseen by Connecticut United
for Research Excellence (CURE), which was initially
launched with $300,000 in state seed money and $700,000
from industry contributions. The cluster has since received
more than $370,000 in additional funds from DECD and
$61.5 million in public funds. Currently, more than 110
Connecticut organizations are members of CURE.
The aerospace cluster operates under the direction of
Aerospace Components Manufacturers (ACM). The
state’s investment of $769,000 was leveraged by $2.3
million in industry funds and $140,000 in other public
funds. ACM is made up of more than 40 manufacturers
from the aerospace industry and is at work in areas
such as progressive and lean manufacturing, workforce
development, consolidated purchasing, multi-company
teaming, and new business identifcation in the worldwide
aerospace market.
The software or information technology cluster, also
known as eBizCT, is an affliate of the Connecticut
Technology Council (CTC). This cluster has worked to
identify and address obstacles in areas such as workforce
development and the state’s regulatory environment. To
date, the group has received more than $1 million in state
and industry dollars. The CTC continues to develop a
strategic plan to strengthen the IT industry, to promote
growth, visibility and competitiveness, and to support
e-business strategies for all Connecticut companies.
41
Clusters in Connecticut
Largest Cluster: Business & Financial Services,
345,465 jobs
Largest Growth Cluster: Business & Financial
Services, 47,348 new jobs since 2002
Most Competitive Cluster: Transportation
Equipment Manufacturing, 9,270 new or retained jobs
due to state competitive advantage
Most Concentrated Cluster: Transportation
Equipment Manufacturing, 2.53 times the national
concentration level
42
Delaware has growing strength in exports, ranking seventh
in export growth from 2002 to 2010, and an innovative
and entrepreneurial business environment. It placed
seventh in science, technology, engineering, and math job
concentration and ffth in share of high-tech business. With
these advantages, plus a business-friendly tax environment
(ranking eighth in the state business climate tax index),
Delaware is poised to capitalize on its strengths to build
the state’s future now.
A Balanced Budget through
Consolidation and Lean Budgeting
While Delaware faced a more than $300 million defcit
early in 2011, the state now fnds itself with a surplus of
about $320 million as payments of taxes and fees and
revenue from abandoned properties have rolled in. The
state is now deciding how to balance the allocation of
these surplus funds between tax reductions and targeted
investments. Proposals include the restoration of assistance
to low-income residents, job creation and tax breaks; the
repeal of 2009 gross receipts, corporate franchise and
personal income tax increases; and the addition of $30-
40 million to the Transportation Trust Fund for highway
improvements.
The governor has requested the ability to realize full-
year savings from FY2010 statewide position reductions,
and worked to drive down employee health costs by
renegotiating the state’s contract for prescription drugs and
implementing a new beneft tier for employees hired after
January 1. Additional efforts to trim the budget include a
push to drive public education administrative effciencies
through consolidated procurement and purchasing,
reducing funding for public school transportation to refect
reduction in fuel costs, and consolidating government
agencies to realize cost savings.
Building Delaware’s Future Now
To maintain fscal discipline while investing in economic
growth, Governor Jack Markell is calling for the creation
of the Building Delaware’s Future Now program.
This proposal would use new state revenues to address
Delaware’s most important needs: putting state residents
to work while upgrading critical public infrastructure,
responsible reductions in taxes and state debt, and
investments in early childhood and higher education. These
initiatives will be funded, in part, by an additional $320
million in expected state revenues as a one-time chance to
invest responsibly in core priorities.
The frst element of the plan is aimed at rebuilding some
of Delaware’s eroding assets in order to attract and retain
external investment. A New Jobs Infrastructure Fund
is intended to give the state the fexibility to address
immediate needs for new businesses that seek to locate
in Delaware and to provide expansion opportunities
for existing businesses. The $40 million set aside for
this initiative would be supplemented by $20 million of
bonding authority.
DELAWARE
Delaware’s Place in the Rankings
1st Economic Output Per Job
5th High-tech Share of All Businesses
5th High Speed Broadband Intensity
6th Median Family Income
6th Export Intensity Growth
7th Export Growth
7th STEM Job Concentration
8th Business Tax Climate
10th Higher-ed Degree Output
13th Budget Gap
13th Export Intensity
14th High Speed Broadband Availability
15th Growth in Share of National Exports
18th High School Advanced Placement
Intensity
23rd Educational Attainment
24th Gross State Product Growth
42
43
Additional components of Delaware’s infrastructure push
include a $40 million supplement to the Transportation
Trust Fund, aimed at making investments in maintaining
roads and other multimodal transportation, including
train stations, bike paths, and air and water routes.
Other programs include the $35 million Delaware
Asset Preservation Fund, aimed at capital investments
to maintain key infrastructure; a $10 million Housing
Preservation Fund, targeting housing stock for families
of low and modest incomes; and the $10 million Open
Space Preservation, which will help preserve critical
open space and address quality-of-life issues. In each case,
the intention is to upgrade the infrastructure needed for
businesses to grow while putting Delaware residents to
work.
The second part of Building Delaware’s Future Now is
aimed at making responsible reductions in taxes and state
debt. In addition to lowering income taxes, the state’s
focus is on reducing energy rates for some of the state’s
core employers: small businesses, fnance frms, and
manufacturing. The plan would reform the gross receipts
tax hitting small businesses and put $20 million towards
debt reduction. The intent is to give businesses incentives
to grow while lowering their long-term energy costs. The
state is also working to reduce its debt, putting people to
work on capital projects paid for in cash instead of bonds.
The third part of Building Delaware’s Future Now
proceeds from the assumption that education is critical to
improving the state’s economic future. The plan targets
investments to help children arrive for their frst day of
public school more ready to learn, and supports new efforts
to help graduates succeed in work and college. To that end,
the state is dedicating money to improving the quality of
early childhood education.
Delaware is also working to expand research and job
training facilities at its three publicly funded universities.
Building Delaware’s Future Now would make $30
million in onetime investments in the state’s research
and technology infrastructure: $10 million for the Optics
Center Research Lab at Delaware State, $10 million to
expand lab capacity at the University of Delaware, and $10
million for facilities expansion at state community colleges
to train for jobs in the sciences.
Targeting Industries Focused on Growth
Delaware has targeted industry clusters that capitalize
on existing strengths and relationships that have proven
important for the state. These industries include automotive
manufacturing, biotechnology and life sciences, chemistry
and advanced materials, fnancial services, and health
sciences and medical devices.
Key infrastructure to support ongoing development and
future growth in these clusters includes the Delaware
Technology Park, a 40-acre research center supporting
Delaware’s science-based growth. A partnership between
the State of Delaware, the University of Delaware, and
the private sector, the Delaware Technology Park is home
to some of the most innovative start-up companies and
research centers in the region, including the Delaware
Biotechnology Institute and the Fraunhofer Center for
Molecular Biotechnology. Delaware’s infrastructure and
workforce have proved to be attractive to biotechnology
and life science companies. With leading academic
institutions, targeted state and local economic development
programs, and venture capital funding, this cluster
represents the fastest growing industry in the state.
For more than two decades, Delaware has been renowned
for its banking, fnancial services and insurance industries.
Delaware has partnered with many innovative and dynamic
fnancial companies around the globe, establishing the
state as the place for international fnancial institutions
looking to enter U.S. markets. Delaware’s pro-business
legal and regulatory environment, strategic positioning,
and landmark legislation such as the Financial Center
Development Act have paved the way for the fnancial
services industry to become a key component of
Delaware’s economic strength and growth.
The fnancial services cluster is composed of a large,
interconnected community of credit card banks,
commercial banks, non-banking fnancial entities,
investment advisors, insurance companies, trust entities,
and service providers. In all, this cluster represents more
than 1,000 employers and nearly 40,000 employees in
Delaware.
43
Clusters in Delaware
Largest Cluster: Business & Financial Services,
81,263 jobs
Largest Growth Cluster: Business & Financial
Services, 24,620 new jobs since 2002
Most Competitive Cluster: Business & Financial
Services, 12,369 new or retained jobs due to state
competitive advantage
Most Concentrated Cluster: Business
& Financial Services, 1.31 times the national
concentration level
44
With the state’s unemployment rates at over 10 percent
and a sizeable budget defcit looming, Governor Rick
Scott took offce with an agenda focusing heavily on
jobs, government effciency, reducing state spending, and
lowering taxes.
Reducing State Spending and Cutting
Taxes
Governor Scott’s frst months on the job have focused
on what he calls the “jobs budget” and a pledge to veto
any provisions that do not create private-sector jobs.
The governor has proposed to cut the corporate income
tax to 3 percent from 5.5 percent in the coming fscal
year and to eliminate the tax by 2018. Governor Scott
also would signifcantly ratchet down Florida’s existing
cap on local property taxes. To help offset this loss in
revenue, the state’s 11 public universities raised tuition by
15 percent for the 2010–11 academic year. This tuition
hike combined with a similar increase in 2009–10, results
in a total two-year increase of 32 percent. The state is
also reviewing efforts to reduce the state workforce by 8
percent, requiring around 8,100 layoffs and the elimination
of about 2,000 vacant positions. Scott would also require
$5,000 health insurance premium contributions from state
employees.
Ultimately, the state passed a $70 billion budget,
overcoming a $3.7 billion defcit without raising taxes.
The budget plan cuts education funding by $1.3 billion (8
percent), offers $300 million in tax cuts, eliminates 4,500
state positions, and includes $30 million in business tax
breaks. An important priority in the “jobs” budget is to
consolidate the state government’s economic development
efforts into a single, highly focused agency. Working with
its public and private partners, the state aims to have the
resources to be effective and the fexibility to adapt to
particularly promising opportunities.
7–7–7 equals 700,000 Jobs
The state has embarked on an ambitious seven-step plan
to create 700,000 jobs over the next seven years. The
7–7–7 Plan is focused on job growth that will accelerate
the number of new business start-ups, increase wages
and salaries, and shore up the productivity and vitality of
Florida’s economy. In addition to creating new jobs, the
program is focused on increasing the state’s GDP by $74
billion, increasing personal incomes by $41 billion, and
providing $1 billion in new state tax revenues as a direct
result of increased economic growth.
The frst step of the plan is to use transparent, outcome-
based budgets and accountability budgeting that is aimed
at “performance” and “effectiveness,” while returning
Florida’s state and local government expenditure burden
to 2004 levels and cutting the number of budget line items
from over 3,200 to 469.
FLORIDA
Florida’s Place in the Rankings
1st High School Advanced Placement
Intensity
1st Job Placement Effciency
2nd Higher-ed Effciency
3rd College Affordability
5th Growth in Share of National Exports
5th Business Tax Climate
6th Small Business Survival Index
7th Entrepreneurial Activity
12th High Speed Broadband Availability
13th Small Business Lending
16th Gross State Product Growth
16th High Speed Broadband Intensity
19th Higher-ed Degree Output
20th Long-term Job Growth
20th Export Intensity Growth
20th State and Local Tax Burden
21st STEM Job Growth
21st Business Birth Rate
22nd Export Growth
22nd High-tech Share of All Businesses
24th Export Intensity
25th Per Capita Income Growth
25th Cost of Living
44
45
The second step is to reduce government spending
by using what the state calls common-sense business
solutions, including operational effciencies, saving almost
$1 billion; making an 8 percent reduction in the state
workforce; aligning state employee pensions and health
care with policies in other states and the private sector; and
reforming health care provisions for Medicaid recipients.
Enacting additional effciencies in various state programs
could save $982 million, including a further 2 percent
reduction in the state workforce.
Third, Florida aims to reform regulations that currently
burden job creation. Efforts would include making
unemployment benefts more affordable, limiting frivolous
lawsuits by implementing tort reform, instituting a
regulatory freeze and implementing a comprehensive
review of existing and proposed regulations, and
expediting permits for job-creating businesses. Governor
Scott’s administration has reviewed over 11,000 regulations
and identifed more than 1,000 for repeal.
The fourth, and perhaps most critical, piece of the state’s
job creation activities is to restructure the state’s economic
development program using public-private partnerships
to improve effciency, remove duplication, and ensure
continued access to industry expertise. The plan would
align economic development activities with others that
perform similar functions, such as workforce training and
community development. Other structural changes would
include combining several incentive funds into a single,
more fexible fund, and improving the overall fexibility of
the economic development system to better help existing
businesses. Another element would use state grants to
create university and private partnerships to support
clustering activities in the state.
The ffth element of the plan would improve school choice
and virtual education, while the last two elements of the
plan would reduce the state’s property tax and eliminate its
corporate income tax. State leaders are working to reduce
the statewide property tax by $1.1 billion, conduct a two-
year, 25 percent water management district tax “holiday,”
and provide additional property tax relief as state revenues
grow in the future. Finally, Governor Scott has called for
the phasing out and eventual elimination of the corporate
income tax.
High Impact Job Creation Initiatives
The Qualifed Defense and Space Contractor Tax
Refund (QDSC) targets defense, homeland security,
and space business contractors, industries in which the
state has traditionally excelled. The 2001 legislative
session designated over $43 million for aerospace-related
economic development. The state’s space-related economic
development agency will get $10 million and another $16
million will be invested in improvements at Kennedy
Space Center and Cape Canaveral. The Space Business
Incentives Act includes $10 million in tax credits and
another $7.1 million in credits to diversify space research
and development. Another bill improves the regulatory
environment for the industry by exempting launch
companies from risk liability associated with space fight.
The Capital Investment Tax Credit (CITC) is used to
attract and grow capital-intensive industries in Florida.
It is an annual credit, provided for up to twenty years,
against the corporate income tax. The following sectors are
eligible for projects: clean energy, biomedical technology,
fnancial services, information technology, silicon
technology, transportation equipment manufacturing,
and corporate headquarters facilities. The High Impact
Performance Incentive is a negotiated grant used to
attract and grow high-impact facilities in Florida. In order
to participate in the program, the project must operate
within designated high-impact portions of target sectors
like the ones listed above.
Workforce training incentives include the Quick Response
Training Program (QRT), an employer-driven training
program designed to assist new value-added businesses
and provide existing Florida businesses with the necessary
training for expansion.
The state also offers infrastructure incentives including
the Economic Development Transportation Fund.
Commonly referred to as the “Road Fund,” this incentive
is a tool designed to alleviate transportation problems that
adversely affect a specifc company’s location or expansion
decision. The award amount is based on the number of
new and retained jobs and the eligible transportation
project costs, up to $3 million. The award is made to local
government entities on behalf of a specifc business for
public transportation improvements.
45
Clusters in Florida
Largest Cluster: Business & Financial Services,
1,285,730 jobs
Largest Growth Cluster: Business & Financial
Services, 300,013 new jobs since 2002
Most Competitive Cluster: Business & Financial
Services, 86,806 new or retained jobs due to state
competitive advantage
Most Concentrated Cluster: Arts,
Entertainment, Recreation & Visitor Industries, 1.35
times the national concentration level
46
Long a crossroads for trade and commerce, Georgia
has capitalized on its strong logistics and transportation
networks to continue to be a leader in exports—a critical
element of its economy and future opportunity for growth
and revenue generation.
Addressing the Defcit
Georgia faces a structural defcit. The state’s FY2010
budget closed a $3.3 billion budget defcit, which resulted
from revenue shortfalls, but used $1.35 billion in American
Recovery and Reinvestment Act (ARRA) funds, almost
$500 million in various reserve funds, and cuts of
approximately $1.5 billion from state agencies. Even with
projected revenue growth of approximately 5 percent in
FY2011 and 6 percent in FY2012, Georgia would still face
an FY2011 budget defcit of $823 million and an FY2012
budget defcit of $1.94 billion.
The state’s new $18.3 billion spending plan contains no
pay raises for teachers and state employees and cuts higher
education funding, while maintaining funding for K-12
education. Because of a shortage of more than $275 million
in the state’s health care plan, Georgia public employees
will see their premiums increase at least 10 percent next
year.
Georgia is one of only eight states in the nation with a
AAA bond rating by all three major bond rating agencies.
Governor Nathan Deal has proposed a bond package of
less than $563 million, approximately 50 percent less than
bond packages in recent years.
Competitive Innovation
Governor Deal recently launched the Georgia
Competitiveness Initiative focused on job creation and
the development of a statewide economic development
strategy. The effort concentrates on strategic issues in
attracting and keeping high-paying jobs in Georgia
including infrastructure, innovation, education and
workforce development; maintaining a friendly business
climate; gaining more access to global commerce and
increasing government effciency.
According to Governor Deal, “The growth and stability
of our job base must come from private businesses. This
Initiative will create an environment that helps Georgia
businesses thrive, expand and attract new companies.”
Because of the broad scope and nature of the initiative, the
commissioner for the Georgia Department of Economic
Development and the president and CEO of the Georgia
Chamber of Commerce were asked to co-chair it. Twenty-
three business leaders from across the state will serve
on the steering committee, with a group of government
GEORGIA
Georgia’s Place in the Rankings
1st Entrepreneurial Activity
5th High School Advanced Placement
Intensity
6th Growth in Share of National Exports
8th High-tech Share of All Businesses
8th Business Birth Rate
9th Cost of Living
9th Higher-ed Effciency
9th Job Placement Effciency
12th Export Intensity Growth
14th Budget Gap
17th Export Growth
19th State and Local Tax Burden
20th Small Business Survival Index
22nd Median Family Income
23rd Export Intensity
23rd College Affordability
25th Economic Output Per Job
25th Business Tax Climate
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47
offcials assisting as ex-offcio members. The group
will work to deliver a plan that enhances Georgia’s
competitiveness and economic growth, while ensuring that
the 12 regions and the diverse industries across the state
are recognized. Initiative members will meet with business
leaders in each region this summer to gain a better
understanding of local needs and perspectives.
To help realize the promise of this effort, Georgia will
need to utilize existing tools to help drive new business and
job creation. These tools include a wide variety of statutory
and negotiated incentives to help eligible businesses grow,
as well as public-private partnerships that will be integral
in the success of these economic development efforts. The
state offers a range of corporate tax credits that enable
companies to minimize or eliminate state corporate
income taxes that, at 6 percent, are already among the
lowest in the nation. The state also offers an incentive to
new and existing business entities performing qualifed
research and development (R&D) in Georgia. Companies
may claim a 10 percent tax credit for increased R&D
expenses, subject to a base year calculation.
Georgia provides opportunities for companies to accelerate
their growth by connecting with the state’s broad menu
of business resources. The state regards innovation as
the key to maintaining competitiveness, and the Georgia
Department of Economic Development (GDEcD) assists
to innovative companies that create new products and
services which both generate revenue and advance society.
To assist innovative companies, the state has developed
the Georgia Centers of Innovation, which bring industry,
academic institutions and investment together around six
strategic industries that are already prominent in the state.
These industries include aerospace, agribusiness, energy,
life sciences, logistics, and manufacturing. Working
with the Georgia Research Alliance, the Advanced
Technology Development Center, and the university
system’s Board of Regents, the program harnesses the
power of collaboration to help these targeted industries
grow.
Exports Help Grow the State’s Economy
Georgia moved up six places to ninth in this year’s
export rankings, due to its growth in export intensity and
its increasing share of the nation’s total export market.
The state’s largest merchandise export category is
transportation equipment, which accounted for $6 billion
of Georgia’s total merchandise exports in 2010. Other
top merchandise exports were chemicals ($3.6 billion),
machinery ($3.5 billion), paper products ($3.1 billion),
and computers and electronic products ($2.4 billion). The
state has the world’s busiest passenger airport, two deep-
water ports, and the most extensive surface transportation
network in the nation. In 2010, $28.7 billion in exports
and $60.2 billion in imports passed through these ports,
making the state the 12th-largest export state and 9th-
largest import state in the U.S.
To support businesses looking to develop new markets
or expand international trade efforts, the GDEcD has
developed programs to help export-oriented business gain
access to research, online assistance, training, fnancial
opportunities and in-country market assessments. These
programs contribute signifcantly to the state’s economy,
in that companies that sell overseas grow an average of
18 percent faster and their workforces are typically 10
to 15 percent more productive than those that do not.
International sales volume lowers overall production costs
and leads to increased proftability.
The GDEcD, in collaboration with the U.S. Chamber
of Commerce, also provides access to TradeRoots,
a program offering customized workshops in seven
communities—Columbus, Douglas, Gainesville, Rome,
Savannah, Thomasville and Tifton—to educate companies
and economic developers about free trade agreements
and trade as an economic development tool. Furthermore,
the GDEcD provides assistance with trade shows,
international trade missions, in-country matchmaking
appointments, connections with international buyers, and
trade opportunity alerts to help the state’s small businesses
access international markets.
47
Clusters in Georgia
Largest Cluster: Business & Financial Services,
589,312 jobs
Largest Growth Cluster: Business & Financial
Services, 116,722 new jobs since 2002
Most Competitive Cluster: Biomedical/
Biotechnical (Life Sciences), 15,575 new or retained
jobs due to state competitive advantage
Most Concentrated Cluster: Apparel & Textiles,
2.10 times the national concentration level
48
While the island state has long been known for its idyllic
geography and tourism industry, Hawaii is currently facing
a more than $800 million defcit. To address this shortfall,
Governor Neil Abercrombie submitted his administration’s
budget with three essential goals including restoring basic
government functions, accelerating the state’s economic
recovery with immediate job creation, and reorienting
government toward investment in human capital and the
creation of a sustainable economy.
Required Spending for a New Day in
Hawaii
To meet the immediate needs of its citizens, Hawaii has
moved to restore critical government services, provide
temporary assistance for needy families, and address
infrastructure repairs and maintenance in what it terms
“required spending.” Key elements of these efforts include
$262 million in special funds to provide extended benefts
to unemployed workers and $54 million for public workers’
health care and retirement funds. The state is also looking
to restore positions at the State Historic Preservation
Division that will accelerate the permitting process
and shore up Hawaii’s building and tourism industries.
Plans are also in place to rebuild the state’s agricultural
inspection system in order to prevent invasive species from
compromising the state’s farm industry. Recognizing that
both commerce and tourism require safe highways, the
budget also provides $22 million in needed repairs and
maintenance.
Still, Governor Abercrombie recognizes that short-term
fxes are inadequate, and his administration has set
longer-term priorities in a plan called the New Day in
Hawaii. Priorities of this effort include education: the
state is targeting $14 million for student transportation,
nursing services for special needs students, new textbooks
and instructional tools, athletics programs, and tuition
assistance for the Hawaii National Guard. The governor
is also calling for $5 million to invest in the repair and
maintenance of Hawaii’s state parks to help stabilize and
grow the tourism industry within the state.
Hawaii passed an $11 billion annual budget, closing a $1.3
billion two-year projected shortfall with a combination of
$600 million in cuts and tax increases that will total $500
million over the next two years. The Legislature repealed a
state income tax deduction for higher-income earners, but
defeated proposals to begin taxing pensions in the state.
Growing a Sustainable Economy
Hawaii is working to create and grow a sustainable
economy with the Hawaii Five Point Economic Plan, a
series of programs aimed at creating and retaining new
jobs, as well as helping to build industry. These programs
hope to address problems created by the economic and
fscal crisis, including the decline in visitor arrivals,
business activity and investment, rising unemployment
HAWAII
Hawaii’s Place in the Rankings
3rd High Speed Broadband Availability
4th High Speed Broadband Intensity
5th STEM Job Growth
10th Long-term Job Growth
14th Small Business Lending
15th Gross State Product Growth
15th Budget Gap
16th Per Capita Income Growth
16th College Affordability
16th Educational Attainment
20th Short-term Job Growth
20th Economic Output Per Job
20th High-tech Share of All Businesses
22nd Business Tax Climate
24th Productivity Growth
48
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and reduced consumer spending. To meet these demands,
the state is working collaboratively with counties, the
Congressional delegation, county Chambers of Commerce,
the Building Trades Council, the Pacifc Resource
Partnership, the Hawaii Economic Stabilization Initiative,
and other private sector and nonproft groups to spur
investment and create a workable plan to address the issues
hampering the state’s economy.
Elements of the plan include the Hawaii Clean Energy
Initiative, which targets the transformation of Hawaii’s
energy system to achieve 70 percent clean energy by
2030. Partly because of geography, Hawaii has some
of the highest energy costs in the nation, affecting both
consumers and businesses. By identifying new energy
sources, the state hopes to decrease energy cost volatility,
address the issue of exporting of up to $7 billion a year
out of the state to purchase foreign oil, and confront the
problem of Hawaii’s vulnerability to supply disruptions,
natural or man-made.
The Hawaii Innovation Initiative aims to build capacity
in the state’s creative and entrepreneurial workforce to
compete in an innovation-driven global economy. This
program works to support increased competitiveness,
productivity and effciency in both existing and emerging
industries.
The Global Links effort targets increases in the range and
value of goods and services exchanged between Hawaii
and its export markets. Reaching new external markets
for goods and services can be challenging for Hawaii’s
existing and emerging businesses, as can increasing
external investment capital fows. The Hawaii Open for
Business initiative works to maintain a more competitive
business environment in the state.
Another element of Hawaii’s larger economic
development program is a focus on developing world-
class infrastructure. The state has pledged to analyze,
recommend, advocate and then implement plans to upgrade
Hawaii’s infrastructure. Hawaii sees modern infrastructure
as the basis of a strong economy, particularly in a state
dependent on transportation links for both visitors and
shipping. The state recognizes the need to play “catch
up” with infrastructure investments throughout the state,
creating jobs for its citizens in the process.
Industry Targets Focused on Long-Term
Strengths
The is relying on many of its traditional strengths for
job development efforts. Tourism has long been a major
revenue generator, although increasingly the state has
sought to reform business rules and regulations in order
to attract outside capital and create new jobs. Two of
the state’s economic development initiatives focus on
increasing the range and value of goods and services
exchanged between the state’s export markets, as well as
enhancing infrastructure within the state to better serve
tourists and commerce alike.
Other industries targeted by the state fall into three
primary groups: technology, creative industries, and
agribusiness. The focus on these industries is driven by
potential growth and the capacity the state has to meet
workforce and infrastructure needs of the businesses. The
technology cluster includes computer and engineering
services, biotechnology, and technical consulting services.
Creative industry targets include engineering research and
development, computer and digital media, and architecture
and design services. Agribusiness, long a staple of the
state, includes agricultural packaging and warehousing,
aquaculture, and advanced agricultural processing, all
sectors that capitalize on existing strengths in the island
state.
49
Clusters in Hawaii
Largest Cluster: Business & Financial Services,
74,567 jobs
Largest Growth Cluster: Business & Financial
Services, 16,152 new jobs since 2002
Most Competitive Cluster: Energy (Fossil &
Renewable), 4,157 new or retained jobs due to state
competitive advantage
Most Concentrated Cluster: Arts,
Entertainment, Recreation & Visitor Industries, 2.13
times the national concentration level
50
Idaho has long been seen as a center of innovation and
advanced research, serving as home to the Idaho National
Laboratory. While science and technology has been at
the forefront, the state also offers signifcant industry
muscle in diverse industries including food processing,
lumber and wood products, machinery, chemical products,
paper products and electrical manufacturing. To frm up
this foundation, the state has developed three primary
initiatives to help diversify and grow the state’s economy.
Three Priorities for Economic Security
To build on the state’s seventh best job growth ranking
this decade, Governor Butch Otter has laid out three
priorities for maintaining growth and diversifying Idaho’s
industry base. The three priorities are enhancing economic
opportunity, empowering Idahoans with education
and affordable health care, and promoting responsible
government. While easier said than done, the state has laid
out actionable steps to attain these goals and help create
new economic opportunity for the people of Idaho.
Governor Otter’s signature initiative is known as Project
60, a plan for growing Idaho’s economy to $60 million
in Gross State Product by capitalizing on homegrown
talent and the experience of its citizens. The state plans
to work collaboratively with business leaders to sell more
to the world and to showcase what it describes a stable
and predictable tax and regulatory environment where
businesses can thrive. Designed in three tiers to strengthen
both rural and urban communities, Project 60 is designed
to create quality jobs by fostering systemic growth,
recruiting new companies to the state, and selling Idaho’s
trade and investment opportunities to the world.
The “systemic growth” element of the Project 60 plan
focuses primarily on workforce training and recruitment
and technology transfer. Maintaining a skilled workforce
is a critical concern for Idaho businesses. At a time when
many states are concerned about “brain drain” and the
departure of highly skilled workers, Project 60 focuses
on recruiting new workers to Idaho. While the state has
signifcant research activity, the plan will work to establish
methods for getting research from the Idaho National
Laboratory and from state universities to the market.
Idaho has also set out to promote responsible government,
including a focus on innovative solutions developed at
the local and state levels, which have led to a top ten
ranking in our state budget gap metric. As part of this
effort, the state has developed a zero-base budgeting
program, which means every agency and operation of the
state government must continually justify its spending
and ongoing existence. The state has not imposed new or
increased taxes on citizens and businesses, but has worked
to fnd effciencies and new and better ways of fulflling
government’s important but properly limited role in
citizens’ lives.
IDAHO
Idaho’s Place in the Rankings
2nd Business Birth Rate
2nd Small Business Lending
7th Long-term Job Growth
9th Budget Gap
10th Gross State Product Growth
10th Entrepreneurial Activity
10th Job Placement Effciency
11th Export Growth
11th College Affordability
12th Cost of Living
15th Productivity Growth
14th Transportation Infrastructure
Performance
15th STEM Job Concentration
18th Business Tax Climate
23rd State and Local Tax Burden
24th Growth in Share of National Exports
24th Higher-ed Effciency
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Supporting Job Creation
Idaho has not been complacent in advancing other
measures to support job creation. The state is working
to create a niche in renewable and alternative energy
resources, as well as improving Idaho’s energy
transmission capabilities. To expedite this, the state has
developed the Offce of Energy Resources, and the team
of experts there hit the ground running with an ambitious
agenda aimed at putting Idaho ahead of the curve in energy
development, transmission and innovation. One state report
boasts that Idaho is already eighth in concentration of
green jobs.
To assist companies already located in the state as part
of its “systemic growth” initiative, Idaho is focusing its
in-state effort on helping its businesses maintain a skilled,
highly trained workforce that is essential for growth. The
state has created a Workforce Development Training
Fund offering companies up to $2,000 per employee
for training. The state also offers up to 50 percent
reimbursement for on-the-job training of new employees,
and will provide customized training programs for
businesses agreeing to cover 50 percent of the cost of the
coursework.
To aid in recruiting new workers to the state, the Idaho
Department of Labor has established IdahoWorks, a
database of 176,000 job seekers that now sees 6,000 to
8,000 searches per day. The Department of Labor also
assists businesses with recruiting and human resource
needs such as job description writing, employee matching,
promoting employer recruitment events, and even
managing interview schedules.
In 2009, the state formed the Idaho Innovation Council,
a committee composed of private sector representatives
tasked with advising state government on technology
transfer and entrepreneurship policies and initiatives.
The private, member-driven Idaho Technology Council
is creating a new collaborative initiative called IGem,
which aims to build the innovation networks necessary
to increase research and spin out new technologies to
businesses in the state.
Synergistic Industry Clusters
The state targets businesses that will ft with its existing
industry clusters. Currently, the state has targeted
alternative energy, recreational technology, manufacturing,
aeronautics and information technology. These industries
are supported with an orchestrated marketing and public
relations campaign, both nationally and internationally.
The Meridian, Idaho region is working in partnership
with Idaho State University to create The CORE, a
health care research and technology clustering initiative.
The initiative includes recently completed fex space for
health technology companies, and already hosts 43 related
enterprises in the six square mile area. The partnership
includes 18 organizations in business, education and
government, which have provided seed investments
totaling $100,000 to fund support activities for the cluster.
The CORE is also home to Idaho State’s Meridian Health
Sciences Center, a new magnet school, and a university
school district partnership involving a repurposed health
care manufacturing facility, which allows high school
students to earn college credit in health care felds from
state institutions.
Idaho sees foreign direct investment (FDI) as a source
of new technologies, capital, processes, products,
organizational technologies and management skills,
which stands to provide a strong impetus for economic
development. The state’s FDI efforts include taking
advantage of the EB-5 Immigrant Investor Program
granting foreigners permanent U.S. residency in exchange
for helping to create U.S. jobs. The program requires
a $1 million investment in urban areas or a $500,000
investment in rural or targeted employment areas and the
creation of at least ten permanent jobs. The investment
must also remain “at risk,” without repayment, for a period
of two full years.
FDI recruitment has been successful in Idaho, helping
to expand the state’s reach into Canada, Europe, Latin
America and Asia. Traditional trade offces have not
been opened, but the state has focused on establishing
relationships with frms that can assist in matching foreign
investors with Idaho investment opportunities. In the
future, the state hopes to expand the global market reach
of Idaho companies through international trade offces,
trade missions, investment seminars, and hosting of inward
buying delegations.
51
Clusters in Idaho
Largest Cluster: Business & Financial Services,
83,565 jobs
Largest Growth Cluster: Business & Financial
Services, 22,585 new jobs since 2002
Most Competitive Cluster: Business & Financial
Services, 9,395 new or retained jobs due to state
competitive advantage
Most Concentrated Cluster: Agribusiness,
Food Processing & Technology, 2.5 times the national
concentration level
52
Facing a daunting budget defcit and pension shortfalls,
Illinois is taking big steps to address fscal issues while
continuing to promote and support the creation of new
jobs and businesses. The state has worked to develop a
comprehensive approach to addressing the defcit through
tax and regulatory actions and enacting proactive,
sustainable programs aimed at job creation, innovation and
workforce retention.
Tax Increases with Spending Limits
With a budget defcit of more than $13 billion, the state has
moved to raise the individual income tax rate to 5 percent
from its current rate of 3 percent and the corporate tax rate
from its current 4.8 percent to 7 percent in order to avert
what Governor Pat Quinn has called a “fscal emergency.”
In addition to the looming defcit, the state has roughly
$8 billion in unpaid bills to social service agencies,
pharmacies and others, and a sinking bond rating.
As part of this legislation, the state’s spending growth
would be limited from one year to the next over the next
four years. Efforts to borrow $8.75 billion to take care
of the state’s months of unpaid bills failed, meaning that
social service agencies and others who have waited to be
paid by the State of Illinois for their services will have to
wait still longer.
The four-year tax increase would be accompanied by state
spending limits through FY2015. For FY2012, the limit
would be $36.8 billion, which would mark a 10 percent
increase from FY2011 spending levels. If the state breaches
the limit, then the higher-income tax rates would revert
to current levels, unless the governor declares a fscal
emergency to raise spending by a set amount for a single
fscal year. Revenue from the tax hikes would enable
Illinois to sell about $12.2 billion in bonds to pay off a
huge bill backlog and to make a $3.7 billion pension fund
payment for FY2011.
Jobs Now and in the Future
While confronted with a daunting budget defcit, Illinois
is pressing ahead with efforts to make the state a better
place for businesses and citizens alike. To this end, the
state is continuing to support programs aimed at business
stimulation, including the state’s Illinois Jobs Now! capital
program and the Economic Development for a Growing
Economy Tax Credit Program (EDGE). Creating jobs
remains an ongoing priority for the governor and state
alike.
As part of the recent legislative push, $25 million would
be set aside to assist companies that will create or retain
well-paying, sustainable jobs. Funding would be available
to help construct or rehabilitate facilities, purchase or
upgrade equipment, or install necessary infrastructure
improvements. The program would also include funding
to assist small businesses operating or wanting to locate
ILLINOIS
Illinois’ Place in the Rankings
3rd Median Family Income
11th Economic Output Per Job
11th High-tech Share of All Businesses
12th Growth in Share of National Exports
13th Higher-ed Degree Output
14th Educational Attainment
20th Export Intensity
20th Cost of Living
20th Job Placement Effciency
22nd High School Advanced Placement
Intensity
23rd Business Tax Climate
23rd Higher-ed Effciency
25th Export Intensity Growth
25th STEM Job Concentration
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in economically depressed areas. The current credit crisis
has particularly hurt small business access to needed
credit. Therefore, $15 million has been made available to
help these small businesses survive and thrive. Another
$15 million has been set aside to help small, high-growth
technology companies to expand and put more people to
work in Illinois. Thanks to the state’s research institutions,
these business development opportunities are particularly
strong in information technology and biotechnology. Yet,
too often, frms in these sectors lack needed access to
capital and locate to other states.
The Increasing Investment in the Employer Training
Investment Program (ETIP) program has emerged as
a critical tool for promoting the continued training and
development of Illinois workers. Investing to upgrade
workers’ skills increases productivity, reduces costs,
improves quality and increases competitiveness. Currently,
Illinois companies are reimbursed up to 50 percent of the
cost of training their employees through an ETIP grant.
Perhaps no other industry has been hit harder by the
current economic downturn than the domestic automotive
industry. The EDGE (Economic Development for a
Growing Economy) program provides corporate tax
credits to companies that create or retain jobs in Illinois
rather than locating or relocating them to other states.
Because the auto companies are experiencing operating
losses, though, they are not in a position to take full
advantage of these credits, a situation that puts further jobs
in jeopardy and threatens to hamper future investment.
Legislation passed by the General Assembly enables auto
manufacturing companies to retain employee income tax
withholdings as an alternative to the EDGE corporate tax
credits.
Supporting Public Private Partnerships
and Innovation
To encourage more economic development and create new
jobs, Illinois is working to promote public- and private-
sector cooperation in order to bring in more federal dollars.
Governor Quinn is developing a grant program that would
pair technology companies with an Illinois-based research
entity (university or national laboratory) for new product
development, technology transfer, commercialization,
or the improvement of manufacturing processes. The
program would bring private-sector experts to the table
to attract strategic investments. The Illinois Science and
Technology Coalition (ISTC) is a public-private economic
development organization founded in 2008 to promote
collaboration between public and private partners to
attract and retain R&D resources and talent. In addition
to managing the new grant program, the ISTC will house
the Illinois Innovation Council, which will assist the state
in developing an innovation agenda and be responsible for
coordinating joint proposals from private companies and
research labs to the federal government.
The ability to translate these ideas into new products,
services, technologies and jobs will be one of the marks
of success in the 21st century economy. Supporting an
innovation-based economy in Illinois will require the
strategic investment of both public and private resources
in technology and research-based sectors. The state is in
the process of building a foundation of partnerships with
the private sector that seek to increase access to capital
for small businesses, provide mentoring opportunities to
emerging entrepreneurs, and take advantage of growing
sectors like biotechnology and new energy solutions.
53
Clusters in Illinois
Largest Cluster: Business & Financial Services,
942,941 jobs
Largest Growth Cluster: Business & Financial
Services, 118,017 new jobs since 2002
Most Competitive Cluster: Apparel & Textiles,
8,597 new or retained jobs due to state competitive
advantage
Most Concentrated Cluster: Machinery
Manufacturing, 1.77 times the national concentration
level
54
Spend Less, Make Cuts Early
When Governor Mitch Daniels took offce in early 2005,
he inherited a sizeable budget defcit in a manufacturing-
intensive state vulnerable to the economic downturn.
Governor Daniels went to work improving the effciency
of state government, eliminating redundancies, and
making cuts where necessary. By 2009, the state had
reduced government spending by 20 percent (excluding
K-12 education and Medicaid), and had reduced the
number of state employees by 10 percent, or roughly 3,000
workers. Yet just 5 percent of the layoffs were involuntary,
facilitated by a special task force charged with reviewing
the need to replace workers after any state job was vacated.
While Indiana avoided much of the housing boom and
bust, its manufacturing-driven economy was hit hard
by the recession. Yet the state was able to maintain its
balanced budget and is one of the few to hold a AAA credit
rating. This year’s two-year state budget does not increase
taxes, and is projected to leave Indiana with a $1.1 billion
surplus by 2013, which will trigger a taxpayer refund and
pension fund replenishment if reserves exceed 10 percent
of revenue. The 2012–2013 budget includes an increase of
$150 million in education funding after $300 million cuts
in both 2010 and 2011.
The 21st Century and Beyond
To help drive economic development and job creation,
the state has created the 21st Century Research and
Technology Fund, also known as the 21 Fund. The
fund identifes and vets technology-based companies
conducting business in Indiana and helps provide fnancial
support and assistance to make the transitional leap from
research to product development. By supporting high-tech
companies during this crucial stage—often known as “the
valley of death”—the 21 Fund encourages entrepreneurial
success and is intended to keep the state’s most promising
technologies within its borders.
The 21 Fund does not focus on a particular technology
or area of application in selecting companies to work
with. This allows the state’s market-driven competitive
advantages to direct investment intelligently through
a rigorous review process. Avoiding pre-selection of
technology focus areas ensures that the 21 Fund plays an
unbiased role in diversifying the state’s economy.
The 21 Fund stimulates an environment of innovation and
cooperation among the state’s universities and businesses
to promote research activity through collaborative
partnerships. These partnerships consequently lead to a
higher incidence of technology transfer, a process that has
been proven to create jobs for Indiana communities.
The 21 Fund also sets aside a portion of its budget for
a Small Business Innovation Research (SBIR) Program
Offce, created to support companies that are applying
for or have received competitive federal SBIR or Small
INDIANA
Indiana’s Place in the Rankings
7th Export Intensity
7th Budget Gap
8th Growth in Share of National Exports
10th Business Tax Climate
14th High School Advanced Placement
Intensity
15th Cost of Living
17th Small Business Survival Index
17th Higher-ed Degree Output
20th Export Growth
20th Transportation Infrastructure
Performance
23rd Export Intensity Growth
24th Short-term Job Growth
24th Median Family Income
25th Productivity Growth
54
55
Business Technology Transfer (STTR) awards. The 21
Fund’s SBIR/STTR Phase I Matching Program has
been expanded to support later-stage commercialization
activities of Phase II SBIR/STTR awardees. With
the support of the Indiana Economic Development
Corporation, these programs make awards through a set-
aside of 20 percent of the 21 Fund’s annual appropriations.
In recent years, the 21 Fund has reformed its business
model to shift its investment focus towards small business
and high-tech startups, while increasing the role of job
creation as a criterion for funding and supplementing
its technical review process with an enhanced business
review. The Fund also adjusted its strategy to focus on
projects near commercialization and prepared to execute
a rollout plan. In 2011, Indiana is using its $34.3 million
allocation from the federal State Small Business Credit
Initiative (SSBCI) for qualifed seed funds, angel networks
and high-growth lending opportunities. The state also
plans to use $1.5 million of the SSBCI funds to fully fund
the state’s Capital Access Program for the next two years.
Recognizing the increasing importance of transportation
as it relates to commerce and the fow of commodities and
trade, in 2005 the state launched a ten-year, $12 billion
transportation plan, known as Major Moves, to improve
and expand Indiana’s highway infrastructure. A total of
$2.6 billion was committed to Major Moves from the $4
billion long-term lease of the Indiana Toll Road. The Major
Moves plan called for 104 new roadways with 1,600 lane
miles by 2015. With $11 billion being invested between
2005 and 2012, the Indiana Department of Transportation
(DOT) is now investing an average of more than $1.5
billion in construction dollars annually to improve
Indiana’s transportation infrastructure, with no increase in
gasoline or diesel fuel taxes. At the end of 2010, the ffth
year of the Major Moves plan, 41 roadway projects were
completed and opened to traffc, nearly 600 bridges were
rehabbed or replaced, and nearly $5.7 billion was invested
in major new construction and preservation projects.
By 2012, the DOT is looking to have 65 roadway projects
complete or substantially under construction, and as many
as 800 bridges rehabilitated or replaced—15 percent of
the state’s inventory. By the end of calendar year 2015,
state offcials project that 88 roadways will be completed
or substantially under construction and 4,000 miles of
highway will be resurfaced (36 percent of the state’s
inventory). In addition, 1,190 bridges will be rehabilitated
or replaced (21.6 percent of the state’s inventory), and more
than $10 billion will be invested in major new construction
and preservation projects. These efforts are having a
positive impact on state employers, with roughly 94 percent
of contracts awarded to Indiana companies.
Bringing Outside Dollars Home
Indiana’s ranking of seventh-highest state export intensity
and its increasing national export market share place it
in a tie for ninth on our list of export states. The state
shipped $28.7 billion in exports in 2010, of which $8.0
billion was in transportation equipment and $7.6 billion in
chemicals. The state has been supported in these efforts
by a partnership with the U.S. Department of Commerce’s
Export Assistance Center (EAC). The EAC assists Indiana
frms seeking to enter new markets or expand overseas
sales, by helping them to develop an effective export
strategy, locate the best markets for their product, fnd
international buyers, and identify sources of fnancing.
This partnership exemplifes Indiana’s continuing efforts to
position itself as one of the nation’s leading exporters.
55
Clusters in Indiana
Largest Cluster: Biomedical/Biotechnical (Life
Sciences), 305,821 jobs
Largest Growth Cluster: Biomedical/
Biotechnical (Life Sciences), 44,973 new jobs since
2002
Most Competitive Cluster: Apparel & Textiles,
5,730 new or retained jobs due to state competitive
advantage
Most Concentrated Cluster: Primary Metal
Manufacturing, 5.41 times the national concentration
level
56
Iowa touts the state’s pro-business policies, nationally
recognized research centers and legendary Midwestern
work ethic to give the state a competitive edge. Those
business advantages fuel an economy organized around
growth industries including renewable energy, information
technology, advanced manufacturing, biosciences and
food processing and packaging. To continue to grow
the economy, the state is looking at reducing taxes and
developing an action plan to create 200,000 new jobs
within the state.
Reducing Taxes and Helping Business
Iowa’s state budget provides nearly $160 million in direct
property tax relief to Iowans. It fully funds the state’s share
of school funding commitments, erasing the need for local
school districts to make up the difference in property taxes.
The budget also makes a clear case that the state is ready
for job creation, proposing to cut one of the nation’s highest
small business income tax rates in half.
Small businesses are the engines of growth throughout the
country, but Iowa small businesses pay an income tax rate
that is the highest in the nation at 12 percent. The small
business income tax rate proposed by the state will be a fat
6 percent. Commercial property taxes will be reduced by
40 percent over the next fve years. New investment will be
immediately taxed at 60 percent of its valuation. Existing
commercial property taxes will be rolled back by 8 percent
a year over fve years. The budget plan includes funding
for these tax cuts through the use of new revenues coming
to the state due to economic growth and by a restoration
of the gaming tax to the level at which it was originally
approved.
Combined with the efforts to reduce the state’s high
corporate income taxes, thousands of Iowa businesses,
both large and small, will see their income taxes reduced
by nearly half, allowing them the opportunity to reinvest
those savings to expand their operations and hire more
Iowans. This rate reduction, coupled with Iowa’s single-
factor corporate income tax structure, will make Iowa one
of the most competitive states for business in the Midwest.
Iowa is also working to transform the current Department
of Economic Development into a public-private partnership
that will draw on best practices from both the public
and private sectors to recharge the state’s job creation
programs.
Two Hundred Thousand New Jobs for
Iowans
The state has set a goal of 200,000 new jobs for Iowans
over the next fve years. To accomplish this, state leaders
have set a course to develop a business environment that
is competitive with other neighboring states. According to
the 50-State Property Tax Study by the National Taxpayers
Conference, commercial property valued at $500,000 in
IOWA
Iowa’s Place in the Rankings
3rd Higher-ed Degree Output
5th Transportation Infrastructure
Performance
6th Productivity Growth
8th Budget Gap
8th High Speed Broadband Intensity
10th Export Growth
11th Educational Attainment
13th Median Family Income
13th Export Intensity Growth
13th Growth in Share of National Exports
14th Cost of Living
17th Short-term Job Growth
17th Export Intensity
19th Per Capita Income Growth
21st Long-term Job Growth
21st Higher-ed Effciency
22nd Gross State Product Growth
23rd STEM Job Growth
56
57
Des Moines bears a greater tax levy than similar property
in New York City. A comparison of rural commercial
property tax rates yields similar results. The state is
working with local governments to reduce commercial
property taxes to less than the regional average, in hopes of
attracting new businesses and jobs to Iowa. To streamline
its development efforts and make them more business-
friendly, the state is also working to establish the Iowa
Partnership for Economic Progress, a private-public
partnership. With these two elements in place, the state’s
ambitious goal of 200,000 new jobs may well be within
reach.
The Iowa Partnership for Economic Progress (IPEP)
aims to support all aspects of a successful economic
development portfolio: business attraction, retention,
innovation, and expansion. The entity will replace the
current laundry list of incentive programs with a more
focused set of incentives providing maximum fexibility
for meeting the needs of potential employers. One element
of the IPEP program will be developing a customer
service attitude among the state’s economic development
professionals, promoting aggressive and proactive problem
solving so that Iowa can make the “sale” to keep and
create jobs. The state will look to best practices from both
the public and private sectors in order to achieve a more
dynamic, results-oriented, and accountable economic
development organization.
IPEP will include a private 501(c)3 non-proft arm that can
house the Iowa Innovation Council (ICC), a business-
led group that developing strategies and long-term plans
for how Iowa can better compete in the global economy.
Eventually, the private entity will take charge of marketing
and tourism activities, giving these critical development
activities a long-term, stable, and predictable funding
stream with which to operate in good and bad times. This
new structure will leverage public and private resources
in order to maximize efforts to attract more jobs and
investment in Iowa.
Targeting High Growth Industries
Iowa has targeted high-growth industries that capitalize
on the state’s resources including raw materials, workforce
and existing strengths in the marketplace to help create
new, high wage jobs for Iowans. These industries include
renewable energy, advanced manufacturing, information
technology, fnancial service, biosciences and food
manufacturing. To help spur development, the state offers
tax incentives including reduced or eliminated corporate
tax and a 50 percent deductibility of federal taxes from
Iowa corporate income. Iowa is one of only fve states
that provide this deductible. It offers a single-factor, non-
unitary tax based only on the percentage of total sales
income within the state. Other key tax initiatives include
no personal property tax and no sales and use tax on
manufacturing machinery and equipment purchases. The
state also offers a refundable credit for increasing research
activities of up to 6.5 percent of the company’s allotted
share of qualifying research expenditures in Iowa.
Iowa’s targeted industry initiative capitalizes on the state’s
existing diverse industrial base, central location, advanced
infrastructure and pro-business approach to attract and
grow new and emerging businesses and industry within the
state. Iowa has targeted fve different industry subsectors
that already have a strong foundation and could beneft
from state-level workforce and infrastructure support to
grow and succeed.
These industries include:
Advanced manufacturing that is focused on agricultural •
and construction machinery, aerospace engineering,
aluminum, and steel.
Renewable energy including wind, biomass, ethanol •
and biodiesel.
Biosciences, where university research concentrated in •
plant, animal and human genomics form the foundation
for a system of interrelated disciplines and areas of
study that support and assist one another.
Information technology. •
Financial services, where the state is already regarded •
as a major center for the insurance and fnancial
services industries.
Food manufacturing, with the state being home to 32 •
of the 100 largest food manufacturers and processors,
creating a critical mass of food companies and industry
knowledge.
57
Clusters in Iowa
Largest Cluster: Agribusiness, Food Processing &
Technology, 190,931 jobs
Largest Growth Cluster: Business & Financial
Services, 26,277 new jobs since 2002
Most Competitive Cluster: Agribusiness, Food
Processing & Technology, 12,254 new or retained jobs
due to state competitive advantage
Most Concentrated Cluster: Agribusiness,
Food Processing & Technology, 3.29 times the
national concentration level
58
Known as a major agricultural producer, Kansas has
capitalized on its growing production sector, central
location and strong public-private partnerships to create
new jobs and add technology and value to products and
services produced in the state. A strong aerospace and
telecommunications industry presence provide additional
high-paying and high-tech jobs to the state.
Growing the Kansas Economy
In a state known as a major agricultural producer, it is no
surprise that the rallying cry of the current administration
is to “grow the Kansas economy.” A central element
of Governor Sam Brownback’s economic development
agenda is to pay for job creation initiatives by eliminating
corporate tax subsidies enjoyed by only a few. Regulatory
and tax reforms include enhanced expensing, allowing
Kansas businesses to immediately deduct a higher
percentage of the cost of an investment, and a Rural
Opportunity Zones initiative that will provide a state
income tax waiver for any individual relocating from out
of state to any participating county that has experienced
double-digit percentage population decline over the last ten
years.
Other aspects of the governor’s agenda include a three-
year, $105 million university economic growth initiative
to enhance job growth in key economic sectors such as
aviation, cancer research, animal health, and engineering.
Each university will be required to provide 50 percent of
the cost of the initiative, through either private-sector or
reprogrammed funds. The governor is also calling for the
creation of a Governor’s Economic Council, which will
consist of private-sector business leaders and will seek to
assure strategy integration, coordination and accountability
across all of the state’s economic development agencies
and initiatives. This Council stands to replace the recently
eliminated Kansas, Inc., an independent economic research
and policy organization for the state.
One of Governor Brownback’s frst tasks was to create
Rural Opportunity Zones. This new law designates
50 rural counties in the state—many of which have lost
10 percent of their populations or more over the past
decade—for a set of incentives for new residents, including
income tax exemptions for those locating in these counties
and a student loan repayment program of up to $15,000
per qualifying student. The state is also exploring new
opportunities for expanding its agriculture exports,
particularly with an eye toward animal agriculture.
“Tending their garden” is an apt term for other efforts
afoot within the state. Kansas is working to support
the competitiveness and growth of the state’s aviation
manufacturing sector, working to ensure that Kansas
remains the premier location for the design and
manufacture of general and business aviation aircraft,
military training aircraft, and large commercial air
vehicles, as well as the modifcation and maintenance of
military aircraft.
The state is working to promote energy development and
growth in wind power and ethanol, as well as responsible
KANSAS
Kansas’ Place in the Rankings
6th Transportation Infrastructure
Performance
7th Cost of Living
9th College Affordability
10th Median Family Income
14th Export Intensity Growth
15th Higher-ed Effciency
16th Productivity Growth
16th Export Intensity
18th Growth in Share of National Exports
18th Budget Gap
21st Per Capita Income Growth
21st Export Growth
22nd Higher-ed Degree Output
23rd High-tech Share of All Businesses
24th Academic R&D Intensity
20th Educational Attainment
58
59
energy development from other sources of energy,
including traditional sources such as oil, natural gas, coal,
and nuclear.
The state is working to stabilize higher education funding
so its public universities remain strong and power a robust
economy. To help meet this goal, the state, in collaboration
with the State Board of Higher Education, is promoting
efforts to build the biosciences. These efforts include
working to get the National Cancer Institute designation
at the University of Kansas (KU) Cancer Center, and
building the National Bio- and Agro-Defense Facility
at Kansas State University (K-State). The state is also
supporting the Kansas Polymer Research Center at
Pittsburg State University and encouraging the National
Institute for Aviation Research at Wichita State
University (WSU) to continue to explore new orthopedic
uses for composite materials.
Other efforts related to higher education in the state
include working with Fort Hays State and Emporia
State Universities to meet the state’s future demand for
international business leaders and teachers and improving
rankings for KU’s School of Medicine, K-State’s School
of Veterinary Medicine, and WSU’s aerospace research
and development mission. The state is also promoting
innovative programs at the state’s community colleges to
meet future industry needs.
The state approved a proposal for $10.5 million per year
in new funding to boost engineering programs at the
University of Kansas, Kansas State, and Wichita State
University. The program will be funded by revenue from
state-owned casinos along with matching funds from each
university. The bill also gives KU the authority to issue
$65 million in bonds for an engineering classroom and lab
facility.
Increasing Entrepreneurship
Kansas recently voted to eliminate its longstanding
technology-based economic development organization,
the Kansas Technology Enterprise Corporation (KTEC).
The state plans to move many of KTEC’s functions to the
state Department of Commerce, including the regional
entrepreneurship centers (including Wichita Technology
Corporation), the Mid-America Manufacturing Technology
Center, and the angel investment tax-credit programs. The
Kansas Board of Regents will now manage the National
Science Foundation’s Experimental Program to Stimulate
Competitive Research (EPSCoR). The state does not plan
to divest previous equity investments made by KTEC in
state companies.
There are several regional networks of angel investors
dedicated to identifying and funding promising start-up
business opportunities in Kansas. These include Kansas
income tax credits available to individuals willing to
provide seed capital fnancing for emerging Kansas
businesses engaged in development, implementation and
commercialization of innovative technologies, products
and services.
Other programs include the Kansas Opportunity
Initiatives Fund provided by the state legislature to
address opportunities or emergencies that may have
substantial impact on the Kansas economy. This
performance-based fnancial assistance is used to secure
economic benefts and avoid or remedy economic losses.
Eligible projects may include major expansion of an
existing Kansas commercial enterprise, potential location
of a major employer in Kansas, matching a signifcant
federal or private-sector grant, the departure or substantial
reduction of the operations of a major employer, or the
closing of a major federal or state institution.
The High Performance Incentive Program (HPIP)
provides tax incentives to employers that pay above-
average wages and have a strong commitment to skills
development for their workers. This program recognizes
the need for Kansas companies to remain competitive and
encourages capital investment in facilities, technology and
continued employee training and education. A substantial
investment tax credit for new capital investment in Kansas
and a related sales tax exemption are the primary benefts
of this program.
HPIP offers employers four potential benefts including a
10 percent income tax credit for eligible capital investment
that exceeds $50,000 at a company’s facility, with a carry-
forward that can be used in any of the next 10 years in
which the qualifed facility re-qualifes for HPIP. It also
offers a sales tax exemption to be used in conjunction with
the company’s eligible capital investment at its qualifed
facility.
59
Clusters in Kansas
Largest Cluster: Business & Financial Services,
173,272 jobs
Largest Growth Cluster: Business & Financial
Services, 28,855 new jobs since 2002
Most Competitive Cluster: Energy (Fossil &
Renewable), 16,670 new or retained jobs due to state
competitive advantage
Most Concentrated Cluster: Transportation
Equipment Manufacturing, 2.95 times the national
concentration level
60
Kentucky’s lowest cost of living in the nation helps move
it into this year’s top ten for taxes and regulation; the
state has also clocked in as the 12th fastest for job growth
over the past two years. This is independent recognition
of the strategic and sound approaches the state has taken
to rebuilding its economy. In order to further streamline
business interactions with state government, Kentucky
recently passed legislation that will lead to the creation
of a business “One-Stop” web site. The online interface
will simplify business flings and cut down on the need for
business owners to complete multiple forms.
Shrinking Government and Slashing
Spending
Despite repeated budget shortfalls, Governor Steve Beshear
has balanced Kentucky’s budget eight different times,
while preventing signifcant cuts to the state’s priorities of
education, critical public safety programs, and job creation
efforts. The state, too, has not allowed any broad-based tax
increases on Kentucky families and businesses.
The governor, along with a proactive legislature, has
shrunk state government to its smallest size in a generation,
and continues to fnd ways to improve government
effciency with fewer taxpayer dollars. Some steps that
have been taken include cutting political appointees and
contracts, as well as selling off unneeded state property
and vehicles. In addition, the governor, his senior staff,
and Cabinet secretaries have each taken 10 percent pay
cuts and reduced the so-called non-merit workforce by $5
million, starting at the highest levels.
Kentucky also made the tough decision to save $24
million by furloughing most state workers for six days.
Recognizing the growing cost of the state employees’
pension system, the governor has proposed and signed a
landmark pension reform to reduce out-of-control costs
while honoring the state’s commitment to teachers, police
offcers, frefghters and state employees. This reform also
helped ease the burden on the budgets of county and local
governments and school districts. This was accomplished
by reducing benefts for new employees, eliminating
pension double-dipping and requiring appropriate expertise
for those making investment decisions.
Job Retention and Creation Key
The state’s top priority continues to be creating and
retaining jobs. To accomplish this, Kentucky created
new incentive programs in the summer of 2009. Thus
far, 248 projects have been approved and are moving
forward. These programs point to a potential investment
of $2.2 billion that has helped create 14,700 new jobs and
retain more than 4,800 existing jobs. Creating new jobs is
important, but from the state’s perspective, retaining jobs
that are in jeopardy is just as critical.
The state’s economic development toolbox includes several
programs aimed at new and emerging businesses and
job retention efforts. Through the Kentucky Economic
Development Finance Authority (KEDFA), established
within the Cabinet for Economic Development to
KENTUCKY
Kentucky’s Place in the Rankings
1st Cost of Living
4th Export Intensity
8th Job Placement Effciency
12th Short-term Job Growth
15th Export Intensity Growth
19th STEM Job Growth
19th Academic R&D Intensity
19th Budget Gap
19th Business Tax Climate
21st State and Local Tax Burden
21st High Speed Broadband Intensity
22nd Small Business Survival Index
23rd Entrepreneurial Activity
25th High School Advanced Placement
Intensity
60
61
encourage economic development, business expansion, and
job creation, the state is able to provide fnancial support
through an array of fnancial assistance and tax credit
programs.
One of those programs is the Kentucky Small Business
Investment Credit program, the frst tax credit program
of its kind for small businesses in Kentucky. The program
is designed to encourage small business growth and job
creation by providing a nonrefundable state income tax
credit to small businesses hiring one or more eligible
individuals and investing at least $5,000 in qualifying
equipment or technology. With certain exceptions, most
for-proft businesses with ffty or fewer full-time employees
are considered eligible for this program, which allocates a
total of $3 million in tax credits per fscal year.
The Kentucky Business Investment Program is aimed
at any business entity engaged in manufacturing or
agribusiness or that is a regional or national headquarters,
regardless of the underlying business activity. The program
is designed to serve companies doing business in a multi-
state, national or international market where services are
provided to a customer base that includes more than 50
percent non-residents. Eligible businesses include call
centers, centralized administrative or processing centers,
telephone or Internet sales order or processing centers,
distribution or fulfllment centers, data processing centers,
and research and development facilities.
Any business entity primarily engaged in manufacturing,
service, or technology activities, or in operating or
developing a tourism attraction in Kentucky, has access to
the Kentucky Enterprise Initiative Act program. Service
and technology companies must use technology or provide
a service to customer or affliate entities primarily outside
the state and serve a multi-state, national or international
market. To qualify for the incentives, an eligible company
must make a minimum investment of $500,000 in an
economic development project. Eligible investment
costs include expenditures for building and construction
materials, research and development equipment, and
acquisition of real property to be owned, used or occupied
by the approved company.
Two other state programs are aimed at reinvestment within
the state. The frst is the Kentucky Reinvestment Act
program, which is targeted at any Kentucky company
engaged in manufacturing and related functions operating
within the commonwealth on a permanent basis for a
reasonable period preceding the request for assistance.
Benefts, including a tax incentive, are available for up
to ten years, including tax credits for up to 100 percent
of corporate income or limited liability entity tax
liability. The other program is the Kentucky Industrial
Revitalization Act. Companies approved under the
program may receive state income tax credits, Kentucky
Corporation License Fee credits, and job assessment fees
for up to ten years. These incentives can add up to 75
percent of the cost of the rehabilitation or construction
of buildings, as well as the refurbishing or purchasing of
machinery and equipment.
The One-Stop Shop
Kentucky has worked to ease the burdens of doing business
in the state by creating a one-stop shop to conduct
business in the commonwealth. This effort authorizes
the establishment of an electronic portal that will serve
as a single, unifed entry point for business owners to
access information about state services and requirements
for operating a business in Kentucky. Additionally, the
portal will allow Kentucky companies to submit forms and
applications, make payments, and complete other required
transactions as part of doing business in the state.
As part of this effort, an advisory committee was
created to oversee the implementation of the portal. The
committee includes the Secretary of State, secretary
of the Governor’s Executive Cabinet; secretary of the
Finance and Administration Cabinet, secretary of
the Cabinet for Economic Development, secretary of
the Education and Workforce Development Cabinet,
secretary of the Public Protection Cabinet, secretary of
the Transportation Cabinet, secretary of the Tourism, Arts
and Heritage Cabinet and and the secretary of the Energy
and Environment Cabinet. This effort aims to reduce
government red tape and ease the burden on businesses,
small and large alike, that have chosen to invest in
Kentucky’s future.
61
Clusters in Kentucky
Largest Cluster: Business & Financial Services,
197,197 jobs
Largest Growth Cluster: Business & Financial
Services, 38,247 new jobs since 2002
Most Competitive Cluster: Business & Financial
Services, 3,866 new or retained jobs due to state
competitive advantage
Most Concentrated Cluster: Transportation
Equipment Manufacturing, 2.25 times the national
concentration level
62
The port state of Louisiana remains at the top of our
exports list this year. The state ranks in the top fve in
all four export measures. Much of the state’s exports
are related to the agriculture and energy economies, but
manufactured exports include various chemicals and
machinery. The state’s primary trading partners are China,
Japan, and Mexico.
Cuts and Savings
Louisiana is facing a $1.6 billion budget shortfall, which
Governor Bobby Jindal has sought to close with roughly
$1 billion in proposed cuts and savings. The remaining
shortfall will be covered by one-time revenues generated
by, among other things, the sale of state prisons and
surplus property. The governor’s 2011–12 spending plan
also includes more than $400 million in one-time revenues
that will be used to make up for the loss of federal
stimulus dollars. In the proposed budget, public colleges
and universities would face no net loss of revenues next
year when money from tuition increases is factored in.
Private doctors, hospitals and other health care providers
treating Medicaid patients also would not see their rates
reduced, nor would any Medicaid patients lose eligibility
for services. Louisiana State University public hospitals,
however, would see a 4.5 percent cut, and many state
employees who now contribute 8 percent of their salaries
toward their pensions would be asked to contribute 11
percent.
Programs to Create Quality Jobs
Louisiana is home to strong traditional industries, such
as petrochemicals and shipbuilding, as well as newer
growth industries with strong foundations in technology
and research. These growth industries include advanced
manufacturing, agribusiness, clean tech, and energy-
related industries. The state has designed programs and
competitive advantages specifcally tailored for each
industry.
The Technology Commercialization Credit and Jobs
program provides tax credits for companies that invest
in the commercialization of Louisiana technology and
create new jobs. Qualifying businesses that invest in the
commercialization of technology in the state may be
granted a refundable tax credit on any income or corporate
franchise tax liability and earn a refundable tax credit
based on new jobs created. Qualifying research centers
that develop Louisiana technology to be commercialized
may be granted a refundable tax credit based on new jobs
created. Such credits are granted for a period of no less
than fve years.
The Quality Jobs program provides a cash rebate to
companies that create high-paying jobs and promote
economic development in the state. The program provides
5–6 percent cash rebate on annual gross payroll for new
jobs for up to ten years. It also allows for 4 percent sales/
use tax rebate on capital expenditures, or a 1.5 percent
investment tax credit for qualifed expenses that help the
industry’s bottom line.
LOUISIANA
Louisiana’s Place in the Rankings
2nd Per Capita Income Growth
2nd Growth in Share of National Exports
2nd College Affordability
3rd Business Birth Rate
4th Export Intensity Growth
4th Export Growth
5th Export Intensity
9th State and Local Tax Burden
10th Entrepreneurial Activity
13th Economic Output Per Job
17th Higher-ed Effciency
19th Short-term Job Growth
19th Small Business Lending
21st Cost of Living
22nd STEM Job Growth
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The Research and Development Tax Credit encourages
existing businesses with operating facilities in Louisiana to
establish or continue research and development activities
within the state. As part of this program, Louisiana
taxpayers who incur research and development expenses
may be able to receive credits against state income
and corporate franchise taxes. The program provides
businesses that employ fewer than 50 Louisiana residents
a credit of up to 40 percent of the apportioned amount
of their expenditures. Additionally, businesses that claim
federal income tax credits for research activities can
receive a credit of up to 20 percent of their apportioned
increase in research activities, or 25 percent of their
apportioned federal credit, depending on the number of
resident employees.
To assist Louisiana businesses in fnding and recruiting
critical employees, the state’s FastStart program provides
customized recruitment, screening, and training to new
and expanding companies, all at no cost. Recognized for
its innovation, effectiveness and effciency, the program
has established a presence among workforce solutions
programs nationwide. Based on a company’s immediate
and long-term workforce needs, FastStart crafts unique
programs that ensure workers are prepared on day one and
beyond. The relationship between FastStart and Louisiana
companies is often multi-year, lasting until the fnal
employee is hired and trained. Working with companies, a
team of industry experts assesses workforce needs and then
designs turnkey training products and solutions specifcally
for each company. They use the latest technology to create
modules that can eliminate training time by up to two-
thirds, helping businesses to open their doors quickly when
productivity matters most. Designed to be service-minded
and fexible, the program also offers new or expanding
companies round-the-clock availability and immediate
response time.
Certain energy companies may also be able to take
advantage of the state’s Digital Media Incentive. As
part of this program, businesses that develop software
for purposes such as accounting, lease management, well
design, seismic evaluation and 3D visualization may
qualify for the program, which provides a 35 percent tax
credit for payroll expenditures and a 25 percent tax credit
on production expenditures. Businesses paying taxes in
Louisiana can use these credits to reduce their tax liability.
For companies without a large tax liability, there is a well-
developed market for selling the credits.
Research centers and universities throughout the state are
fueling innovation and providing skilled workers to energy
companies. A number of Louisiana universities graduate
new petroleum engineers each semester, including the
University of Louisiana at Lafayette and Louisiana State
University. Both of these universities are also pioneering
research into new eco-friendly alternatives to fossil fuels.
Exports are King
Capitalizing on its proven prowess in exports, the state
provides incentives and an extensive transportation
and logistics infrastructure to bolster trade and export
opportunities. Louisiana’s port system is one of the most
extensive in the world, transporting tons of cargo in and
out of the country. Businesses in the state have access to a
variety of robust logistics choices, including six Class One
railroads, seven commercial service/primary airports, an
integrated interstate grid and a vast deepwater port system.
For advanced manufacturing, the state effectively provides
a zero corporate income tax environment for items
produced in Louisiana and shipped out of state (single
sales tax apportionment). Electricity, water, natural gas,
machinery and equipment used by manufacturers are all
exempt from Louisiana sales taxes.
The state’s robust transportation and distribution
infrastructure is a strong foundation for export-oriented
agribusiness and clean tech industries. With approximately
$30 billion generated each year, agribusiness is a
well-established industry that benefts from abundant
local commodities and raw materials, as well as value-
added growth opportunities. Louisiana’s strong energy
legacy serves as a foundation for the nation’s growing
clean tech industry. The state also offers a business-
friendly regulatory climate for clean tech companies,
illustrated recently by the elimination of the sales tax on
manufacturing machinery and equipment and the franchise
tax on corporate debt.
63
Clusters in Louisiana
Largest Cluster: Energy (Fossil & Renewable),
242,346 jobs
Largest Growth Cluster: Business & Financial
Services, 36,864 new jobs since 2002
Most Competitive Cluster: Energy (Fossil &
Renewable), 14,196 new or retained jobs due to state
competitive advantage
Most Concentrated Cluster: Energy (Fossil
& Renewable), 1.94 times the national concentration
level
64
Maine is a top ten state in all three infrastructure
measures, including the highest share of broadband
connections in the nation over three megabits per second.
A coalition of state and university offcials and private
companies created the Three Ring Binder project, a dark
fber network designed to provide the “middle mile”
telecommunications infrastructure needed to serve the
state’s business, academic, and telemedicine needs. The
network is funded with federal and private sources.
Cuts and More Cuts
Maine’s Governor Paul LePage has proposed eliminating
in 2012 the state’s alternative minimum income tax. He
would also lower the top income tax rate for income above
$50,000 from 8.5 percent to 7.95 percent. In 2014, he
would also double income exempted from the state’s estate
tax from $1 million to $2 million. These proposed cuts
would cost the state $203 million in the coming two-year
budget cycle and would widen the two-year budget gap by
25 percent, dropping the top income tax rate to its lowest
level since 1975.
One of the most pressing concerns in Maine is the $4.4
billion unfunded liability in the state pension system.
Without reform, payment for pension liabilities will total
$449 million in the frst year of the upcoming biennium.
That is 15 percent of projected general fund revenue.
Within ten years, the total annual cost to taxpayers will
be more than $700 million. The governor’s budget called
for changes to the retirement system that would save $524
million over the current biennium, with most of the savings
accruing to the general fund. Governor LePage argues
that over the longer term, these changes would reduce
the state’s unfunded pension liabilities by $2.5 billion,
reduce retiree health liability by almost $1 billion, and
keep almost $7 billion in Maine’s private sector economy
through 2028.
Recent estimates put the state’s budget gap at $164 million.
Proposals to close the gap, some of them controversial,
have included include cutting health insurance coverage
for childless adults who qualify for Medicaid to save
$35 million; reducing the tax cut package by $4 million;
taking $30 million from the rainy day fund; booking $16.8
million in federal aid for a computer billing system; cutting
$10–20 million in transportation funding; eliminating 259
vacant state positions and cutting $2 million in funding for
the Maine Public Broadcasting network.
Comprehensive Incentives
Maine offers a wide range of funding assistance programs
to businesses of most sizes and areas of expertise. From
tax incentives to fnancial assistance and grants, the State
of Maine is working to position itself as a partner in
long-term business growth and success. To accomplish
this, the state has developed several programs that offer
what the state terms “comprehensive incentives.” These
programs include progressive tax reimbursement policies
and a nationally recognized Community Development
Block Grant program that provides funds to projects like
infrastructure development.
The Pine Tree Development Zone (PTDZ) program
offers eligible businesses the chance to greatly reduce
or virtually eliminate state taxes for up to ten years.
The program’s goal is to create quality jobs in targeted
industries and support new or expanding Maine businesses,
as well as businesses relocating or establishing a Maine
MAINE
Maine’s Place in the Rankings
1st High Speed Broadband Intensity
4th Small Business Lending
7th High Speed Broadband Availability
8th Transportation Infrastructure
Performance
12th High School Advanced Placement
Intensity
13th Short-term Job Growth
19th Job Placement Effciency
20th Per Capita Income Growth
22nd Entrepreneurial Activity
25th Higher-ed Effciency
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presence. Targeted industries include biotechnology,
aquaculture and marine technology, composite materials
technology, environmental technology, advanced
technologies for forestry and agriculture, precision
manufacturing, information technology and fnancial
services. Benefts provided by the PTDZ include corporate
income tax credits, insurance premium tax credits,
Maine payroll and property tax credits, income tax
reimbursement, and several sales and use tax reductions
and credits.
The state also offers assistance and support in bolstering
innovation-based technology businesses. The Maine
Technology Institute (MTI) is one element of the state’s
economic development strategy, which contributes to
the long-term development of a statewide research,
development and commercialization infrastructure.
As a state-funded, private nonproft organization, MTI
offers capital and commercialization assistance for the
research and development of innovative, technology-
based projects that create new products and services and
generate jobs in the state of Maine. This effort offers
commercialization grants and early-stage fnancing for
research and development projects, and in collaboration
with State University Innovation Centers, fosters
innovation in life sciences, renewable energy, and advanced
materials. The state relies on excellent research facilities
including Jackson Laboratory, the Gulf of Maine Research
Institute, Mount Desert Island Biological Laboratory,
Bigelow Laboratory, and the University of Maine’s AEWC
Advanced Structures and Composites Center to provide
commercialization and technology support and assistance.
The Three Ring Binder Broadband
Project
The Three Ring Binder is a $32 million project that will
create an open access fber optic network extending into
the most rural and disadvantaged areas of the state of
Maine. The project will help to make “middle mile” fber
available for broadband service providers in order to bring
cost-effective, high-speed broadband services to areas that
do not have access to it today.
The project will also improve the reach and effectiveness
of Maine’s rural health care system, by providing
infrastructure that benefts clinics and hospitals. It will
improve health awareness for impoverished communities
in Maine, allow more immediate contact with clinical
health care specialists, increase the collaboration of local
community-based health care providers with specialists in
major metropolitan areas, and allow quicker, more accurate
diagnoses and care for health-related problems.
The Three Ring Binder project is being executed as a
public-private collaborative effort between the internet
provider Great Works Internet, multiple other commercial
service providers (including Pioneer Broadband), and the
University of Maine system. Multiple levels of service will
be provided by the various entities involved. The higher
education and government locations will receive 100 Mbit
or gigabit level services from NetworkMaine, a partnership
recently created between Maine state government and the
University of Maine system to operate the MaineREN
backbone and the Maine School and Library Network.
Commercial broadband providers will be able to gain
access to dark fber optic strands via Indefeasible Right to
Use agreements or other leasing arrangements.
These efforts will solidify Maine’s current top ranking for
high-speed broadband intensity and seventh place position
for high-speed broadband availability. The 1,100 miles of
fber optic cable will enhance not only the state’s health
care system, but will also positively impact academia and
small business alike, providing a competitive advantage in
meeting the the state’s ongoing connectivity needs. This
project will ultimately provide “dark fber” broadband
service to more than 100 rural Maine communities with
110,000 households, 600 anchor community institutions,
and 38 government facilities that are not served today.
65
Clusters in Maine
Largest Cluster: Biomedical/Biotechnical (Life
Sciences), 75,372 jobs
Largest Growth Cluster: Biomedical/
Biotechnical (Life Sciences), 9,520 new jobs since
2002
Most Competitive Cluster: Chemicals &
Chemical Based Products, 1,227 new or retained jobs
due to state competitive advantage
Most Concentrated Cluster: Forest & Wood
Products, 2.32 times the national concentration level
66
With a strong orientation toward science, technology,
engineering and mathematics (STEM), Maryland has
focused its resources on shoring up and reenergizing its
economy by supporting businesses and jobs in advanced
technology, defense systems and health sciences. Initiatives
within the state have focused on workforce training, tax
programs and infrastructure development that stand to
enhance the state’s competitive advantages in retaining,
growing and attracting businesses in these sectors.
Balancing, Cutting & Reducing
Faced with a $1.4 billion gap between expenditures and
the state’s recession-battered revenues, Governor Martin
O’Malley is proposing an approach to balancing the budget
that cuts spending and reduces the size of government.
This is no easy task with 87 cents of every general fund
dollar that the state spends allocated to public education,
public health and public safety.
In order to close this gap, the governor has proposed a plan
that would draw $950 million from the state’s general fund
and would cut about $250 million in Medicaid payments to
hospitals. Keeping education dollars at current levels would
save nearly $100 million. Additional proposals would cut
$60 million from state aid to counties and save $40 million
through buyouts of more than 1,000 state workers. These
buyouts would be coupled with potential savings of $100
million through an overhaul of the pension system for
public employees.
The current fscal year budget has been supplemented
by $1.3 billion in federal stimulus money and a one-time
transfer of $350 million from the income tax reserve fund.
The governor’s proposed budget relies heavily on one-
time transfers from cash-rich programs to fund operations.
The plan would shift $430 million, with nearly half ($200
million) coming from the state’s capital budget and $60
million from the Transportation Trust Fund, which is
ordinarily used for projects such as the proposed light rail
lines in Baltimore and the Washington suburbs. Nearly $20
million would be moved from the Chesapeake Bay trust
fund.
Creating Jobs in a Tough Economy
While confronted with tough budgetary constraints,
Maryland has not recoiled in the face of adversity. In fact,
the state and its businesses worked collaboratively to create
26,000 jobs in 2010, marking the state’s best year of job
creation since 2006 and putting Maryland ahead of 36
other states. To accomplish this, the state has marketed a
dedicated workforce, quality product development, quality
MARYLAND
Maryland’s Place in the Rankings
2nd STEM Job Concentration
2nd High School Advanced Placement
Intensity
3rd High-tech Share of All Businesses
5th Median Family Income
8th Export Intensity Growth
8th Educational Attainment
10th STEM Job Growth
10th High Speed Broadband Availability
11th High Speed Broadband Intensity
12th Economic Output Per Job
13th College Affordability
14th Short-term Job Growth
14th Gross State Product Growth
14th Productivity Growth
15th Per Capita Income Growth
16th Growth in Share of National Exports
18th Long-term Job Growth
19th Export Growth
23rd Budget Gap
24th Higher-ed Degree Output
25th Job Placement Effciency
66
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of physical plants, affordable wages rates, geographical
access, and initiatives to improve business climate in the
state, including Maryland Made Easy, which focuses
on developing specifc strategies for state agencies to
streamline processes, simplify regulations, and improve
communications.
The Invest Maryland program is a premium tax credit
program designed to fuel venture capital investment in
Maryland businesses by offering insurance companies
the opportunity to forward-pay taxes at a discounted rate
in exchange for an up-front investment in the program. A
minimum of 50 percent of these investments will fow into
the Maryland Venture Fund, and the balance would fow
into Maryland-based venture capital frms for the purposes
of getting critical capital to businesses so they can create
jobs and advance innovation in felds like biosciences and
nanotechnology. The 2011 legislative session funded the
program at $75 million.
Another initiative is the One Maryland Tax Credit that
allows businesses that invest in an economic development
project in a qualifed distressed county the ability to
qualify for project tax credits of up to $5 million and
start-up tax credits of up to $500,000. This program offers
up to $5 million based on qualifying costs and expenses
incurred with the acquisition, construction, rehabilitation,
installation, and equipping of eligible projects including
land acquisition, performance and contract bonds,
insurance, architectural and engineering services,
environmental mitigation, and utility installation.
The state also offers a Start-up Tax Credit that helps
cover the expense of moving a business from outside
Maryland and helps minimize the costs of furnishing and
equipping a new location. Eligible costs include the cost
of fxed telecommunications, offce equipment, and offce
furnishings. The credit is capped at the lesser of $500,000
of eligible costs or $10,000 times the number of new
positions created. In years one through fve, the business
may apply the start-up credits against its Maryland income
tax liability. In years six through ffteen, it may apply the
start-up credits against its Maryland income tax liability
and, in addition, claim a refund subject to the payroll
withholding of the qualifed employees.
Investing in Innovation
Maryland has been a leader in innovation and
entrepreneurship, ranking second in STEM job
concentration in 2010 and third in high-tech share of
all establishments. This strong performance has been
supported by broadband initiatives that will provide much
needed backbone infrastructure throughout the state. In a
knowledge economy, this initiative is critical to creating
the infrastructure required to compete and win in a
globally competitive market.
The state is focused on supporting its workforce through
increased skill sets and a competitive training process.
The state’s Skills2Compete program is a workforce
development and skills initiative focused on increasing the
number of Marylanders prepared for middle- and high-
skill jobs. The initiative aims to promote the importance of
middle-skill jobs while providing information on training
and fnancing programs for skills upgrades.
Knowing that small business is a major driver in job
development, the state has developed the Small Business
Credit Recovery Program that supports the ongoing
economic recovery and continued limited activity
in private-sector lending. This program helps small
businesses obtain private loans by allowing the state to
share in some of the risk. The Maryland Department of
Business and Economic Development has extended the
Small Business Credit Recovery Program through 2011
to continue encouraging banks to provide needed capital.
The program became a model for the federal State Small
Business Credit Initiative Act of 2010, unlocking federal
funds to support small business loan guarantee programs
across the nation.
67
Clusters in Maryland
Largest Cluster: Business & Financial Services ,
472,994 jobs
Largest Growth Cluster: Business & Financial
Services, 85,545 new jobs since 2002
Most Competitive Cluster: Information
Technology & Telecommunications, 17,320 new or
retained jobs due to state competitive advantage
Most Concentrated Cluster: Defense &
Security, 1.50 times the national concentration level
68
Long renowned as a leader in research and development
(R&D) capacity, the Commonwealth has continued its
dominance as a top-tier state for measures of degree
attainment (fourth), educational attainment of its
young workforce (frst), share of high school seniors
taking Advanced Placement exams in 2010 (ninth). But
Massachusetts doesn’t stop there; it also ranks ninth in
share of broadband connections that are high-speed and
ffth in regions with high-speed broadband penetration. It
is no wonder they are so smart.
Creating Jobs and Expanding Economic
Opportunity
Governor Deval Patrick’s broad-based growth agenda
covers investments in education, innovation industries,
small businesses, and infrastructure, stating, “We can’t be
satisfed until every single resident who seeks work can
fnd it.” To meet that challenge, the state is executing a
strategy for bringing more good jobs and new economic
growth to all parts of the state. The strategy is focused
on four pillars: investing in public education, supporting
innovation industries, strengthening the infrastructure, and
reducing business costs.
Investing in Public Education
A well-trained workforce and a strong system of public
education are some of the state’s calling cards, and they
remain critical to expanding economic opportunity. To that
end, the commonwealth is supporting public education at
the highest levels in the history of the state. Using state
Chapter 70 funding to schools and federal Race to the Top
funds, the commonwealth has committed record funding to
public schools, despite the challenges of a global economic
recession. Other initiatives include more autonomous
Innovation Schools based on detailed innovation plans, and
competitive grants awards for higher education.
Supporting the Commonwealth’s
Innovation Industries
Massachusetts is well suited for high-tech industries
including clean technology, biotechnology, life sciences,
information technology, and precision manufacturing.
It has implemented a $1 billion, ten-year Life Sciences
Initiative that, with targeted investments in growing sectors
and employment at solar panel construction facilities, has
increased almost 150 percent since 2007.
Strengthening Infrastructure
The state has recommitted to renewing its aging and
neglected infrastructure, ensuring that the state has a 21st-
century system of roads, bridges, and broadband networks.
By investing in these growth platforms and streamlining
the state’s transportation bureaucracy, the state has helped
created immediate employment opportunities and set
Massachusetts on a long-term growth trajectory. The state’s
FY2012 budget will increase funding for its Chapter 90
Local Road Program to $200 million, an increase of $45
MASSACHUSETTS
Massachusetts’ Place in the
Rankings
1st Median Family Income
1st Educational Attainment
2nd Job Placement Effciency
3rd STEM Job Concentration
4th Higher-ed Degree Output
5th High Speed Broadband Availability
6th High-tech Share of All Businesses
8th Economic Output Per Job
9th High School Advanced Placement
Intensity
9th High Speed Broadband Intensity
11th Short-term Job Growth
11th Budget Gap
21st Export Intensity
22nd Academic R&D Intensity
25th Higher-ed Effciency
68
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million or 29 percent over the current fscal year. Capital
spending for municipalities will expand from $7.9 billion
in the frst phase to a projected $11.5 billion in the second
phase. Additionally, the state will continue supporting
large-scale transportation projects such as South Coast Rail
and enhancing existing platforms, such as the commuter
rail and state highway systems.
Reduce Costs and Streamline
Regulations for Small Businesses
The state has reduced its corporate tax rate from 8.75
percent in tax year 2010 to 8.25 percent in 2011. The
Department of Revenue estimates that this will save 35,000
businesses statewide roughly $185.1 million. Additionally,
the state has streamlined and consolidated its economic
development agencies, which has helped to lay out a more
coherent, effcient network of support for businesses
investing in Massachusetts, as well as marketing initiatives
designed to promote the state.
Massachusetts will continue to review and simplify the
interactions between business and government, particularly
through efforts to support small businesses doing business
with the state. The state is working to encourage banks to
start lending again to small businesses through the state’s
Growth Capital Fund.
Stimulating Growth with Programs that
Work
While incentives shouldn’t be the driving force to
developing business in any state, incentives play an
important role in helping small and emerging business
develop, grow and prosper, especially in these tough
economic times. To that end, Massachusetts has developed
a series of incentives that are affecting the state and
helping to create jobs.
The state’s Economic Development Incentive Program
(EDIP) is a tax incentive program designed to foster job
creation and stimulate business. Participating companies
may receive state and local tax incentives in exchange
for job creation, manufacturing job retention and private
investment commitments. Reforms to the program in
2010 added fexibility to award incentives based upon the
number of jobs created and added the requirement that
qualifying projects have substantial sales outside the state.
The Massachusetts Investment Tax Credit (ITC)
offers a 3 percent credit for qualifying businesses against
their Massachusetts corporate excise tax. The credit
is to be used for the purchase and lease of qualifed
tangible property used in the course of doing business.
Massachusetts recognizes that growing business and
investing in new jobs requires time and money. The state
helps to encourage capital investment, and in return, the
ITC can reduce the cost of expansion. Additionally, the
ITC includes a carry-forward provision and is considered a
permanent incentive.
Massachusetts offers a tax incentive for research and
development (R&D) investment for both manufacturers
and R&D companies, suggesting why it may lead in
R&D businesses. This tax incentive was designed to
remove obstacles to R&D investment and spur growth
and innovation throughout the state. The R&D tax credit
closely resembles the federal credit program; however,
it specifcally offers qualifying companies a number of
unique features for doing business in Massachusetts.
Massachusetts’ Single Sales Factor tax apportionment
signifcantly reduces the tax burden for manufacturers
and other qualifying companies. The Single Sales Factor
adds to the attractive tax environment for businesses
in Massachusetts. While many states use a three-factor
apportionment formula to determine a frm’s net income,
creating a greater burden for businesses, Massachusetts
only uses a single sales factor apportionment formula.
Massachusetts’ version of Tax Increment Financing
allows municipalities to provide fexible targeted incentives
to stimulate job-creating development. Elements of
this program include an opportunity for a negotiated
agreement between a business and host municipality; a
fve-year minimum and 20-year maximum; an exemption
from property tax on all or part of the increased value
accrued as a result of development (the “increment”); and
a percentage of exemption that can range from 5 percent to
100 percent.
69
Clusters in Massachusetts
Largest Cluster: Business & Financial Services,
566,811 jobs
Largest Growth Cluster: Biomedical/
Biotechnical (Life Sciences), 71,666 new jobs since
2002
Most Competitive Cluster: Advanced Materials,
7,285 new or retained jobs due to state competitive
advantage
Most Concentrated Cluster: Computer &
Electronic Product Manufacturing, 2.30 times the
national concentration level
70
Facing a daunting budget gap, 11 percent unemployment
and a net population loss since 2000, Michigan has worked
to develop programs and tools to reshape its economic
climate and create new, exciting jobs for its citizens. These
programs are focused on emerging industries but also
pay heed to tourism, a key component to bringing outside
dollars into the state. By targeting scarce resources to key
areas of development, the state is defning a strategy that
builds on its existing strengths.
Tough Times—Tough Decisions
With the state facing a $1.4 billion budget defcit, Governor
Rick Snyder has proposed a budget that would make $1.2
billion in cuts to schools, universities, local governments
and other areas, while asking public employees for $180
million in concessions. The Snyder plan restructures
Michigan’s tax system, which includes a promised
elimination of the Michigan Business Tax, to be replaced
with a fat corporate income tax set at 6 percent. The
plan includes the scheduled reduction in the individual
income tax rate from 4.35 percent to 4.25 percent. Because
Michigan is one of only three states in the nation that
exempts most or all of earned pension income, Snyder’s
plan will broaden the base of taxpayers by including those
earning private and public pensions. In addition, the plan
proposes to eliminate all credits and deductions related
to the individual income tax with the exception of the
personal exemption, homestead property tax credit and
other minor subtractions.
To streamline and right-size government, the budget
proposes the elimination of statutory revenue-sharing
payments for cities, villages and townships in FY2012, to
be replaced with a new incentive-based revenue sharing
program available to municipalities that meet state
standards and adopt best practices. Additionally, the state
has proposed the elimination of the dairy farm inspection
program within the Department of Agriculture and
revenue adjustments and administrative effciencies in the
Department of Environmental Quality, as well as seeking
to make programs self-supporting relative to the cost of
regulation and employee concessions, resulting in savings
of $180 million.
The state has dedicated $2.6 billion in both 2012 and 2013
to state and local bridge construction and maintenance
projects. Programming efforts include the creation of
the IT Innovation Fund for technology improvements
that create savings in state government and the creation
of the Quality of Place Fund for the arts and cultural
development. The budget also identifes funding for
Michigan’s workforce, the 21st Century Jobs Fund, to
promote economic development, and the Pure Michigan
campaign, an effort to promote Michigan and enhance
tourism.
Job One is Jobs
Even with a looming budget defcit and an unemployment
rate nearing 11 percent, the state is moving to build a more
robust economy in the face of adversity by using new
and existing programs to retool and restore the economy.
With several programs targeting innovation, information
technology and 21st century jobs, the state is very specifc
about its priorities: job one is jobs, the mantra goes. The
retention and creation of jobs will create new revenue
streams for the state and reverse patterns of outmigration
that are challenging the state.
MICHIGAN
Michigan’s Place in the Rankings
8th Export Intensity
11th STEM Job Concentration
11th Job Placement Effciency
12th Budget Gap
17th Business Tax Climate
18th Median Family Income
20th Higher-ed Degree Output
21st Small Business Lending
22nd High Speed Broadband Availability
22nd Transportation Infrastructure
Performance
25th Higher-ed Effciency
70
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The 21st Century Jobs Fund was created to reshape
and diversify Michigan’s economy by sparking new
investments to rapidly create companies and jobs. The
21st Century Jobs Fund addresses four primary areas of
focus, including commercialization of competitive-edge
technologies: life sciences, alternative energy, advanced
automotive manufacturing and materials, and homeland
security and defense. Priorities include increasing capital
investment activity by attracting and growing venture
capital, private equity and mezzanine fnancing in
Michigan and increasing commercial lending activity to
stimulate additional lending by fnancial institutions across
the state. The 21st Century Jobs Fund has the ability to
create commercial loan enhancement programs and new
industry clusters.
With clear competitive advantages in manufacturing
and engineering, the state is still number eleven for
concentration of science, technology, engineering and math
jobs. Michigan is poised to translate leading manufacturing
and supply chain expertise, coupled with competitive-edge
technologies, to launch and diversify into new vertical
markets.
To help accelerate job creation and enhance quality of life
within the state, Michigan has designed the IT Innovation
Fund for technology improvements that save money for
the state government and created the Quality of Place
Fund for arts and cultural development. By supporting
technology improvements for business and government
alike, the state is identifying the key infrastructure of the
new economy and is working to create new higher-wage
jobs with it.
To capitalize on these programs, the state has focused
many of its efforts on a triad of industry clusters. As auto
production continues to contract, the state’s economy is
making the transition to a more diversifed and resilient
industrial base. Companies are fnding opportunity in the
production of everything from medical devices to military
hardware and increasingly alternative energy technologies
and the state is working to support these efforts. Michigan
is developing new state and nationwide markets for
alternative energy sources as bio energy and fuels, wind
generation and advanced energy storage. Another point
of focus includes homeland security support industries.
Michigan is home to an impressive number of military and
defense-related facilities, including advanced research labs,
testing grounds, and bases. Michigan has placed special
emphasis on the sector, helping both entrepreneurs and
established frms to expand into the industry and to secure
contracts with the Department of Defense and its prime
contractors.
Measuring Performance—the Michigan
Dashboard
True success is based on achieving real results based
on hard measurements that refect either achievements
or lack of progress. In this vein, the state has developed
the Michigan Dashboard, which will provide real-time
data composed of 21 different measures in fve key areas.
These measures include the overall strength of the state’s
economy, benchmarks for future academic success and the
well-being of Michigan citizens, fscal metrics that show
the spending and borrowing of government, population
and popularity of outdoor activities, and crime and traffc
injury rates.
The Dashboard is designed to promote transparency by
giving information at a glance. It will include Michigan’s
current standing in particular categories, such as
unemployment. It will also allow Michigan citizens and
stakeholders to see whether that trend is moving in a
positive or negative direction. In addition, where feasible, it
will include Michigan’s national rank for comparison with
other states.
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Clusters in Michigan
Largest Cluster: Business & Financial Services,
541,426 jobs
Largest Growth Cluster: Biomedical/
Biotechnical (Life Sciences), 41,954 new jobs since
2002
Most Competitive Cluster: Agribusiness, Food
Processing & Technology, 7,213 new or retained jobs
due to state competitive advantage
Most Concentrated Cluster: Transportation
Equipment Manufacturing, 3.36 times the national
concentration level
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While Minnesota has long been characterized as a national
leader in higher education and innovation, ranking ffth
in degree output, second in educational attainment and
tenth in science and technology jobs, lower rankings
related to the state’s budget, taxes and regulations may
pose challenges in the state’s continuing efforts to grow its
economy.
The Budget Blues
With a $5 billion budget gap, Governor Mark Dayton and
legislative leaders are set to make hard decisions to help
alleviate the budgetary burden. Governor Dayton has
proposed a new top income tax bracket and an additional
property tax charge for homes valued over $1 million.
Dayton is also proposing to close corporate tax loopholes,
and put in place health care surcharges that allow the state
to capitalize on additional federal funding for health care.
In a state known for its educational prowess, budget issues
are forcing the state to look at higher education funding
cuts, under which approximately 9,400 students are
projected to lose their state fnancial aid grants entirely and
the remaining recipients will see grants cut by 19 percent.
Additionally, Governor Dayton has proposed reducing
by one-third support for the state’s work-study program.
Approximately 2,600 fewer students would have a work-
study opportunity at Minnesota colleges and universities
as a result of the cut. Dayton’s budget also would phase out
state funding for a college savings program that helps low-
income families save for college expenses.
The employment picture within Minnesota has seen
improvement recently, but the state is still working to
recover jobs lost during the height of the recession, when
offcials estimated that 51,000 manufacturing jobs were
lost during the period from 2007 to 2009. While these
trends are reversing, many companies have resumed
revenue growth without adding workers. Moreover,
manufacturing jobs in Minnesota had already fallen from
400,000 in 1999 to 350,000 before the recession hit.
Creating Jobs Using Existing Strengths
The regional economy is expected to grow in the frst
half of 2011, even as Minnesota is held back by job
losses suffered during the recession. The state’s economy
has fared better recently, due in part to expanded
business activity for frms with close ties to agricultural
commodities. Looking at these successes, the state has
focused its job creation efforts on competitive advantages
already at play in the marketplace, including agriculture
and biosciences.
The Minnesota Agriculture Innovation Triangle
(The Triangle) encompasses 36 contiguous counties in
southwest, west central and south central Minnesota. This
region is defned by two primary industries: agriculture
and agricultural manufacturing. The mission of The
Triangle Initiative is to boost innovation and cultivate new
technologies in order to achieve a competitive advantage
through business and talent development. This initiative
is based on strategic partnerships providing the expertise
and assets needed to drive regional transformation. The
initiative has been supported by a highly integrated public-
MINNESOTA
Minnesota’s Place in the Rankings
2nd Median Family Income
2nd Educational Attainment
3rd Job Placement Effciency
5th Higher-ed Degree Output
10th STEM Job Concentration
10th Transportation Infrastructure
Performance
13th High-tech Share of All Businesses
17th High Speed Broadband Availability
20th Growth in Share of National Exports
21st High School Advanced Placement
Intensity
22nd Export Intensity
23rd Short-term Job Growth
23rd Economic Output Per Job
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private partnership that is working to increase place-
based innovation and heighten educational attainment by
promoting workforce development and skills. The partners
include regional councils, investment boards, the state,
institutions of higher education, foundations and private
companies that are looking to accelerate job growth and
workforce capacity.
The Bioscience Business Development Public
Infrastructure (BBDPI) program is focused on job
creation and retention through the growth of new and
emerging bioscience businesses and organizations. The
BBDPI provides grants to local governmental units on a
competitive basis for up to 50 percent of the capital cost of
the public infrastructure needed to expand or retain jobs.
The projects must be of publicly owned infrastructure
related to a particular bioscience development project,
including wastewater collection and treatment, drinking
water, storm sewers, utility extensions, telecommunications
infrastructure, roads, bridges, parking ramps, and other
facilities that support basic science and clinical research.
Sectors eligible for these incentives include manufacturing,
technology, warehousing and distribution, research and
development, bioscience business incubators, agricultural
bio-processing, and industrial, offce or research park
development associated with a bioscience business.
To maintain economic growth, the state is focused on
upgrading the skills of a workforce that uses more and
better technology and delivers more productivity. The
state has developed regional economic and workforce
development strategies to help cultivate a more productive
environment for Minnesota’s businesses. These initiatives
look to stimulate and train the workforce by focusing on
industry needs. FIRST Grants, or the Framework for
Integrated Regional Strategies, is a funding framework
that requires K-12 education, postsecondary education,
economic development, workforce development and
business entities to defne their regional economies and
then develop strategies that will align each stakeholder’s
resources to accomplish the vision for the region. These
strategies must be business-led.
With its Job Skills Partnership Program, Minnesota is
pursuing industry cluster strategies by awarding multiple
grants within regional industries to maximize investment
in training within an industry sector. The program has
also focused on grants that help low-income workers to get
industry training tied to career ladder opportunities.
STEM Jobs Critical in Jump Starting
Economy
With a strong concentration of science, technology,
engineering and mathematics (STEM) jobs in the state,
regional and state-led economic developers have worked
to defne and promote regional, or place-based, industry
clusters focused on fnancial services, medical devices
and information technology. These efforts have paid off
as Minnesota is ranked tenth in STEM job concentration
for 2010, showing that the state has capitalized on its
strong, diverse and mature bioscience and medical device
industries to help reverse job losses realized at the height
of the recession. The bioscience cluster is benefting
and growing because of concerted efforts by the state’s
bioscience infrastructure initiative, which has helped to
provide the required capital support for infrastructure for
this critical industry.
73
Clusters in Minnesota
Largest Cluster: Business & Financial Services,
382,841 jobs
Largest Growth Cluster: Biomedical/
Biotechnical (Life Sciences), 59,797 new jobs since
2002
Most Competitive Cluster: Biomedical/
Biotechnical (Life Sciences), 18,871 new or retained
jobs due to state competitive advantage
Most Concentrated Cluster: Computer &
Electronic Product Manufacturing, 2.08 times the
national concentration level
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Mississippi remains in this year’s exports top ten as the
ffth fastest growing state exporter. The state is rapidly
increasing exports to South and Central American
countries, including Panama, Brazil, Honduras, Columbia,
and Guatemala. With proven export capacity and
programs, the state counts on exporting as one major
component of its job creation strategy.
Cutting Costs and Streamlining
Government
Facing a potential $715 million budget gap in FY2011
and projections indicating that the state will be faced
with a budget gap of more than $1.2 billion during 2012,
Governor Haley Barbour has proposed a reduction of 12
percent for most state agencies below fscal year 2010
appropriations, with some exceptions for those line items
that the state is not legally allowed to cut as well as for
specifc priority services. The plan recommends just a
fve percent reduction for the Mississippi Development
Authority because it plays a crucial role in creating new
jobs by attracting new employers to Mississippi and
encouraging existing businesses to continue investing
within the state’s borders.
The Department of Corrections and the law enforcement
budgets of the Department of Public Safety will see cuts
of six and eight percent, respectively. On the other hand,
some agencies, like the Attorney General’s Offce, which
had much smaller reductions in FY2009 and 2010, will
see budget reductions of more than 12 percent in order to
bring them into parity with the rest of state government
as compared to FY2009 appropriations. Others like the
Department of Marine Resources will see cuts above 12
percent.
Revenue is unlikely to signifcantly rebound, and the
state will lose $370 million of federal stimulus money
used to prop up the $5.5 billion FY2011 budget. Along
with declining revenue streams, Mississippi also will face
several rising expenses for the 2011 and 2012 fscal years.
One particular area of projected increase is Medicaid,
where the state expects expenses to climb $200 million in
2011 and $220 million in 2011.
The governor’s budget recommendation for FY2011 relies
heavily on six main principles:
Creating more and better jobs; increasing the budget of •
the Tax Commission, so it can hire additional auditors
to collect money the state is already owed.
Assuring that law enforcement programs or budgets •
take less of a spending reduction so they can continue
their vital service of protecting Mississippi families.
Identifng signifcant cost savings that don’t diminish •
educational opportunities.
Establishing budget priorities and investing in state •
government entities that generate revenue.
MISSISSIPPI
Mississippi’s Place in the Rankings
3rd Export Intensity Growth
5th Export Growth
10th Cost of Living
11th Per Capita Income Growth
11th Growth in Share of National Exports
11th Higher-ed Effciency
12th Productivity Growth
12th Business Birth Rate
15th State and Local Tax Burden
16th Small Business Survival Index
18th Export Intensity
18th Transportation Infrastructure
Performance
20th STEM Job Growth
20th Entrepreneurial Activity
20th Small Business Lending
21st Short-term Job Growth
21st Business Tax Climate
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Streamlining government by seeking effciencies and •
savings.
Allowing Medicaid to achieve spending reductions •
without harming the quality of services provided to the
state’s citizens.
Creating More And Better Jobs
Confronted by budgetary issues and still recovering from
the impacts of Hurricane Katrina, the governor and state
stand ready to grow the regional economy and create jobs
that will impact the livelihood of the state and its citizens.
To help drive this agenda the governor outlined priorities
for the state:
Enact real, comprehensive tort reform. •
Reform of job training systems. •
Balance the budget without raising taxes. •
Realign the state’s economic development programs. •
Improve education. •
By addressing tort reform, Mississippi was able to reduce
its liability rates for automobile, homeowner’s, and other
property insurance rates, and more than 50 new insurance
programs have entered the state. Tort reform created more
competition, more affordable insurance, and created jobs
by reducing unnecessary costs for small businesses.
The Legislature, working collaboratively with the
governor’s offce, worked to overhaul the state job training
system under the reformed Department of Employment
Security. The state workforce training budget was
doubled over two years and a new, stable funding source
was created without raising taxes. The legislature approved
the governor’s proposal to reform the unemployment tax
system to provide dedicated funding to workforce training
while cutting state payroll taxes by 25 percent.
To assist in the goals and objectives of economic
development within the state, a group of business,
education, and government leaders from every area of
the state dedicated to planning for long-term economic
development created Momentum Mississippi. The intent
of the program is to pursue high-value, high-growth
business opportunities by identifying specifc industries
by aligning incentives to attract them. These industries
include a mix of manufacturing and service industries.
Goals of this initiative include improving productivity
and proftability of existing businesses and spurring job
creation by increasing the development and deployment of
new technologies in Mississippi.
Programs that Work
The state has developed several programs that are focused
on job creation and revenue enhancement. These include
the Jobs Tax Credit Program (income tax credit for
companies) which rewards businesses for increasing
employment numbers and payroll levels. Available credit
amounts are based upon the conditions for development in
the business’s local county, and can be used to offset up to
50 percent of an entity’s income tax liability.
The MBFC Revenue Bond Debt (RED) Tax Credit
Program (Corporate Income Tax Credit) has added
national and regional corporate headquarters, data/
information processing, research and development
(R&D) pilot manufacturing, research and development/
high technology to the list of eligible businesses that may
qualify – targeting high growth and innovative companies
that can prosper under the program. The Sales/Use and
Property Tax Exemption Incentive Programs modify
existing code sections to create a new category within
the defnition of manufacturing to include R&D pilot
manufacturing facilities, This allows for a reduction of the
sales and use tax rate to 1.5 percent, and provides authority
for local government units to offer up to a 10-year local
property tax exemption (except school taxes) for R&D pilot
manufacturing and data/information processing facilities.
75
Clusters in Mississippi
Largest Cluster: Business & Financial Services,
102,313 jobs
Largest Growth Cluster: Business & Financial
Services, 20,518 new jobs since 2002
Most Competitive Cluster: Transportation
Equipment Manufacturing, 7,116 new or retained jobs
due to state competitive advantage
Most Concentrated Cluster: Forest & Wood
Products, 2.32 times the national concentration level
76
Missouri remains at seventh this year on the tax and
regulation list. The state ranks better than 20th on all fve
measures, topping out eighth in cost of living. In recent
years, Missouri has enacted comprehensive reforms in
its workers’ compensation system and enacted one of the
strongest tort reform laws in the country.
Making Prior Cuts Help Stem Crisis
While facing a potential $600 million defcit in FY2012,
the state has maintained that the biggest contributor to
the shortfall will be the loss of about $860 million in
federal funding. The state has been proactive in working
to address potential shortfalls, and efforts included $301.4
million in budget cuts for the current fscal year due to
slumping revenues.
The state has approved a $23 billion operating budget and,
despite budget cuts and low revenue growth, the state is in
relatively good fnancial shape. Missouri lands at seventh
in our tax and regulation measures, helping the state
maintain its AAA bond rating. However, the current budget
relies on short-term federal funding sources set to expire,
an issue that will need to be addressed by future sessions.
Basic aid for public schools in this year’s budget remains
fat, while school transportation funding was cut by $45
million. Aid to state colleges and universities is reduced by
more than 5 percent. As proposed, the state will continue
to subsidize prescription drugs for seniors and the disabled.
Other legislation will phase out the state’s franchise tax
over a period of six years, saving employers in the state
$80 million.
Partnerships Lead the Way
The Strategic Initiative for Economic Growth
program, spearheaded by the Missouri Department
of Economic Development, represents a public-private
partnership including business, labor, higher education,
and economic development across the state to chart a path
for transforming the state’s economy into a long-term,
sustainable growth economy. The intent of the plan is to
identify a vision for transforming the state’s economy
within fve years, using data-driven strategic and tactical
plans for specifc high-growth industries important to the
state and addressing factors that support economic growth
including innovation, workforce, access to capital, quality
of life, tax structure and incentives.
Missouri’s clusters represent the state’s strongest
possibilities for job creation and economic growth. These
clusters include advanced manufacturing of transportation
equipment, aerospace and defense, energy solutions,
biosciences including plant and agriculture technology and
animal sciences, health sciences and services, information
technology, fnancial and professional services, and
transportation and logistics. While not excluding other
industries or businesses, this focus helps to target scarce
state resources towards businesses and industries that
are best able to capitalize on the state’s competitive
advantages.
To support this effort the state has several programs that
provide fnancial support and incentives for growing and
retaining new and emerging jobs and businesses. The
Action Loan program provides capital to start-up or
expansion businesses for the purchase of new machinery
and equipment, working capital, building acquisition and
construction, and land acquisition. The Grow Missouri
Loan facilitates the funding of an expansion project
that would create or retain full-time jobs for targeted
businesses. Under this program, principal and interest
payments may be deferred for up to three years to aid in
obtaining approval for the other project fnancing. After
the initial deferral period, payments may be structured as
interest-only for up to three additional years.
MISSOURI
Missouri’s Place in the Rankings
8th Cost of Living
8th Higher-ed Degree Output
16th Business Tax Climate
17th State and Local Tax Burden
19th Budget Gap
19th Small Business Survival Index
19th Higher-ed Effciency
21st Median Family Income
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Business Friendly Taxes and
Regulations
To continue to be a leader in business-friendly tax and
regulatory climate, the state has worked to optimize its
tax, incentive and regulatory policies to best support
the growth of high-value target sectors. Following the
recommendations of the Economic Development Tax
Credits subcommittee of the Missouri Tax Credit Review
Commission, Missouri is streamlining and optimizing
existing tax credits and providing a research and
development tax credit and an angel investment tax credit
in the state.
These programs and the tax structure within the state
provide corporations with one of the most favorable
situations in the nation. An important tax advantage for
businesses is the amount of income considered taxable;
only income earned in the state is taxed. Manufacturers’
inventories (raw materials, goods in process and fnished
goods), as well as goods and wares of retailers, distributors
and wholesalers, are exempt from property taxes. Other
advantages include a state law that sets the corporate
income tax rate at a percentage of net taxable income
earned by a business and allows a portion of federal
income tax payments to be deducted before computing
taxable income, as well as the state’s recent repeal of the
franchise tax.
Boosting Innovation and Manufacturing
The Missouri IDEA (Innovation, Development, and
Entrepreneurship Advancement) Fund promotes the
formation and growth of businesses that engage in the
transfer of science and technology into job creation. The
funds provide fnancing to eligible businesses through four
components corresponding to the four stages of growth for
investment-grade, high-growth enterprises: pre-seed capital
stage fnancing, seed capital stage fnancing, venture
capital stage fnancing, and expansion stage debt.
The Missouri Automotive Manufacturing Jobs Act
allows qualifed manufacturing facilities or suppliers that
bring next-generation production lines to Missouri to retain
withholding taxes typically remitted to the state. Beginning
January 1, 2012 a qualifed manufacturing company may
retain 100 percent of the withholding taxes from full-
time jobs at the facility for ten years if it manufactures
a new product, or may retain 50 percent of withholding
taxes from full-time jobs for seven years if it modifes or
expands the manufacture of an existing product. It also
allows qualifed suppliers to retain 100 percent of the
withholding taxes from new jobs for three years. If the
qualifed supplier pays wages for the new jobs that are
equal to or greater than 120 percent of the county average
wage for Missouri, it can retain the withholding taxes for
fve years.
To get back on the right track and to create good-paying
jobs, Missouri is working to encourage the development
and growth of small businesses. The Show Me JOBS
initiative is working to put Missourians to work and to
support small-business growth. Governor Jay Nixon has
noted that “too often, those starting up small businesses
are willing to take the risks needed but face obstacles
such as obtaining suffcient capital from lenders. State
government needs to help such entrepreneurs.” To help
bolster these efforts the state, the Department of Economic
Development is working collaboratively with the Missouri
Development Finance Board to create a pool of funds for
low-interest or no-interest direct loans for small businesses.
These loans can be a real step toward allowing small
businesses to expand and create jobs.
77
Clusters in Missouri
Largest Cluster: Business & Financial Services,
356,496 jobs
Largest Growth Cluster: Business & Financial
Services, 56,957 new jobs since 2002
Most Competitive Cluster: Information
Technology & Telecommunications, 2,605 new or
retained jobs due to state competitive advantage
Most Concentrated Cluster: Agribusiness,
Food Processing & Technology, 1.60 times the national
concentration level
78
Montana ranks seventh or better in fve innovation and
entrepreneurship measures including science, technology,
engineering, and mathematics (STEM) job growth
(fourth), business birth rate (sixth), R&D intensity
(seventh), entrepreneurship activity (second), and small
business lending activity (ffth). The state has added 3,200
STEM jobs to its economy since 2002, led by growth in
engineering services, computer systems design, custom
computer programming, and energy industries.
Montana’s Budget
After operating in the black with a $300 million surplus
during the past budget cycle, Montana’s recently approved
two-year budget cuts general fund spending by 6 percent to
$3.6 billion. The state is holding education spending steady
through the recession, while not raising any taxes. At the
same time, the state will reduce from 3 to 2 percent the
tax on the frst $2 million of equipment for businesses and
individuals, and will include triggers to reduce the tax to
1.5 percent and raise the cap to $3 million. Like the budget
from the last biennium, the 2011–2013 framework does not
include raises for state employees, though employees at the
top level are in line for raises according to state law.
Big Sky Programs That Work
To continue to provide support for innovation and
entrepreneurship in Montana, the state has developed
a variety of programs aimed at improving, enhancing,
and diversifying its economic and business climate. The
Business Resource Division of the Montana Department
of Commerce works closely with the private sector,
regional economic and community development partners,
as well as other state agencies and federal programs, to
enhance the economic base of Montana through business
creation, expansion, and retention efforts.
Technical and fnancial assistance is provided to local
development groups, Chambers, and similar organizations
to help Montana communities develop their full economic
potential.
The state-funded Big Sky Economic Development Trust
Fund (BSTF) grant program provides grant dollars to
local or tribal governments that can be used to assist
businesses creating new jobs in Montana. Program funds
can be utilized to assist a business with the purchase of
land, building or equipment, the reduction of a lease rate
for lease of public or privately owned property, relocation
costs incurred in connection with moving the assisted
MONTANA
Montana’s Place in the Rankings
1st Budget Gap
2nd Export Intensity Growth
2nd Export Growth
2nd Entrepreneurial Activity
4th Per Capita Income Growth
4th STEM Job Growth
4th Transportation Infrastructure
Performance
5th Long-term Job Growth
5th Small Business Lending
5th Higher-ed Effciency
6th Business Birth Rate
6th Business Tax Climate
7th Academic R&D Intensity
11th Gross State Product Growth
15th Short-term Job Growth
16th State and Local Tax Burden
18th Small Business Lending
19th Productivity Growth
21st College Affordability
22nd Educational Attainment
25th Growth in Share of National Exports
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business’ physical assets to Montana, or employee training.
The BSTF program is designed to provide fnancial
assistance in two key areas. Seventy-fve percent of BSTF
set-asides are awarded to local and tribal governments
in the form of direct grants. Funding may not exceed
$5,000 for each new job created, or $7,500 for each new
job created in a high-poverty county. Program funding
is also available to assist with the completion of project
development activities such as Preliminary Engineering
Reports, Preliminary Architectural Reports, feasibility
studies and business plans.
Montana understands the importance of workforce training
for new and expanding companies, but it also understands
the cost. To meet this need, the state utilizes multiple
funding sources to award workforce training grants. The
bulk of these funds are reserved for new worker training,
but some funds are available to train workers in existing
positions. The Montana Department of Commerce
manages a state-funded workforce training program that
requires $1 of private funds for every $3 of state grant
funds. The ceiling is $5,000, and the maximum award
amount depends on the number of jobs to be trained.
The Primary Sector Workforce Training Grant,
administered by the Department of Commerce, funds
the training of both new and existing full-time workers.
$5,000 of grant funds can be provided for training each
full-time employee. This program is targeted at businesses
that demonstrate that 5 percent of their sales are outside of
Montana, that the business is a manufacturing company
with 50 percent of its sales from companies that have
50 percent of their sales outside of Montana, or that the
business provides a product or service that is not available
in Montana.
The Montana Board of Research and
Commercialization Technology provides a
predictable, stable source of funding for research and
commercialization projects to be conducted in Montana.
The purpose of the program is to encourage economic
development through investment in research projects that
have a clear path to commercialization. Key criteria for
this program are that the business has the potential to
diversify or add value to a traditional basic industry of the
state’s economy, shows promise for enhancing technology-
based sectors or commercial development of discoveries,
and employs or takes advantage of existing research and
commercialization strengths within the state.
TechRanch is a leading business development assistance
organization that is focused on the high-tech sectors. By
offering programs and events targeted at specifc types of
companies, TechRanch aims to speed the development of
tech start-ups and to minimize their cash burn. TechRanch
helps entrepreneurs pursuing ventures in high-tech markets
to grow their businesses faster, more effciently and
with less investment capital than they could otherwise.
TechRanch has also developed expertise in bootstrapping,
recruiting talent in rural markets, raising fnance capital
outside of traditional regions, and developing near-term
strategic plans for getting a company to cash fow positive
as soon as possible.
Different program elements of the TechRanch effort
include the Bozeman Technology Accelerator (BTA),
where select businesses have access to offce space,
broadband (wireless and wired), audio-visual equipped
conference space, fax, copier, networked laser printer and
other executive suite services. BTA clients receive a very
high degree of advising from TechRanch staff, pro bono
service providers, advisors, and other professionals in the
TechRanch network. Another key program is the Bridger
Private Capital Network (BPCN) that is Montana’s frst
and largest angel investor network. This network is a vital
part of Montana’s thriving entrepreneurial community.
It convenes throughout the year to hear presentations
and learn about innovative companies and investment
opportunities.
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Clusters in Montana
Largest Cluster: Business & Financial Services,
57,608 jobs
Largest Growth Cluster: Business & Financial
Services, 12,552 new jobs since 2002
Most Competitive Cluster: Energy (Fossil &
Renewable), 5,057 new or retained jobs due to state
competitive advantage
Most Concentrated Cluster: Mining, 4.33 times
the national concentration level
80
Boasting one of the nation’s lowest unemployment rates,
low foreclosure rates, and rising per capita personal
incomes, Nebraska has continued to show signs of relative
economic strength as other states have struggled through
the recession. That said, the state was not immune to
the downturn and did see modest job losses during the
recession. Still, local observers note that the economy
has begun to shake off its sluggishness, with strong
commodities markets, record farm incomes, and increased
retail sales setting the stage for steady economic growth
over the next year.
Building New Economic Momentum to
Enhance Job Creation
Entering the 2011 session with a biennial defcit
approaching $1 billion, the state’s unicameral legislature
has been forced to consider cuts to state educational
aid funding and to debate potential delays in funding
infrastructure investments. Discussions surrounding state
funding of pensions and collective bargaining rights for
public employees also made their way onto the legislative
agenda, with legislators examining new policy proposals
focused on controlling costs.
In the face of such fscal challenges, Governor Dave
Heineman has pressed for continued and increased
investment of state resources towards policies and
programs designed to support innovation, investment,
and job training. Building on job creation and economic
development priorities identifed by recent studies
conducted on behalf of the state’s government, Governor
Heineman has made calls for a Talent and Innovation
Initiative, the center of his current priorities. The proposal
is focused on supporting state efforts to enhance job
creation and building new economic momentum through
a four-part plan. The Nebraska Internship Program
would provide grants to private businesses to create
internship programs, in order to keep Nebraska students
in state. The Business Innovation Act is a sweeping
proposal focused on enhancing technology transfer by
supporting R&D efforts, providing prototyping and
technology commercialization funding, supporting Small
Business Innovation Research (SBIR) funding grants, and
restructuring small business investment programs. The
Site and Building Development Act would provide grants
and loans to support acquisition and development of prime
business sites. Finally, the governor has proposed creating
an angel investment tax credit to support investment in the
state’s high-tech companies.
The Nebraska Advantage
One of Nebraska’s major job creation initiatives over the
past several years has been the Nebraska Advantage, a
package of incentives and enterprise-friendly tax credits
and refunds designed to support business start-ups and
expansion of existing businesses. Benefts to businesses are
built around a tiered system, based on the type of business
and number of jobs created. Depending on the tier,
businesses are eligible for investment tax credits between
3 and 10 percent, wage credits based on job pay levels,
property tax exemptions and sales tax credits on capital
purchases. The program’s top tier, the Nebraska Super
Advantage, includes enhanced incentives packages focused
on supporting larger employers making multi-million
NEBRASKA
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Nebraska’s Place in the Rankings
3rd Transportation Infrastructure
Performance
6th Cost of Living
7th Short-term Job Growth
8th Academic R&D Intensity
11th Productivity Growth
12th Higher-ed Degree Output
12th College Affordability
13th Long-term Job Growth
13th Export Growth
13th Educational Attainment
16th Median Family Income
16th Higher-ed Effciency
19th Growth in Share of National Exports
21st Budget Gap
22nd Export Intensity Growth
22nd Job Placement Effciency
23rd Gross State Product Growth
23rd Per Capita Income Growth
23rd High Speed Broadband Intensity
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dollar investments in job creation. Small businesses are not
overlooked, however, as the state also offers the Nebraska
Small Business Advantage, focused on providing a
range of support to smaller entrepreneurs. Since the
program’s creation, it has been credited with supporting
the establishment or expansion of around 250 businesses in
the state, creating over 18,500 new jobs and spurring $5.5
billion of business-driven investment.
In order to better leverage the potential of the University
of Nebraska as an engine for job creation and economic
growth, in 2010 Nebraska created the Nebraska
Innovation Campus adjacent to the University of
Nebraska-Lincoln’s city campus. This 249-acre space
is designed to serve as a “public/private research and
technology development center.” Companies located
in the new campus will be able take advantage of their
proximity to the university in order to work collaboratively
with university researchers, directly recruit interns and
employees from the pool of recent graduates, and access
university facilities and infrastructure, such as UNL’s
supercomputing facility. Infrastructure development at
the site is ongoing, and Governor Heineman has made
increasing funding for the new campus one of his job
creation and education priorities.
As part of the Nebraska Advantage program, the state has
adopted a research and development tax refundable tax
credit, which supports advanced research by businesses
in the state. In order to encourage public-private research
and development (R&D) partnerships, the state offers an
increased tax credit for R&D expenditures incurred at
Nebraska’s colleges and universities.
Nebraska has also enacted a 20 percent refundable
microenterprise tax credit, which may be accessed by
companies with fve or fewer employees at their launch.
Hoping to encourage investment in in-state companies, the
state has also created a capital gains exemption in the
state income tax, which extends some exemptions from
taxes on capital gains realized by employees who have
invested in the stock of their Nebraska-based employer.
Other tax reform packages enacted by recent legislative
sessions eliminated the state’s estate tax, lowered state
income taxes, and repealed some sales taxes focused on
construction.
Nebraska continues to focus on building trade relationships
with targeted overseas partners, including China, Brazil,
and Japan. The state maintains an international trade
offce in Japan, supports trade missions, and continues
to actively pursue investment from foreign companies,
supporting transition teams to support business location
from abroad into Nebraska. The state also supports efforts
by the Nebraska Logistics Council to help businesses in
connect to import/export routes and distribution channels,
capitalizing on the state’s central location as a selling
point to companies interested in building new or expanded
operations in the United States.
Governor Heineman has made increased use of internships
to retain Nebraska’s best and brightest one of his current
priorities for job training. In addition to this proposal, the
state already has a group of workforce training initiatives
designed to better prepare its existing workforce to
exploit emerging economic opportunities. As part of the
Nebraska Advantage, the state offers employers access to
a customized job-training program, with grants from
$500 to $4,000 per job available for each new position.
In order to encourage job development in rural areas, the
state offers increased job training incentives for qualifed
jobs created in rural areas, and support from state staff in
designing and implementing needed training programs.
Moving Forward
As part of its efforts to hone its future economic
development efforts, Nebraska has identifed twelve
base industry clusters which have a strong presence in
the state, with three identifed as emerging strengths,
including health services, tourism, and engineering. In
order to better capitalize on new and existing areas of
growth, studies conducted for the state government have
suggested supporting increased cluster organization efforts,
consolidation of clusters into more focused groups, support
for workforce and talent initiatives, and an increased
emphasis on business innovation efforts. Governor
Heineman, in rolling out his four-part plan and refocused
job development policy, appears to be using this guidance
to set his economic development policy priorities as the
state begins to recover from the relatively modest setbacks
it experienced during the past few years of economic
diffculty.
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Clusters in Nebraska
Largest Cluster: Business & Financial Services,
133,244 jobs
Largest Growth Cluster: Business & Financial
Services, 22,382 new jobs since 2002
Most Competitive Cluster: Transportation &
Logistics, 5,163 new or retained jobs due to state
competitive advantage
Most Concentrated Cluster: Mining, 3.98 times
the national concentration level
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The year 2010 continued a string of diffcult years for
the state. Facing one of the largest budget defcits in the
nation, battered property markets, and unemployment
rates firting with 15 percent, Nevada remains saddled
with some of the most vexing economic challenges of any
state in the nation. However, these challenges come on the
heels of yet another decade of strong population growth
for the state, as confrmed by last year’s Census. Signs of
a turnaround have begun to emerge, with unemployment
rates dropping, state revenues increasing, and signs of
increased economic activity being reported in the state’s
large tourism and gaming industries.
A Complete Overhaul
As noted, Nevada entered the year facing one of the
nation’s largest budget defcits as a percentage of its
previous budget. The state’s $1.5 billion shortfall was
equal to 45.2 percent of its FY2011 budget. As a result,
it was no surprise that newly elected Governor Brian
Sandoval made dealing with the budget one of his chief
priorities. Sandoval proposed cutting spending by 8 percent
compared to the previous biennium. He also pledged to
hold the line on taxes, stating that he will oppose attempts
by the legislature to raise revenue through tax increases.
Proposals for freezes in pay raises and across-the-board
pay cuts for state employees were also included in the
governor’s budget.
The governor has also proposed sweeping changes
to the state’s economic development and job creation
activities. Calling for a “complete overhaul” of existing
structures, Sandoval also proposed increasing funding
for the state’s Commission on Economic Development.
The administration has also proposed creation of new
public-private job creation effort, Nevada Jobs Unlimited,
organized along private sector lines but with cabinet
level status. The governor has also called for creation of
a Catalyst Fund for closing deals and funding needed
infrastructure upgrades for business recruitment.
Global Business Development
Nevada has been a national leader in export growth
over the past decade, and remains strong in this year’s
performance measures. In order to support trade activity
by Nevada companies, the state offers several programs
and support services through its division for Global
Business Development. The state maintains a network
of independent trade representatives around the globe,
in locations including Shanghai, Beijing, Hong Kong,
Germany, Brazil and Italy. The state is seeking to expand
the network to Spain and the United Kingdom, in order to
register increased trade with new markets. The independent
representatives work on contract with the state to support
outreach by Nevada companies in their countries, while
acting as points of contact for foreign frms exploring
potential investment and expansion opportunities in
Nevada. The state also hosts inbound buying missions
where foreign buyers are brought to Nevada and connected
NEVADA
Nevada’s Place in the Rankings
1st Export Intensity Growth
1st Export Growth
2nd State and Local Tax Burden
2nd Small Business Survival Index
3rd STEM Job Growth
4th Business Birth Rate
4th Business Tax Climate
4th Job Placement Effciency
5th Entrepreneurial Activity
9th Long-term Job Growth
9th Gross State Product Growth
9th Growth in Share of National Exports
14th High-tech Share of All Businesses
16th Economic Output Per Job
16th Small Business Lending
17th High School Advanced Placement
Intensity
18th Academic R&D Intensity
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with local companies producing products they might be
interested in purchasing. The state also works with local
development agencies throughout the state to coordinate
efforts to attract foreign direct investment, working with
the federal government to identify and support foreign
companies interested in establishing operations in the state.
Efforts to designate a Las Vegas World Trade Center also
came to fruition early this year, giving the state a high-
profle venue to attract international corporations to the
region, potentially laying the foundation for increased trade
and associated job creation.
Nevada maintains two foreign trade zones, in Las Vegas
and Reno, in partnership with the federal government.
These zones allow businesses access to expedited customs
processing and decreased duties and excise taxes. Nevada
continues to promote access to foreign trade shows for
businesses in the state interested in export possibilities,
targeting markets in Asia, Europe, and the Middle East.
The state also hosts workshops designed to train Nevada
entrepreneurs about the challenges and opportunities faced
when accessing foreign markets. The Nevada District
Export Council is another program offered in affliation
with the federal government, providing trade support
services to small and medium-sized businesses in the state.
The Council offers entrepreneurs access to trade-savvy
volunteers for one-on-one advisory services, offers training
sessions and seminars on trade-related issues, hosts trade
missions visiting the state, and helps businesses exploring
trade opportunities gain access to needed fnancing.
Nevada’s job creation efforts are supported by a set of tax
incentives and an enterprise-friendly tax code. Nevada has
no corporate income tax, personal income tax, franchise
tax on income, estate tax, or gift tax. While the state
collects a sales and use tax, businesses are eligible for sales
and use tax abatements and deferrals. The abatements
are applicable to purchases of capital equipment, offering
reduced taxes to companies that meet job creation and
wage provision thresholds. The sales tax deferrals also
apply to investments made in capital equipment, and allow
the company to put off paying taxes for a period of 12 to
60 months, depending on the size of capital investment.
Nevada has also targeted a tax abatement at intellectual
property development businesses. Under terms of the
program, such companies are eligible for breaks in sales,
modifed business, and personal property tax bills if they
meet job creation and investment requirements. In order to
support conservation of energy and adoption of substitutes
for fossil fuels in the state, Nevada also offers businesses
that recycle materials, including for power generation,
tax abatement incentives. This recycling property tax
abatement is available to eligible businesses that recycle
on-site and create a minimum of 10 new jobs, among
several other requirements.
Innovation and entrepreneurship-driven job creation is
also a point of focus for Nevada’s economic development
plans. The Nevada Center for Entrepreneurship and
Technology (NCET) is a nonproft organization providing
programming and support services to entrepreneurs
throughout the state. NCET sponsors entrepreneurship
conferences, venture capital events, and an annual
business plan competition for entrepreneurial college
students, all designed to increase entrepreneurial activity,
commercialization efforts, and job creation in high-
tech industries. Small businesses in search of support
services are also served by the Nevada Microenterprise
Initiative. The NMI offers entrepreneurs access to
microloans for startup and expansion of businesses.
Loans of up to $35,000 are available, along with access to
entrepreneurship workshops and training course designed
to help budding businesspeople get up and running.
To support workforce training activities by Nevada
businesses, the state created the Train Employees Now
program. Qualifed new and expanding businesses with a
minimum of ten employees are eligible to receive funding
from the state in support of their employee screening
and training activities. The beneft is limited to $1,000
per employee, employees must be Nevada residents, and
positions created and offered training must meet certain
wage and beneft standards.
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Clusters in Nevada
Largest Cluster: Arts, Entertainment, Recreation
& Visitor Industries, 249,354 jobs
Largest Growth Cluster: Business & Financial
Services, 54,533 new jobs since 2002
Most Competitive Cluster: Business &
Financial Services, 26,737 new or retained jobs due to
state competitive advantage
Most Concentrated Cluster: Arts,
Entertainment, Recreation & Visitor Industries, 5.07
times the national concentration level
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Boasting the strongest employment growth rates in New
England, New Hampshire is showing notable signs of
economic recovery. According to the Federal Reserve,
New Hampshire showed one of the strongest job growth
rates nationally in 2010, and now enjoys the lowest
unemployment rate in New England. However, while
progress has been made, personal income gains have been
below national average, unemployment rates are still above
pre-recession levels, and the state has had to deal with
budget challenges created by decreased revenues. Still, as
the nation recovers from a deep economic trough, New
Hampshire appears poised to be a regional growth leader.
Job Creation and Basic Infrastructure a
Priority
With estimates showing up to a $1 billion defcit looming
over the next biennium and state revenues down over 10
percent from their pre-recession level, New Hampshire’s
policymakers entered the year facing a set of diffcult
fnancial decisions. Both the governor and legislature
proposed budgets making substantial cuts from spending
levels seen in the prior biennium. However, while calling
for cutbacks, Governor John Lynch has continued to
press support for programs and initiatives focused on job
creation and economic recovery. Although the state faces
budget challenges, the Lynch administration has remained
openly committed to keep tax rates as they are, working
with the legislature to avoid raising any tax rates as part
of budget negotiations. In order to support innovation
and entrepreneurship in New Hampshire, the governor
has proposed doubling the state’s existing research and
development tax credit program.
Upgrading the state’s roads and other basic infrastructure
has also emerged as a priority, and the administration has
supported implementation of a comprehensive ten-year
highway plan. To further upgrade the state’s transportation
infrastructure, Governor Lynch has proposed creation
of a State Infrastructure Bank, which would give local
communities throughout the state access to a revolving
loan fund to fnance infrastructure improvements. The
administration has also called for continued and steady
state investment in workforce training programs to help
provide a channel of skilled workers ready to support
expansion at existing companies and to attract new
employers to the state.
Job Creation Initiatives
New Hampshire continues to tout itself as a low-tax
environment in which to conduct business. Unlike other
states in its region, New Hampshire does not have sales
taxes or income taxes on wages. Corporate income taxes
are relatively low. In addition, the state offers a series
of tax incentives to spur business development. The
state’s Economic Revitalization Zone Tax Credits
are designed to offer businesses an incentive to create
new jobs in distressed areas of the state. Communities
NEW HAMPSHIRE
New Hampshire’s Place in the
Rankings
1st High Speed Broadband Availability
2nd High Speed Broadband Intensity
4th High-tech Share of All Businesses
7th State and Local Tax Burden
7th Business Tax Climate
7th Educational Attainment
7th Job Placement Effciency
9th Median Family Income
9th Export Growth
11th Higher-ed Degree Output
12th STEM Job Concentration
12th Higher-ed Effciency
18th Short-term Job Growth
19th Export Intensity Growth
22nd Growth in Share of National Exports
23rd Long-term Job Growth
23rd Small Business Survival Index
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looking to promote job growth in such areas are able to
gain Economic Revitalization Zone status and access
these credits if they meet certain minimum requirements
showing need. Qualifed projects focused on the creation,
expansion, or remodeling of an industrial or commercial
facility receive credits based on the number and wage level
of jobs created.
New Hampshire’s Research and Development (R&D)
Credit program, which Governor Lynch has targeted for
expansion, offers tax credits to businesses conducting
manufacturing research and development activities.
The credit is calculated based on wages paid to New
Hampshire-based employees involved in R&D activities,
with credits of up to 10 percent of wages paid available to
offset a company’s state corporate tax burden. The credit is
capped at $50,000 per business per fscal year.
Looking to help strengthen the economy of northern
New Hampshire, the state offers the regionally focused
Coos County Job Creation Tax Credit program.
Having identifed Coos County as a struggling area in
need of targeted support, the state offers businesses that
hire new full-time employees in the county a tax credit
of up to $1000 per employee, depending on wage level
of the positions created. Enacted in 2008, the program
is designed to run through 2013 in order to address the
continued effect of job losses in the region. Businesses are
able to carry forward credits earned for up to fve years.
Businesses in New Hampshire are also able to take
advantage of the state’s Community Development
Investment Program tax credits. Designed to encourage
businesses to support innovative community development
projects, the credits are granted to companies that donate
to eligible projects. The credit is equal to 75 percent of
a company’s donation. The program allows businesses
to invest property, cash, or securities into programs that
improve their communities, while receiving a sizable tax
credit to offset their input.
In order to connect green businesses and entrepreneurs
to the research and business support infrastructure of the
University of New Hampshire, the state has established
the Green Launching Pad. The program, designed to
bring together interdisciplinary public-private teams
focused on supporting green business ventures, supports
implementation of the state’s Climate Action Plan, creating
new economic opportunities while reducing the state’s
carbon footprint. The goal of the plan is to incubate new
companies with the support of the university, creating jobs
for graduates. The state’s Innovation Research Center
also offers coordination services and grants designed to
facilitate public-private technology commercialization
partnerships between New Hampshire companies and
research institutions.
Created in 1992, New Hampshire’s Business Finance
Authority provides businesses with access to a variety
of fnance programs designed to expand credit access in
the state. Programs are often offered in partnership with
the state’s banks. The authority’s Capital Access Program
helps banks offer loans to companies that are starting up or
expanding, mitigating some of the risk inherent in lending
to small start-up frms. The state’s Working Capital Line of
Credit Guarantee program provides banks that offer lines
of credit to New Hampshire companies with a guarantee
of up to 75 percent of the line of credit. The Authority also
sponsors a Guarantee Asset Program, which guarantees up
to 90 percent of a line of credit extended by a participating
bank to a qualifed nontraditional capital-intensive
company. In addition, the Authority coordinates a set of
programs focused on small business lending and bond
fnancing, including industrial development bonds.
Workforce development efforts in New Hampshire have
included the state’s Job Training Fund, which provides
businesses with matching grants for workforce training
activities conducted through the state’s community college
system. The state’s New Hampshire Working program
offers companies undergoing economic stress with
workforce support services such as retraining employees
and offering employees facing reduced schedules partial
unemployment compensation, helping companies facing
temporary rough patches to hold on to valued employees.
The state also maintains a Rapid Response Team, tasked
with offering workforce support services to businesses
facing economic diffculty on an expedited schedule.
85
Clusters in New Hampshire
Largest Cluster: Business & Financial Services,
93,065 jobs
Largest Growth Cluster: Business & Financial
Services, 15,487 new jobs since 2002
Most Competitive Cluster: Apparel & Textiles,
2,082 new or retained jobs due to state competitive
advantage
Most Concentrated Cluster: Computer &
Electronic Product Manufacturing, 3.01 times the
national concentration level
86
made efforts to place consideration of changes to public
employee pensions and benefts on the state’s budget
agenda.
Technology and Innovation
New Jersey offers a large and varied set of programs
and opportunities focused on supporting and attracting
innovative businesses to the state, with over 80 different
incentives available to entrepreneurs. While the state is
looking at restructuring some programs in order to help
balance its budget, the administration and legislature have
continued to affrm support for incentives and programs
designed to spur job growth efforts in the state.
NEW JERSEY
New Jersey’s Place in the Rankings
4th High Speed Broadband Availability
6th Economic Output Per Job
6th STEM Job Concentration
6th Educational Attainment
6th Job Placement Effciency
7th Median Family Income
7th High-tech Share of All Businesses
7th High Speed Broadband Intensity
17th Academic R&D Intensity
18th Small Business Lending
23rd Growth in Share of National Exports
24th Export Intensity Growth
24th High School Advanced Placement
Intensity
25th Short-term Job Growth
86
Long a home to cutting-edge research and education
institutions, industry-leading innovators, and boasting one
of the nation’s top per capita income levels, New Jersey
has recently found itself facing a diffcult set of economic
challenges. Since 2008, the state has lost over 200,000
jobs, and seen unemployment rates double to between 9
and 10 percent. This hard hit from the recession has forced
state policymakers to confront one of the nation’s largest
projected budget gaps for FY2012. However, even in the
face of one of the most diffcult economic climates seen
in decades, New Jersey has continued to support a variety
of job creation incentives and initiatives, and is showing
signs that job losses have stopped and that the worst of the
recession is behind it.
Streamline Processes, Cut Red Tape
and Reduce Spending
New Jersey entered 2012 with the nation’s second largest
budget defcit when measured as a percentage of its
FY2011 budget. With a projected shortfall of $10.5 billion
facing the state, Governor Chris Christie’s administration
has made closing the anticipated gap one of its chief
priorities. As part of this process, the administration
has led state efforts to review programs throughout New
Jersey’s government to identify economic development
initiatives with the highest rate of return on investment in
order to prioritize state spending in a challenging budget
environment.
The Christie administration has also put forward plans
that it says will streamline regulatory processes, cut red
tape, and reduce state spending in order to cut the defcit.
One highlight of the administration’s activities has been
a focus on comprehensive tax reform, with the governor
offering multiple tax reform proposals, including cutting
taxes on small businesses and pressing for adoption of a
single sales factor formula in corporate taxes, which would
enable businesses in the state to simplify tax compliance.
In all, the administration offered proposals for almost $200
million in tax cuts in its FY2011 budget proposal. The
governor has also made a push to make use of zero-based
and performance budgeting procedures in the state to
enable government to better adapt to changes in revenue on
a year-to-year basis, removing old programs from baselines
and allowing the state to put more focus on funding new
and emerging priorities. As in many other states facing
challenging budget situations, the administration has
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In order to support job creation in the technology and
life sciences industries, New Jersey created the Edison
Innovation Fund, which contains a portfolio of programs,
incentives, and funding sources designed to “develop,
sustain, and grow technology and life sciences businesses
that will lead to well-paying job opportunities.” Since
its launch in 2006, the Fund has provided hundreds of
millions of dollars in support to early-stage technology
companies throughout the state. It offers competitively
awarded commercialization funding to new companies,
helping them bring new products to market and bridge
the gap toward other funding sources. Research and
development (R&D) efforts are also supported through
low-interest loans backed by the state. Grants for proof-of-
concept efforts are also available, supporting companies
at earlier stages of development. Other focused programs
within the Fund also look to support growth in targeted
industries, including energy innovation, digital media
production, and advanced manufacturing.
In order to better leverage the monies committed through
the Innovation Fund, New Jersey has also created a
group of Innovation Zones. These zones are located
near research and educational facilities in order to spur
increased public-private innovation and collaboration.
Technology companies located in the zones have access to
special funding, tax credits, grants, and support from the
state’s two technology centers, which offer laboratory and
production space.
As two of the state’s targeted growth industries, high
technology and biotechnology companies are offered
lowered thresholds for accessing job creation tax credits.
While companies in other industries are required to create
25 jobs in order to make use of available tax credits,
technology companies may take advantage of such credits
when they create 10 jobs.
While the state offers R&D tax credits to qualifed
businesses, not all early-stage technology companies are
proftable and thus able to make use of the credits. In
order to support such ventures and the jobs they create,
New Jersey has created a Technology Business Tax
Certifcate Transfer Program. This program, which
the administration has slated for expansion, allows
unproftable technology and biotechnology companies to
sell their unused R&D tax credits to unaffliated businesses
for at least 80 percent of their value. By doing so, such
companies are able to raise funds to procure the equipment
and facilities they need to build and strengthen their
business, enhancing potential future proftability and job
creation.
Regulatory Policy
As part of an effort to streamline government, the Christie
administration launched a Red Tape Review Group led
by the Lieutenant Governor. Charged with reviewing the
state’s rules, regulations, and processes, and exploring
changes to build a better business environment, the group
offered a set of proposed rulemaking reforms and proposed
modifcations and revocations of existing rules. While
originally intended to be a temporary effort, the review
group has now been made permanent, in order to exercise
continual oversight of rulemaking processes in the state.
By way of easing the process of business establishment and
development, New Jersey also recently adopted “time of
application” rules for development project applications in
the state. Under the new rules, proposed developments will
be allowed to follow the rules and regulations that applied
at the time their initial development application was
made, simplifying the process towards completion of an
application. The new rules give new business developments
increased regulatory certainty, and will allow them to
avoid costly changes and setbacks as new rules are adopted
by local governments.
87
Clusters in New Jersey
Largest Cluster: Business & Financial Services,
723,686 jobs
Largest Growth Cluster: Business & Financial
Services, 93,489 new jobs since 2002
Most Competitive Cluster: Computer &
Electronic Product Manufacturing, 2,084 new or
retained jobs due to state competitive advantage
Most Concentrated Cluster: Chemicals &
Chemical Based Products, 1.57 times the national
concentration level
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Buoyed by the presence of world-class research facilities
such as Los Alamos and Sandia National Labs, New
Mexico remains a leader in innovation and entrepreneurial
activity in this year’s study. While the economic downturn
did drive unemployment rates up and leave the state
facing a sizable budget defcit for FY2012, the state has
seen signs of economic rebound, backed by growth in its
energy and tourism sectors. State tax collections are up, a
sign of increased economic activity, unemployment rates
have begun to drop, and severance tax receipts are up,
a refection of strong commodity prices and increasing
activity in the state’s signifcant oil and natural gas felds.
Wholesale Changes
Newly elected Governor Susana Martinez and the New
Mexico legislature convened in Santa Fe this year facing
a budget defcit estimated at up to $450 million. Taking
a strong stance against tax increases in her State of the
State address, Martinez instead pushed for a package of
spending cuts, tax credit adjustments, and pension and
other program reform in order to reduce state obligations
and reduce the defcit. Martinez has outlined several
different ideas designed to aid business development
and encourage job creation, including pressing for red
tape reduction legislation to identify unneeded business
regulations, cutting down on the cost of regulatory
compliance for businesses in New Mexico. While proposed
legislation related to this aim was not completed during
this year’s session, action was taken to create a Small
Business-Friendly Task Force, which conducted a
review of state rules and regulations, and forwarded
recommendations for future revisions and legislative
changes.
The administration has also forwarded the idea of
making use of unemployment funds to subsidize hires of
unemployed workers by small businesses in the state. Tax
reform was also made a key priority by the administration,
with the governor calling for “wholesale changes” in the
state’s tax structure, and a new focus on moving beyond a
“piecemeal” focus on industry-specifc tax credits toward
restructuring the overall tax code to make the state more
attractive to business. The administration plans to bring
legislation aimed towards such ends before the legislature
in 2012. As noted above, the governor also pushed for
changes to public employee pension plans. Reforms
requiring greater contributions from state workers were
passed by the legislature and coupled with cuts to spending
and new caps on specifc tax credits in order to close the
state budget defcit faced this year.
Eliminate Barriers to Business
While the Martinez administration has called for a re-
evaluation of the use of industry-targeted tax credits in
New Mexico, the state has and continues to offer a slate of
general and targeted tax credits and incentives designed to
support job creation and business growth.
New Mexico policymakers have increased their focus
on reducing and streamlining regulation to cut down on
barriers to business. As part of this initiative, the state has
created an Offce of Business Advocacy in its economic
NEW MEXICO
New Mexico’s Place in the Rankings
5th Per Capita Income Growth
8th STEM Job Growth
9th STEM Job Concentration
10th Entrepreneurial Activity
10th State and Local Tax Burden
10th Higher-ed Effciency
11th Long-term Job Growth
14th College Affordability
15th Small Business Lendin
16th Business Birth Rate
17th High-tech Share of All Businesses
17th Budget Gap
21st Gross State Product Growth
21st Academic R&D Intensity
25th Small Business Survival Index
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development department. This offce is designed to
act as a “caseworker” for business in the state, helping
entrepreneurs deal with regulatory hurdles they encounter
in New Mexico’s government. Working in partnership with
communities and economic development organizations
around the state, the new offce will work with referred
businesses to work their way through the system, reduce
roadblocks, and fnd ways to aid job creation efforts.
Increasing jobs in high technology felds continues to
be an area of key focus for New Mexico. The state has
identifed four industry clusters as areas of strength and
potential growth, including aerospace, nanotechnology,
information technology and software, and biotechnology.
In order to attract and support companies in these
industries, New Mexico offers workforce training options
and higher education programs focused on these clusters
at universities throughout the state. The state also provides
tax incentives targeted to support high-tech business
development. Aerospace companies in the state can take
advantage of tax deductions for aircraft manufacturing and
maintenance, aerospace research and development, and
spaceport operation. The state has also attempted to spur
development of an advanced energy sector with credits and
incentives, including alternative energy manufacturing tax
credits and renewable energy production tax credits.
The latter offers energy generators an income tax credit of
2.7 cents per kilowatt hour for up to ten years.
In addition to more industry-specifc tax incentives, New
Mexico offers a set of general tax incentives designed to
attract businesses to the state and spur job growth. The
state’s high-wage jobs tax credit offers businesses a
tax credit of up to 10 percent of wages on qualifed jobs
for four years. The credit has lower wage requirements
for smaller communities, in order to help drive job
creation in the state’s smaller cities and towns. Looking
to support manufacturing jobs, New Mexico also offers a
manufacturer’s investment tax credit of up to 5 percent for
qualifed equipment and property investments. Another
tax incentive showing the state’s commitment to rural
development while focusing on its overall goal of high-tech
job growth is the technology jobs tax credit. Businesses
with qualifed research and development (R&D) expenses
may take a tax credit of 4 percent if the R&D is conducted
in urban areas and 8 percent if it is conducted in rural
areas.
New Mexico has also made a concerted effort to attract
the flm and television production industries to the state.
The state’s flm production tax credit, created in 2002, has
been credited with creating thousands of jobs and drawing
hundreds of millions of dollars of flm activity to the state.
The state has placed a rolling cap of $50 million on the tax
credit as of this year, in an effort to help address the budget
defcit, but still offers the flm industry a 25 percent tax
credit. In addition, the state offers other incentives to the
flm industry, including access to job training support and
a flm investment loan program of up to $15 million per
project.
Small, local business development has also been a focus
in the state. New Mexico’s MainStreet Program is a
community-focused approach to redevelopment and job
creation in downtown business districts throughout the
state. Working with community nonprofts, the program
supports efforts to improve the physical appearance of
business districts, support and promote small business
development and market efforts, collect economic
information needed to design effective business attraction
and retention efforts, and provide professional guidance to
local agencies looking to build new plans for job creation
in their downtown cores.
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Clusters in New Mexico
Largest Cluster: Energy (Fossil & Renewable),
103,540 jobs
Largest Growth Cluster: Biomedical/
Biotechnical (Life Sciences), 22,053 new jobs since
2002
Most Competitive Cluster: Energy (Fossil &
Renewable), 12,509 new or retained jobs due to state
competitive advantage
Most Concentrated Cluster: Mining, 2.21 times
the national concentration level
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New York entered the year with a projected budget
gap of up to $10 billion to be dealt with during this
year’s session of the general assembly. While moves by
incoming Governor Andrew Cuomo to change the state’s
accounting methodologies moved some projections down
by billions, the state still was left facing diffcult decisions
regarding spending levels and tax rates moving forward
into FY2012. Governor Cuomo pressed a job creation
agenda that will create ten regional economic development
councils, bringing more local direction to state efforts. The
administration also argued in favor of greater university
involvement in job creation efforts, in order to leverage
higher education’s abilities to coordinate intergovernmental
efforts and create “one-stop shops” for job creation
coordination. The governor has also pressed for re-
evaluation of the state’s many departments to streamline
government services, eliminate unnecessary regulatory
pitfalls, and identify potential cost savings. The state was
able to pass a budget by the legally mandated date of April
1, and held the line on taxes while making slight cuts to
spending levels and adjusting some health care spending
procedures.
JOBS Now Focused on Private Sector
Projects
New York’s JOBS Now initiative is focused on supporting
large-scale private sector job creation projects. Companies
that will create over 300 jobs are eligible for loans and
grants of up to $10,000 per position. These funds may be
used to purchase needed equipment, site and infrastructure
preparation, and construction of needed facilities. The
program also provides grants that can be used to conduct
workforce training needed to facilitate the attraction or
expansion of a business. The initiative is focused on target
industries, including manufacturing, distribution, and high
technology-related felds.
To give state job creation efforts more fexibility to
deal with opportunities that present themselves, New
York created a general Economic Development Fund
(EDF). Funds from the program can be used to support
job creation activities driven by private companies or
facilitated in partnership with the private sector by
municipalities and nonproft organizations. Funds are
available for a wide range of uses, including workforce
training, site acquisition, feasibility planning, and
construction.
Entrepreneurial activity in New York is supported through
the state’s Entrepreneurial Assistance Program.
The program supports a network of 24 entrepreneurial
assistance centers throughout the state. These centers
offer budding entrepreneurs a one-stop solution to access
business training, support services, and other state assets
related to small business creation and expansion. The
assistance centers are operated in partnerships between the
state, nonproft organizations, and community colleges.
Small businesses in New York can also seek access to
capital needed for expansion through the state’s Small
Business Revolving Loan Fund (SBRLF). Backed by $50
million, the loan fund offers entrepreneurs access to both
micro and regular small business loans. Loans of up to
$125,000 are available, and require a private sector match.
NEW YORK
New York’s Place in the Rankings
4th Educational Attainment
4th High School Advanced Placement
Intensity
5th Economic Output Per Job
6th Higher-ed Degree Output
6th High Speed Broadband Intensity
10th Short-term Job Growth
11th Academic R&D Intensity
15th Job Placement Effciency
15th High Speed Broadband Availability
16th Entrepreneurial Activity
17th Small Business Lending
18th Per Capita Income Growth
22nd STEM Job Concentration
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With an eye towards spurring increased growth in
high-tech jobs, New York launched the Excelsior Jobs
Program. This initiative is focused on support of
manufacturing, clean tech, biotech, and other high-tech
sectors in the state. Companies that create jobs in targeted
industries may be eligible for up to four tax credits under
the program. The Excelsior Jobs Tax Credit offers job-
creating employers a credit of up to 6.85 percent of the
wages of each new job created. The Excelsior Investment
Tax Credit supports investment in equipment by expanding
companies through a 2percent tax credit. The initiative’s
research and development tax credit can be worth up to
3 percent of a company’s qualifed spending on research
and development in the state. Finally, the program’s
real property tax credit is available to businesses that
are willing to establish operations and create jobs in
economically distressed areas of the state.
A strong performer in workforce development measures,
New York provides several programs and tax credits
designed to support business workforce training efforts,
create jobs, and help workers gain the skills they need to
compete in an increasingly demanding workplace.
The Workers with Disabilities Tax Credit (WETC) is
a state program designed to help disabled workers fnd
employment by offering employers a tax credit of up to
$2,100 to help offset wages. The program provides the tax
credit in the second year of employment, as a follow-up
to similar federal tax credits that are available in the frst
year of employment. In doing so, the state helps businesses
reduce wage costs and incentivizes employment of an
at-risk group of workers. The state’s Qualifed Emerging
Technology Companies Training Credit offers small
companies in targeted high-tech industries refundable
tax credits of up to $4,000 per employee for expenses
incurred during “high technology training.” The state also
makes use of the 64 campuses of the State University of
New York (SUNY) system to offer various tailored job
training programs to employers throughout the state. The
vast reach of the system allows for regional solutions to
local employers’ needs. The state also offers employers
in need of help fnding qualifed entry-level employees to
fll vacancies recruitment and staffng assistance. Offered
through the NYS Jobs program, these services maintain
pools of job seekers who can be placed according to an
employer’s needs.
Seeking to aid small and medium-sized companies
in accessing export market opportunities, New York
launched the Global Export Market Services (GEMS)
program. This initiative offers small entrepreneurs seeking
to tap foreign markets grants of up to $25,000. These
funds can be used to procure technical and marketing
support services, such as hiring export market consulting
professionals. The grant can be used to cover up to 50
percent of total project costs, thus requiring a 1:1 match in
investment on the part of the company looking to seek out
export opportunities.
New York uses its Empire Zone Program to help
stimulate economic growth in 72 economically distressed
regions of the state. The program offers wage tax credits
of up to $3,000 for jobs paying at least 135 percent of
minimum wage and employing lower-income individuals
and a series of income, property and sales and use tax
exemptions for qualifed businesses operating inside an
enterprise zone. Each zone is staffed with professionals
ready to assist with business expansion or relocation into
the zone.
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Clusters in New York
Largest Cluster: Business & Financial Services,
1,628,269 jobs
Largest Growth Cluster: Business & Financial
Services, 258,402 new jobs since 2002
Most Competitive Cluster: Printing &
Publishing, 14,018 new or retained jobs due to state
competitive advantage
Most Concentrated Cluster: Education
& Knowledge Creation, 1.85 times the national
concentration level
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After years of economic diffculty, North Carolina appears
to be showing signs of turning the corner. Tax receipts
are up, and unemployment rates have eased from the
peaks seen during the depths of the recession. While the
state faces budget challenges moving forward, the state’s
historically strong technology and innovation performance
may place the state in a competitive position as demand for
science and technology-driven growth builds.
Budget and Policy Agenda
North Carolina entered 2011 facing a budget defcit
approaching $2.4 billion. While the state’s policymakers
have had to make cuts to government programs in order
to close the gap, Governor Beverly Purdue has advanced
an economic development agenda that calls for increased
tax incentives, tax cuts, and further investment in job
creation activities. In order to help bring the defcit
under control, Purdue has called for consolidation of
government agencies, cuts in the number of state boards
and commissions, and a hiring freeze for government
positions. The administration also conducted a review of
state regulations, and submitted lists of proposed changes
and eliminations to the general assembly. The governor
has made calls for rethinking the state’s business tax
structure, hoping to cut tax rates on small businesses and
corporations in order to remain regionally competitive
and spur new job growth. The governor also supported
continued and increased state investments in business
incentives and tax credit programs designed to support job
growth.
Public-Private Partnerships are Key
Home to the nationally renowned Research Triangle Park,
North Carolina continues to show strong performance
in innovation and entrepreneurship. In addition to the
Research Triangle, the state is home to six other research
parks, with several sited in conjunction with higher
education institutions throughout the state. The state also
has a network of over 25 core public and private research
laboratories supporting research in biotechnology and life
sciences.
The North Carolina Biotechnology Center manages
programs and incentives designed to build up the state’s
strong biotech and life sciences clusters. The center’s
Centers of Innovation grant program gives fnancial
support for the creation of virtual technology hubs backed
by public-private research partnerships. Focused on a
specifc technology area, these centers are designed to
drive commercialization efforts, build regional research
capacities, and support ongoing tech development efforts,
in order to drive biotech job creation. The Biotechnology
Center also offers business fnancing and venture capital
access support services to nascent biotech frms located in
the state. The Center’s BATON (Business Acceleration
and Technology Out-licensing Network) program works
to grow North Carolina biotech frms, by providing access
to professional services, funding sources, and recruitment
of skilled entrepreneurs to join companies in need of
more professional support to attain sustainable growth.
The Center also supports an Industrial Fellowship
Program, which connects recent doctoral graduates from
the state’s universities to professional opportunities at
NORTH CAROLINA
North Carolina’s Place in the
Rankings
9th Small Business Lending
10th College Affordability
11th Business Birth Rate
14th High Speed Broadband Intensity
15th High School Advanced Placement
Intensity
16th Academic R&D Intensity
19th High-tech Share of All Businesses
22nd Economic Output Per Job
22nd Cost of Living
24th STEM Job Growth
24th Educational Attainment
25th Export Intensity
25th Entrepreneurial Activity
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companies in the state. The program provides up to two
years of funding to aid the company in bring the researcher
onboard, helping companies gain access to highly educated
professionals, and keeping talented graduates in the
state. The center also provides companies with access
to competitive research grants, technology enhancement
grants, and maintains a “funding gateway” database of
potential funding sources from both public- and private-
sector sources, easing access to funding information for
start-up companies.
The One North Carolina Fund provides funding
to support recruitment and retention of high-wage,
knowledge-sector jobs. Funding is provided on a
competitive basis, and requires a local government
match. Funds can be used for equipment purchase and
infrastructure upgrades needed to attract a company.
North Carolina also offers tax incentives designed to
foster innovation-driven job creation. The Technology
Development Tax Credit is offered to businesses
conducting North Carolina-based research and
development efforts. The credit ranges between 1.25
percent and 3.25 percent depending on the level of
investment, and gives added support to research
conducted by small businesses by offering them the
3.25 percent credit regardless of expenses incurred. The
credit incentivizes research conducted in public-private
partnerships by offering a tax credit of 20 percent on
qualifed expenses for research performed by North
Carolina universities.
Looking to job business establishment and job creation
in the biofuels, green building, and clean technology
industries, North Carolina created the North Carolina
Green Business Fund. The fund offers competitive
grants to public and private sector organizations focused
on supporting related green innovation activities at North
Carolina businesses with less than 100 employees. Awards
of up to $500,000 are available to help small businesses
and communities build the state’s green economy.
North Carolina has also focused energy and resources
on building support structures for job creation by
entrepreneurs and small businesses. The state’s Biz
Boost initiative offers economically vulnerable small
and mid-sized businesses access to an expanded range of
direct state services, including business analysis support,
marketing research, cash management counseling, and
debt restructuring advisement, in order to help businesses
increase competitiveness and create new jobs. While the
program does not provide direct fnancial assistance to
businesses, it does offer businesses funding identifcation
support. In order to give small businesses easier access to
support networks, North Carolina’s community college
system serves as host to the state’s Small Business Center
Network. The SBCN offers entrepreneurs access to state
and federal business support programs, and connects
businesses to resources available through the community
college system. North Carolina’s Capital Access Network
(CAN) is a public-private partnership between state
agencies and private fnancial institutions to provide
small and mid-sized businesses in the state with access
to the bank loans they need to build their businesses and
create jobs. CAN connects entrepreneurs and lenders
through federally guaranteed loan structures and provides
businesses seeking fnancing with access to experienced
business advisors to help them prepare more successful
loan proposals.
In order to assure that North Carolina government does
its part to support local businesses, the state launched
the North Carolina Preference program by executive
order. The program requires government agencies letting
contracts for goods to allow North Carolina companies that
have submitted competitive bids the opportunity to match
the lowest bid, if the lowest bid came from an out-of-state
frm.
One of the oldest programs of its type in the nation,
the North Carolina Industrial Extension Service
offers services and support to the state’s manufacturing
sector. Offered through North Carolina State
University, the program allows companies in the state
to access information and professional support in lean
manufacturing techniques, management systems, safety
and environmental technologies, and industrial engineering
support needed to streamline processes and implement
more effcient production methods.
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Clusters in North Carolina
Largest Cluster: Business & Financial Services,
492,233 jobs
Largest Growth Cluster: Business & Financial
Services, 110,708 new jobs since 2002
Most Competitive Cluster: Biomedical/
Biotechnical (Life Sciences), 35,646 new or retained
jobs due to state competitive advantage
Most Concentrated Cluster: Apparel & Textiles,
2.31 times the national concentration level
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North Dakota is a top fve state in short- and long-term job
growth, GSP growth, productivity growth, and per capita
personal income growth. Alaska’s rapid ascension nudged
North Dakota from the number one spot in our overall
top economic performance states. The energy boom has
created 15,000 jobs in the state in the last decade and the
state has added another 9,400 in business and fnancial
services. North Dakota avoided the housing market
collapse, its construction employment is up 29 percent
since 2002, and its manufacturing sector has not seen the
decline occurring in other states.
Let the Good Times Roll
With an unemployment rate of 3.9 percent, North Dakota
largely avoided extended job losses during the recession,
and its booming energy industry has led to a sizeable
budget surplus. The state recently passed an initiated
measure changing the state’s constitution to create a long-
term savings Legacy Fund for oil extraction tax revenue,
while other oil tax revenues were diverted to fund road
improvements in heavy drilling areas and to property tax
relief. The Legacy Fund measure sets aside approximately
$619 million throughout the upcoming biennium.
The state anticipates total reserves at the end of the current
biennium of just over $1 billion. At the end of 2013,
reserves are expected to grow an additional $200 million
to a signifcant reserve of $1.237 billion, including the
Legacy Fund.
With ongoing one-time expenditures accounted for
and the reserves secured, the state’s fnancial position
still provides the state with the resources necessary to
provide additional tax relief. In the last biennium, the
state reduced property taxes by $300 million through
a reduction of approximately 75 mills in school district
levies, simultaneously raising the state’s share of school
funding from about 48 percent to the long-sought goal of
70 percent.
The recently approved $9.9 billion two-year budget added
another $342 million in local school funding used to
cut property taxes. The state cut individual income tax
rates by 18 percent and corporate tax rates by close to 20
percent. This produces a total of roughly $900 million in
cumulative tax relief over four years.
North Dakota ranks frst in the U.S. Chamber of
Commerce’s transportation performance index. The state’s
recently passed budget diverts oil extraction and mining
revenues directly to fund road improvements in the western
half of the state, improving transportation infrastructure
that is needed by the booming drilling activities. However,
the state budget addresses infrastructure needs in every
NORTH DAKOTA
North Dakota’s Place in the
Rankings
1st Short-term Job Growth
1st STEM Job Growth
1st Budget Gap
1st Transportation Infrastructure
Performance
2nd Long-term Job Growth
2nd Gross State Product Growth
3rd Per Capita Income Growth
3rd Educational Attainment
4th College Affordability
5th Productivity Growth
6th Export Growth
7th Export Intensity Growth
14th Job Placement Effciency
17th Median Family Income
18th Small Business Survival Index
18th Higher-ed Degree Output
18th Higher-ed Effciency
19th Cost of Living
20th Business Tax Climate
20th High Speed Broadband Intensity
21st High Speed Broadband Availability
25th Entrepreneurial Activity
25th State and Local Tax Burden
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region of the state, and transportation investments alone
come to $1.7 billion statewide.
The budget includes $371 million to repair state and local
roads in western North Dakota’s oil country, along with
$100 million in grants that local governments may tap for
public works improvements and repairs in oil-affected
regions. The state also approved $110 million for a new
water pipeline system to feed the large and growing needs
of the extraction business, a project leaders believe can be
fnanced by selling water to drillers.
North Dakota ranks third in educational attainment of its
25–44 year old population, associate degrees conferred,
above average for the, and fourth in college degree
affordability. Unemployment rates have held very low
throughout the recession, and the state’s Department of
Commerce and Job Service North Dakota are working
diligently with businesses to address shortages of skilled
workers and recruit new residents to the state. The state
has continued to work on education adequacy, and has
proposed signifcant improvements in the quality of
instruction in the K-12 school system.
North Dakota’s new education bill increases aid to local
school districts by 13 percent, up more than $700 per
student, and funds a new Gearing Up for Kindergarten
program. To assist rapidly growing schools in oil-
producing parts of the state, the plan sets aside $5 million
in grants for schools showing enrollment increases of more
than 7 percent The education bill also includes $700 per
semester college scholarship aid for students scoring at
least 24 out of 36 points on their ACT, capped at $6,000
per student.
The $646 million state higher education budget represents
a roughly 9 percent increase over last year, and includes
another $16 million in funding aimed at bringing up
funding at certain universities to “peer” levels, while
attempting to limit tuition increases to 2.5 percent.
Job Creation, Fiscal Discipline & Private
Sector Participation
Economic development and job creation have been
priority number one over the past ten years. By following a
strategic plan for economic development, working to build
the strongest business climate possible, and establishing
effective tools like the Department of Commerce and the
North Dakota Trade Offce, the state has been able to grow
and diversify the economy. This strategy, combined with
good fscal discipline and partnerships with the private
sector, are the reasons for the current surplus and solid
fnancial situation.
To continue to grow the economy, the state has developed
several key programs targeted towards job creation and
new revenue generation. Energy was designated as one of
fve targeted industries in the strategic plan for economic
development drafted nearly a decade ago. To continue to
support this activity, the state established the Oil and Gas
Research Fund and Council, established appropriate
incentives, and worked to cultivate North Dakota’s oil
patch. Today the state is second only to Texas in land-
based drilling activity.
North Dakota’s Centers of Excellence program is built
on the concept of partnering the research capacities
found at its public colleges and universities with private-
sector companies to generate jobs and new business
opportunities. The state will extend the Centers of
Excellence program for the next biennium with an
additional $12 million. The state also created the Small
Business Technology Investment Program, a $1 million
fund to provide grants of up to $50,000 matched 2:1 with
an angel fund investment.
ND Trade Offce
Just as the energy industry has met with success, so have
North Dakota’s exporters. North Dakota exports grew
nearly 250 percent between 2000 and 2009. During the
same time, the nation’s exports grew by just 35 percent.
To help solidify this trend, the state developed the North
Dakota Trade Offce. The state’s budget recommends
increasing funding for the Trade Offce by about $490,000
to continue its activities in marketing North Dakota
businesses, products, and services to the world. The funds
will be used to acquire services in shipping logistics for
all North Dakota exporters, to help businesses master the
complexity of serving customers throughout the world.
The state and the governor’s offce further recommend
supplying services to all entrepreneurs seeking assistance
in capital formation.
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Clusters in North Dakota
Largest Cluster: Agribusiness, Food Processing
& Technology, 49,728 jobs
Largest Growth Cluster: Energy (Fossil &
Renewable), 15,903 new jobs since 2002
Most Competitive Cluster: Energy (Fossil &
Renewable), 13,687 new or retained jobs due to state
competitive advantage
Most Concentrated Cluster: Agribusiness,
Food Processing & Technology, 3.33 times the
national concentration level
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Create Platform for Entrepreneurship
Ohio’s General Assembly and newly elected Governor John
Kasich gathered in Columbus this year facing a two-year
budget hole estimated at between $8 and 10 billion, with
a $3 billion gap projected for FY2012. Having faced the
third largest number of job losses nationally over the past
decade, the incoming governor has argued that the state is
“under siege” and needs to change direction and “create a
platform for entrepreneurship.” Expressing concern over
jobs unflled due to a lack of qualifed workers, Governor
Kasich has called for an examination of how the state’s
community college system interfaces with workforce
training and the secondary education system. Outlining a
reform agenda for job development, Kasich has called for
reductions to programming and streamlining bureaucracy
in the economic development departments. His signature
proposal, JobsOhio, called for reforming how such
departments do business, reforming their organization
around a more business-like structure directed by a
private nonproft organization. Furthermore, in an effort to
restructure programs and make progress towards closing
the budget gap, the governor has proposed a complete
review of all economic development programs in the state,
with an eye towards consolidation and elimination of some
programs.
Ohio’s Third Frontier Focuses on Access
to Capital and Commercialization
Ohio has created a variety of tax credits and incentives
to support job creation, with many focused on targeted
innovation support and manufacturing enhancement.
One key program is the state’s Ohio Job Creation Tax
Credit, which provides income and franchise tax credits
to businesses that choose to locate or expand operations
in Ohio. To be eligible, companies must create at least 25
jobs that pay 150 percent of minimum wage. The program
has lower requirements for job creation numbers if the
jobs created are particularly well paid. In addition to
attempting to lure new businesses to the state, Ohio also
offers a Job Retention Tax Credit. Directed at large,
existing employers, the credit provides income tax relief
to businesses that employ over 1,000 workers and commit
to making capital investments of over $200 million. As
with the job creation credit, there are lower thresholds
for eligibility if the jobs created are particularly well
compensated, supporting high-tech job retention.
Innovation-focused tax credits are also offered by Ohio.
Looking to support entrepreneurial innovation and
create jobs for researchers, Ohio continues to support
a Research and Development Investment tax credit.
Investments made by Ohio taxpayers in qualifed
research and development activities are eligible for a 7
percent tax credit that may be carried forward for up to
seven years, providing job-creating businesses with tax
fexibility. Innovation support is also at the heart of the
state’s Technology Investment Tax Credit. This credit is
granted to Ohio taxpayers who make investments in small,
entrepreneurial frms involved in research and development
activities. It is equal to up to 25-30 percent of a qualifed
investment, depending on certain restrictions. Businesses
targeted for investment must be primarily Ohio-based and
show a net book value of less than $1 million, assuring
that credits are focused in support of small businesses. The
state also offers a variety of sales tax exemptions tailored
to support capital investments in manufacturing equipment,
warehousing, and research and development activities.
The exemptions are intended to cut down on barriers to
investment, helping businesses to expand and offer new job
opportunities.
In conjunction with local governments, Ohio has
established a set of enterprise zones in cities and counties
throughout the state. Businesses that choose to locate or
OHIO
Ohio’s Place in the Rankings
9th Small Business Survival Index
10th Export Intensity
12th Academic R&D Intensity
13th Cost of Living
15th Median Family Income
21st Higher-ed Degree Output
24th STEM Job Concentration
24th High Speed Broadband Availability
25th Budget Gap
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expand in one of these zones are eligible for property tax
exemptions as an incentive. The total exemption varies
by zone type, but lasts for up to ten years, supporting
continued job retention and creation activity in the zone.
In addition to the enterprise zones, the state has also
created a set of Community Reinvestment Areas, which
allow additional property tax exemptions to commercial
and industrial property investments made in the region.
The exemption may be up to 100 percent and last for up
to 15 years, giving job-creating businesses an incentive to
expand facilities in designated areas.
The Ohio Workforce Guarantee provides workforce
training assistance to employers in any of nine targeted
industries. Support is both technical and monetary in
nature. The program reimburses employers for workforce
training expenses, either internal or external in nature. The
program is available for training both new and existing
employees. The state has also targeted workforce training
support for the advanced energy industry, available
through its Energizing Careers Program. Administered
by the Governor’s Workforce Policy Advisory Board, the
initiative provides workforce training grants to companies
that manufacture clean energy components, helping the
sector increase employee skill sets, stay competitive,
and expand to offer new job opportunities. In addition to
job expansion, fnding ways to help companies make it
through economic rough patches and retain jobs is also of
importance to Ohio’s economic development efforts.
The state’s Early Warning Network facilitates state-
local government partnerships to identify resources that
can rapidly be put into play to help companies in danger
of laying off workers. The program seeks to identify
troubled companies before they are caught in a downward
spiral, offering workforce support services as well as other
public and private resources to stand behind the company
and its employees. The state has also pressed to offer
more of its university students in high-tech felds access
to in-state internship opportunities through its Third
Internship Program. The program reimburses up to 50
percent of a qualifed intern’s wages, encouraging Ohio
technology companies to provide valuable work experience
and potential career paths to the state’s most promising
students.
In 2010, Ohio’s electorate made an extended commitment
to support technology-driven job creation by voting to
provide continued funding to the state’s Ohio Third
Frontier program. The goals of the program include
providing increased access to capital for innovators,
increasing high-tech research throughout the state,
supporting growth at existing technology companies,
and ensuring that Ohio’s workforce has the needed
skills to attract cutting-edge companies. Ohio’s New
Entrepreneurs Fund (ONE Fund) recruits young
technology entrepreneurs to create companies in Ohio,
offering funding for professional development and business
formation support services.
In order to help new entrepreneurs more easily overcome
potential regulatory pitfalls involved in creating and
registering a new business, Ohio created the 1st Stop
Business Connection program. Offered in conjunction
with the state’s network of small business development
centers, the connection provides new businesspeople
with a tailored business information kit to help them
through regulatory and licensing processes. Participating
entrepreneurs receive basic information needed to
work their way through the regulatory process, and can
access a centralized, online process to receive forms
and applications needed to set up their business. If a
new business runs into challenges dealing with state
agencies and processes, they can contact the state’s Small
Business Advocate. The Offce of the Advocate works
with entrepreneurs to investigate and resolve potentially
harmful or unfair treatment by state agencies, helping
small companies deal with challenges that might otherwise
harm their business.
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Clusters in Ohio
Largest Cluster: Business & Financial Services,
667,118 jobs
Largest Growth Cluster: Business & Financial
Services, 77,715 new jobs since 2002
Most Competitive Cluster: Apparel & Textiles,
6,263 new or retained jobs due to state competitive
advantage
Most Concentrated Cluster: Primary Metal
Manufacturing, 2.78 times the national concentration
level
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With one of the nation’s lowest unemployment rates,
stable housing markets, and strong growth in its major
cities, Oklahoma has bounced back from the depths of
the recession with relative strength. Tax revenues are on
the rise, refecting increased economic activity, and the
state’s energy and agricultural sectors have been buoyed
by recent strength in commodity markets. Still one of the
nation’s leading energy producers, Oklahoma continues to
look for ways to diversify its economy, looking to growth
in industries including aerospace and manufacturing as a
source of new jobs and economic momentum.
Quick Action Can Mean New Jobs and
Wealth Creation
While strong growth and prices in the state’s energy
extraction industries have recently helped to increase
state revenues, Oklahoma still entered the year facing
a budget defcit of approximately $500 million, a gap
equal to 9.4 percent of the state’s FY2011 budget. Newly
elected Governor Mary Fallin and the state legislature
have focused on making cuts to existing state programs
and shifting balances in existing state funds to cover
the shortfall. Governor Fallin also entered this year’s
legislative session with several policy proposals centered
on job creation and economic development. These included
calls for workers’ compensation system reform, which the
governor argues will create a more effcient system at less
cost to employers. The governor has advanced proposals
to cap noneconomic damage awards in lawsuits against
businesses and to reform the state’s pension system, which
faces a long-term defcit of up to $16 billion.
Tax policy reform has also been an agenda item for
the administration, which has argued in favor of a
comprehensive review of the state’s tax credits for business
development and the elimination of those found to be
ineffective. Furthermore, Fallin has argued in favor
of expanded implementation of triggered income tax
reductions, which are designed to kick in when the state
meets certain benchmarks for revenue collection. One
of the governor’s more notable economic development
proposals has been calling for creation of an Oklahoma
Quick Action Closing Fund, also referred to as the
Governor’s Closing Fund. This Fund, to be administered
by the state’s Department of Commerce, would allow the
governor to quickly access funding needed to provide
incentives to companies considering locating in Oklahoma.
Access to Capital is Paramount
A major focus of Oklahoma’s job creation efforts is the
Oklahoma Quality Jobs Program. Under the terms of
the program, Oklahoma makes direct cash payments to
businesses in targeted industries that create and maintain
jobs in the state. Businesses may receive a payment of up
to 5 percent of their payroll expenses for a period of up to
ten years if certain growth benchmarks are met. Jobs must
OKLAHOMA
Oklahoma’s Place in the Rankings
3rd Cost of Living
4th Gross State Product Growth
4th Productivity Growth
6th Per Capita Income Growth
8th Higher-ed Effciency
8th College Affordability
14th Long-term Job Growth
14th State and Local Tax Burden
15th Export Growth
16th STEM Job Growth
16th Transportation Infrastructure
Performance
18th Business Birth Rate
18th Entrepreneurial Activity
21st Growth in Share of National Exports
21st Small Business Survival Index
22nd Budget Gap
24th Economic Output Per Job
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meet certain wage and beneft requirements to be eligible
for the state payment. Designed to help the state increase
its manufacturing base, the program has been credited
with the creation of up to 400,000 jobs over the past two
decades. The state has created a similar program targeted
specifcally at small businesses, which offers payments in
support of created jobs for up to seven years. The related
21st Century Oklahoma Quality Jobs Program targets
the creation of jobs in high-wage, knowledge-based
industries, providing cash incentives of up to 10 percent
of payroll for jobs which pay well above regional median
wage levels.
Tax credits are another tool used by the state to create a
business-friendly environment. Under the terms of the
Investment/New Jobs Income Tax Credit, manufacturers
in Oklahoma can receive up to fve years of tax credits
for making qualifed investments in property while also
creating new jobs. The credit can be for up to 5 percent
of the investment. Oklahoma has also made attracting
aerospace industry jobs a priority, offering Aerospace
Industry Engineer Work Force Tax Credits equal to 10
percent of wages to companies hiring engineers. The credit
offers incentives to hire engineers educated at Oklahoma
universities and offers tax credits of up to 50 percent to
offset tuition reimbursements made to engineers hired
from the state’s university system. The state has also made
an effort to attract insurance company regional offces to
the state by offering an Insurance Premium Tax Credit
to companies that expand or locate in the state and create a
minimum of 200 jobs.
In order to support access to fnancing for business
development and expansion, Oklahoma’s Capital
Investment Board operates two programs in conjunction
with private sector partners. The state’s Venture
Investment Program works with private sector investors
to guarantee investments made in venture capital
partnerships that then agree to prioritize investment
in Oklahoma businesses. The board also operates the
Oklahoma Capital Access Program, working with
Oklahoma banks to support small business lending by
using its $100 million of funding to support access to lines
of credit and underwrite loans with state-backed credit
insurance. The state’s Industrial Finance Authority
works to provide needed fnancing for expanding and
relocating businesses in the manufacturing, agricultural
processing, and mining and extraction industries. Eligible
businesses can receive loans of up to $5 million dollars,
with most loans offered in partnerships between the
Finance Authority and local banks. In order to aid small
businesses in the state, Oklahoma has also offered a linked
deposit loan program. Oklahoma-based small businesses
can receive fnancing of up to $1 million, in partnership
with Oklahoma banks, in support of efforts to preserve or
create jobs.
Hoping to drive entrepreneurial innovation in the state,
Oklahoma has instituted a New Products Development
Income Tax Exemption. Entrepreneurs working through
the state’s Oklahoma Center for the Advancement of
Science and Technology (OCAST) are able to collect tax-
free royalties on products developed and made in the state
for up to seven years. Innovative companies that choose
to locate at qualifed technology incubators are eligible
for income tax exemptions on income earned through
activity at the incubator for up to ten years, supporting
new business start-ups. OCAST also offers innovative
businesses access to commercialization support structures,
including seed and pre-seed funding sources and the
Oklahoma Technology Commercialization Center,
which offers a variety of entrepreneurial support services
for early-stage tech companies.
99
Clusters in Oklahoma
Largest Cluster: Energy (Fossil & Renewable),
224,938 jobs
Largest Growth Cluster: Energy (Fossil &
Renewable), 79,550 new jobs since 2002
Most Competitive Cluster: Energy (Fossil &
Renewable), 67,247 new or retained jobs due to state
competitive advantage
Most Concentrated Cluster: Energy (Fossil
& Renewable), 2.01 times the national concentration
level
100
Struck by downturns in its manufacturing and construction
industries, Oregon was hit particularly hard by the
recent recession. Unemployment rates in 2010 were more
than twice as high as before the downturn, and among
the highest in the nation. While economic measures
have shown signs of recovery over the past year and
unemployment rates are off their peak levels, the state
still faces the specter of a period of “below trend” growth
as it struggles to regain economic footing. However,
even through a period of economic stress, the state has
continued to be a magnet for growth, outpacing the
national growth rate in the 2010 Census fgures. Moving
forward, the state hopes to capitalize on its proximity to
and experience in accessing Asian markets to help spur
future growth.
Bipartisan Approach to Jobs
State legislators and incoming Governor John Kitzhaber
have committed to making job creation the state’s top
priority during 2011, with a bipartisan group of legislators
choosing to wear pins labeled “JOBS” to reaffrm their
continued support for a jobs-focused agenda. However,
also high on the state legislative assembly’s agenda has
been dealing with a large budget defcit for the upcoming
biennium. Estimated at up to $3.5 billion over two years
and $1.8 billion for FY2012, the state’s defcit entering the
session was equal to 20 percent of the state’s general fund.
Governor Kitzhaber, entering offce for a third,
nonconsecutive term in 2011, has proposed several agenda
items and budget changes to bring the defcit under control
and pursue job creation in the state. The governor called
for cuts in pay to government workers, changes in revenue
structures to collect unpaid taxes, reforms to educational
funding structures, fat spending in many government
agencies, and no tax increases. The administration has also
reiterated support for several proposed and pending job
creation initiatives and programs, including continued state
funding for technology transfer efforts, new bond backing
for infrastructure improvements, increased funding for
some existing economic development funds, and enhanced
funding for business expansion efforts.
State Looks to BOOST Small Business
Retention and Growth
Oregon has created several tax incentive programs
designed to help new and growing business ventures. The
Standard Enterprise Zones program offers businesses
that choose to locate or expand in one of the state’s
enterprise zones an exemption from certain property taxes
for 3–5 years. These exemptions may also be coupled with
other tax breaks for building a business and creating jobs
in rural areas or in the e-commerce industry. The Oregon
Investment Advantage gives job-creating businesses in
much of the state a ten-year income tax exemption. In
addition, companies that choose to locate in one of the
nearly ninety eligible communities can receive a ten-year
waiver on excise taxes. Oregon supports expansion in its
manufacturing sector through its Strategic Investment
Program. The program makes frms located in certain
zones of the state eligible for property tax exemptions on
large capital investments, encouraging manufacturers to
add equipment, facilities, modernize lines, and create jobs.
OREGON
Oregon’s Place in the Rankings
1st Higher-ed Effciency
3rd Productivity Growth
5th Gross State Product Growth
10th Business Birth Rate
10th Academic R&D Intensity
11th Transportation Infrastructure
Performance
14th Business Tax Climate
14th High Speed Broadband Intensity
15th Export Intensity
16th STEM Job Concentration
16th Entrepreneurial Activity
18th Economic Output Per Job
24th High-tech Share of All Businesses
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Oregon has also worked to support continued jobs
development in its renewable energy sector through the
use of several incentives. The state’s business energy
tax credit lets manufacturers of renewable energy
components offset the cost of machinery, equipment, and
facilities with a tax credit of up to 50 percent of eligible
costs. Low interest loans to build new manufacturing
facilities are provided through Oregon’s State Energy
Loan Program. The state has also incentivized
renewable energy production by creating rural renewable
energy development zones, which receive property
tax exemptions for certain renewable energy generation
facilities and equipment. Demand for energy from such
facilities is backed by a state-enacted renewable portfolio
standard.
Small business creation and development are also
part of Oregon’s job creation approach. The Building
Opportunities for Oregon Small Business Today
(BOOST) Fund offers loans and grants to promising small
businesses in the state looking to build up their operations.
The program’s operations are focused on companies with
under 100 employees in the manufacturing, processing,
and distribution industries. The program’s grant program
offers businesses a grant of up to $2,500 per job created
or trained, supporting job creation and cultivation of new
workforce skills in order to increase business capacity
and competitiveness. Oregon also offers small and micro
businesses in the state access to needed fnancing through
the Entrepreneurial Development Loan Fund. The
fund provides qualifed entrepreneurs with loans of up to
$50,000 to help set up their business ventures, providing
fnancing to a category of job-creating businesses that
traditional lenders may overlook.
The Oregon Innovation Council (Oregon InC) continues
to be the spearhead of the state’s efforts to build its
knowledge-driven economy. Created in 2005, the Council
offers the state guidance on how to more effectively shape
and direct its technology-based economic development
efforts. Audit committees composed of private-sector
businesspeople have been formed to evaluate existing
policies and program implementation. The goal of the
program is to identify and support innovation initiatives
that will eventually be able to achieve sustainable operation
without state funding. The Council currently operates a
set of signature research centers focused on renewable and
green energy, nanoscience and microtechnologies, and
pharmaceutical and biotech research in affliation with the
state’s university system. The state’s High Tech Extension
Service offers businesses interested in research and
development partnerships access to the research center’s
facilities and services, including lab space, researchers,
prototyping assistance, and workforce training.
In order to provide infrastructure needed to drive job
creation, Oregon offers several fnance support programs
through its Infrastructure Finance Authority. The
state’s Special Public Works Fund offers communities
and public agencies throughout the state access to funds
for infrastructure design, improvement, construction, and
planning conducted in support of economic development
activities. Multiple classes of infrastructure project are
eligible for loans of up to $10 million. The state also
provides grants of up to $500,000 to fnance infrastructure
developments tied to the creation or retention of jobs in
manufacturing and related sectors. Overall grant size is
based on the number of jobs created. In order to maintain
the infrastructure needed to drive the state’s export sector,
Oregon also offers infrastructure fnance options for port
expansion and improvement. These programs include a
matching fund for marine navigation improvements, a
port revolving fund for construction of port facilities and
support infrastructure, and a port marketing fund.
101
Clusters in Oregon
Largest Cluster: Business & Financial Services,
223,978 jobs
Largest Growth Cluster: Business & Financial
Services, 42,574 new jobs since 2002
Most Competitive Cluster: Agribusiness, Food
Processing & Technology, 11,135 new or retained jobs
due to state competitive advantage
Most Concentrated Cluster: Computer &
Electronic Product Manufacturing, 2.48 times the
national concentration level
102
Budget Situation and Policy Priorities
Entering the legislative session with a budget defcit
projected at over $4 billion, incoming Governor Tom
Corbett called on the general assembly to hold the line
on taxes and to enact spending cuts in order to help
close the gap. The governor also called for a renewed
focus on free enterprise and reform in laying out his
vision for the commonwealth. In addition to his “no
new taxes” pledge, the governor and his administration
entered this year’s session with a variety of agenda items
and proposals focused on job creation. In order to spur
development of the commonwealth’s oil and gas resources,
the administration created a task force to identify growth
strategies and review regulatory standards. The governor
has called for cuts to taxes on business inventories, and has
made a commitment to continuing support for job-creating
tax credit programs. Privatization of state-run functions
is also on the table, with the governor backing a study on
what functions might be successfully spun off to private
interests, potentially cutting costs and creating private-
sector business opportunities.
Encourage Commercialization, Support
Startups
Pennsylvania has made a focus on trade a key part of its
economic development activities, and continues to be a
solid performer in trade measures. The commonwealth’s
network of Pennsylvania Trade Representatives is
located in over 20 countries around the globe, offering
liaison services for Pennsylvania companies interested
in accessing new markets and for foreign companies
interested in doing business in the commonwealth.
Pennsylvania’s Center for Direct Investment offers
foreign companies support services for accessing the
Pennsylvania market and identifying promising business
opportunities. The Center is focused on creating a friendly
environment for foreign investment by helping foreign
companies to set up U.S. subsidiaries, deal with labor
issues, identify sites for development and expansion, act
as a point of access to business incentive programs, and
connect investors with Pennsylvania-based partners.
The Center for Trade Development was created to help
the commonwealth’s exporters expand their reach and
trade capacity, offering services including market research,
connections to potential trade partners, and access to trade
shows and trade missions. Pennsylvania also offers Market
Access Grants to small and mid-sized companies in the
commonwealth that are interested in accessing global
markets. The grants are offered on a matching basis, and
can be used to pay for expenses incurred in attending
trade shows, participating trade missions, and conducting
marketing trips abroad. Pennsylvania also offers an online
“virtual trade advisor” which allows small companies
to explore potential trade options and examine market
information before approaching other commonwealth
offces for support.
The Ben Franklin Technology Partners is one
Pennsylvania’s longest running innovation-based
economic development programs. Active for over 25
years, the program works to encourage technology
commercialization, support entrepreneurial technology
PENNSYLVANIA
Pennsylvania’s Place in the Rankings
4th Growth in Share of National Exports
8th Short-term Job Growth
9th Higher-ed Degree Output
11th Export Intensity Growth
12th High Speed Broadband Intensity
13th High Speed Broadband Availability
14th Median Family Income
16th Export Growth
18th Educational Attainment
21st Economic Output Per Job
21st STEM Job Concentration
24th Per Capita Income Growth
25th Long-term Job Growth
102
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startups, and fnd public and private lines of funding
for technology development in the commonwealth. The
program has four regional offces throughout the state.
Financing is a key part of the program, which makes
direct seed investments in technology start-ups, supports
technology investor groups, and helps entrepreneurs gain
access to tools needed to attract private-sector fnancing.
The program also offers mentoring and business support
services to new technology entrepreneurs, and connects
start-up companies to university research facilities around
the state.
The Pennsylvania Innovation Partnership (IPart) is
another program focused on helping technology start-ups
thrive and create high-quality jobs in the commonwealth.
The program works to connect entrepreneurs in clean
tech, energy, life sciences, and other target industries to
access federal research funding in support of technology
commercialization activities. The program offers
companies on the hunt for federal grant opportunities
support in creating effective proposals, with proposal
writing assistance and draft review services. As a
supplement to the Keystone Innovation Zone program,
the commonwealth offers Innovation Grants to build out
research infrastructure in support of technology transfer
and commercialization efforts. The grants are provided
to institutions of higher education, nonproft research
promotion organizations, and academic medical centers,
and they must be matched by funding not sourced from the
commonwealth.
In order to assure that communities throughout the
state maintain a strong inventory of development-ready
sites for potential business creation and expansion,
Pennsylvania created a Business in Our Sites grant and
loan program. The program offers communities support
in site identifcation and preparation in order to make sites
“shovel ready” for business use and job creation. Private
developers may also qualify for support. Backed by a $300
million loan pool, the program offers developing agencies
up to $5 million in support of a project, with a matching
requirement. Infrastructure fnancing in the commonwealth
is also supported through Pennsylvania’s Infrastructure
Development Program. The program is designed to
provide low-interest fnancing options for both public and
private infrastructure development. Low-interest loans are
used to back the building of infrastructure in support of
economic development, including transportation, rail and
port, and telecommunication installations.
Pennsylvania has also looked to use university resources
to help drive modernization of its manufacturing sector,
thereby protecting and creating jobs. The commonwealth’s
Agile Manufacturing program, offered in partnership
with Lehigh University, works to support manufacturing
companies looking to increase their effciency. Grants
provided by the program are used to pay for support
services from Lehigh faculty and staff, purchase needed
equipment for upgrades, and hire outside consultants to
drive adoption of advanced manufacturing techniques.
A variety of small business job creation supports also
fgure into Pennsylvania’s economic development
agenda. The Small Business First Program provides
small entrepreneurs with low-interest loans of up to
$200,000 for use in acquiring land, equipment, or
facilities and for working capital. Loan availability is
tied to the number of jobs created by a company and the
specifc projects it is undertaking. The commonwealth’s
Business Opportunities Fund also provides fnancing
to small entrepreneurs, with a particular focus on
women- and minority-owned enterprises. Businesses
located in qualifed counties are eligible for loans to be
used as working capital and for equipment and property
acquisition.
103
Clusters in Pennsylvania
Largest Cluster: Business & Financial Services,
793,462 jobs
Largest Growth Cluster: Business & Financial
Services, 101,328 new jobs since 2002
Most Competitive Cluster: Defense & Security,
16,600 new or retained jobs due to state competitive
advantage
Most Concentrated Cluster: Primary Metal
Manufacturing, 2.38 times the national concentration
level
104
Rhode Island found 2010 to be a challenging year.
Unemployment rates, which had stayed between 4 and 6
percent prior to the recession, peaked at nearly 13 percent
early in the year. The state also faced a sizeable defcit
entering 2011, hit by projections of up to $7 billion in
unfunded pension liabilities. However, while the state
faces multiple fnancial challenges, there are signs that the
economic outlook is beginning to improve. Unemployment
rates have retreated slightly from their highs, and tax
revenues are running ahead of projections for 2011, giving
state policymakers hope that the worst is behind them and
that the state’s economy is beginning to pick up steam.
Budget Situation and Gubernatorial
Priorities
Newly elected Governor Lincoln Chafee entered offce
this year facing a budget defcit estimated at $331 million,
equivalent to 11.3 percent of the state’s total FY2011
budget. While paling in comparison to the gaps faced by
some states, the gap has still led the Chafee administration
to call for cuts to programs throughout the state and for
reform of the state’s tax structures. Chafee has launched
reviews of government programs to identify potential cost
savings, operational changes, and cuts, and has called for
tens of millions of dollars in cuts to programs throughout
Rhode Island’s government. His administration has also
argued in favor of sales tax “modernization” reforms,
which would cut the sales tax rate but broaden its base by
applying it to classes of goods and services not currently
taxed. Chafee has also supported corporate tax reform,
including changes to income reporting for multi-state
companies and cuts to the overall corporate tax rate.
The administration has singled out infrastructure as a
point of focus, calling for creation of a new transportation
infrastructure fund, supported by revenue from licensing
and title fees, in order to provide the state with more
fexibility in sourcing funds for transportation upgrades.
Chafee has also proposed increasing state employees’
contributions to pension funds as a frst step towards
restoring balance to the pension system. He has expressed
willingness to work with public employees and the
legislature on more comprehensive reforms that would
close the remaining budgetary gap.
Job Creation Initiatives
Rhode Island offers several notable programs and
incentives aimed at workforce training and development.
To support employers interested in fnancing training
for their employees, the state offers employer credits
that reduce an employer’s corporate income tax burden.
Qualifed employees receiving training in state are eligible
for up to $5,000 of tax credit over three years for their
employer. Credits are limited to 50 percent of qualifed
expenses, and may be received for direct training expenses,
employee benefts, and wages paid during training. Rhode
Island also offers employers grants to fund on-the-job
training, including reimbursement for employee wages
during training. In order to assist companies training their
employees in tactics to access foreign markets and promote
exports, the state offers qualifed businesses up to $5,000
in a matching grant for export training through its Export
Management Training Grant Program. The state has
also offered employers access to an apprenticeship tax
credit program, which provides a 50 percent tax credit
RHODE ISLAND
Rhode Island’s Place in the Rankings
2nd Higher-ed Degree Output
3rd High Speed Broadband Intensity
9th High Speed Broadband Availability
10th High-tech Share of All Businesses
12th Per Capita Income Growth
14th Academic R&D Intensity
15th Educational Attainment
17th Economic Output Per Job
17th Productivity Growth
22nd Short-term Job Growth
22nd STEM Job Concentration
104
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on qualifed apprentice wages up to a cap of $4,800.
The credits are focused on apprenticeships in targeted
manufacturing felds, including machine tools, metal
trades, and plastics processing. Rhode Island has offered
other workforce training grants to companies on a broader
basis, including a Comprehensive Worker Training Grant,
which awards matching grants of up to $50,000 to a single
company to support worker skill development.
The state adopted the Jobs Development Act to
incentivize new hiring by Rhode Island companies. The
act offers corporate tax breaks to companies that create
new jobs in the state over a period of at least three years.
Tax breaks are based on company size and number of
jobs created, with smaller companies eligible for a quarter
point tax reduction for every 10 jobs created, and larger
companies a quarter point reduction for each 25 jobs
created. Created jobs must meet certain wage standards.
When combined, the job creation tax breaks allow a
company to reduce its corporate tax rate from 9 percent to
3 percent.
Rhode Island has made a commitment to support continued
development of manufacturing in the state. The state’s
manufacturing investment tax credit gives qualifed
manufacturers a 4 percent tax credit on investments made
in buildings, machinery, and equipment used in production.
Credits can be carried forward for up to seven years. The
state also offers a High Performance Manufacturing
Investment Tax Credit of up to 10 percent for companies
in targeted advanced manufacturing sectors, including
biotechnology. Other manufacturing incentives include
accelerated amortization and depreciation options for
defense manufacturers and apportionment exclusions
directed at medical and pharmaceutical manufacturers.
Hoping to support job creation in the state’s small business
sector, Rhode Island has launched the Every Company
Counts (ECC) initiative. This program offers existing and
start-up small businesses access to a variety of business
support services and learning opportunities tailored to
smaller companies. ECC staff will work directly with
small businesses to help them access customized technical
support, seminars, and direct consultation services. The
goal of the program is to act as a clearinghouse and point
of access to Rhode Island’s business support services
for small companies that might otherwise overlook
opportunities and incentives available to them.
Recognizing that access to fnancing can be a challenge
for small businesses, Rhode Island supports programs
designed to increase credit accessibility for small frms.
The state’s small business loan fund offers fully secured
loans of up to $250,000 for existing manufacturing,
processing, and selected services companies. Funding
can be used for working capital, land, equipment, or
buildings needed for expansion. To support small start-
ups with fewer than fve employees, the state maintains a
Micro-Business Emerging Growth Fund. Loans of up to
$10,000 can be used for multiple purposes, including start-
up costs and equipment.
Seeking ways to streamline government regulations in
order to create a better environment for job creation,
Rhode Island opened an Offce of Regulatory Reform in
2010. The goals of the new offce include helping small and
medium-sized businesses to navigate state and municipal
regulatory processes, coordinating state and local efforts
to improve permitting processes, recommending state
regulatory changes, and creating a more effcient and
business-friendly regulatory environment in the state.
105
Clusters in Rhode Island
Largest Cluster: Business & Financial Services,
71,028 jobs
Largest Growth Cluster: Business & Financial
Services, 10,726 new jobs since 2002
Most Competitive Cluster: Education &
Knowledge Creation, 1,255 new or retained jobs due
to state competitive advantage
Most Concentrated Cluster: Education
& Knowledge Creation, 1.99 times the national
concentration level
106
South Carolina remains one of the top states for export
performance, repeating last year’s strong showing. The
state has continued to press efforts to expand access to
foreign markets in an effort to improve overall economic
performance. Building on such points of strength is of
particular importance to South Carolina, which was hit
particularly hard by the recent recession. In early 2010,
the state had unemployment rates above 12 percent—one
of the highest rates in the nation. However, since that
inauspicious start to the year, the state has seen measurable
drops in its unemployment and surprisingly strong revenue
collections, giving state leaders hope that a much-needed
economic recovery may be gaining momentum.
Budget Situation and Policy Agenda
As unemployment rates rose in the state, revenues collected
by government fell measurably. South Carolina entered
2011 facing a projected budget defcit of around $800
million for the fscal year beginning July 1. While the
General Assembly and incoming Governor Nikki Haley
have since received positive updates to the budget outlook,
indicating that the state revenues are running ahead of
initial projections, the state’s policymakers continue to face
a challenging budget situation.
Governor Haley, in addition to calling for cuts to help
cover the defcit, has stated that economic development
and job creation are the top priorities of her incoming
administration. The governor has made calls for red tape
reduction, proposing efforts to harmonize local and state
regulations to create a less challenging environment for
small businesses in the state. Haley has also pressed the
general assembly to pass tort reform legislation, capping
maximum awardable damages, bringing South Carolina’s
laws into line with surrounding states. In order to make
sure that business and job creation are at the top of the
agenda throughout state government, the administration
has committed to appointing businesspeople to openings
on state boards and councils, to ensure that business
concerns are heard. Haley has also argued in favor
of comprehensive tax reform, including reducing or
eliminating the state’s corporate and small business income
taxes, in order to give the state a competitive edge in
attracting, retaining, and growing businesses.
Leader in Export Performance
As noted, South Carolina remains a national leader in
export performance, exporting to nearly 190 nations
around the globe. In order to build on this strength,
the state offers several programs designed to support
businesses actively involved in foreign trade or interested
in pursuing trade opportunities. The state’s export
development program offers interested South Carolina
businesses access to training programs and workshops
designed to offer “how to” information on exporting to
targeted countries. The program also maintains two foreign
offces, in Munich, Germany and Shanghai, China. These
offces help South Carolina companies gain access to
foreign markets in Europe and Asia, while acting as a point
of contact for foreign companies interested in establishing
SOUTH CAROLINA
South Carolina’s Place in the
Rankings
3rd Export Intensity
7th Growth in Share of National Exports
8th State and Local Tax Burden
8th Small Business Survival Index
9th Export Intensity Growth
9th Academic R&D Intensity
12th Export Growth
13th STEM Job Growth
15th Business Birth Rate
20th High School Advanced Placement
Intensity
24th Business Tax Climate
24th High Speed Broadband Intensity
25th Small Business Lending
25th Transportation Infrastructure
Performance
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operations and creating jobs in the state. Services
offered to foreign companies exploring direct investment
opportunities include site identifcation, industry data
and market information, and access to South Carolina’s
workforce training solutions. The state’s Global Business
Resource Center is a program offered by the College
of Charleston. Exploiting relationships with the South
Carolina World Trade Center and the South Carolina Ports
Authority, the resource center offers management training
and degree programs in international business and trade.
The program offers companies in the region access to a
trade knowledge base and potential employees educated in
global business. South Carolina has also attempted to build
up collaboration between federal, state, and local assets
interested and involved in international trade through the
South Carolina International Trade Coalition. The state
also continues to support export-enabling infrastructure
through the South Carolina State Ports Authority, which
maintains public marine terminals at two ports in the state.
Run like a private-sector business, the ports invest money
made during operations into upgrades and expansions,
taking advantage of public bonding authority to raise
capital for major projects.
South Carolina maintains a set of tax incentives and
credits designed to support job creation and small business
development. The state’s Job Tax Credit supports
job growth in the state by offering businesses a credit
against state income taxes for creating new jobs in the
manufacturing, distribution, research and development
(R&D), and other targeted industries. The tax credit
can remove up to 50 percent of a company’s state tax
obligation. South Carolina has also classifed a group of
counties as “Economic Impact Zones.” Manufacturers
establishing operations in such counties are given a one-
time credit against income taxes equal to up to 5 percent of
the company’s investment made in production equipment
for their new facility. Companies located in such zones
seeking to conduct workforce development activities
are also eligible for a Retraining Credit Program,
which reimburses up to 50 percent of workforce training
expenses. In order to support technological innovation in
the state, South Carolina offers a research and development
tax credit, capped at 5 percent of a company’s in-state
spending on R&D activities.
South Carolina also makes use of tax credits to support use
and expansion of its export infrastructure. The state’s Port
Volume Increase Credit offers credits to manufacturers,
warehousers and distributors that use state ports and meet
benchmarks for increased cargo volume. The state also
maintains a fund that may be used to give up to $1 million
towards development of a distribution facility shipping
through state ports that invests at least $40 million in
infrastructure and creates 100 jobs.
South Carolina also offers channels for business fnance in
support of job creation, including for small entrepreneurs.
The South Carolina Capital Access Program (SC CAP)
leverages public resources to operate a reserve fund, which
backs loans made by private sector fnancial institutions
in the state. By offering backing, the state is able to drive
capital to small businesses and entrepreneurial start-ups
at more favorable rates, helping them to get off the ground
and create jobs. The SC CAP reserve fund is not a loan
insurance program, but instead keeps funds in reserve to
cover potential loan losses experienced by private-sector
lending partners. In order to build access to venture
capital for South Carolina businesses, the state’s Jobs-
Economic Development Authority created InvestSC, Inc.
This venture capital “fund of funds” works with the state
Venture Capital Authority and four private sector funds to
identify and invest in promising companies interested in
locating or expanding in the state.
107
Clusters in South Carolina
Largest Cluster: Business & Financial Services,
231,228 jobs
Largest Growth Cluster: Business & Financial
Services, 57,418 new jobs since 2002
Most Competitive Cluster: Business &
Financial Services, 19,824 new or retained jobs due to
state competitive advantage
Most Concentrated Cluster: Electrical
Equipment, Appliance & Component Manufacturing,
2.03 times the national concentration level
108
A leader in tax policy and overall job growth rankings,
South Dakota continues to show steady economic
performance, even in the face of a sizeable budget defcit.
While cuts to government programs, education, and health
care carry the potential to cause fallout over the upcoming
biennium, the state continues to boast one of the lowest
unemployment rates in the nation. With strong commodity
prices boosting its agricultural sector and tourism
showing its strongest one-year gains in state history, South
Dakotans have reasons to be optimistic moving forward.
Budget Situation and Gubernatorial
Priorities
South Dakota entered 2011 facing a budget defcit of
around $127 million, equal to around 10.9 percent of the
FY2011 budget. In proposing his frst budget, incoming
Governor Dennis Daugaard took a hard line on taxes,
calling for any budget solution to focus on spending
cuts. Daugaard presented a budget proposal in January
that called for a minimum of 10 percent cuts in all state
agencies, with some programs taking hits as large as 22
percent. In addition to cuts, the administration proposed
holding the line on other spending, including no increase in
pay for state workers. While there was some resistance to
the depth of cuts, particularly in health care and education,
the legislature did follow through on many of the
governor’s budget recommendations, covering the entire
budget defcit with cuts and no tax increases.
While the central focus of the administration this year
was closing the budget defcit, Governor Daugaard did
make efforts to revamp the state’s economic development
and job creation activities and programs. The governor
called for elevating the economic development offce
(GOED) to a Cabinet-level department, acknowledging its
key importance to state government. Daugaard outlined
a vision of economic development built around inviting
new business to the state, increasing the footprint of
existing businesses, and encouraging innovation and
entrepreneurial activity. Daugaard also called for upgrades
to key economic development loan funds, training more
rural development specialists, reducing paperwork and
streamlining regulations related to economic development
programs in the state. The governor also pushed for
executive reorganization, including restructuring and
eliminating programs and giving seats on the Cabinet
to others, in order to realize greater effciencies and cost
savings.
SOUTH DAKOTA
South Dakota’s Place in the
Rankings
1st Business Tax Climate
1st Small Business Survival Index
2nd Productivity Growth
2nd Transportation Infrastructure
Performance
3rd Gross State Product Growth
3rd State and Local Tax Burden
5th Short-term Job Growth
6th College Affordability
7th Higher-ed Effciency
8th Long-term Job Growth
8th Per Capita Income Growth
8th Export Growth
8th Small Business Lending
15th STEM Job Growth
18th Export Intensity Growth
18th High Speed Broadband Intensity
19th Educational Attainment
20th Business Birth Rate
23rd Academic R&D Intensity
23rd Entrepreneurial Activity
24th Budget Gap
24th Job Placement Effciency
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Leveraging Public-Private Partnerships
As one of the nation’s leaders in providing a business-
friendly tax environment, South Dakota offers a unique
set of policies, tax refunds and incentives to businesses
located in the state. South Dakota has no corporate income
tax, personal income tax, personal property tax, business
inventory tax, or inheritance tax. While the state does
have sales, use, and excise taxes, it has established a tax
refund program offering targeted refunds in these tax
classes to qualifed business building projects. Focused on
larger corporate investments, the program offers refunds
on projects exceeding $10 million in scope that involve
construction or expansion of a business facility. Projects
valued between $10 and $500 million are eligible for
refunds ranging between 45 and 55 percent. Above $500
million, the tax refund phases out. While smaller projects
and business investments are not eligible for such refunds,
the state’s sales tax rate of 4 percent remains below the
national median.
In addition to low taxes, South Dakota offers a package
of fnancing programs to help businesses in the state
gain access to the credit they need to expand and create
jobs. The state’s Revolving Economic Development and
Initiative Fund (REDI) can provide low-interest fnancing
for up to 45 percent of a project’s cost. Qualifed projects
include land, machinery, and equipment purchases and
construction, acquisition, and renovation of buildings.
In order to support value-added agricultural production,
South Dakota maintains an Agricultural Processing and
Export Loan Program (APEX), in partnership with the
U.S. Department of Agriculture. Loans made through this
program cover up to 75 percent of the cost of a qualifed
project focused on developing agricultural processing
businesses. In order to identify promising ag industry
business opportunities, the state also supports a Value-
Added Ag Subfund, which provides funding for feasibility
and marketing studies to businesses and entrepreneurs
exploring potential ag business ventures in the state.
Small business and entrepreneurial start-ups in search of
low-interest fnancing can make use of South Dakota’s
MicroLOAN South Dakota Loan Program. Conducted
in partnership between the South Dakota Development
Corporation and GOED, program loans are provided to
businesses for use as working capital and to purchase
equipment, real estate, and other fxed assets. Each
applicant must access the program through a primary
bank, which funds at least half of the loan being secured.
State funding for any one loan is capped at $50,000. Small
businesses seeking access to larger capital sources in order
to back more capital-intensive investments can seek access
to the state’s pooled loan program. The program issues
bonds to individual fnancing projects or to those that are
pooled in groups to help lower the overall cost of issuance.
Like many states, South Dakota is working to leverage
its universities and their research infrastructure as launch
pads for public-private research and commercialization
partnerships. The Innovation Campus at South Dakota
State University (SDSU) is a fne example of this model,
providing technology entrepreneurs with incubator offce
and lab space, access to light manufacturing assets and
development sites, conference facilities, and access to seed
and venture capital networks. Located next to SDSU, the
campus has almost 125 acres of space available to support
construction of research facilities focused on agriculture,
energy, infectious diseases, and medical biotechnology,
among other target industries. Companies located at
the Innovation Campus also have access to the Dakota
Seeds Program, a project designed to steer South Dakota
students into internships and assistantships at in-state
companies. Firms participating in the program receive
grants that cover up to 50 percent of the wages for a
student employee, gaining access to a potentially valuable
employee at less cost than would otherwise be possible.
In addition to providing support for internship programs,
South Dakota also supports workforce development
efforts focused on new and existing employees. The state’s
Workforce Development Program supports companies
seeking to train employees by funding up to 50 percent of
total training costs incurred. The program gives priority
to training in “hard skills” which focus on technical and
functional aspects of a job. However, the program will
also support other types of job training when offered in
conjunction with “hard skills” training.
109
Clusters in South Dakota
Largest Cluster: Business & Financial Services,
52,233 jobs
Largest Growth Cluster: Business & Financial
Services, 11,871 new jobs since 2002
Most Competitive Cluster: Energy (Fossil &
Renewable), 3,649 new or retained jobs due to state
competitive advantage
Most Concentrated Cluster: Agribusiness,
Food Processing & Technology, 3.02 times the
national concentration level
110
Regionally Tailored Strategies
Tennessee’s General Assembly gathered in Nashville
this March facing projections of up to $1 billion less in
revenue in state coffers. According to some estimates,
when coupled with previous spending obligations and
budgets, the lower revenue level left state policymakers
to deal with a budget defcit of up to $1.4 billion. While
unemployment levels in the state remain relatively
high, spring has brought some signs of recovery, with
tax revenues beginning to recover, and jobless rates
beginning to recede from recessionary highs. With the
state facing a challenging economic environment, newly
elected Governor Bill Haslam has made dealing with the
pending budget shortfall his central policy focus. Haslam
has called for reductions in government employment,
cutting administrative budgets, extending collection of
some “temporary” fees, and making cuts to government
departments averaging around 2.5 percent.
The governor has also laid out several agenda items related
to the state’s economic development environment and job
creation policies. Haslam has proposed expanding reviews
of the state’s economic development assets and programs,
in an effort to identify successful programs, eliminate
lagging ones, and create a more cohesive approach to job
creation statewide. The governor has also argued in favor
of investing in infrastructure that would support business
expansion and job creation, even in the face of the diffcult
budget situation. This includes backing over $180 million
in economic development projects around the state, and
supporting construction of intermodal and port facilities to
expand transport and export capabilities. As in other states,
rule and regulation review is also being discussed, with the
governor calling for a review of the state’s 140 boards and
commissions to see which remain necessary, and which
may be hindering future development.
Since taking offce, Haslam has also launched a new
job creation initiative. The administration’s Jobs4TN
plan will make use of existing economic development
assets to identify and prioritize growth-ready industry
clusters, establish nine regional “jobs base camps” which
will work to produce more regionally tailored economic
development strategies throughout the state, coordinate
innovation activities, and reduce regulations that get in the
way of business and job growth. The plan also includes the
INCITE initiative, a planned $50 million project designed
to increase the state’s investment in innovation activities
by providing early-stage companies with access to capital
and increasing funding to support commercialization
partnerships between the public and private sectors.
FastTrack to Job Creation
A national leader in its overall business tax and regulatory
environment, Tennessee offers new and expanding
businesses in multiple industries access to a wide array
of tax incentives to help spur job creation. Boasting a
relatively low state and local tax burden, the state touts the
fact that it has no tax on personal income and no state
property tax in its business attraction efforts. While the
state does collect a franchise tax, excise taxes, and sales
and use taxes, it offers businesses several exemptions and
incentives related to each. Businesses are charged no sales
tax on qualifed installation of machinery and industrial
equipment, renewable energy production equipment,
qualifed equipment for data centers, and certain industrial
supplies, among other exemptions largely tailored to
TENNESSEE
Tennessee’s Place in the Rankings
2nd Cost of Living
4th State and Local Tax Burden
10th Growth in Share of National Exports
10th Budget Gap
11th Export Intensity
11th Small Business Survival Index
14th Entrepreneurial Activity
18th Export Growth
19th Business Birth Rate
21st Export Intensity Growth
22nd College Affordability
24th Transportation Infrastructure
Performance
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support production and manufacturing. Manufacturers
are also offered sales tax reductions on energy, fuel, and
water used in their production processes. The state also
offers businesses benefts related to excise taxes, including
the ability to carry forward net operating losses for 15
years. Large industrial employers, investing in projects
over $100 million, receive even more fexibility in the tax
code, and are able to carry forward losses beyond the 15-
year threshold, giving them the ability to offset future tax
burdens when proftable.
The state’s Job Tax Credit also offers job-creating
businesses in the state relief from franchise and excise
taxes. Companies in targeted industries creating at least
25 jobs in a year and meeting minimum investment levels
are able to claim a tax credit of up to $4,500 per job. The
credits can be used to offset up to 50 percent of their tax
liability in a year. If unused immediately, the business is
able to carry the credit forward up to 15 years, obtaining
future tax relief. In order to give more support to job
creation activity in areas of need, the state offers expanded
timeframes to meet job creation thresholds for the credit
in certain counties. There are also lowered job creation
standards to gain access to the credit if a company is
involved in creating specifcally targeted high-wage jobs.
Tennessee also offers a version of the program focused on
larger-scale industries called the Job Tax Super Credit.
Qualifed companies creating at least 100 jobs meeting
specifed wage standards are eligible for a tax credit of up
to $5,000 per created job, which can be used to offset up to
100 percent of the companies state tax liability and carried
forward under certain circumstances for up to 20 years.
To further support manufacturing development in the state,
Tennessee maintains an industrial machinery tax credit
for qualifed investments. The credit is based on size of
investment, varying from 1 to 10 percent. Tennessee has
also made efforts to attract business headquarters facilities
to the state, offering job creation tax credits and relocation
benefts to companies interested in centering their
operations in the state. The state has also implemented
a data center tax credit, supporting the construction and
expansion of such facilities.
Tennessee has also made increasing exports one of its
areas of emphasis in its job creation platform. The state
has sought to attract foreign direct investment, particularly
through the use of aggressive manufacturing incentives.
Areas such as automotive and clean tech manufacturing
have been areas of notable success. The state also
maintains a group of foreign trade offces throughout
the globe, acting as ambassadors for the state’s business
community.
Tennessee’s FastTrack program offers grants for use
in conducting job training activities and infrastructure
upgrades proposed by communities for use in business
attraction and expansion activities. The program’s
Infrastructure Development Program allows
Tennessee’s communities to apply for funding to build
and improve infrastructure needed to create new jobs.
Applications for funding must be tied to a private sector
partner’s commitment to locate in a community and create
new jobs.
Supporting small business establishment and growth is
the focus of Tennessee’s Business Resource Enterprise
Offce (BERO). The offce works in conjunction
with other state agencies and programs to offer small
entrepreneurs the information and resources they need to
fourish. Services offered include connecting businesses
to grant and loan opportunities, offering small businesses
connections to potential public and private sector
partnerships, information and technical support services,
aid in expansion and location efforts, and connection to
educational opportunities for entrepreneurs. The state has
also made increasing opportunities for rural entrepreneurs
a focus, through its Creating a Rural Entrepreneurial
System in Tennessee (CREST) program. Operated in
partnership with the University of Tennessee, CREST
takes a community-centered approach to small business
development. The program offers rural communities
throughout the state aid in developing strategic plans
to support small business creation, organizational
development support, and assistance in identifying
community economic strengths and weaknesses with an
eye towards small business job creation.
111
Clusters in Tennessee
Largest Cluster: Business & Financial Services,
333,477 jobs
Largest Growth Cluster: Business & Financial
Services, 70,107 new jobs since 2002
Most Competitive Cluster: Biomedical/
Biotechnical (Life Sciences), 18,577 new or retained
jobs due to state competitive advantage
Most Concentrated Cluster: Electrical
Equipment, Appliance & Component Manufacturing,
2.28 times the national concentration level
112
The Lone Star State has worked to provide a combination
of low taxes, a reasonable and predictable regulatory
structure and a capable, diverse workforce to develop
a business climate that is economically strong and an
environment that is business-friendly. These efforts have
continued to pay off as the state is identifed as the best-
performing large state in terms of job growth, ranking
fourth in short- and long-term employment growth. This
has been coupled with solid overall economic expansion, as
the state ranked 13th in GSP growth and 14th in GSP per
job. Since 2002, the state’s business and fnance, energy,
and biomedical/biotechnical clusters each expanded
more than 30 percent, adding more than 960,000 jobs to
the Texas economy. Of the major industry sectors, only
manufacturing and information lost jobs since 2002, and
the state’s manufacturing sector still outperformed national
manufacturing performance by a signifcant margin.
Cutting Bureaucracy, Reducing
Spending
To help address a FY2012 budget shortfall, Governor Rick
Perry, the state legislature and comptroller have proposed
implementing $800 million in cuts. The administration
also looks to take advantage of $300 million from
increased sales tax collections over the last few months,
and a one-time drawdown not to exceed $4 billion from
the state’s Economic Stabilization Fund (also known as
the Rainy Day Fund) to bring the budget into balance.
Ongoing and proposed efforts to contain the budget also
include consolidating certain government agency functions,
reducing spending on areas including public schools and
Medicaid providers, and improving effciencies within
state agencies to help manage the shortfall. State leaders
and lawmakers have worked collaboratively to balance the
current budget, and continue to focus on a more effcient,
fscally responsible government, essential state services,
and private-sector job creation. By working to aggressively
confront the current shortfall, state leaders can focus future
efforts on completing the 2012–2013 biennial budget
without raising taxes.
Innovation, Entrepreneurship & Exports
While Texas is known for its energy industry, it is also
a strong performer in innovation and entrepreneurship,
ranking 16th or better in every category but research
intensity, overall job growth and its above average
rankings in small business lending and business birth
rate. To accomplish this, the state has developed a series
of initiatives and programs to spur new job and revenue
creation. Coupled with signifcant participation from
the private sector, the state utilizes two primary tools to
incentivize and support efforts to continue to grow jobs
TEXAS
112
Texas’ Place in the Rankings
1st Growth in Share of National Exports
2nd Export Intensity
3rd Small Business Survival Index
3rd Higher-ed Effciency
4th Long-term Job Growth
4th Short-term Job Growth
5th Cost of Living
5th Job Placement Effciency
6th State and Local Tax Burden
7th Entrepreneurial Activity
12th High-tech Share of All Businesses
12th Small Business Lending
13th Gross State Product Growth
13th Business Birth Rate
13th Business Tax Climate
13th High School Advanced Placement
Intensity
14th Economic Output Per Job
14th Export Growth
14th STEM Job Growth
16th STEM Job Concentration
19th College Affordability
22nd Per Capita Income Growth
25th Median Family Income
113
and bolster the state’s economy.
As the largest “deal-closing” fund of its kind in the nation,
the Texas Enterprise Fund (TEF) is an incentive used
to help to close a deal or to attract businesses to a Texas
site that is competing with another viable out-of-state
option. Projects that are considered for TEF funding must
demonstrate a signifcant rate of return on the public
dollars being invested, competition with another state for
the project must exist, the business must not have already
announced a location decision, and projected new job
creation must be signifcant. Past recipients have typically
created more than 100 jobs in urban areas or more than
50 in rural areas. Additionally, the new positions created
must be high-paying jobs—above the average wage of the
county where the project would be located. The potential
capital investment by the company must be signifcant
and the applicant’s business sector must be an advanced
industry that could potentially locate in another state or
country. Since its inception in 2003, the Texas Enterprise
Fund has attracted more than 56,000 new jobs to the
state and generated more than $14.7 billion in capital
investment.
The state’s Emerging Technology Fund is focused
on creating a competitive advantage in the research,
development, and commercialization of emerging
technologies. Key elements of the program include
commercialization and matching awards, as well as
research superiority acquisition. The goal of the ETF
Commercialization Awards is to grow new small
businesses and to help existing businesses accelerate new
products and services to the marketplace. The design of
these investments is to ensure a vibrant economy and
create a global leadership position in the technology
marketplace. Commercialization awards provide early-
stage investments in new technology-based private
entrepreneurial entities that collaborate with public or
private institutions of higher education, and that provide
signifcant economic beneft to the state. The goal of
the ETF Research Superiority Acquisition program is
to bring the best and brightest researchers in the world
to the state of Texas. This enables the state’s academic
institutions to build expertise in key research areas, attract
and encourage students to pursue advanced degrees in
math, sciences, and engineering, and foster innovation and
commercialization in Texas-based companies.
Exports, too, are a critical component of job creation and
economic development within the state. Of the more than
26,000 businesses exporting from Texas, 92 percent were
small and medium-sized enterprises, the fourth highest
total of any state. Of its $206 billion in exports in 2010,
$72.4 billion was exported to Mexico, and its top exported
merchandise categories included computers and electronic
products ($39.1 billion), chemicals ($38.9 billion), and
petroleum and coal products ($32.9 billion). To bolster
and promote this important element of the economy, the
state has developed the TexasOne program. This initiative
works to effectively market and communicate the state’s
assets and resources to an international market focusing
on both exports and foreign direct investments. TexasOne
acts as a critical tool for job creation in Texas, providing a
deal-opening fund to generate leads and create promotional
materials to competitively promote the state in foreign
markets.
Targeted Industries Energize the
Economy
Long a leader in energy development, the state has
continued to capitalize on this industry sector, working
collaboratively with the private sector to grow and support
the still-vital industry. The energy cluster is made up of
three sub-clusters: oil and gas exploration and production,
electric/coal/nuclear power generation, and renewable
and sustainable energy generation. Texas leads the nation
in petroleum refning and chemical products production,
and is a global leader in the closely related petrochemical
industry. Additionally, it leads the nation in production and
reserves of crude oil and natural gas.
Other clusters and industry targets include advanced
technology and manufacturing which is made up of
three sub-clusters: nanotechnology, semiconductors and
automotive manufacturing; aviation; biotechnology and life
sciences; and information technology including computers,
software, telecommunications and IT services. All three
industry clusters have been able to gain economic traction
and grow as the state has used its assets and resources
to give them a competitive advantage in the global
marketplace.
113
Clusters in Texas
Largest Cluster: Business & Financial Services,
1,667,677 jobs
Largest Growth Cluster: Business & Financial
Services, 412,797 new jobs since 2002
Most Competitive Cluster: Energy (Fossil &
Renewable), 216,642 new or retained jobs due to state
competitive advantage
Most Concentrated Cluster: Energy (Fossil
& Renewable), 1.71 times the national concentration
level
114
Regaining Footing Through Startups
and Exports
The economic downturn did not leave Utah unscathed.
While the state’s unemployment rates have remained below
national averages, they nearly tripled during the recession,
ranging between 7.5 and 8.5 percent over the past year
and up from remarkably low levels of 2–3 percent in 2006
and 2007. Utah’s budget has also shown signs of economic
stress, as the state entered the current year facing a FY2012
shortfall of around $400 million. While this defcit is
smaller than that faced by many other states, Utah has
faced a challenging structural defcit over the past several
years, which has forced it to tap into its fnancial reserves.
The state’s economy is showing signs of rebound from the
depths of the recession, but there remains some way to go
before it regains its footing completely.
In order to help drive a sustained economic recovery,
Governor Gary Herbert has made job creation one
of the cornerstones of his agenda, along with energy
development, education, and increasing the state’s capacity
to solve problems independently. In an effort to drive
innovation and attract high-tech frms to the state, the
administration has set a goal of expanding the number of
citizens with degrees and professional certifcations to 66
percent of adults by 2020. The governor has also called for
an increased focus on science and engineering careers in
the state’s educational system.
Hoping to capitalize on inexpensive sources of energy in
Utah and create opportunities for energy development,
the administration has launched preparation of a ten-year
strategic energy plan. The administration has also called
for a three-pronged effort to cut unemployment in the
state, focused on increasing access to development capital
for businesses, increasing the state’s export base, and
supporting legislation and programs designed to enhance
business expansion and retention. Governor Herbert
has made calls for increased coordination of economic
development activities, supporting and signing legislation
that created a Governor’s Economic Development
Coordinating Council to work with public- and private-
sector partners to identify opportunities and coordinate
policies for job development in Utah.
Job Creation Initiatives
Utah continues to focus its job development efforts
around several key established and emerging industry
UTAH
Utah’s Place in the Rankings
1st Business Birth Rate
3rd Growth in Share of National Exports
3rd Export Growth
4th Higher-ed Effciency
5th Export Intensity Growth
6th Long-term Job Growth
6th Export Intensity
6th Small Business Lending
7th College Affordability
8th Gross State Product Growth
9th STEM Job Growth
9th High-tech Share of All Businesses
9th Business Tax Climate
12th Small Business Survival Index
13th Transportation Infrastructure
Performance
15th Academic R&D Intensity
15th Budget Gap
16th STEM Job Concentration
16th Higher-ed Degree Output
16th High School Advanced Placement
Intensity
17th Cost of Living
18th Entrepreneurial Activity
19th High Speed Broadband Availability
23rd Productivity Growth
23rd Median Family Income
25th Educational Attainment
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sectors. Organized through the Governor’s Offce for
Economic Development, the state’s Economic Clusters
Initiative has identifed seven economic sectors: aerospace,
defense, energy, fnancial services, life sciences, software
development, and outdoor products and recreation as
targets for future job growth and development.
Innovation and Entrepreneurship
In 2006, the state launched the Utah Science, Technology
and Research Initiative (USTAR) to promote excellent
research and associated job growth at Utah’s universities.
The program, designed as a lasting effort to build the
state’s “knowledge economy,” views the state’s existing
public university research base as a source of leverage for
public-private research partnerships leading to private
start-ups and spin-offs. The program has invested in
additional research infrastructure at state universities,
created research teams in “strategic innovation focus
areas,” and built up the state’s regional technology outreach
activities. These outreach initiatives, organized through
the state’s Technology Outreach Innovation Program
(TOIP), offer services including business consulting,
market analysis, and prototyping grants to entrepreneurs
conducting research at and in partnership with the state’s
universities.
The Utah Legislature has shown continued support for the
USTAR program, passing continued funding for both its
research team and outreach programs. The state’s Cluster
Acceleration Partnerships have also received increased
funding to build out target clusters by creating industry-
focused training and educational programs and connecting
the state’s institutions of higher education to private
industry in new ways.
Hoping to ensure that job-creating entrepreneurs will have
access to needed venture capital, the state of Utah launched
the Utah Fund of Funds. Backed by an initial $300
million state commitment, the fund makes investments
into venture capital and equity funds that are interested in
investing in promising Utah start-up companies. Since its
creation, the Fund of Funds has directed over $200 million
into approximately 35 companies; today, it boasts a total
of $5 billion of investable capital in conjunction with its
partner funds.
The state’s Technology Commercialization and
Innovation Program offers grants to businesses looking
to commercialize technologies created in partnership with
the state’s university researchers. Grants can also be made
to companies interested in licensing university-created
technology for further development. The program is a
continuation of the state’s Centers of Excellence Program,
working to promote successful public-private partnerships
that will spur job growth in Utah.
Exports
Utah continues to be a leader in export measures. The
state has trumpeted the fact that its international exports
have increased by 45 percent per year since 2009, and it
continues to offer a variety of programs and incentives
to drive further growth. The state’s International Trade
and Diplomacy Offce serves as an intermediary between
Utah companies and international markets, promoting
Utah products and helping companies prepare themselves
to operate globally. The Offce hosts trade seminars,
information sessions for companies interested in export
opportunities, trade missions, and works with partners
such as the Utah U.S. Export Assistance Center to support
Utah companies in their efforts to access new markets.
Governor Herbert, aiming to double Utah’s exports over
the next fve years, has taken an active role in supporting
such initiatives, recently leading a trade mission of Utah
interests to China. The Governor’s Offce of Economic
Development also works with the World Trade Center
Utah to promote increased exports. Located in Salt Lake
City, the Center offers export-minded businesses a variety
of support services, including opportunity assessments,
global trade education materials, and matchmaking to
potential trade partners around the globe.
Regulatory Policy
In an effort to increase government effciency, state
leaders launched an advisory committee to optimize state
government. Composed of public- and private-sector
experts, the committee made over 50 recommendations,
including calls for review of regulatory processes that
affect businesses in the state. Greater coordination between
regulatory agencies was identifed as a way to maintain
a business-friendly environment and avoid harmful
duplication of services and unneeded red tape.
115
Clusters in Utah
Largest Cluster: Business & Financial Services,
235,349 jobs
Largest Growth Cluster: Business & Financial
Services, 73,528 new jobs since 2002
Most Competitive Cluster: Business &
Financial Services, 38,527 new or retained jobs due to
state competitive advantage
Most Concentrated Cluster: Mining, 1.83 times
the national concentration level
116
Shaped by its largely rural environment and its large
number of small companies, Vermont has built an
economic development strategy around retaining and
expanding existing frms while maintaining and promoting
quality of life. The state has seen a recent rebound from
peak unemployment rates experienced during the recent
recession, and is focused on making new investments in
infrastructure needed to help it overcome the challenges of
promoting job growth in a rural state.
Multi-Point Approach to Job Creation
Faced with a daunting $176 million defcit entering the
year, the Vermont legislature was able to close the gap
through a package of cuts, unanticipated receipts, shifted
funding, and new taxes. While cuts were wide-ranging,
the governor and legislature were still able to support
continuation of key economic development initiatives.
Entering his frst term, Governor Peter Shumlin called
for a multi-point approach to job creation, including
increased investments in workforce education, tax fairness
and credits for expanding businesses, and broadband
infrastructure expansion throughout the state.
The governor also pressed strongly during the session
for adoption of legislation outlining a path towards a
single-payer healthcare system in the state, which led
to passage of legislation that will lay the foundation for
implementation of such a program by 2017. Shumlin has
argued that adoption of single-payer reforms will reduce
the burden of healthcare provision on entrepreneurs,
freeing them to focus on business-related issues, and help
control overall costs.
Infrastructure development in support of economic growth
was also a key priority of the administration, which backed
legislation investing over $100 million in roads and other
transportation infrastructure upgrades. Broadband and
related telecommunications infrastructure were also a
key part of the Shumlin agenda, with the administration
proposing and the legislature approving major investments
in telecom infrastructure and changing regulatory
processes to speed private investment. Moving on another
of the governor’s priorities, the legislature was able to pass
bills supporting continued and expanded investment in job
training programs and support for seed capital funding for
agricultural frms in the state.
Infrastructure Initiatives
Vermont has made the improvement of its rural technology
infrastructure a point of emphasis. Governor Shumlin
recently launched ConnectVT, a coordinated effort to
expand broadband and wireless communications access to
all parts of the state by 2013, in an effort to support rural
business job creation. The initiative also convened experts
to identify areas of need and examine ways to coordinate
ongoing public and private efforts. With funding support
passed in the recent legislative session, ConnectVT plans
to couple state efforts with federal and private-sector
funding sources to install and upgrade infrastructure in
underserved areas throughout the state.
VERMONT
116
Vermont’s Place in the Rankings
3rd Short-term Job Growth
6th High Speed Broadband Availability
7th Higher-ed Degree Output
7th Transportation Infrastructure
Performance
9th Export Intensity
9th Educational Attainment
10th High Speed Broadband Intensity
11th High School Advanced Placement
Intensity
13th Per Capita Income Growth
13th Academic R&D Intensity
14th Entrepreneurial Activity
18th High-tech Share of All Businesses
20th Median Family Income
20th STEM Job Concentration
22nd Productivity Growth
22nd Long-term Job Growth
117
The Vermont Economic Development Authority’s
Technology Infrastructure Financing Program attempts
to address private-sector needs for vital infrastructure
upgrades. Under the terms of the program, qualifed
technology service providers, businesses, and nonprofts
can access funding to drive construction, equipment
provision and installation, and the creation of loan funds
used to install and upgrade technology infrastructure.
Funding comes in the form of low-interest loans, with
applicants required to provide at least 15 percent of the
funding for projects themselves. Vermont sponsors a
Technology Loan Program, which provides fnancing
for capital projects and debt refnancing for technology
companies. Qualifying frms must be involved in providing
technology-based goods or services.
Workforce and Training
Vermont offers a variety of workforce development
programs and incentives designed to support existing and
expanding businesses. The Vermont Training Program
offers funds to companies that create jobs that will pay at
least twice the minimum wage. Regions with persistently
high unemployment have lower wage thresholds for
eligibility. The program offers supplementary fnancial
support to qualifed companies conducting training for
new employees and crossover and skill upgrade training
for existing employees. The focus of the program is
on creating and retaining jobs in the manufacturing,
technology, healthcare, and telecommunications sectors
in the state. Vermont also maintains an active Registered
Apprenticeship Program, which connects interested
workers with apprenticeship opportunities, while providing
employers supporting apprentices with access to job
training programs and classes offered through state
educational institutions.
In order to support enhanced job training initiatives,
Vermont maintains ffteen Career and Technology
Centers throughout the state. The Centers work directly
with businesses and communities to create workforce
training solutions tailored to their needs. The Centers also
offer career development services and a broad array of
work training programs to support workers in search of
a new career or retraining. The University of Vermont is
also involved in workforce development activities through
its Vermont Business Center (VBC). The VBC offers a
variety of management and business training programs
and seminars, including programs focused on supporting
family-owned businesses through the Vermont Family
Business Initiative. The VBC also serves as a point of
connection between businesses throughout the state and
programs and resources at the university.
Innovation and Entrepreneurship
The University of Vermont is engaged in promoting
the development of high-tech companies through the
Vermont Center for Emerging Technologies (VCET),
located on the Burlington campus. Launched in 2005,
this technology incubation program couples research
and commercialization efforts at the University of
Vermont with those underway at partner higher education
institutions throughout the state. VCET provides start-up
companies with access to offce space, university research
facilities, product development support services, and
venture capital opportunities.
The Vermont Employment Growth Incentive (VEGI)
provides direct support, in the form of cash payments,
to companies engaged in new job creation. In order to
be eligible for the incentive, any job created undergoes a
cost-beneft analysis and must generate more new revenue
for the state than is granted through the VEGI program.
Qualifed companies must show progress toward job
creation goals in order to remain eligible for support. The
goal of the program is to support companies undertaking
job creation efforts that would not occur without the
incentive and to create an environment favorable to the
creation of higher-paying jobs.
Exports
Located along the Canadian border, Vermont has launched
initiatives to promote and expand international trade. The
Vermont Global Trade Partnership connects businesses
with opportunities to promote their products and services
through trade shows, trade missions, and marketing
support. The Partnership also provides educational and
informational services to companies interested in pursuing
export opportunities. Furthermore, the state offers
access to international trade market development grants,
which qualifed companies can use to support their trade
development and market identifcation efforts.
117
Clusters in Vermont
Largest Cluster: Business & Financial Services,
37,542 jobs
Largest Growth Cluster: Business & Financial
Services, 5,321 new jobs since 2002
Most Competitive Cluster: Electrical
Equipment, Appliance & Component Manufacturing,
488 new or retained jobs due to state competitive
advantage
Most Concentrated Cluster: Computer &
Electronic Product Manufacturing, 2.54 times the
national concentration level
118
Steep Cuts Lead to Surplus
Entering 2010, Virginia faced a daunting budget defcit
approaching nearly $2 billion for 2012 and $4 billion
for the biennium. Forced into action, Governor Bob
McDonnell and the Virginia general assembly were able
to close the gap with a budget package centered on steep
cuts to government programs and services, use of federal
stimulus dollars, accessing rainy day funds, new fee
structures, and changes to contribution rates and pension
structures for Virginia state employees. Government
spending was taken back to levels last seen in 2006. As a
result of the changes made, as well as increased revenues
due to economic recovery, the assembly’s 2011 session was
able to convene in Richmond with a surplus estimated at
up to $400 million.
Faced with a healthier budget picture, the McDonnell
administration has pressed for investments in several
programs and initiatives focused on job creation and
enhancing Virginia’s economic competitiveness. The
administration has made calls for increased funding to
programs that act as tools for job creation, including
funding for a research and technology innovation
program, increased resources for small business
fnancing authorities, focused investments in incentives
for the commonwealth’s tourism industry, and more
funding for workforce and industrial site development
efforts. The administration has also said there is a need
to realign efforts at the commonwealth’s universities
to provide better access to education and training in
science, technology, engineering, and math-related felds.
Infrastructure development in Virginia is another one of
the governor’s priorities. The governor has argued that
Virginia’s job creation activities “will not be sustainable”
if the commonwealth does not make upgrades to its
transportation infrastructure.
Translational Research = Jobs
Among the nation’s leaders in innovation and
entrepreneurship, Virginia continues to press development
of advanced research and development through multiple
programs and incentives. The Virginia Innovation
Partnership is an innovation grant program launched by
the commonwealth in conjunction with the University of
Virginia and Virginia Tech to fund “translational research”
leading to potential technology commercialization and
job creation. Grants made are intended to spur public-
private collaboration, support small tech start-ups, and
attract companies from outside the commonwealth to
relocate, bringing new high-tech jobs to the area. Virginia
has also established partnerships with a series of nine
university research parks throughout the commonwealth.
These parks offer technology companies access to public
research assets, as well as a variety of support services.
VIRGINIA
118
Virginia’s Place in the Rankings
1st High-tech Share of All Businesses
3rd STEM Job Concentration
3rd High School Advanced Placement
Intensity
7th STEM Job Growth
10th Economic Output Per Job
10th Productivity Growth
12th Gross State Product Growth
12th Business Tax Climate
12th Educational Attainment
12th Transportation Infrastructure
Performance
14th Per Capita Income Growth
14th Small Business Survival Index
15th Long-term Job Growth
16th Short-term Job Growth
18th State and Local Tax Burden
19th High Speed Broadband Intensity
20th Higher-ed Effciency
20th High Speed Broadband Availability
22nd Business Birth Rate
24th Cost of Living
119
Entrepreneurial and high-tech start-ups throughout the
commonwealth also have access to a network of over 30
small business incubator facilities, which promote job
creation at innovative small companies. The state is home
to a vast array of advanced federal research institutions,
including 11 R&D centers and 19 laboratories, which
attract research talent and help to create an environment
attractive to private innovation activity. In order to support
local high-tech job attraction and creation efforts, Virginia
enables communities to create technology zones. Creation
of a technology zone enables local governments to offer
job-creating businesses access to special incentives,
including reductions in government fees, special zoning
rules, exemption from local ordinances, and other local tax
incentives.
Established in 1992, the Governor’s Opportunity Fund
is another tool used by Virginia to attract businesses and
create jobs in the commonwealth. The fund acts as a deal-
closing fund, allowing the governor to give an extra push to
local efforts to attract new businesses and jobs to the state.
Loans or grants from the fund are allocated under caps
based on the size of the community, and cannot be used
to move a business already existing in Virginia to another
community in the commonwealth.
Tax stability is another plank of Virginia’s job creation
efforts. The commonwealth touts the fact that it has not
raised corporate income taxes in almost three decades,
and has tax rates that are below national and regional
medians. The state also offers tax incentives and credits
to businesses that create jobs in economically distressed
areas, and offers grants to support job creation in such
areas through its Virginia Enterprise Zone program.
The Virginia Jobs Investment Program (VJIP) is one
of Virginia’s central tools for workforce development
activities. The program is designed to spur private-sector
job creation by providing funding to offset workforce
development activities for companies interested in
expanding or retooling their workforce. The VJIP is
organized around three areas of focus, including support
for new jobs creation, programming specifcally designed
to help small businesses create new jobs, and retraining
assistance for companies in targeted sectors. The VJIP’s
New Jobs Program focuses on supporting companies
establishing a new or expanding presence in Virginia
and creating at least 25 jobs. The Small Business New
Jobs Program also provides support to companies with
workforce training expenses, but is limited to companies
located in Virginia and only requires companies to
create fve jobs to qualify for assistance. The industry-
specifc portion of the VJIP’s activities is in its Retraining
Program, which provides job training services and funding
to companies in the manufacturing and distribution
industries. Support is designed to help companies merging
new technology into their operations, requiring employees
to gain new work skill sets.
Virginia has made workforce development outreach a
priority. The Virginia Workforce Network supports a
system of “one-stop career centers” at the commonwealth’s
community colleges. These centers offer workers
throughout Virginia easy access to job retraining services
and other programs designed to support skill development.
In order to assure that the commonwealth’s workforce
development efforts are aligned with the needs of private
industry, Virginia established the Virginia Workforce
Council, which sets policy guidelines for the local
workforce training centers. This business-led body also
serves as an advisory council to the governor on issues
related to workforce training and development throughout
the commonwealth.
One notable tool used to drive infrastructure improvement
and investment in Virginia is the Private-Public
Transportation Act (PPTA) program. Established in
1995, the PPTA allows Virginia and its local governments
to enter into agreements with private companies for the
development and operation of transportation infrastructure
facilities. The program is designed to attract private
investment in needed infrastructure investment to Virginia,
thus reducing the burden of infrastructure provision
and fnancing placed on the commonwealth and local
governments. Virginia uses funds placed in the program
to leverage investment by private entities, which fnance
and develop projects in return for a share of revenues
generated. Projects can be solicited or unsolicited in
nature, giving private entities the ability to propose
potentially economically benefcial infrastructure upgrades
overlooked by the public sector.
119
Clusters in Virginia
Largest Cluster: Business & Financial Services,
681,128 jobs
Largest Growth Cluster: Business & Financial
Services, 161,335 new jobs since 2002
Most Competitive Cluster: Business &
Financial Services, 48,906 new or retained jobs due to
state competitive advantage
Most Concentrated Cluster: Defense &
Security, 1.86 times the national concentration level
120
Home to major employers such as Boeing, Starbucks, and
Microsoft, the state of Washington continued to suffer
the economic effects of the recent recession in 2010.
Unemployment rates peaked near 11 percent, before
showing some signs of easing later in the year. Like
most states, Washington also faces a budget defcit for
the current year. Beyond its headline corporate citizens,
Washington has focused its economic development and
job creation efforts on several established and emerging
industries, including aerospace, clean energy, life sciences,
IT, manufacturing, marine technologies, agriculture and
food, and tourism.
Budget Situation and Gubernatorial
Priorities
Entering the budgeting period for the upcoming biennium,
Washington state legislators and Governor Christine
Gregoire were presented with a biennial defcit of around
$5 billion, an FY2012 budget defcit of approximately $2.5
billion. The debate over closing this gap has, as in many
other states, proved to be challenging. With the state’s
House, Senate, and governor all pushing for different
combinations of cuts and revenue increases, the budgeting
process was forced into overtime in the form of a special
session.
Governor Gregoire presented a biennial budget that called
for an increased focus on core services throughout state
agencies. Cuts were found throughout the proposal, along
with calls for restructuring government agencies, including
rolling 21 existing departments into nine new ones, in
order to save money on administration and operations.
The governor has also placed pension reform on the policy
agenda, calling for halting automatic increases, which
held the potential to save the state up to $2 billion over
the next four years, and north of $11 billion over 25 years.
In order to support the state’s businesses, Gregoire asked
for legislative support for cuts to workers’ compensation
and unemployment insurance, allowing the state to invest
the savings in other activities including job creation. The
administration has supported continued funding for tax
incentives to attract and retain business, including tax
credits for new hires. The governor has also advanced a
10-point job creation plan that calls for regulatory changes
and streamlining permitting processes.
Job Creation and Enterprise-Friendly
Initiatives
Innovation and technology-based economic development
efforts are a central part of Washington’s job creation
agenda. The state offers multiple tax incentives and
programs focused on attracting, retaining, and growing
job opportunities in key advanced industries. The state’s
WASHINGTON
Washington’s Place in the Rankings
1st Export Intensity
1st STEM Job Concentration
5th Small Business Survival Index
9th Economic Output Per Job
9th Business Birth Rate
11th Median Family Income
11th STEM Job Growth
11th Business Tax Climate
15th College Affordability
16th Long-term Job Growth
16th Job Placement Effciency
17th Educational Attainment
17th High Speed Broadband Intensity
17th Transportation Infrastructure
Performance
18th High Speed Broadband Availability
19th High School Advanced Placement
Intensity
20th Gross State Product Growth
22nd State and Local Tax Burden
120
121
high technology business and occupation tax credit
is available to businesses in the advanced computing,
advanced materials, biotech, electronic device, and
environmental tech industries that conduct research and
development (R&D) activities in the state. Companies
in the same industry set also have access to a sales and
use tax deferral program for qualifed R&D and initial
manufacturing activity expenses. Biotech and medical
devices companies also receive sales and use tax breaks
on qualifed equipment purchases used in expansion and
job creation.
Aerospace manufacturing and product development
continues to be an industry of vast importance in
Washington, a fact refected in the state’s tax incentive
structure. The state offers several special aerospace tax
incentives, including a business and occupation tax rate
decrease, aerospace research and development tax credits,
aerospace specifc property and excise tax credits, and
a sales and use tax exemption on computers used in
aerospace design.
Multiple other tax credits for research and development,
sales and use taxes, and capital investment activities
are offered to other target industries, including timber
extraction, manufacturing, food processing, biofuel and
renewable energy production, semiconductor manufacture,
smelting, farming, and warehousing.
Washington’s Innovation Partnership Zones are locally
driven technology job development efforts focused around
key industry clusters throughout the state. Local economic
development agencies, workforce development councils,
and local governments work together with private sector
partners to build technology commercialization efforts,
offer incubation services for entrepreneurial start-ups,
support tech transfer, and provide needed workforce
training to companies located in the innovation zones.
University researchers are also actively involved in the
partnerships, which last for four years before a community
must reapply.
Washington also offers an array of workforce development
services and incentives. These include a workforce
business and operations tax credit equal to up to 50 percent
of qualifed training expenses incurred through the state’s
Customized Employment Training Program (CTP).
The CTP pays the upfront costs for customized training,
which businesses can later repay free of interest. Back
payments for training can be made over an 18-month
period, and businesses receiving training services are only
required to pay for 25 percent of the costs upon completion
of the training. Such repayment options remove cost
barriers that might otherwise keep a business from pursing
workforce training that will make it more competitive.
Washington also maintains an active apprenticeship
funding program, which offers one-year program
development funding in support of creation and expansion
of apprenticeship programs through the state’s Board for
Community and Technical Colleges.
Washington’s Community Economic Revitalization
Board (CERB) provides infrastructure funding support
to communities throughout the state. CERB focuses on
fnancing projects that support business growth and job
creation opportunities. Since 1982, CERB has provided
local governments throughout Washington with $149
million of infrastructure investment, which was used to
leverage $5.2 billion in private business investment. In
addition to funding, CERB offers communities support
in evaluating potential infrastructure projects and
development of overall funding strategies for proposed
projects.
Rural areas are not overlooked in Washington’s job
creation efforts. The Rural Washington Loan Fund
(RWLF) provides gap fnancing for up to one-third of the
cost of a business project that will create or retain jobs in
a rural area of the state. Funding is focused on property
acquisition, improvement, or construction, with up to $1
million of fnancing available to any one project.
In order to help reduce the regulatory burdens on small
businesses, Washington’s Department of Licensing offers
businesses seeking to apply for or renew licenses access to
a Master Business Application. The master application
gives applicants a simplifed form that can be used to apply
for multiple classes and types of license, at both the state
and local level. When coupled with the state’s online fle
and pay system, the master application helps entrepreneurs
access needed licensing more quickly and easily, allowing
them to focus on business matters instead of paperwork.
121
Clusters in Washington
Largest Cluster: Business & Financial Services,
415,931 jobs
Largest Growth Cluster: Business & Financial
Services, 89,290 new jobs since 2002
Most Competitive Cluster: Information
Technology & Telecommunications, 37,215 new or
retained jobs due to state competitive advantage
Most Concentrated Cluster: Transportation
Equipment Manufacturing, 3.06 times the national
concentration level
122
West Virginia entered 2011 as one of just a handful of
states facing a budget surplus, instead of a budget defcit.
With estimates placing the state’s windfall approaching
$250 million, West Virginia’s policymakers entered this
year’s legislative session in an enviable position. While
the budget entered the year in relatively strong shape, the
same could not be said of West Virginia’s overall economic
condition. Joblessness remains near 10 percent, well above
pre-recession levels. The state also faces projected future
budget shortfalls, a graying workforce, and the specter of
decreased coal production and accompanying severance
tax receipts in the long term. However, the strength and
stability of West Virginia’s current budget situation have
placed the state and its leaders in a position to make moves
calculated to improve the state’s long-term economic
outlook.
Policy Priorities
The election of Governor Joe Manchin to the U.S. Senate
in late 2010 left West Virginia in the position of having
to fll the vacancy with an acting governor. West Virginia
has no Lieutenant Governor, so the vacant offce of
the governor was flled by State Senate President Earl
Ray Tomblin. Since taking the reins, Acting Governor
Tomblin has argued in favor of making business climate
improvement and job creation the state’s highest priorities.
In order to support this agenda, Tomblin has called
for making improvements in the state’s tax increment
fnancing structures in order to give municipalities more
control over projects, introducing sales tax credits for
distribution businesses to create jobs, and conducting a
comprehensive review of the state’s business recruitment
efforts. Energy development, including continued support
for the state’s massive coal industry as well as exploration
and exploitation of natural gas resources, are also a major
administration focus. The state’s strong budget situation
allowed Tomblin and the state legislature to construct a
budget that included no tax increases, no cuts to existing
government programs, and no state employee layoffs, all
while also increasing wages for the state’s teachers.
Five-For-Ten Helps Job Creation
Decreasing tax burdens on business has and continues to
be a point of emphasis for West Virginia. Over the past fve
years, the state has removed nearly $250 million dollars of
taxes on business, and has passed legislation to continue
cuts by implementing a series of phased reductions to the
state’s corporate net income tax through 2014.
The state also offers a variety of tax programs designed
to support development in specifc industries. Support for
manufacturing industries and jobs has been a particular
area of note. The state’s “Five-For-Ten” Program
offers decreased property taxes to manufacturing
businesses in the state, by valuing capital improvements to
manufacturing equipment at 5 percent of their true value
for up to ten years, thus offering support to companies
interested in expanding or modernizing their facilities.
West Virginia offers manufacturing businesses access
to investment credits for qualifed investments made
in productive property. These can be used to offset up
to 60 percent of a company’s income and franchise tax
liabilities. The state also provides tax breaks, in the form
of a manufacturing inventory credit, on raw materials and
goods held in inventory by manufacturers in the state.
In support of high-tech manufacturing, the state offers a
WEST VIRGINIA
West Virginia’s Place in the
Rankings
1st Budget Gap
1st Higher-ed Degree Output
6th Short-term Job Growth
7th Per Capita Income Growth
12th STEM Job Growth
13th Small Business Survival Index
13th Job Placement Effciency
14th Higher-ed Effciency
17th Long-term Job Growth
22nd High Speed Broadband Intensity
24th State and Local Tax Burden
122
123
targeted High-Tech Manufacturing Credit, which can
be used to offset up to 100 percent of a company’s tax
obligation, if job creation benchmarks are met.
In fact, West Virginia has tailored special tax incentives
to attract high-tech frms, under the auspices of the High-
Technology Business Property Valuation Act. Because
of this legislation, property taxes on qualifed property
and machinery owned by high-tech and Internet marketing
companies are set at a level equal to 5 percent of what they
would otherwise be. The Act also provides such companies
with sales tax breaks on certain classes of inputs used in
conducting business, including software and computer
hardware.
Small business fnancing in the state is supported by the
West Virginia Jobs Investment Trust. This publicly
funded venture capital fund works in tandem with private
sector venture funds to provide loans to small companies
seeking capital to expand in West Virginia. In addition
to providing access to capital, the trust offers businesses
selected for investment with access to experts who
can provide assistance in developing effective growth
strategies and management recruitment support. The goal
of the Trust is to create an environment supportive of
entrepreneurial success in the state. The West Virginia
Economic Development Authority also works to further
such goals through its West Virginia Venture Capital
program. The program works with seven venture capital
funds that have an interest in investing in and supporting
entrepreneurship in West Virginia. To encourage
investment in the identifed frms, the program offers tax
credits to individuals and private institutions that make
investments in the frms, expanding the amount of capital
available for investment in West Virginia companies.
In order to support technology transfer from the
state’s university system to private businesses, driving
commercialization and job creation, West Virginia has
created an Economic Development and Technology
Advancement Center program. The Centers are
designed to act as points of connection between university
research institutions and private sector frms, through
which research collaboration and assistance can be
organized. The program includes a focus on acquisition
and management of research and development grants, and
provides tax credits to incentivize private sector investment
in such research partnerships.
Recognizing the importance of quality infrastructure to
job creation activity, the state created the West Virginia
Infrastructure and Jobs Development Council. The
Council manages a revolving loan fund used to support the
installation of economically important water infrastructure,
as well as other economic development projects throughout
the state.
West Virginia offers businesses access to a package of
export assistance services through the West Virginia
Development Offce’s Export Promotion Program.
The program subsidizes costs for businesses to exhibit
at international trade shows, and offers access to foreign
trade missions. The program also provides businesses free
evaluations of their trade readiness and logistical support
to prepare for attending and taking part in trade missions
and international shows. For businesses that are interested
in accessing foreign trade channels but do not have the
capability to make trips abroad to promote their goods and
services, the state organizes meetings with foreign buyer
delegations that are touring West Virginia. The state also
maintains outreach offces in Japan and Germany, which
act as entry points to Asian and European markets for West
Virginia businesses.
123
Clusters in West Virginia
Largest Cluster: Energy (Fossil & Renewable),
88,989 jobs
Largest Growth Cluster: Energy (Fossil &
Renewable), 19,109 new jobs since 2002
Most Competitive Cluster: Energy (Fossil &
Renewable), 12,699 new or retained jobs due to state
competitive advantage
Most Concentrated Cluster: Primary Metal
Manufacturing, 2.52 times the national concentration
level
124
Wisconsin has adopted a cluster-based approach to
economic development and identifed eight established
and two emerging clusters as points of focus for job
creation. The state relies on private-sector leadership to
support public efforts to develop its clusters, building its
economic development strategy around successful public-
private partnerships. Although 2010 was a year of high
unemployment and burgeoning budget defcits, recent
revenue projections, unemployment reports, and job
outlooks show an economy transitioning back towards
health.
Budget Situation and Policy Priorities
While Wisconsin’s budget defcit of $1.8 billion only
ranks it in the middle of the pack nationally, the fallout
from debates over potential solutions to the defcit has
been one of the most dramatic in the nation. Driven by
partisan disagreement over pension reforms and collective
bargaining, Wisconsin’s legislative session became a
national fashpoint for debates over setting state budget
priorities. Incoming Governor Scott Walker has pressed for
more aggressive reforms than have some other governors,
leading to consternation among state employees and
nationally publicized debates.
As much of the spotlight in Madison focused on protests
and legislative wrangling, Governor Walker had advanced
a set of proposals focused on job creation and economic
development upon entering offce. These included pressing
for increased tax credits for relocation and economic
development, introduction of regulatory reform legislation,
adoption of more aggressive business recruitment policies,
and avoiding tax increases on business in the state.
Immediately upon taking offce in January, Governor
Walker called the legislature into a special session to
address several other economic development-related
proposals, including elevation of the Wisconsin Economic
Development Corporation to replace the state’s Department
of Commerce. Organized along public-private partnership
lines, the corporation will take the reins of economic
development in the state in July 2011, tasked with driving
new job creation efforts. Other proposals made by the
governor have involved lawsuit reform, business tax cuts,
and chartering of a commission to explore potential waste,
fraud, and abuse in government programs, in order to
identify ways to cut down on spending where possible.
Job Creation Initiatives and Enterprise-
Friendly Policies
Wisconsin maintains several programs and support
structures designed to promote exports of the state’s
products. The state’s Export Development Managers
work directly with companies throughout the state,
assessing their readiness for international trade, giving
marketing direction and advice, connecting companies
with the needed professional trade services, and educating
companies about foreign business practices they may
encounter when entering new markets. Wisconsin’s
International Offce Network consists of a group of
four offces around the globe where trade professionals
contracted by the state act as liaisons for Wisconsin
business interests in key markets. Wisconsin’s outreach
WISCONSIN
Wisconsin’s Place in the Rankings
4th Median Family Income
12th Export Intensity
13th High Speed Broadband Intensity
14th Growth in Share of National Exports
17th Export Intensity Growth
18th College Affordability
21st Educational Attainment
22nd High School Advanced Placement
Intensity
23rd Cost of Living
23rd Job Placement Effciency
23rd High Speed Broadband Availability
24th Export Growth
124
125
efforts currently include support for offces in China,
Canada, Brazil and Mexico. The overseas offces are
able to provide Wisconsin businesses interested in trade
with market assessments, and can conduct searches for
distributors and end users for companies and products
seeking access to export markets. In addition to sponsoring
and taking part in trade shows and trade missions,
Wisconsin operates a Trade Show Grant program.
This program encourages small businesses to explore
international trade possibilities by offering reimbursement
of up to $5000 of travel expenses incurred to attend
trade shows or trade matchmaking events. The state has
also created a Division of Global Ventures tasked with
seeking out potential foreign direct investment (FDI)
opportunities. The state has targeted provision of FDI in
several high-tech felds. With the governor’s support, the
division has launched a new pilot Regional Marketing
Grant Program. The new grants are available to regional
economic development organizations on a matching basis,
designed to help create “unique and innovative” regional
branding strategies to market the state.
The Business Employees’ Skills Training (BEST)
Program helps small businesses in markets that are
experiencing severe labor shortages fund skills upgrade
training for their existing employees. Businesses must not
have over 25 employees, and must be in one of several
targeted industry clusters. Qualifed businesses receive
a tuition reimbursement grant to help cover part of the
training costs incurred.
Entrepreneurs starting new businesses also receive
support in their job creation activities from the state. The
Early Planning Grant (EPG) program provides new
businesses with a grant of up to $3,000 to hire professional
business planning services. Due to limited funds, the
program is restricted to entrepreneurs in targeted industry
clusters, and will cover up to 75 percent of qualifed
business planning expenses. The state also offers an
Entrepreneurial Training Program (ETP). This program
allows entrepreneurs starting businesses that are not in
the targeted industry clusters the opportunity to apply for
grants which will cover up to 75 percent of the expenses
for qualifed training programs offered through a Small
Business Development Center.
The state’s Customized Labor Training fund supports
Wisconsin companies that are in the process of adopting
new processes or technologies by helping pay for
workforce training needs that such a transition may create.
In order to be eligible for the program, training must be
focused on a new technology or process, and must not be
available from another source in the state, necessitating a
customized plan of training. If a company is found to be
eligible, it may receive a grant offsetting up to 50 percent
of the costs incurred in provision of the training.
Tax exemptions and incentives are also part of Wisconsin’s
job creation toolbox. Many are targeted towards support
of manufacturing businesses. The state offers property
tax exemptions for machinery and equipment used in
manufacturing, farm and manufacturing inventories,
business computer hardware and software, and through
tax increment fnance districts set up by local governments
to spur development. Sales and use tax exemptions are
also offered on manufacturing equipment, on pollution
abatement and recycling equipment, and on production
fuel and electricity. Innovation activities in the state are
eligible for the state’s research expenditure credit and
research facilities credit. Both provide companies with
tax incentives to increase research activity conducted in
the state. The Angel Investment Tax Credit Program
offers investors in qualifed high-growth potential new
businesses a tax credit worth up to 25 percent of their
investment. Credits are issued up to an annual limit, with
total state funding varying from year to year. The state’s
Early Stage Seed Investment Credit is another credit
offered to spur investment in Wisconsin businesses, driving
job creation. The program offers venture capital seed funds
a credit for investments made in qualifed high-growth
potential companies that is worth up to 25 percent of their
investment.
125
Clusters in Wisconsin
Largest Cluster: Business & Financial Services,
315,739 jobs
Largest Growth Cluster: Business & Financial
Services, 44,500 new jobs since 2002
Most Competitive Cluster: Advanced Materials,
8,608 new or retained jobs due to state competitive
advantage
Most Concentrated Cluster: Electrical
Equipment, Appliance & Component Manufacturing,
2.93 times the national concentration level
126
A top performer in last year’s measures of overall
growth, Wyoming has continued to show signs of steady
economic momentum. Driven by strong performance in
the mining and natural resource sectors, the state’s two
main cities of Cheyenne and Casper are national leaders
in real GDP growth, with the latter leading the nation in
2009. This economic growth, supported by continued
strong commodity prices, has translated into broad-based
population growth in the state’s urban and rural areas, with
21 of the state’s 23 counties showing increased counts in
the 2010 census. While other High Plains states have seen
rural areas lose population, the Cowboy State appears to be
bucking regional trends.
Robust Sectors Drive Job Growth
Unlike most other states around the nation, Wyoming
entered 2011 in possession of a large severance tax-
supported budget surplus, which some estimates placed
at near $1 billion. As a result, the state’s newly elected
governor, Matt Mead, took offce facing a budget situation
that many other governors would have envied. Given the
state’s relatively strong economic performance, Governor
Mead called for continued efforts to invest in the state’s
robust energy, agriculture, and tourism sectors to drive
continued job growth. However, given Wyoming’s
dependence on the production of energy and natural
resources, the Mead administration has argued that
diversifcation of the economy should be among the state’s
chief goals moving ahead. Having identifed the technology
sector as a target for growth, the Mead administration
supported legislation that would increase funding to recruit
large data centers to the state, expanding on efforts already
underway at the University of Wyoming and federally
supported research centers. The administration has made
streamlining government functions a focus, proposing
merging departments and reviewing and repealing
executive orders seen as unnecessary. The administration
also supported legislation to increase investments in
transportation infrastructure, arguing that effective
infrastructure would “lay the groundwork to attract new
businesses and employers.”
Community Development Key to Jobs
In order to connect more effectively with private-sector
employers, Wyoming has focused on supporting its job
creation efforts with the Wyoming Business Council,
an entity with a more corporate structure than the state’s
previous economic development agencies. The Council
is directed by a board of successful businesspeople from
throughout the state. The Council organizes its efforts
on a regional basis, with seven offces around the state
serving as points of access to state government for new and
expanding businesses.
Wyoming has made community development and
assistance a central focus in its economic development
efforts. The state offers a suite of programs and incentives
WYOMING
Wyoming’s Place in the Rankings
1st Long-term Job Growth
1st Gross State Product Growth
1st Productivity Growth
1st Per Capita Income Growth
1st College Affordability
2nd STEM Job Growth
3rd State and Local Tax Burden
4th Economic Output Per Job
4th Business Tax Climate
5th Budget Gap
7th Business Birth Rate
9th Transportation Infrastructure
Performance
11th Small Business Lending
19th Median Family Income
23rd Export Growth
25th Academic R&D Intensity
25th High Speed Broadband Availability
126
127
focused on making its communities, large and small,
more attractive to private-sector development. Investments
have been made in infrastructure, community amenities,
business recruitment and promotion activities, and
enhancement of community facilities and downtowns. The
Business Ready Community Grant and Loan Program
provides fnancial support to local governments seeking
to build up public infrastructure and amenities needed
to support business development. In order to support
economic development in rural areas of Wyoming, the
state maintains a rural development council, which
focuses on supporting community, leadership, and land
use enhancement efforts in the state’s rural communities.
The state also assists rural communities in conducting
economic development assessments, and communities
of all size have access to a centralized library of local
development plans and templates to guide their planning
efforts. Similarly, the state maintains a database of sites
and structures available for business development, aiding
entrepreneurs in the rapid identifcation of suitable sites to
locate a new or expanding venture.
Aiming to diversify its economy even within the
energy sector, Wyoming has made efforts to support
the development of its abundant wind power. The state
offers access to an anemometer loan program, which
provides site owners with data collection and analysis
equipment, needed to gauge a site’s suitability for wind
energy development. Governor Mead has recently called
for increased efforts to attract wind energy component
manufacturers to the state. In order to help the state’s
existing businesses cut costs and increase energy
effciency, the state also offers matching grants to small
businesses that would like to conduct an energy audit of
their equipment and operations.
Trade and Manufacturing Support
Wyoming has sought to enhance exports of its products
through several channels. The state promotes its products,
particularly livestock, through international trade missions
organized by the Agriculture Business Development and
International Trade Development agencies. The state
actively promotes international sales of livestock genetic
stocks and offers marketing support to organic livestock
producers. To support the creation of new exporters, the
Wyoming International Trade Assistance Program
works with individual businesses seeking access to foreign
markets, offering services including product development
support and links to funding sources. The Wyoming
Market Research Center offers companies in the state
access to market and competitive analysis services,
information on dealing with regulations, and marketing
material evaluations at little to no cost.
Wyoming has also made creation of manufacturing jobs
a priority in its economic development plans. The state’s
Manufacturing-Works program supports manufacturing
companies with business assessments, integration of
advanced manufacturing techniques, workforce training,
and product and prototype testing. The 2011 legislative
session saw passage of legislation continuing the state’s
manufacturing tax exemption. Manufacturers taking
advantage of the law are able to receive a sales and use
tax exemption on equipment purchases, aiding them in
expanding production lines and creating new jobs.
Wyoming has continued to focus on building up its
technology sector in its effort to increase economic
diversifcation. Hoping to capitalize on its access to
relatively low-cost energy, Wyoming has made efforts
to attract data centers to the area. Targeting larger
developments, the state has enacted and expanded a sales
and use tax exemption for data center investments of over
$2 million in a calendar year. Purchases of equipment
and software needed to start a center are included in the
exemption.
Recognizing that capital markets remain tight and that
large-scale business developments in the state often face
challenges in landing funding from big banks, Wyoming
has greatly expanded its industrial development bond
program. Originally authorized to invest $100 million,
the program was increased in size six fold by the 2011
legislature; it now has the ability to buy up to $600 million
of bonds issued by local governments in support of
business development activities. While the state appears
open to supporting larger business developments, the
legislature must approve bonding for any project exceeding
$100 million.
127
Clusters in Wyoming
Largest Cluster: Energy (Fossil & Renewable),
57,234 jobs
Largest Growth Cluster: Energy (Fossil &
Renewable), 17,646 new jobs since 2002
Most Competitive Cluster: Energy (Fossil &
Renewable), 13,887 new or retained jobs due to state
competitive advantage
Most Concentrated Cluster: Mining, 6.81 times
the national concentration level
128
Puerto Rico’s dual mission of fostering multi-sector
growth while reducing costs and barriers to business and
investment is lifting the commonwealth incrementally out
of a recession that has been more severe than the downturn
on the mainland. According to the Federal Reserve Bank
of New York, by mid-2010, total employment in Puerto
Rico had fallen by 13 percent or 138,000 jobs from its peak
in 2005, representing almost double the 7 percent job loss
on the mainland from the employment peak to its lowest
point. Furthermore, the recession in Puerto Rico has lasted
about fve years—three times as long as the mainland
downturn.
Since mid-2010, however, there have been some
encouraging signs: job growth on the island improved
modestly. The unemployment rate has come down by a full
percentage point since its peak; nevertheless, it remains
among the highest in America, lingering at about16
percent. Unemployment has remained especially persistent
in construction and manufacturing.
Fiscal Reconstruction
A committee of private-sector leaders convened in early
2009 to offer ideas on how to address the government’s
looming fscal crisis. The committee’s report detailed
more than 30 proposed measures to increase revenue, cut
spending and raise temporary fnancing.
Fiscal and economic reforms comprising signifcant
expenditure controls and revenue enhancement measures
have substantively improved Puerto Rico’s situation.
Responsible budgetary practices eliminated the
Commonwealth’s practice of overestimating revenues to
sustain high expenses. This has resulted in a 70 percent
reduction in the defcit with a target of a balanced budget
in just four years.
In 2008–2009 Puerto Rico’s budget defcit, measured as a
percentage of revenues, was the highest among all states
and territories. By 2010–2011 it was ranked 20th, moving
from 43.6 percent to 10.9 percent. This lifted the outlook
on the Commonwealth’s credit to positive from stable in
2010, the frst upgrade since 1983.
Strategic Choices
Puerto Rico’s administration is emphasizing initiatives to
enhance the Commonwealth’s competitive position: (1)
overhauling the permitting process; (2) reforming the labor
market; (3) reducing energy costs; (4) reforming the tax
system; (5) promoting the development of various projects
through public-private partnerships; (6) implementing
strategic initiatives targeted at specifc economic sectors;
and, (7) promoting the development of certain strategic/
regional projects.
The new Strategic Model considers each one of the sectors
in the economy and contains the projects and reforms
necessary to promote the competitiveness and sustained
growth of Puerto Rico and its business partners. These
advantages are providing opportunities for the development
of strategic sectors, which include manufacturing,
agriculture, commerce, tourism and entertainment,
banking/insurance and credit unions, and flm and creative
services.
Puerto Rico has natural or structural competitive
advantages in several areas, such as medical device,
pharmaceutical and biotechnology manufacturing.
Puerto Rico has a proven 40-year track record as a major
pharmaceutical and medical devices center in the world
with 25 percent of the world’s biological manufacturing
capacity now located in Puerto Rico.
Puerto Rico’s Strategic Model for a New Economy focuses
on growth, competitiveness and jobs. Funds are being
made available for strategic projects to develop a world-
class physical infrastructure to stimulate the economy
and reduce the operational costs of doing business by
addressing regulatory barriers.
Regional Initiatives
The Administration has also targeted strategic/regional
projects that are intended to generate investments in all the
regions of the Island in order to foster balanced economic
development.
These include:
An urban redevelopment project of the area called the •
Golden Triangle is developing San Juan Bay into a
major tourism, recreation, commercial and residential
sector that serves the local community and will
become a major attraction for leisure and business
travelers.
The development of the Port of the Americas, an •
international trans-shipment Post Panamax port of
PUERTO RICO
128
129
global caliber.
Science City, in the heart of San Juan, to move Puerto •
Rico to the forefront of science, technology and
research and development. Science City is leveraging
Puerto Rico’s signifcant competitive advantages in
the knowledge-based sectors to integrate medical
centers, research centers and university campuses.
Efforts intended to transition Puerto Rico to a
knowledge-based economy are leveraging the Island’s
highly educated work force and existing industrial
base to create new jobs and businesses by creating
new industry clusters and consortia with a focus on
innovation.
The development of a section of the Caribbean Riviera •
to be a tourist complex which will include hotels,
casinos, eco-tourist attractions, international airport,
retail, yacht marina, and cruise ship ports.
Exports and International Trade
Advantages
The major pillars of Puerto Rico’s long-term growth
strategy also include initiatives focused on increasing
exports. The island currently runs a surplus with the
mainland that accounts for much of the island’s overall
export volume. However, Puerto Rico’s export markets
also extend overseas, including, the top export markets
of Germany, Netherlands, Belgium and Spain. Exports
to these four countries combined exceeded $11 billion in
2009 and have grown by more than 30 percent since 2007.
Puerto Rico has many attributes to attract investment and
take advantage of international trade opportunities. It
enjoys intellectual property protection under U.S. law and
banking regulation under the U.S. system (FDIC). The
Commonwealth participates in the trade agreements of
the U.S and is under the U.S. customs border jurisdiction.
Tax treatment for Controlled Foreign Corporation (CFC),
where Federal income taxes for U.S. based multinational
corporations are deferred until profts are repatriated to the
U.S.
Tax incentives and Credits available through the Economic
Incentives for the Development of Puerto Rico Act enable
local and foreign companies to operate successfully in
Puerto Rico enjoying the benefts of operating within a
US jurisdiction, while taking advantage of a foreign tax
structure.
Economic incentives in 2008’s Development of Puerto
Act provided attractive tax and other incentives to
foster investment in key sectors of the Commonwealth’s
economy. Manufacturing and export services such as
Financial Services, Insurance and Consulting are eligible
for some of the incentives provided under this law.
In 2010, Puerto Rico passed into law a comprehensive
series of incentives to attract investment to the island.
These programs include:
Housing incentives for purchasing residential and •
commercial properties.
Incentives for continued development of flm industry •
infrastructure and tax incentives to attract foreign
capital.
World-class tourism incentives. •
Amendments to the Insurance Code of Puerto Rico •
to secure a tax regime that will apply to international
insurers.
Measures to stimulate the development of sustainable •
energy systems by establishing the Green Energy
Fund.
Taxes and regulation laws are being passed and
implemented to reform Puerto Rico’s institutional and
regulatory framework, to turn government into a facilitator
and to strengthen the private sector. On December 1, 2009,
the Governor signed Act No. 161, which overhauled the
permitting and licensing process in Puerto Rico in order to
provide a lean and effcient process that fosters economic
development. This restructuring eliminated the signifcant
backlog of unprocessed permits that were in the pipeline
of various government agencies. Longer term, this law
signifcantly reduces the number of inter-agency processes
and transactions required by creating a centralized, client-
focused system that simplifes and shortens the permitting
process for applicants.
In sum: Puerto Rico has responded diligently and
deliberately through its Fiscal Reconstruction Plan and the
Strategic Model for a New Economy aimed at addressing
the current fscal and economic challenges. Improvements
are now detectable in key sectors, capital injections
are being made in infrastructure projects and a rise in
business and consumer confdence is helping to drive the
performance of the economy in 2011.
129
130
END NOTES
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3 Jim Rutenberg and Megan Thee Brenan, “New Poll Shows
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6 Elizabeth McNichol, Phil Oliff and Nicholas Johnson,
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10 Rowland Berthoff, “Independence and Enterprise: Small
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12 Evelyn M. Rusli, “Changing Rules for Entrepeneurs: Take
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28 Jeff Steele, “The Illinois Tax Incentive: Why Studios Aren’t
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June 2011
FreeEnterprise.com
doc_183860229.pdf
The National Chamber Foundation continues its partnership with the Campaign for Free Enterprise.
ENTERPRISING
STATES
RECOVERY AND RENEWAL FOR
THE 21ST CENTURY
A Project of the U.S. Chamber of Commerce
and the National Chamber Foundation
1
Contents
Executive Summary
Restoring Growth and Upward Mobility: A Call
to the States
Hard Choices Now, Hard Work Ahead: State
Strategies to Renew Growth and Create Jobs
A New Era of Leadership by the States?
Job-Centric States are Redesigning
Government and Investing in Opportunity
Investing in Opportunity
Redesigning Government
Measuring States: A List of the Top Performers
Top Growth Performers
Entrepreneurship and Innovation
Exports
Taxes and Regulation
Workforce and Training
Infrastructure
Rating the States: The Metrics
State Performance Graphic
Profles of the States
About the Report
The report was prepared by Praxis Strategy Group and
Joel Kotkin. Authors from the Praxis team include Delore
Zimmerman, Mark Schill, Doug McDonald, and Matthew
Leiphon. Zina Klapper and Marcel LaFlamme provided
editing and additional research. Praxis Strategy Group is an
economic research and community strategy company that
works with leaders and innovators in business, education
and government to create new economic opportunities. Joel
Kotkin is an internationally recognized authority on global,
economic, political and social trends. His book The Next 100
Million: America in 2050 explores how the nation will evolve
in the next four decades.
About the U.S. Chamber of Commerce
The U.S. Chamber of Commerce is the world’s largest
business federation representing the interests of more than 3
million businesses of all sizes, sectors, and regions, as well
as state and local chambers and industry associations.
About the National Chamber Foundation
The National Chamber Foundation (NCF), a nonproft affliate
of the U.S. Chamber of Commerce, is dedicated to identifying
and fostering public debate on emerging critical issues. We
provide business and government leaders with insight and
resources to address tomorrow’s challenges.
About American Free Enterprise. Dream Big.
The Campaign for Free Enterprise is the U.S. Chamber of
Commerce’s comprehensive, multiyear campaign to support
free enterprise and entrepreneurship through national
advertising; grassroots advocacy; citizen, community, and
youth engagement; and research and ideas leadership.
The opinions and conclusions expressed or implied in
the report are those of the research agency. They are not
necessarily those of the National Chamber Foundation and
the U.S. Chamber of Commerce.
ENTERPRISING
STATES 2011
RECOVERY AND RENEWAL
FOR THE 21ST CENTURY
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17
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A LETTER FROM OUR EXECUTIVE VICE PRESIDENT
June 20, 2011
Dear Colleague,
The National Chamber Foundation continues its partnership with the Campaign for Free Enterprise to help restore
the more than 7 million jobs lost during the recession and create the 13 million new jobs that our growing nation will
need in this decade.
The entire country has felt the economic impact of the Great Recession and, as a result, each state has new issues to
tackle resulting in tough choices for policymakers. Federal resources are limited; as the federal government contends
with its own budget issues, states must look for ways to champion economic growth.
To help remedy their budget shortfalls states are making job creation a high priority and are implementing
meaningful changes in their approaches to job creation. While each state’s approach varies, there is a renewed focus
on creating more favorable conditions for business growth. States must restore confdence in their economies by
creating a friendly business climate and job creation and retention is necessary for states and our country’s long-term
economic growth.
Our study, Enterprising States, focuses on what makes certain states attractive places to locate, relocate and expand
in this uncertain economy; the unintended consequences of cutting certain items from a state budget; and what types
of investments the public and private sectors can make now to improve the economy in the future. States are looking
to maximize their resources to address growth and employment without increasing spending and dealing with the
increased demand in services caused by this recession.
We hope that you fnd this study to be interesting and useful in understanding what is going on at the state level to
create jobs and spur economic growth in the face of mounting state budget defcits. The U.S. Chamber of Commerce
and the more than 3 million businesses that it represents understand the urgency of addressing this jobs challenge
and ensuring a strong and growing private sector in the economic recovery.
Sincerely,
Margaret Spellings
Executive Vice President
National Chamber Foundation
3
EXECUTIVE SUMMARY
for growth, but it has become clear that outdated state tax
systems can undercut economic vitality. Any state with
a budget tilting towards insolvency is in a weak position
to make and maintain investments in its workforce and
economic infrastructure.
Determining where to cut and where to invest is the central
challenge of the day. States must carry out short-term
strategies to jumpstart and/or sustain an as of yet lackluster
recovery and cut costs to make state government more
effcient and to avoid fnancial calamity. Simultaneously,
though, they must craft and invest in innovations and
structural solutions that will foster long-term economic
growth while reining in taxes and regulations that stife job
creation.
“Ultimately, there is only one route to sustainable state
economies, and that is through broad-based economic
growth,“ writes study co-author Joel Kotkin. “The road to
that objective can vary by state, but the fundamental goal
needs to be kept in mind if we wish to see a restoration of
hope and American optimism about the future.”
The 2011 Enterprising States study highlights state-driven
initiatives to 1) redesign government, including measures
to deal with excessive debt levels that inhibit economic
growth and job creation and 2) implement forward-
looking, enterprise-friendly initiatives with a primary
goal of creating the conditions for job creation and future
prosperity.
How States are Modernizing
Government
Enterprising States fnds that states are engaged in a
variety of initiatives that change the way government
operates:
Government Redesign:
Consolidation, reorganization, or elimination of •
agencies, boards and commissions.
Regionalization of governance to decentralize •
decision-making and to customize and align service
delivery with local circumstances.
Streamlining and modernizing bureaucratic processes •
to increase productivity and improve service delivery,
often by deploying services online.
Over a year and a half into the recovery, the condition
of the American economy is far from satisfactory.
Unemployment remains high, job creation meager,
and American workforce participation has dropped to
near record depths — the lowest rate in a quarter of a
century. The U.S. will need to create 20 million jobs in
this decade to recover from the 7 million lost in the Great
Recession and 13 million needed for the country’s growing
population.
Since the frst Enterprising States study in 2010, 29 new
governors have started their terms. Governors of every
state, along with their legislative counterparts, are taking
steps to grow their states’ economies, create jobs and
compete globally. They want to help businesses prosper, to
produce an educated and skilled workforce, and to provide
other essential services and infrastructure that foster the
entrepreneurship and innovation that will lead to greater
productivity and competitiveness.
In the past, states could look to Washington for assistance.
Now, whatever the intentions or real achievements of the
stimulus package, future increases in federal spending
seem likely to be meager at best. This presents a new,
and perhaps unprecedented, challenge for the states. With
Washington effectively forced to the sidelines, states will
now have to address fundamental economic issues relating
to growth and employment on their own. Most will have to
do so without signifcantly increasing their own spending.
For many states the short-term prognosis is dire.
Altogether, 44 states and the District of Columbia are
projecting budget shortfalls for 2012 amounting to $112
billion. The upcoming fscal year, according to the Center
on Budget and Policy Priorities, will be “one of the states’
most diffcult budget years on record. Retiree benefts
for state employees add yet another strain, with the states
facing a $1.26 trillion shortfall.”
Most states have already taken actions to streamline and
downsize government to meet the new economic realities
and this has proven to be challenging given the increased
demand for state services during the national recession.
Surely more redesign, streamlining and reforms are on
the way. To recoup lost revenue, states have taken such
actions as eliminating tax exemptions, broadening the tax
base, and in some cases increasing rates as well as raising
fees. Low tax rates by themselves are not a silver bullet
4
Experimentation with charter agencies that commit •
to producing measurable benefts and to saving
money—either by reducing expenditures or increasing
revenues— in exchange for greater authority and
fexibility.
Public-private partnerships and privatization initiatives •
for the delivery of programs and services including,
for example, medical benefts, correctional food and
pharmaceutical services, road maintenance, highway
design engineering, and vehicle feet management and
maintenance.
Steps to Curb Spending:
States with the most serious fscal problems are •
laying off workers, imposing hiring freezes, reducing
spending for education and health care, and ending or
curtailing social services.
Aid to local governments has been cut. •
For many states, current obligations for public pension •
funds and health insurance costs are unaffordable
and future obligations represent a looming fnancial
disaster. Cuts, concessions and larger contributions
from employees are now a part of balancing the state’s
checkbook.
Taxation and Tax Policies:
To make up for lost revenues, most states have taken •
such actions as eliminating tax exemptions, broadening
tax bases, and in some cases increasing rates as well as
raising a number of fees. Other states are rolling back
tax credits.
States have enacted increases in all of the major taxes •
they levy including personal income taxes, general
sales taxes, business taxes, and excise taxes.
Many of the states have reduced business taxes with •
new credits or expanded existing credits to encourage
investment and growth in targeted industries.
Regulation:
Corporate managers and business owners cite consistent
policies and regulations that allow them to plan as
key factors in choosing when and where to grow their
companies. Uncertainty is the ultimate antagonist of
growth, investment, and job creation. States are taking
action to eliminate onerous DURT (delays, uncertainty,
regulations and taxes), which put them in peril of placing
the heaviest burdens on new and small businesses and on
entrepreneurs, the real job creators in a growing economy.
States are adopting a fast-track approach to achieving a •
better balance between requirements of regulation and
the need for new jobs and industry, so that results have
a higher priority than rules.
Regulatory impact statements are being required in •
some states to estimate the cost of business of any new
regulations.
A jobs impact statement now accompanies proposed •
rules and regulations in some states.
Special offces and commissions have been established •
in some states to identify rules, regulations and statutes
that are costly, outdated and ineffective.
How States are Fostering Opportunity
The states that have fared best in creating middle-class
jobs have been either those close to the expanding federal
government, a major benefciary of the stimulus, or
those that have attended to more basic industries, such as
energy production, agriculture and manufacturing. State
investment in education and training is correlated with
a higher-performing economy, as is investment in new
infrastructure such as ports, airports, roads and improved
transit. But the other common denominator is that these
states have simply tended to create a business-friendly
atmosphere for companies of all sorts.
Investments in Public Universities and Colleges:
Investing in higher education to create the future talent •
pool, and fostering collaboration in key economic
sectors between business, education and government
on science and technology, technology transfer and
entrepreneurial programs.
Using performance-based funding to align colleges •
and universities as partners in workforce preparation
and sources of opportunity, growth, and competitive
advantage.
Starting and Expanding Businesses:
Targeted investments and initiatives that focus on high- •
growth start-ups, which are the best generators of new
jobs.
Efforts to help companies scale up and grow in order •
to capture growing domestic and international markets.
Establishment or expansion of seed and growth-stage •
fnancing funds.
Economic gardening programs deliberately designed to •
focus on expanding existing second-stage companies
that have viable growth opportunities.
Tax credits for angel investors and state-backed •
venture capital funds to fx defciencies in the
market that inhibit private-sector investment and
entrepreneurial activity.
5
“To simply proclaim
an enterprise-friendly
environment is no
longer adequate. A
story must be backed
up by actions.”
Programs to help companies expand into global •
markets by assisting in the development of a
customized international growth plan.
Public-Private Partnerships and Privatization
Initiatives:
The implementation of privatization tools and •
outsourcing strategies to deliver economic development
programs and services.
Building funds and bonding programs that tap private •
sector investors to construct specialized facilities for
research, demonstration, and technology transfer in
key economic sectors.
Workforce Training and Development:
Flexible, affordable training programs for workers, •
designed with business input to equip workers with
skills needed by local companies.
People-focused approaches that help workers in •
navigating their careers, provide assistance for
entrepreneurs, make lifelong learning loans, and offer
wage insurance plans.
Hard Choices Now – Hard Work Ahead
Enterprising States 2011 confrms that states are the
fulcrum of change and opportunity in key areas of
education, infrastructure, energy, innovation, and skills
training. States and localities are far better positioned
than the federal government to foster strategic investment,
regulations, taxes and incentives that encourage business
creation and private sector prosperity.
A state, however, can neither cut nor tax itself into
prosperity. The evidence regarding job creation among the
states shows that fscal probity is an essential ingredient,
but states can deal with the fundamental problems they
face only by spurring growth and upward mobility.
In the fnal analysis, to simply proclaim an enterprise-
friendly environment is no longer adequate. States that
are doing it right today are responsive and are taking on a
cooperative and supportive approach to dealing with new
and existing companies.
Enterprising states are making the hard choices today by
trimming costs and prioritizing investments that establish
the conditions for business creation and expansion.
Enterprising states are getting ready for the hard work
ahead in a globally competitive economy by modernizing
government and focusing on creating and sustaining high-
growth, higher-wage, 21st century industries.
6
reform, the state of Utah, for example, would have seen
its contributions to government workers’ pensions rise
by about $420 million a year, an amount equivalent to
roughly 10 percent of Utah’s spending from its general
and education funds.
5
The states often must deal with
declining revenues at a time when the demand for services
caused by the recession has increased. And, unlike the
federal government, states can neither print their own
money nor buy their own bonds.
In the past, states could look to Washington for assistance.
Now, whatever the intentions or real achievements of the
stimulus package, future increases in federal spending
seem likely to be meager at best. The 2010 election
effectively ended the nation’s experiment with massive
fscal stimulus from Washington. Indeed, leaders of both
parties, President Obama, and perhaps most importantly
the capital markets, now acknowledge that defcit reduction
will be a priority in the coming years.
This presents a new, and perhaps unprecedented, challenge
for the states. With Washington effectively forced to the
sidelines, states will now have to address fundamental
Over a year and a half into the recovery, the condition of
the American economy is far from satisfactory. For the
vast majority of Americans, conditions have improved
only marginally since the onset of the Great Recession.
Unemployment remains high, job creation meager, and
American workforce participation has dropped to near
record depths — the lowest rate in a quarter of a century.
1
Not surprisingly, this spring’s Washington Post-ABC poll
revealed that far more Americans feel the economy is
getting worse than getting better.
2
There seems to be what
the New York Times described as “a darkening mood”
among Americans about the future. Confdence in the
Federal Reserve’s policies on the money supply has eroded
among economists, as few benefts have accrued to smaller
businesses and middle-class households.
3
Times are
particularly tough for entry level workers, including those
with educations, and have been worsening since at least the
mid-2000s.
4
This stress is felt keenly by state and local offcials, even
in areas that aren’t suffering from the highest rates of
indebtedness or pension liabilities. Without pension
Figure 1. Source: Center for Budget and Policy Priorities. Number indicates projected revenue shortfalls as a percent of a state’s current cost of
services.
RESTORING GROWTH AND UPWARD MOBILITY:
A CALL TO THE STATES
7
economic issues relating to growth and employment on
their own. Most will have to do so without signifcantly
increasing their own spending.
For many states, the short-term prognosis is dire.
Altogether, 44 states and the District of Columbia are
projecting budget shortfalls for 2012 amounting to $112
billion. The upcoming fscal year, according to the Center
on Budget and Policy Priorities, will be “one of the states’
most diffcult budget years on record. Retiree benefts
for state employees add yet another strain, with the states
facing a $1.26 trillion shortfall.”
6
As a result, states and localities increasingly fnd
themselves forced to impose tough, even draconian cuts in
spending. This affects not only newly minted conservative
Republicans, but new liberal Democratic governors such as
California’s Jerry Brown and New York’s Andrew Cuomo.
The only real debate now is how much to rely on taxes and
how much on cuts in spending to address the fscal issues
ahead. One casualty: infrastructure spending, which was
boosted by the stimulus, now seems to be winding down as
well.
7
and have suffered a strong out-migration of middle class
citizens and jobs for decades.
Now, faced with enormous defcits, there is a temptation to
reduce those very “crown jewels,” such as the California
public university system, into what University of California
President Mark Yudof describes as “tatters.” In trying to
balance their budgets, states run the risk of undermining
their own long-term recoveries.
8
The great danger that looms here, in our estimation, is not
bankruptcy. Rather, it is long-term stagnation, in which
growing demands for social services, combined with weak
revenues. foster pressure for more taxes, reduced services
or a deadly combination of both. This represents something
of an existential problem in a country where the prospect
for a better future has long been a hallmark.
The founders of the republic understood the critical
importance of maintaining this aspiration, and European
observers were struck by the remarkable social mobility
in America’s cities. In the 19th century, American factory
workers and their offspring had a far better chance of
Figure 2. Growth in jobs for “middle” education levels, including long term on-the-job training, up to associate’s
degree or other post-secondary credential for states above the national average growth rate. Source: EMSI
Complete Employment 1st Quarter, 2011.
This report will try to
address the nature of this
dilemma and suggest
ways to best deal with
it. Although we agree
with the notion of fscal
probity, ultimately,
states can deal with the
fundamental problems
only by spurring growth
and upward mobility. This
will not only create new
revenues, but also dampen
the demand for social
services.
A state can neither
cut nor tax itself into
prosperity. Weak public
infrastructure combined
with low taxes has failed
through history to create
strong state economies,
as was long the case in
the Southeast. But at the
same time many large
states—California, New
York, Illinois—have
raised taxes and spending
8
entering the middle or upper classes than their European
counterparts.
9
In politics and in daily life, expansion
of opportunity was seen as essential to the American
experiment. Writing in 1837, one Whig lawyer in
Pittsburgh suggested, “If you deny the poor man the means
to better his condition . . . you have destroyed republican
principles in their very germ.”
10
Today, this traditional faith is being sorely tested in much
of the country. Although both stock prices and corporate
profts have rebounded, little has been done that has
stimulated employment. Large companies may be sitting
on large caches of cash, in part due to low interest rates
and a buoyant stock market, but capital remains scarce for
the small businesses that create most of America’s new
jobs. Indeed, entrepreneurial growth, as the Kauffman
Foundation recently found, has now slowed down among
most segments of the population.
Of course, there have been remarkable stories of wealth
creation and success despite these hard times. But even
in Silicon Valley—home to such high-fiers as Google,
Apple and Facebook—the overall impact on jobs has
been minimal. Of the nation’s 51 largest metropolitan
regions, San Jose, the Valley’s heartland, has suffered the
largest net loss of jobs over the past decade of any major
metropolitan region outside Detroit. The San Francisco
area suffered job losses only slightly lower, on a percentage
basis, than hard-hit Cleveland.
11
Due in part to fnancial
controls, investment in promising new companies has
become ever more undemocratic, with the bulk of new
money pouring into frms like Facebook coming not
from public markets, but from a small, well-heeled
cadre of private investors. Venture-backed technology
companies, notes Intel co-founder Andy Grove, now fnd
it expensive to “scale” their operations and add employees
in California or even the United States. As a result, he
suggests, companies tend to indulge in “an undervaluing
of manufacturing” that erodes employment. This contrasts
with, for example, China, where job creation is considered
“the number one objective of state economic policy.”
12
Much the same can be said of New York, where the paper
economy has been boosted by Fed policy but the creation
of middle-income jobs continues to lag. New York City’s
current fnancial boom—Wall Street pay hit a new record
in 2011
13
—simply reinforces a level of income inequality
that is the highest in the nation. Unemployment in the
Figure 3. Job growth in Science, Technology, Engineering and Mathematics (STEM) jobs for states above the national growth rate. Includes two-year
degree technician level jobs and higher. Source: EMSI Complete Employment, 1st Quarter 2011.
9
toniest Manhattan precincts reaches barely fve percent,
while it’s 20 percent in working-class Brooklyn. Not
surprisingly, the city’s distribution of wealth is now twice
as unequal as in the rest of the nation. It may seem a model
recovery on Wall Street, but it is less so on the streets of
the nation’s premier city.
14
In contrast, the states that have fared best in creating
middle-class jobs have been either those close to the
expanding federal government, another major benefciary
of the stimulus, or those that have attended to more basic
industries, such as energy production, agriculture and
manufacturing. These industries have propelled widespread
expansions in the Great Plains, parts of the Intermountain
West, Alaska and Texas.
More interestingly, many of these states have also
experienced a surge in STEM—science, technology,
engineering and mathematics—related employment. In
some states, this has come as a result of continuing state
investment in education and training; in most cases, these
states have simply tended to create a business-friendly
atmosphere for companies of all sorts. They have also
generally kept housing costs low, something critical to
young families.
Perhaps the best way to look at our evolving economy
is not so much from the point of view of companies or
industries, but of individuals. States often focus on their
largest employers, but those companies have been cutting
jobs for the past decade. Since 2000, large corporations—
which employ roughly one-ffth of American workers—
have stopped hiring, as they did in the previous decade,
and actually reduced their payrolls by nearly three million
while adding 2.4 million jobs abroad.
15
Andrei Cherny, an Arizona Democrat writing in the
journal Democracy, suggests that “both progressives and
conservatives have offered little in the way of new answers
as their long-held orthodoxies run headlong into new
realities.” Cherny admits that the stimulus and the Fed’s
strategy of loose money—what he calls “government by
hot check”—failed to address the needs of the nation’s
large class of small entrepreneurs.
16
Left out of the equation are the small businesses that,
according to the Bureau of Labor Statistics, employ half of
all workers and create 65 percent of all new jobs. Most of
these frms are small, under-capitalized, and run by single
proprietors or families.
In this environment, notes economist Ying Lowery,
Figure 4. Concentration of Science, Technology, Engineering and Mathematics (STEM) jobs for states above the national level. Includes two-
year degree technician level jobs and higher. Measure charted is location quotient, the state employment concentration divided by the national
employment concentration. Source: EMSI Complete Employment, 1st Quarter 2011.
10
“Business creation is job creation.”
17
The states that
will do best are those that create the conditions to lure
and retain those who start companies or who are self-
employed. Policies that target managers of hedge funds,
venture frms, or large corporations have their place, but
the real action—particularly in a world of ever-changing
technology and declining long term employment—lies in
the movement of individuals.
Under these conditions, where individuals migrate or
decide to settle will have a critical impact on which states
or regions grow. Three dynamic population segments—
educated workers, immigrants and downshifting
boomers—illustrate the factors that drive their migration
patterns. In many ways they represent the “canaries in the
coal mine”; where they go is generally where the air is
good for entrepreneurship.
The movement of educated workers has become a much
discussed topic among pundits and economic developers
in recent years. One common assumption is that “the best”
migrants tend to move to “hip and cool” locales, generally
on one of the coasts. These workers then form the core of
growing industries and, more importantly, new ones.
Yet the evidence tells a somewhat different, perhaps
surprising, story. An analysis of recent Census data on the
migration of educated workers fnds that the biggest net
growth has taken place not in New York, San Francisco
and Boston, but in places like Nashville, Houston, Dallas,
Austin, and Kansas City. Indeed, many of the leading
“creative class” states, notably California, Massachusetts
and New York, fared considerably worse than regions in
states such as Missouri, Kansas, Texas and Tennessee in
terms of net migration numbers.
18
These location choices have to do with how individuals
make decisions: people move primarily for reasons related
to jobs, family, and housing.
19
An analysis of the migration
of educated workers, for example, reveals that, for the
most part, these workers are moving away from expensive,
dense regions to more affordable, generally less dense
places. This migration also tends to parallel moves to those
states that generally impose fewer regulatory burdens on
business.
Perhaps even more surprisingly, we see a similar pattern
in minority and immigrant entrepreneurship. These groups
now constitute a growing percentage of business startups.
Overall, according to the Kauffman Foundation, foreign-
born immigrants in 2010 constituted nearly 30 percent
of all new businesses owners, up from 13.4 percent in
1996. This has also been the one outstanding segment of
the population whose entrepreneurship rate has grown
throughout the current recession.
20
As with the case of educated migrants, minority
entrepreneurs tend to establish themselves in less
expensive, more business-friendly, and generally less
heavily regulated metropolitan regions. A recent survey
of minority migration and self employment by Forbes
21
found that the best conditions for non-white entrepreneurs
were in metropolitan areas in Georgia (Greater Atlanta),
Tennessee (Nashville), Arizona (Phoenix), Oklahoma
(Oklahoma City), and several Texas cities (Houston,
Dallas, San Antonio and Austin). In contrast, most regions
in California and the Northeast, outside of the Washington,
D.C. metropolitan area, did quite poorly.
Jonathan Bowles, president of the New York-based Center
for an Urban Future, has traced this poor performance to a
myriad of factors including sky-high business rents, which
stymie would-be entrepreneurs in minority communities.
“[Entrepreneurs] face incredible burdens here when they
start and try to grow a business,” Bowles suggests. “Many
go out of business quickly due to the cost of real estate and
things like high electricity costs. It’s an expensive city to
do business in without a lot of cash.”
Boomers are unique compared to traditional senior
populations. According to the Kauffman Foundation, they
tend to be more likely to start businesses than are younger
age groups. In 1996, people between 55 and 64 years of
age accounted for 14 percent of entrepreneurs; in 2010 they
represented 23 percent.
22
Less is known about the migration of aging boomers,
a large segment of the population, but evidence so
far suggests that they, too, are moving to such states.
According to AARP, most boomers prefer to stay close
to where they live—mostly in suburbs—or where their
children tend to move, that is, to the low-regulation states
of the South and West.
23
States can draw on these migration patterns in developing
their economic policies. Generally, people migrate to
states with jobs, and states with population gains generally
produce more employment than those with slower growth.
Indeed, despite the great disruptions of the mortgage crisis,
regions such as Orlando, San Bernardino-Riverside and
Las Vegas all recorded double-digit employment gains over
the last decade.
More recent developments suggest that future growth may
depend on several critical factors. It is clear, for example,
that investments in education—for example in Austin,
Raleigh-Durham and parts of the Great Plains—have
11
This is not to say that California, or any other state, should
draw its economic policy from another state. Those states
that attempt to use tax incentives to “lure” industries
with no overwhelming need to relocate — as shown in
recent fndings about Illinois incentives to movie-makers
— are often disappointed. In many cases, the incentive
game becomes a classic “race to the bottom,” in which
the benefts of new jobs often prove transitory.
28
Since
the 1990s, just two percent of job growth and decline has
been due to businesses relocating across state borders, yet
the costly practice of using unfocused tax expenditures to
poach companies continues.
29
Nor can states reliably predict which industries will need
more workers over the long term. In the 1990s, economist
Michael Mandell predicted that cutting-edge industries
like high-tech would create 2.8 million new jobs; in
reality, notes a 2010 New America Foundation report, they
actually shed 68,000.
30
Each state and each region has its own peculiar economic
DNA. States with exportable products—for example
the Great Plains or the Upper Midwest—may need to
focus on ways to get their output effciently to market.
Already affordable, they may also choose to increase
their attractiveness to high value-added companies and
educated individuals by boosting their education systems
and making their metropolitan regions more congenial to
well-educated migrants.
In other states such as New York or Massachusetts, the
economy is focused on intangible exports like fnancial
services and software. Making themselves more affordable
for both individuals and companies may be the best way
for states to improve competitiveness. Over the long term,
no state economy can sustain its people if it only focuses
on the “luxury” sectors; the large number of unemployed
and underemployed workers will drain state resources.
As those state resources become more limited, decisions
about how to structure tax incentives or where to place
education and infrastructure investments must be based
upon a deep understanding of this economic DNA.
Strategic investments will limit wasteful spending and
maximize impact in the economic sectors where a state is
most likely to grow.
Ultimately, there is only one route to sustainable state
economies, and that is through broad-based economic
growth. The road to that objective can vary by state, but
the fundamental goal needs to be kept in mind if we wish
to see a restoration of hope and American optimism about
the future.
paid off by attracting both individuals and industries, and
have made these areas among the healthiest employment
markets in the country. Some of these states have suffered
less fscal distress than states elsewhere in the nation, and
have benefted from their educational investment through
hard times. Investments in community colleges may prove
to be particularly essential, since their role in providing
skilled workers has been critical in many states.
States that have invested in new infrastructure such as
ports, airports, roads and improved transit tend to have a
leg up on others that have failed to do so. Even relatively
low-tax states such as Texas have invested heavily in
recent years in roads and port facilities, which are critical
to industries locating there.
24
Even during the recession,
many industries—from manufacturing and environmental
frms to health care and information technology—have
had trouble hiring skilled workers. States are responding
by creating job-oriented training programs in states like
Ohio, New York, Tennessee, Washington and Wisconsin,
which have all established technical institutions separate
from community colleges. Tennessee alone has 27 such
“technical centers” offering one-year certifcates for
certain jobs.
25
Overall, as Delaware Governor Jack Markell has pointed
out, businesses generally do not want to eliminate
government, but rather want it to be useful for economic
growth. Markell, who has done some considerable budget-
cutting himself, believes that the focus needs to be on
expanding the economy, which will requires improvements
not only in schools, but in transportation infrastructure that
will make the free market work better.
26
Perhaps even more important has been creating a favorable
business climate. California, for example, possesses
the greatest basic economic attributes of any state: a
mild climate, location on the Pacifc Rim, a world-class
university system, and a legacy of strong infrastructure
investment. Yet today, despite the presence of leading
global industrial zones such as Hollywood and Silicon
Valley, as well as the country’s richest agricultural sector,
California’s unemployment remains well above the national
average and job growth has remained relatively tepid.
After many years in denial, even some of the state’s most
progressive politicians realize that something is amiss.
In a remarkable development, for example, California
leaders including Lieutenant Governor Gavin Newsom
recently visited Texas to learn from the large state that has
fared best during the long recessionary period. Given the
political gap between Californians like Newsom, a former
mayor of San Francisco, and Texas Governor Rick Perry,
this represents something of a “Nixon in China” moment.
27
12
America has the world’s largest economy, the world’s
leading universities, the most robust entrepreneurial culture
and many of its biggest companies—yet many see this as
a diminishing advantage.
31
Stagnation, many predict, will
extend into the foreseeable future because the economy’s
low-hanging fruit has disappeared and so the pace of
innovation has slowed; by this argument we are now on
a “technological plateau” that will make further growth
challenging.
32
The United States remains a leader in
global innovation, but better-funded, higher-performing
hubs of innovation are emerging among determined
competitors, notably China.
33
In contrast, we believe America’s prospects for competing
with other countries are better than commonly assumed,
and we are convinced that our strategy for the future
is unlikely to be found elsewhere. Unlike our major
competitors, we enjoy a huge base of natural resources—
such as food and energy—which are likely to become
ever more in demand as countries like China and India
grow their economies. Most important of all, the United
States, particularly in contrast with Europe and East Asia,
enjoys relatively youthful demographics, promising an
expanding workforce, new consumers and a new food of
entrepreneurs.
Yet our demographics and resources require intelligent
policies that ft our particular situations. As a young
country, we will have to fnd employment for an additional
20 million Americans in this decade. Slow growth,
which could be accommodated in rapidly aging Japan or
Germany, is not an option for the United States. We will
also need to harness all forms of energy, from renewables
to fossil fuels. Today, half of our trade defcit consists of
energy, and yet we have the oil and gas resources to supply
the vast majority of our needs. As we invest in renewables
for the long run, the country needs to use the resources that
are readily available in order to reduce the defcit and spark
job growth.
Our ability to compete, particularly on the state level,
could be compromised by an inability to address our
budgetary challenges. According to the Center on Budget
and Policy Priorities, states are struggling with budget
shortfalls for fscal 2012 that add up to $112 billion.
The most recent Fiscal Survey of the States
34
anticipates
considerably more fnancial stress in the states as the
substantial funding made available by the American
Recovery and Reinvestment Act of 2009 will no longer be
available.
Most states have already taken actions to streamline and
downsize government to meet the new economic realities.
This has proven to be challenging given the increased
demand for state services during the national recession.
Surely, more redesign, streamlining and reform is on
the way. To recoup lost revenue, states have taken such
actions as eliminating tax exemptions, broadening the
tax base, and in some cases increasing rates as well as
raising a number of fees. Low tax rates by themselves are
not a silver bullet for growth, but it has become clear that
outdated state tax systems can undercut economic vitality.
35
States are the fulcrum of change in key areas of education,
infrastructure, energy, innovation and skills training—
something that was confrmed on many fronts in the frst
Enterprising States study. States and localities are far
better positioned than the federal government to foster
strategic investment, regulations, taxes and incentives that
encourage private sector prosperity. In large part, this is
because they are more responsive to local conditions.
Equally important, a diversifed portfolio of opportunity
agendas implemented by the individual states will go a
long way toward renewing growth and prosperity in the
national economy.
A New Era of Leadership by the States?
As the 2010 Enterprising States study was being
completed, the states were implementing sweeping
changes to deal with a growing number of challenges.
Since then twenty-nine new governors have started
their terms. Governors of every state, along with their
legislative counterparts, are taking steps to grow their
states’ economies, create jobs and compete globally. They
want to help businesses prosper, to produce an educated
and skilled workforce, and to provide other essential
services and infrastructure that foster the entrepreneurship
and innovation that will lead to greater productivity and
competitiveness.
The dramatic shortage of job opportunities has driven up
the unemployment rate, pushed a large number of workers
into part-time jobs, increased underemployment problems,
and reduced the number of people who were expected to
be active participants in the labor force. There is universal
agreement that we need policies and programs that create
jobs now, alongside investments to lay the foundations
for long-term economic growth. “To keep the American
dream of widely shared prosperity alive,” one commentator
has argued, “we need to choose entrepreneurship and
competition over the vested interests of the status quo.”
36
HARD CHOICES NOW, HARD WORK AHEAD:
STATE STRATEGIES TO RENEW GROWTH AND CREATE JOBS
13
Job-Centric States Are Redesigning
Government and Investing in
Opportunity
Determining where to cut and where to invest
40
is the
central challenge of the day. States must carry out
short-term strategies to jump-start and/or sustain an
as-of-yet lackluster recovery, and cut costs to make state
government more effcient and to avoid fnancial calamity.
Simultaneously, though, they must craft and invest in
innovations and structural solutions that will foster
long-term economic growth while reining in taxes and
regulations that stife job creation.
In most states, revenues remain stubbornly down from
where they were before the recession, and job growth
is proving to be more elusive than in most previous
recoveries. The strategies now being planned or undertaken
by each state are based on their unique sets of interests,
resources and capabilities, aligned with the opportunities
that they see on the horizon and believe are conceivably
within their grasp. Yet all states “will likely need a new
network of market-oriented, private-sector-leveraging,
performance-driven institutions”
41
to restore and revitalize
their economies.
The 2011 Enterprising States study highlights state-
driven initiatives to 1) redesign government, including
measures to deal with excessive debt levels that inhibit
economic growth and job creation, and 2) forward-looking,
enterprise-friendly initiatives whose primary goal is to
create the conditions for job creation and future prosperity.
The policy initiatives and programmatic efforts are related
to the fve policy areas that were included in the original
Enterprising States report.
Entrepreneurship and Innovation •
Exports, International Trade and Foreign Direct •
Investment
Workforce Development and Training •
Infrastructure •
Taxes and Regulation •
What’s different in 2011 and for the foreseeable future is
that for many states the imperative for change is real. The
choice is simple. To remain a job-creating, fscally robust
economy, states will either change on their own or change
will continue to be forced upon them.
42
Investing In Opportunity
States are taking a hard look at making investments in and
implementing initiatives to create and sustain high-growth,
Restoring confdence in the economy by creating a
meaningful and compelling plan for moving forward is
a top priority for elected offcials as well as leaders from
business, education, and labor groups throughout the
country.
There is also a stark recognition among the states that
solving their fscal problems is directly connected to
creating an economic climate that will foster job creation.
Any state with a budget tilting towards insolvency is in
a weak position to make and maintain investments in its
workforce and economic infrastructure. A state’s fscal
health also has immediate consequences by affecting its
credit rating and, thereby, the cost of borrowing money.
Unfunded pension obligations, viewed historically as soft
debt, are now being considered together with the total
value of state bonds to come up with a credit rating.
Many governors and state legislatures are attempting
to strike a balance between budget cuts that could hold
back the recovery by putting more people out of work,
and spending cuts and government reforms that would
create a more business-friendly environment, leading to
greater business confdence, private-sector investment
and job creation. How this balance is achieved depends
on each state’s unique set of circumstances and available
assets. Moreover, at their core, these debates refect the
fundamental tensions between the two major visions
of American progress,
37
namely: creating equality
of condition by boosting wages, improving working
conditions, and guaranteeing basic services, and creating
equality of opportunity, by creating the conditions whereby
individuals can elevate themselves through industry,
perseverance, talent, and righteous behavior.
As noted in The Economist,
38
private capital is mobile
and it goes where government works. So while political
considerations and ideological rationalizations certainly
do infuence the mix of austerity measures and public
investments, the real opportunity today is for states to
redesign government for the 21st century. That means
cutting programs that do not spur economic growth and
shifting resources, where possible, to those existing or
planned programs that will.
39
While spending cuts will help control defcient budgets, so
will increased revenue brought by economic growth. As
states enact budget austerity measures, what job creation
initiatives are surviving or receiving increased investment?
What are the new priorities for job creation? How are states
balancing cuts with critical job-creating initiatives that will
stimulate innovation, build infrastructure, provide skills
training, and unleash the dynamism of small business?
14
higher-wage, 21st century industries.
States play a key role in the higher education landscape,
so there is considerable support for and investment in
programs that educate the future talent pool and foster
collaboration between business, education and government
on science and technology, technology transfer and
entrepreneurial programs. As states evaluate their return
on investment, performance-based funding has become
a best practice for aligning colleges and universities
as partners in workforce preparation and sources of
opportunity, growth, and competitive advantage.
43
High-growth start-ups are the best generators of new jobs,
accounting for nearly all net job creation in America in the
last twenty-plus years. They are also the frms most likely
to raise productivity, a basis for economic growth. They
also create jobs that did not previously exist, and solve
problems in a way that makes a difference in people’s lives.
States have stepped up their efforts to help companies
scale up and grow in order to capture growing domestic
and international markets. A number of states have
established or expanded seed and growth-stage fnancing
funds. Some have implemented economic gardening
programs deliberately designed to focus on expanding
existing second-stage companies that have viable growth
opportunities. Several states have undertaken initiatives
to fx defciencies in the market that inhibit private-sector
investment and entrepreneurial activity. Tax credits for
angel investors and state-backed venture capital funds are
just two examples.
Companies with a global reach that bring together multiple
technologies or complex expertise—such as advanced
manufacturing, investment banking, construction and
engineering, and natural resources—are likely to drive the
nation’s global competitiveness in the next few years, along
with more focused technology companies that are part of
complex virtual networks.
44
For that reason, several states
are implementing, and having considerable success with,
programs to help companies expand into global markets by
assisting in the development of a customized international
growth plan. And, some states have made signifcant
headway using focused and purposeful strategies to attract
foreign direct investment.
Public-private partnerships and privatization initiatives for
economic development and the provision of infrastructure
are proliferating throughout the states. Building funds and
bonding programs that involve private-sector investors
are now widely used to construct specialized facilities for
research, demonstration, and technology transfer in key
economic sectors. Building on the lessons of the past,
states have become considerably more adept at avoiding
what Robert Fogel has called “hothouse capitalism,” in
which government assumes much of the risk while private
contractors and fnanciers take the proft.
While unemployment remains high, many currently
available jobs go unflled. America faces a shortfall of
almost two million technical and analytical workers in the
coming years, a situation that stands to thwart economic
growth.
45
Painfully cognizant of this dilemma, many
states are establishing workforce training and development
programs that address structural unemployment problems
and the mismatch between available jobs and the skills of
the existing workforce. The goal is to align training and
academic programs with in-demand regional occupations,
and to add greater fexibility to workforce training
programs that have left some re-trainable individuals
slipping through the cracks.
Forward-looking states are modernizing their education
and workforce training initiatives by developing
people-focused approaches that help and train workers
in navigating their careers, provide assistance for
entrepreneurs, make lifelong learning loans, and offer
wage insurance plans. The goal is to empower people
to fnd better jobs and/or to create new ones. Plainly,
making America more globally competitive is vital, but
the increasingly obvious gap in our economic discussions
is an agenda for making Americans more personally
competitive. In this view, forging a new economics for
the Individual Age will require rethinking our economy
from the bottom up in order to realize future growth and
prosperity.
46
Finally, because energy issues, both current and future,
have become such critical factors in business and for
economic growth, states are getting serious about policies,
initiatives and investments to provide clean, secure,
safe and affordable energy tailored to regional, state
and local resources. These include renewable energy
standards, investments in research, development and
commercialization of energy technologies and processes,
and the establishment of new fnancing authorities to build
the infrastructure that will extract and transport energy to
the places where it will fuel new growth.
Redesigning Government
The fscal situation of many states has caused them to
reconsider the level of services they are providing and,
certainly, the way that they deliver them. According to
the Government Accountability Offce, “Because most
state and local governments are required to balance their
15
looming fnancial disaster. Cuts, concessions and larger
contributions from employees are now a necessary part of
balancing the state’s checkbook.
Taxes and tax policies vary considerably among the states.
To make up for lost revenues, most states have taken such
actions as eliminating tax exemptions, broadening tax
bases, and in some cases increasing rates as well as raising
a number of fees. States have enacted increases in all
of the major taxes they levy, including personal income
taxes, general sales taxes, business taxes, and excise
taxes. However, many states did reduce business taxes
with new credits or expanded existing credits to encourage
investment and growth in targeted industries.
Uncertainty, above all, is the antagonist of growth,
investment, and job creation. States that cannot rid
themselves of onerous DURT
49
(delays, uncertainty,
regulations and taxes) are in peril of putting the heaviest
burdens on new and small businesses and on entrepreneurs,
the real job creators in a growing economy. In a tight
economy these considerations become more stringent for
entrepreneurs and companies that are making economic
decisions simply because the levels of uncertainty and
the stakes are so much higher. Eliminating employment
regulations and time-consuming processes that place
unreasonable burdens on business can have a signifcant
impact on job creation.
50
Moreover, the competitive identity of a state today relies
increasingly on the degree to which the actions of the
private, public and civic sectors are aligned with and
corroborate the identity claimed or brand promise. A
story must be backed up by actions: to simply proclaim an
enterprise-friendly environment is no longer adequate.
States that are doing it right today are responsive and are
taking a cooperative, supportive approach to dealing with
new and existing companies. Their attitude and operating
systems are customer-centric and their emphasis is on
streamlining processes for obtaining permits, licenses, and
titles.
Many state governments across the country are adopting a
fast-track approach to achieving a better balance between
the requirements of regulation and the need for new jobs
and industry, so that that results have a higher priority than
rules. This is the mindset that must guide the interface
between government and business.
operating budgets, the declining fscal conditions shown in
our simulations suggest the fscal pressures the sector faces
and foreshadow the extent to which these governments will
need to make substantial policy changes to avoid growing
fscal imbalances.”
47
In The Price of Government: Getting the Results We Need
in an Age of Permanent Fiscal Crisis, David Osborne and
Peter Hutchinson contend that Industrial Age government
is just not up to the tasks and challenges at hand.
Centralized bureaucracies, hierarchical management, rules
and regulations, standardized services, command-and-
control methods, and public monopolies are simply not
aligned to Information Age realities. Today, government
must be restructured and prepared for rapid change, global
competition, the pervasive use of information technologies,
and a public that expects quality and has lots of choices.
The keys, according to Osborne and Hutchinson, are
to 1) get rid of low-value spending, 2) move money into
higher-value, more cost-effective strategies and programs
and 3) motivate all managers to fnd better, cheaper ways
to deliver results. In sum, government needs to provide
incentives, expect accountability, and allow the freedom to
innovate.
48
Government redesign efforts that are now underway or
in the planning stages often follow the simple guidelines
outlined above. Yet various approaches are now being
used by state governments, including:
Consolidation, reorganization, or elimination of •
agencies, boards and commissions.
Regionalization of governance to decentralize •
decision-making and to customize and align service
delivery with local circumstances.
Streamlining and modernizing bureaucratic processes •
to increase productivity and improve service delivery,
often by deploying services online.
Experimenting with charter agencies that commit •
to producing measurable benefts and to saving
money—either by reducing expenditures or increasing
revenues—in exchange for greater authority and
fexibility.
Steps to curb spending and reform taxation in the
states have varied widely. States with the most serious
fscal problems are laying off workers, imposing hiring
freezes, reducing spending for education and health care
and ending or curtailing social services. Aid to local
governments has been cut. For many states, current
obligations for public pension funds and health insurance
costs are unaffordable and future obligations represent a
16
A primary goal of any state economic development
program is not only to increase the number of jobs in the
state, but to improve the quality of jobs and the overall
prosperity of the state’s residents. States and regions must
balance increases in productivity driven by innovation and
technology with the need to maintain overall employment
for citizens.
This study combines metrics for each economic
development policy area to measure performance in each
policy topic area. States were ranked in each metric and
top states were determined by a composite ranking of all
metrics in overall performance and in each policy area.
For a full description of all metrics and results for each
state, see the Rating the States section on page 27.
To identify the overall best performers, we combined:
Ten-year and two-year job growth. •
Gross State Product measures: real GSP growth since •
2000, GSP per job in 2009 (measuring productivity
of industries), and growth in GSP per job 2000-2009
(measuring productivity increases).
Income: per capita personal income growth 2000-2010 •
and median four person family income adjusted for
cost of living in 2009.
Top Growth Performers
1. Alaska—Alaska places in the top 10 in six of seven
economic performance rankings, trailing only in
adjusted family income. Its rapid gross state product
increase propelled it to the top spot in this year’s
rankings. The state has seen job growth in the past
decade in every industry super-sector, and is home
to high-value energy and natural resources industries
whose growth has fueled large gains in gross state
product and productivity. Since 2002, Alaska has
added more than 6,600 jobs in oil and gas extraction,
metal ore mining, and related support activities, as
well as another 3,800 in the seafood products industry
and 1,700 in new management, science, and technical
consulting.
2. North Dakota—North Dakota is a top fve state
in short- and long-term job growth, GSP growth,
productivity growth, and per capita personal income
growth. Alaska’s rapid ascension nudged North
Dakota from the No. 1 spot. The energy boom has
created 15,000 jobs in the state in the last decade and
the state has added another 9,400 in business and
fnancial services. North Dakota avoided the housing
market collapse, and its construction employment is up
29 percent since 2002. Its manufacturing sector has
not seen the decline occurring in other states.
3. Wyoming—Wyoming moves up two spots this year
to third. The state places frst in four of our seven
performance measures: long term job growth, GSP
growth, productivity growth, and per capita personal
income growth. But the state’s job losses in the last
two years (more than just two other states) kept it from
the top two spots. Employment in the state’s energy
cluster has grown by 47 percent since 2001, adding
nearly 19,000 jobs. The business and fnancial services
cluster saw similar growth, adding 9,800 jobs for 46
percent growth.
4. South Dakota—South Dakota falls one spot to fourth
in 2011, placing in the top 10 in job growth measures,
GSP and productivity growth, and per capita personal
income growth. South Dakota’s manufacturing
industry (especially machinery manufacturing) has
remained more stable than most states, while the
construction industry added nearly 2,700 jobs since
2001. The state added nearly 5,300 professional and
technical services jobs over the same period, led by
computer systems design, programming, engineering
services, and various other scientifc and technical
consulting services.
5. Maryland—Maryland is a center for high-end
professional and technical services and 60,000
new jobs in that sector make it a strong all-around
performer. It places ffth this year, down one spot from
2010. The state places in the top 15 in every measure,
and ffth in median family income adjusted for cost
of living. Highly competitive clusters in Maryland
include information technology, defense and security,
business and fnance, and advanced materials.
6. Virginia—Virginia is strong in most performance
measures, highlighted by tenth place in both
productivity and productivity growth. The infuence
of the nation’s capital is refected in strong growth
since 2002 in business and fnance (158,000 new
jobs), defense and security (60,000), biomedical and
biotechnical (58,000), and information technology and
telecommunications (25,000) clusters.
7. Oklahoma—Oklahoma moves into the top ten this
year after placing 14th in 2010, most notably due to an
increase in gross state product. The state placed fourth
MEASURING THE STATES: A LIST OF THE TOP
PERFORMERS
17
security, and transportation and logistics.
Entrepreneurship and Innovation
Gone are the days of economic development organizations
spending the majority of their time luring factories from
other states. Businesses built from within a region are
more likely to stay for the long term and to be integrated
into the local economy, supporting more jobs. Recent
research suggests that not only do small companies create
the majority of jobs in the nation, younger small companies
do. For this reason, states are rapidly increasing their
investments in entrepreneurship and small business
programs.
Most states are creating small business incubators
and entrepreneurship programs, often integrated with
university entrepreneurship curricula and designed to
serve companies commercializing academic research from
nearby universities. Incubators are now being linked into
statewide networks to pool resources. Many have created
facilities with specialized infrastructure, such as lab space
available on an à la carte basis for start-up science and
technology ventures. Others are instituting economic
gardening programs to assist small businesses with market
research or product evaluation.
States are working to increase the impact of federal
and academic research on their local economies by
coordinating connections between business and academic
researchers, and streamlining the process of licensing
university-produced technologies. Economic developers
are identifying industry clusters where their state holds
a competitive advantage and are adjusting assistance
programs, infrastructure, and funding for public-private
partnerships to focus on these clusters.
Measurements of innovation and entrepreneurship include:
Growth and concentration of science, technology, •
engineering and mathematics (STEM) jobs.
Academic research and development intensity in the •
state.
The share of all businesses involved in high •
technology.
A measure of small business fnance activity. •
Two measures of entrepreneurial activity: net business •
birth rate and the Kauffman Foundation index of
entrepreneurial activity.
in GSP growth and fourth in productivity growth.
It also enjoyed a sixth place ranking in per capita
personal income. Like many states in this year’s top
ten, Oklahoma’s energy cluster saw huge growth in its
energy cluster, which added 86,000 jobs for 60 percent
growth since 2002. The state also benefts from a
competitive advantage in other productive economy
clusters, such as machinery manufacturing, forest and
wood products, advanced materials, and chemical
products.
8. Texas—Texas is the best performing large state in
terms of job growth, ranking fourth in both long
term and short term employment growth, and also
shows solid overall economic expansion (13th in GSP
growth and 14th in GSP per job). Since 2002 the
state’s business and fnance, energy, and biomedical/
biotechnical clusters have each expanded more than
30 percent, adding more than 960,000 jobs to the
Texas economy. Of the major industry sectors, only
manufacturing and information have lost jobs since
2002 — yet manufacturing still outperformed the
national manufacturing economy by a signifcant
margin.
9. Nebraska — Nebraska keeps its position at number
nine in economic performance this year. Nebraska
places in the top 25 in six of seven performance
metrics, and is seventh in short term job growth. The
state has a healthy construction sector along with
strong growth in transportation and warehousing
(4,400 jobs since 2002); professional, scientifc
and technical services (11,500); and management
of companies and enterprises (4,200). The state’s
most nationally competitive industry clusters include
transportation and logistics, advanced materials,
energy, printing and publishing, and chemical
products.
10. Iowa — Iowa’s sixth-place ranking in productivity
growth helped place it 10th this year, down two spots
from last year. The state shows balance across the
board, with fve more top 25 performance rankings
and no ranking lower than 33rd. Iowa remains a
strong, productive economy. Its agribusiness, food
processing and technology cluster remain the largest
cluster in the state, encompassing 190,000 jobs. While
employment in this cluster remains essentially fat
since 2002, it is signifcantly better than in the rest
of the nation, making agribusiness one of the state’s
most competitive industries. Other important clusters
in the state include machinery manufacturing, which
has gained 2,000 jobs since 2002, advanced materials,
computer and electronics manufacturing, defense and
18
entrepreneurial activity and small business lending.
7. Maryland—Maryland remains a center for STEM
jobs and high technology companies, ranking tenth
in STEM job growth, second in STEM job intensity,
and third in high-tech business concentration. The
state is also a national leader in biotech product
manufacturing, biotechnology and general scientifc
R&D, guidance instruments, and computer systems
design.
8. Virginia—Virginia has the highest concentration of
high-tech businesses in the nation and holds the third
highest concentration of STEM jobs. Since 2002, the
state has added more than 43,000 high-tech jobs, led
by 46,000 jobs in computer systems design services;
9,100 in physical, engineering, and life sciences
research; 8,100 in engineering services; and 7,900 in
other scientifc and technical consulting services.
9. Idaho—Home to the Idaho National Laboratory, Idaho
moves up three spots to make the top 10 in innovation
and entrepreneurship this year, led by second place
rankings in establishment birth rate and small business
lending and a 10th place ranking in entrepreneurial
activity.
10. California—California remains the nation’s center for
research, ranking number one in federal and academic
research intensity. To help harness this innovative
spirit, the Golden State launched the Innovation Hub
(iHub) initiative to stimulate partnerships, economic
development, and job creation around specifc regional
research clusters. These six new iHubs link and
leverage assets such as research parks, technology
incubators, universities, and federal laboratories to
provide an innovation platform for startup companies,
economic development organizations, business groups,
and venture capitalists.
10. Washington—Innovation and technology-based
economic development efforts are a central part of
Washington’s job creation agenda. The state’s high
technology business and occupation tax credit is
available to businesses in the advanced computing,
advanced materials, biotech, electronic device, and
environmental tech industries that conduct research
and development (R&D) activities in the state.
Companies in the same industry set also have access to
a sales and use tax deferral program for qualifed R&D
and initial manufacturing activity expenses. Biotech
and medical devices companies also receive sales and
use tax breaks on qualifed equipment purchases used
in expansion and job creation.
Top Entrepreneurship and Innovation
States
1. New Mexico—New Mexico places no lower than
21st in any of our innovation and entrepreneurship
rankings. Home to Sandia and Los Alamos National
Labs, the state is already a center for STEM jobs, and
its strength is increasing. The state ranks ninth in
STEM job concentration, eighth in STEM job growth,
and tenth in entrepreneurial activity. The state is
also home to the New Mexico Technology Ventures
Corporation, one of the longest running and most
successful research commercialization enterprises.
2. Colorado—Colorado moves up seven places to second
in innovation and entrepreneurship this year. The
Rocky Mountain state is frst in small business loan
activity, second in research and development (R&D)
activity, second in high-tech business concentration,
third in entrepreneurship activity and ffth in STEM
job growth.
3. Utah—Utah’s top ranking in net business birth rate
helps it move up fve places to third in innovation and
entrepreneurship this year. The state ranks no worse
than 18th in any metric and is sixth in small business
lending activity, ninth in STEM job concentration and
ninth in high-tech business concentration. Utah is
making investments in research commercialization
infrastructure with its Utah Science, Technology and
Research Initiative and offers an outreach and business
assistance program for technology companies.
4. Montana—Montana ranks seventh or better in fve
innovation and entrepreneurship measures including
STEM job growth (fourth), business birth rate
(sixth), R&D intensity (seventh), entrepreneurship
activity (second), and small business lending activity
(ffth). Since 2002, the state has added 3,200 STEM
jobs to its economy, led by growth in engineering
services, computer systems design, custom computer
programming, and energy industries.
5. Texas—While Texas is known for its energy
industry, it is a strong performer in innovation and
entrepreneurship, ranking 16th or better in every
category but research intensity. The Lone Star State
moved up twelve places over last year’s ranking, due
in part to its increase in entrepreneurial activity and
above average rankings in small business lending and
business birth rate.
6. Arizona—Arizona is a top 25 performer in each
innovation and entrepreneurship metric, landing in
the top ten in R&D intensity, business birth rate,
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and growth in the share of the nation’s exports.
The non-proft South Carolina Export Consortium
offers client specifc market research, training,
and customized marketing materials, allowing the
organization to assist businesses at various stages of
the market development process.
4. Mississippi—Mississippi remains in this year’s
exports top 10 as the ffth fastest-growing state
exporter. The Magnolia State is also rapidly increasing
exports to South and Central American countries,
including Panama, Brazil, Honduras, Columbia, and
Guatemala.
5. Delaware—Delaware exported $5 billion in
merchandise in 2010, with 44 percent of that going
to Canada and the United Kingdom. Nearly half
of the $5 billion was in chemicals, with other top
merchandise exports computers and electronic
products, transportation equipment, machinery, and
plastics and rubber products.
6. Texas—Of the more than 26,000 businesses exporting
from Texas, 92 percent were small and medium-sized
enterprises, the fourth highest total of any state. Of
its $206 billion in exports in 2010, $72.4 billion was
exported to Mexico, and its top exported merchandise
categories including computers and electronic products
($39.1 billion), chemicals ($38.9 billion), and petroleum
and coal products ($32.9 billion).
7. Nevada—Nevada is the nation’s fastest growing export
state, as well as the fastest in growing export value as
a share of its total economy. The value of the Silver
State’s manufactured exports has more than tripled
since 2002. Its primary exports are mineral deposits,
coin-operated games, and various electronics.
8. Iowa—Iowa is the tenth fastest growing export state,
with nearly half of its exports bound for Canada or
Mexico. Much of the goods coming from Iowa are
processed foods and agricultural products (totaling
$3.5 billion) followed by machinery. To help the
agribusiness sector access international markets,
the Greater Des Moines Partnership economic
development agency formed the Iowa Agribusiness
Export Partnership with Iowa State University to
help address a range of trade topics important to
agriculture.
9. Georgia—Georgia moved up six places to ninth in
this year’s export rankings due to its growth in export
intensity and its increasing share of the nation’s total
export market. The state’s largest merchandise export
category is transportation equipment, which accounted
for $6 billion of Georgia’s total merchandise exports
Exports
One out of three manufacturing jobs in the U.S. is a
consequence of foreign exports. In some states, exports of
manufactured goods have outpaced domestic sales. Exports
are not solely the province of big companies, with 97
percent of the U.S.-manufactured exports emanating from
factories operated by small and mid-sized manufacturers.
More than a quarter million of America’s small businesses
export products, and they account for nearly a third of U.S.
merchandise exports. Still, that’s just one of every 100
companies. Many new international markets are emerging
as incomes increase around the world. There is ample
opportunity to create new jobs by helping America’s small
businesses start exporting and providing some of the tools,
training, fnancing, and contacts these businesses need to
sell overseas. Most states promote the expansion of exports
either through an independent trade offce or as part of
an in-house component of their economic development
agency.
Export measurements track manufactured exports in the
state of origin, excluding bulk commodity exports usually
attributed to the state of port location. High performing
states are based upon:
The value of exports as a share of total economic •
output and change in that value.
Change in a state’s share of the nation’s total exports. •
Overall export growth since 2002. •
Top Export States
1. Louisiana—The multi-port state of Louisiana remains
at the top of our exports list this year. The state ranks
in the top fve in all four export measures. Much of the
state’s exports are related to the agriculture and energy
economies, but manufactured exports include various
chemicals and machinery. Its primary trading partners
are China, Japan, and Mexico.
2. Utah—Utah continues to be a leader in export
measures, with exports up 45 percent since 2009.
The state’s International Trade and Diplomacy Offce
serves as an intermediary between Utah companies
and international markets, promoting the state’s
products and helping companies prepare themselves to
operate globally. The Governor’s Offce of Economic
Development also partners with the World Trade
Center Utah to promote increased exports.
3. South Carolina—South Carolina is the third largest
exporter for its size in the nation, and the Palmetto
State ranks in the top 10 in growth of export intensity
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than direct economic development incentives, since a tax
credit requires a specifc direct investment in a business
to trigger the incentive. Many states are reforming their
tax credit programs towards smaller awards in specifc
industries and performing cost-beneft analysis on a per
job basis to ensure that new revenue generated by the
job exceeds the expense of the incentive. Because tax
credits leverage direct outside investment by in-state
companies, these investment credits are rapidly replacing
direct taxpayer subsidies for business recruitment and are
shifting the focus toward stimulating businesses already
in the state. Other states are eliminating tax breaks and
targeted incentives entirely in favor of more broad-based
tax reductions for small businesses.
State tax and regulation rankings include broad-based tax,
business environment, and cost measures:
Taxes: Overall state and local tax burden and a state •
corporate tax index.
A small business survival index: a broad measure of •
36 government-imposed or related costs impacting
small business and entrepreneurs.
Size of anticipated state budget gap in fscal year 2012. •
Overall cost of living index. •
Top Taxes and Regulation States
1. Tennessee—Tennessee’s low cost of living, fourth
lowest state and local tax burden and manageable
budget gap place it frst in this year’s tax and regulation
rankings, up two places from 2010. The home state
of country music and Elvis’ Graceland has long been
known for its business-friendly legislature and for how
its Commissioners of Economic Development and
Revenue work together to make this “No Surprises”
regulatory policy possible.
2. South Dakota—South Dakota has the nation’s most
favorable business tax climate and third lowest overall
state and local tax burden. It also has no corporate
income tax, personal income tax, personal property
tax, business inventory tax, or inheritance tax. While
the state does have sales, use, and excise taxes, South
Dakota has established a tax refund program offering
targeted refunds in these tax classes to qualifed
business-building projects.
3. Wyoming—Wyoming is a top fve state for state
budget gap, state and local tax burden, and business
tax climate. Governor Matt Mead’s administration
has made streamlining government functions a focus,
proposing department mergers and reviewing and
repealing executive orders seen as unnecessary.
in 2010. Other top merchandise exports are chemicals
($3.6 billion), machinery ($3.5 billion), paper products
($3.1 billion), and computers and electronic products
($2.4 billion).
9. Indiana—Indiana’s seventh-highest state export
intensity and its increasing national market share
of all exports place it in a tie for ninth on our list of
export states. The Peach State shipped $28.7 billion
in exports in 2010 of which $8.0 billion was in
transportation equipment and $7.6 billion in chemicals.
Taxes and Regulation
Taxes and regulations impact the decisions and competitive
position of both large and small businesses. The
combined burden of excessive DURT—delays, uncertainty,
regulations and taxes
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—inhibit new job creation but can
also jeopardize existing jobs. States are reducing delays
by consolidating redundant operations and creating “one-
stop” customer service contacts to help assist businesses,
as well as drafting new legislation allowing projects to
be governed by the regulations in place when a project is
initiated. Other states are including private-sector leaders
on committees formed to identify sources of unresponsive
government and unreasonable regulations.
Many governors now recognize that an air of uncertainty
in state leadership and legislative bodies can stife private-
sector investment as businesses wait for clarity or, worse,
look to expand in other states. This recognition is leading
to a more open assessment of business climates in many
states and to greater bipartisan and governor-legislature
cooperation in the most successful states.
A reasonable tax code and regulatory environment can
reward achievement, encourage investment, and enable a
level playing feld for businesses that now compete in a
global economy on a daily basis. Fostering private-sector
economic growth is even more important as state budgets
remain in the red, with a shrinking economy eroding
the tax base and threatening investments in education,
infrastructure, and basic services.
As noted by the Tax Foundation,
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“the most competitive
tax systems create the fewest economic distortions by
enforcing the most simple, pro-growth tax systems
characterized by broad bases and low rates.” At the same
time, tax levies must be used to deliver a proportionate
level of services that are valuable to the business
community.
Targeted tax credits are often viewed as more effective
21
Comprised of public and private sector experts, the
committee made over 50 recommendations, including
calling for review of regulatory processes that impact
businesses in the state. Greater coordination between
regulatory agencies was identifed as a way to maintain
a business friendly environment and avoid harmful
duplication of services and unneeded red-tape.
Workforce and Training
It has been estimated that by 2018, 63 percent of the
nation’s jobs will require some type of post-high school
training credential. In some states, that number is over
70 percent.
53
This has placed education and training of
workers at the center of a new paradigm for economic
growth. State leaders are realizing that education and
training programs must be aligned with the jobs open
within the state. This alignment can only occur with
explicit cooperation between education, government, and
the business community.
As companies become more reliant on competent, highly
skilled workers and access to advanced knowhow become
essential ingredients of innovation-driven business
ecosystems, access to the capabilities, expertise and
facilities at colleges and universities is an increasingly
critical asset.
54
Workforce training is also a key element of state initiatives
directed at job creation. Customized training programs
oriented to the needs of employers and emerging industries
are delivered in partnership with colleges and, in many
cases, with the individual businesses themselves. Many
states are now augmenting federal workforce training
funds with more fexible and focused funding that better
meets the needs of small businesses and displaced workers.
Our education and training metrics combine measures
of educational attainment, higher education output and
effciency, and the state workforce development system
performance:
Educational attainment: associate’s degree (and higher) •
attainment of 25-44 year olds.
Higher education output: rate of bachelor’s degrees •
conferred per 18-24 year old population.
Affordability: undergraduate public university charge •
as a share of disposable personal income.
Higher education productivity: total charge (state and •
tuition funds) per degree or certifcate conferred.
Share of public high school seniors taking advanced •
placement exams.
Workforce development system job placement •
4. Alaska—Alaska’s closing of its budget gap and its top
state and local tax and business tax climates propelled
it onto the top ten list this year. The Last Frontier
State has almost $12 billion in savings—excluding the
Permanent Fund savings—enough for about two years
of state funding for operating and capital budgets to
insulate it from fuctuating energy prices.
5. Indiana—After bordering on insolvency in past
years, the Hoosier State has turned around its budget
situation with a series of state government reforms to
reduce redundancy and improve effciency. Indiana’s
latest biannual budget includes a $1 billion surplus, a
corporate income tax reduction and provisions for an
automatic taxpayer refund should revenue reach certain
benchmarks.
6. Texas—The Lone Star State is a low tax and low
cost of living state, as well as an enterprise friendly
climate that’s paying off as it is adding jobs at a much
faster rate than other large states. To go along with
its lack of personal income tax, Texas does not tax
property used for pollution control, goods in transit, or
machinery and equipment used in manufacturing.
7. Missouri—The Show Me State remains at seventh
this year on the tax and regulation list. It ranks better
than 20th on all fve measures, topping out eighth in
cost of living. In recent years, Missouri has enacted
comprehensive reforms in its workers’ compensation
system and enacted strong tort reform laws.
8. Kentucky—Kentucky’s lowest cost of living in the
nation helps move it into this year’s top 10. In order
to further streamline business interactions with state
government, the state recently passed legislation that
will lead to the creation of a business “One-Stop”
web site. The online interface will simplify business
flings and cut down on the need for business owners to
complete multiple forms.
9. North Dakota—North Dakota largely avoided
extended job losses during the recession, and its
booming energy industry has led to a sizeable budget
surplus. The Peace Garden State recently passed a
ballot-initiated measure changing the state constitution
to create a long-term savings Legacy Fund for oil
extraction tax revenue, while other oil tax revenues
were diverted to fund road improvements in heavy
drilling areas and to property tax relief.
10. Utah—Utah ranks in the top 17 in four of our fve
tax and regulation measures, landing it in 10th
place. The Beehive State recently launched an
advisory committee to optimize its state government.
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address shortages of skilled workers and to recruit new
residents to the state.
6. Minnesota—The North Star State is deploying FIRST
Grants—Framework for Integrated Regional Strategies
— requiring K-12 education, post-secondary education,
economic development, workforce development
and business to defne their regional economies
and develop strategies that will align each agency’s
resources to accomplish the vision for the region. The
essential piece of the strategy is that they must be
business-led. In its Job Skills Partnership Program, the
state is pursuing industry cluster strategies by awarding
multiple grants within regional industries to maximize
investment in training within each industry sector.
7. Colorado—Colorado places in the top 25 in fve of six
workforce and training measures, including in the top
ten for educated workforce and high school advanced
placement courses. The Rocky Mountain State offers
workforce development and training services to
rural residents free of charge with its Colorado Rural
Workforce Consortium, which oversees 11 sub-regions
and 35 local offces.
7. New Hampshire—Governor John Lynch has called
for continued and steady state investment in workforce
training programs as a means to help provide a
channel of skilled workers that will support economic
expansion. The state’s New Hampshire Working
program supports companies undergoing economic
stress with workforce support services, and it also
maintains a Rapid Response Team, tasked with
offering workforce support services on an expedited
schedule to businesses facing economic diffculty.
7. Utah—Utah ranks in the top 10 in higher education
productivity and affordability, and 25th in educational
attainment of its young workforce. In order to help
drive innovation and attract high-tech frms to the
state, Governor Gary Herbert’s administration has set
a goal to expand the number of citizens with degrees
and professional certifcations to 66 percent of adults
by 2020. The governor has also called for an increased
focus on science, engineering, and math careers in the
state’s educational system.
10. Connecticut — The Constitution State emphasizes
that employee productivity is at an all-time high,
with output per worker more than 33 percent above
the national average. In addition, a highly trained
and educated workforce is a major selling point for
business attraction and retention efforts. Thirty-six
percent of the state’s population aged 25 and older has
a college degree. The state boasts over 45 colleges and
performance.
Top Workforce & Training States
1. Florida—The Sunshine State moves into the top
spot in our workforce and training rankings due to
its effcient job placement system, high share of high
school students in advanced placement courses, and
affordable and effcient higher education system. The
state places in the top three in all four measures. The
Quick Response Training Program is an employer-
driven training program designed to assist new
value-added businesses and provide existing Florida
businesses the necessary training for expansion.
2. Massachusetts—The Bay State has the most educated
young workforce in the nation, along with a high-
output higher education system and a job placement
system that met its goals last year better than 48 other
states. The state’s workforce development system
comprises 16 regional workforce development boards
coordinated by state association, with members from
business associations, labor, education, and economic
development.
3. New York—The Empire State has the fourth most
educated young workforce and a highly productive
higher education system, producing the sixth most
graduates per college-aged resident in the state.
Funded by state and federal dollars, the Workforce
Development Institute (WDI) offers funding for
training programs for workers and businesses when
no other funding sources are available. The WDI also
produces labor market intelligence and works to bring
together business, labor, government, environmental
groups to fnd solutions to grow the manufacturing
industry in New York.
4. Maryland—The state recently created the
Skills2Compete program, a workforce development
and skills partnership among many workforce and
training organizations, focused on promoting the need
for and increasing access to middle and high skill jobs
training programs. The Old Line State has already
seen the ninth highest growth rate of middle-skill jobs
in the past decade.
5. North Dakota—North Dakota ranks third in
associate-degree-and-above educational attainment
of its 25-44 year old population, and fourth in college
degree affordability. Unemployment rates have held
very low, even through the recession, so the state
Department of Commerce and Job Service North
Dakota are working diligently with businesses to
23
universities, ranging from Ivy League to community
colleges offering two-year degrees and job training
programs.
Infrastructure
Infrastructure plays a critical role in economic
development, and states work with local, regional and
national governments to put it in place. The basic
infrastructure package for a sustainable economy includes
highways, airports, harbors, utility distribution systems,
railways, water and sewer systems, and communications
networks. As high-value services become more important
to state economies, the value of high-quality passenger air
service and broadband increases as well.
Investments that improve performance of transportation
infrastructure provide positive long-term value for the
U.S. economy.
55
State expenditures on transportation
infrastructure include investments in highways, air
transport facilities, and port facilities. Most states have
programs in place for funding public works in industrial
or research parks and for infrastructure associated with
individual business developments. States can use their
bonding authority to fnance infrastructure, and a few
states have developed infrastructure banks.
Broadband telecommunication infrastructure is at the
forefront of many state public policy initiatives and is
viewed as indispensable to economic and community
development. The share of employees working from
home has increased 31 percent since 2000, and if current
trends continue, telecommuting could overtake transit
for work trips by 2017.
56
Many states, especially those
with large rural regions, have created specifc broadband
infrastructure investment and incentive programs.
States are ranked based upon two broadband measures
and one comprehensive measure of transportation
infrastructure performance:
Share of internet telecommunication lines that are •
high-speed.
Share Census tracts with high broadband penetration. •
The U.S. Chamber of Commerce’s state transportation •
infrastructure performance index.
Top Infrastructure States
1. Maine—The Pine Tree State is in the top ten of
all three infrastructure measures, including the
nation’s highest share of broadband connections
over three megabits per second. A coalition of
state and university offcials and private companies
created the Three Ring Binder project, a dark fber
network designed to provide the “middle-mile”
telecommunications infrastructure needed to serve the
state’s business, academic, and telemedicine needs.
The network is funded with both federal and private
sources.
2. Vermont—Already a top ten state in broadband
access, the Green Mountain State has made
improvement of its rural technology infrastructure a
point of emphasis. Governor Peter Shumlin recently
launched ConnectVT, a coordinated effort to expand
broadband and wireless communications access
to all parts of the state by 2013, in an attempt to
support rural business job creation. The initiative
also convened experts to identify areas of need, and
examine ways to coordinate ongoing public and private
efforts.
3. North Dakota—The Peace Garden State ranks frst
in the U.S. Chamber of Commerce’s transportation
performance index. The state’s recently passed budget
diverts oil extraction and mining revenues to fund
needed road improvements in the western half of the
state, to improve transportation infrastructure needed
by booming drilling activities.
4. Iowa—The Hawkeye State combines a top 10 rank in
transportation infrastructure performance with another
in high speed broadband infrastructure quality. The
state’s primary infrastructure funding mechanism is
the Rebuild Iowa Infrastructure fund (RIIF). This
year’s legislature set aside nearly $274 million from
the RIIF, Technology Reinvestment Fund and revenue
bonds. Much of that will go to projects in local
communities to build or repair new buildings, roads,
bridges and other infrastructure including for disaster
relief infrastructure projects.
5. South Dakota—Ranking second in transportation
infrastructure performance, the Mount Rushmore
State is making investments in specialized economic
development infrastructure, such as South Dakota
University’s Innovation Campus, with almost 125 acres
of space available to support construction of research
facilities focused on agriculture, energy, infectious
diseases, and medical biotechnology, among other
target industries.
6. Nebraska—Like South Dakota, the Cornhusker
State is investing in specifc infrastructure to
better leverage the knowledge at its universities
with Nebraska Innovation Campus adjacent to the
University of Nebraska-Lincoln’s city campus. This
24
249-acre space is designed to serve as a “public/
private research and technology development center.”
Companies located in the new campus will be able take
advantage of their proximity to the university in order
to work collaboratively with university researchers,
directly recruit interns and employees among recent
university graduates, and access university facilities and
infrastructure, such as UNL’s supercomputing facility.
Infrastructure development at the site is ongoing, and
Governor Heineman has made increasing funding for
the new campus one of his job-creation and education
priorities.
7. Minnesota—The North Star State is addressing
specialized industry infrastructure with the Bioscience
Business Development Public Infrastructure (BBDPI)
program focused on job creation and retention through
the growth of new and emerging bioscience businesses
and organizations. The BBDPI provides competitive
grants to local governmental for up to 50 percent of
the capital cost of the public infrastructure necessary
to expand or retain jobs. The projects must be of
publicly owned infrastructure related to a development
project, including wastewater collection and treatment,
drinking water, storm sewers, utility extensions,
telecommunications infrastructure, roads, bridges,
parking ramps, facilities that support basic science and
clinical research, research infrastructure and streets
which support an eligible project.
7. New Hampshire—Upgrading the Granite State’s roads
and other basic infrastructure is a priority for Governor
John Lynch’s Administration, which has supported
implementation of a comprehensive 10-year highway
plan. In order to further upgrade the state’s transport
infrastructure, Governor Lynch has proposed creation
of a State Infrastructure Bank, which would give local
communities throughout the state access to a revolving-
loan fund to fnance infrastructure improvements.
7. Virginia—The Old Dominion State ranks in the top 20
in all three metrics, with the 12th best score in the U.S.
Chamber of Commerce’s transportation performance
infrastructure index. Virginia lawmakers signed off
on a $4 billion transportation funding plan to fund
900 projects, of which 16 are “mega-transportation
projects.” The largest transportation funding infusion
in Virginia since 1986, the bill includes at least $282
million for a Virginia Infrastructure Bank to provide
grants to local governments and loans to private entities
for infrastructure projects.
10. Oregon—In 2009 the state legislature created the
Oregon Infrastructure Finance Authority (IFA)
to develop goals and policies to meet the state’s
infrastructure needs and to serve as a fnancing
clearinghouse for public works projects. The IFA helps
coordinate state and federal partners to streamline
funding and approval processes for local entities, and
works with localities to develop strategic responses to
infrastructure needs using limited resources.
RATING THE STATES: THE
METRICS
For this study we assembled 33 measures of overall
economic performance, grouping them in fve key policy
areas tied to job growth. Data for each measure was
tabulated for each state and states were ranked according
to performance.
The heat map matrix on the following page displays each
state’s performance for each of the 37 metrics. Dark
red squares indicate a top 10 ranking in that metric and
light red squares indicate an 11-25 ranking in a particular
metric. To gauge a state’s performance, read across the
page for each state or region. Groupings of red highlights
indicate better performance in a particular policy area.
States are grouped by region and metrics by policy area for
easy visual comparison to other neighboring states. For
instance, the New England region proves to be a poorer
performer in tax and regulation, as shown by large blocks
of white, while the Rocky Mountain region scores well in
the innovation and entrepreneurship measures, as shown by
the concentration of light and dark red.
Metric Defnitions
Economic Performance
Long-term Job Growth. Job Growth, 2001-2011.
Percent job growth between the November 2000-January
2001 average fgure and the November 2010-January 2011
average fgure. U.S. Bureau of Labor Statistics Current
Employment Survey.
Short-term Job Growth. Job Growth, 2007-2009.
Percent job growth between November 2008-January 2009
fgure and the November 2010-January 2011 fgure. U.S.
Bureau of Labor Statistics Current Employment Survey.
Measures recent job shifts.
Gross State Product Growth. Real Gross State Product
Growth, 2000-2009. 2005 Chained Dollars. U.S. Bureau
25
of Economic Analysis.
Economic Output Per Job. Gross State Product
Output per job, 2009. Total economic output per job, a
measure of a state economy’s productivity. U.S. Bureau of
Economic Analysis.
Productivity Growth. Growth in Gross State Product
Output per job, 2000-2009. Percent change in total
economic output per job between 2000 and 2008. An
indication of a state’s shift towards higher value jobs and
industries. U.S. Bureau of Economic Analysis.
Per Capita Income Growth. Per capita personal income
growth, 2000-2010. Change in real income per person,
2000-2009. U.S. Bureau of Economic Analysis.
Adjusted Median Family Income. Median Income for
a Family of Four Adjusted for Cost of Living, 2007-
2009 average in 2009 dollars. U.S. Census American
Community Survey, Missouri Economic Research and
Information Center, using data from the Council of
Community and Economic Research.
Exports
Export Intensity. Dollar value of manufactured exports
per dollar of gross state product, 2009. Value of
exports equalized for the relative size of state economies.
Measures the importance of exports to a state’s economy.
Covers manufactured exports, not including bulk
commodities that tend to be credited to the state where
an exporting port is located. U.S. Census Foreign Trade
Division, U.S. Bureau of Economic Analysis.
Export Intensity Growth. Change in dollar value of
manufactured exports per dollar of gross state product,
2002-2009. Measures increasing or decreasing role of
exports in a state’s economy. Manufactured exports. U.S.
Census Foreign Trade Division, U.S. Bureau of Economic
Analysis.
Growth in Share of National Exports. Percentage point
change in state share of total national exports, 2002-
2010. Measures a state’s export performance relative
to other states, and accounts for overall national export
growth or decline. Manufactured exports. U.S. Census
Foreign Trade Division.
Export Growth. Growth in gross manufactured
exports, 2002-2010. U.S. Census Foreign Trade Division.
Innovation and Entrepreneurship
STEM Job Growth. Growth in science, technology,
engineering, and mathematics jobs, 2001-2010. Growth
in computer specialists; mathematical science; engineers;
engineering technicians; life scientists; physical scientists;
social scientists; and life, physical, and social science
technicians. EMSI Complete Employment, First Quarter
2011.
STEM Job Concentration. Concentration science,
technology, engineering, and mathematics (STEM)
jobs, 2001-2010. Measures concentration of STEM jobs
in a state versus the nation. Location Quotient: share
of STEM jobs in state divided by share of STEM jobs in
nation. EMSI Complete Employment, First Quarter 2011.
High-tech Share of All Businesses. High Technology
share of all establishments, 2010. Concentration of
establishments in 79 high-tech six digit NAICS industry
sectors within the state. EMSI Complete Employment,
First Quarter 2011.
Business Birth Rate. Net establishment birth rate,
2006-2007. U.S. Census Bureau, 1989-2007 Business
Information Tracking Series.
Academic R&D Intensity. Academic Research and
Development as a share of Gross State Product, 2008.
Measures the extent to which academic R&D plays a
role in the state economy. Funding could come from
industry, state or federal government, or other agency.
National Science Foundation and U.S. Bureau of Economic
Analysis.
Entrepreneurial Activity. Kauffman Index of
Entrepreneurial Activity, 2006-2008. Measure of
monthly new business starts derived from the Current
Population Survey. Kauffman Foundation.
Small Business Lending. Small Business Loans per
1,000 Employees in small businesses, 2009. Measure of
availability of small business fnancing. County Business
Patterns; U.S. Small Business Administration, Offce of
Advocacy, Community Reinvestment Act.
Taxes and Regulation
Budget Gap. Estimated State Budget Gap, FY2012.
Center on Budget and Policy Priorities, The Josiah Bartlett
Center for Public Policy, Bill Haslam State of the State
Address.
26
State and local tax burden, 2009. Composite measure of
overall state and local tax burden expressed as a share of
income. Tax Foundation.
Business Tax Climate. State business tax climate
index, FY 2011. Index of taxes affecting business. Tax
Foundation.
Small Business Survival Index, 2010. An index
combining 36 measures of government-imposed or
government-related business cost measures affecting
a wide variety of industries and business types. Small
Business & Entrepreneurship Council.
State cost of living index, 2010. Missouri Economic
Research and Information Center, using data from Council
of Community and Economic Research.
Workforce and Training
Higher-ed Degree Output. Bachelor’s degrees conferred
per 1,000 18- to 24-year-olds, 2008-2009. Measures
degree output of the state higher education system. U.S.
Department of Education, National Center for Education
Statistics, 2008-09 Integrated Postsecondary Education
Data System (IPEDS), Fall 2009, U.S Census American
Community Survey 2009.
Higher-ed Effciency. Higher Education Spending Per
Degree Awarded at Public Research Institutions. A
measure of higher education system productivity. Delta
Project on Postsecondary Education Costs, Productivity,
and Accountability IPEDS database.
College Affordability. Average undergraduate charge
at public four-year institutions as a share of disposable
personal income, 2010. Measure of degree affordability
adjusted for state income levels. National Center for
Education Statistics, U.S. Bureau of Economic Analysis.
Educational Attainment. Share of 25- to 44-year-old
population holding Associate’s degree or higher, 2009.
U.S Census American Community Survey 2009.
High School Advanced Placement Intensity. Share of
public high school seniors taking Advanced Placement
Exams, 2010. Measures the extent to which rigorous
curriculum is available in secondary schools. College
Board, Advanced Placement Report to the Nation.
Job Placement Effciency. Adult entered employment
rate goal attainment, 2009. Ratio of workforce
development system adult customers still employed
after exit from state job training and placement services
compared to agreed-upon goal rate. Measure of
performance of a state’s workforce assistance system
performance. U.S. Department of Labor Employment and
Training Administration.
Infrastructure
High Speed Broadband Intensity. Share of fxed
connections of at least 3Mbs downstream speed, 2010.
Measure of broadband capacity. FCC.
High Speed Broadband Availability. Share of Census
tracts with at least 60 percent high speed internet
penetration, 2010. FCC.
Transportation Infrastructure Performance. State
Infrastructure Performance Index, 2007. Comprises
50 percent of overall state infrastructure ranking. U.S.
Chamber of Commerce Let’s Rebuild America Project.
About the state profle cluster data, pages 29-129:
Most competitive cluster jobs number is the change due to
“competitive effect” of a shift share analysis, an indicator
of how the cluster performed relative to national factors
of expansion or contraction for period of 2002-2010. The
cluster may have lost jobs overall due to these national
factors. Most concentrated cluster number is a national
location quotient in 2010. Data includes non-covered
employees. Cluster defnitions developed by Purdue Center
for Regional Development. Data Source: EMSI Complete
Employment - 2011.2.
27
STATE PERFORMANCE
28
Alabama’s Place in the Rankings
4th Academic R&D intensity
4th Broadband Availability
7th Small Business Survival Index
10th High Speed Broadband Intensity
11th State and Local Tax Burden
11th Cost of Living
14th Export Intensity
17th Per Capita Income Growth
17th Business Birth Rate
18th STEM Job Growth
20th Entrepreneurial Activity
21st Productivity Growth
23rd Small Business Lending
25th Higher-ed Degree Output
25th GDP Growth
ALABAMA
Early in 2011, Governor Bentley signed Executive
Order Number Five, establishing the Alabama Rural
Development Offce. The purpose of the new offce
is to improve and advance education, healthcare, and
economic development in the rural areas of Alabama.
The Executive Order requires the Director to work with
existing department heads, commissioners and directors to
coordinate their organizations’ efforts in rural Alabama.
The fscal agency of the Alabama Rural Development
Offce is the Alabama Department of Economic and
Community Affairs.
Alabama is heavily invested in aerospace, education,
health care, banking, and various heavy industries,
including automobile manufacturing, mineral extraction,
steel production and fabrication. The state has a history
of successfully recruiting and growing out-of-state
companies—and will continue to do so—but it is also
realizing growth and opportunities in its own backyard.
Most jobs are created by businesses already in the state.
According to Governor Bentley, “They are the backbone of
our economy and it is important for our workforce training
system to help them prosper and grow.”
Streamlining Workforce Training and
Economic Development
With a strong automobile and aerospace manufacturing
presence, the state has been successful in recruiting and
growing out-of-state business and industry that, according
to Governor Bentley, “gets our picture and our name in
magazines across the country, but they don’t create most
of the jobs. Most of the jobs are created by companies
that are already here.” To address this challenge, the state
has focused on helping local and regional businesses be
more competitive and better trained by utilizing workforce
training programs in place at the two-year college
systems. These programs, including Alabama Industrial
Development Training and the Alabama Technology
Network, offer job-specifc and technical training for
technology and manufacturing companies of all sizes.
Along with better utilizing existing workforce training
efforts, the state is streamlining economic development
efforts by creating a blueprint for the roles and
responsibilities of the state’s lead agency and others
involved in economic development. These efforts include
aligning economic development assets through written
agreements between the Alabama Development Offce
and the state, local, and private agencies engaged in
economic development. This realignment and renewed
cooperation will strengthen Alabama’s ability to recruit,
retain and grow companies that are important to the
state’s economic future. The articulation agreements will
formalize ties between the Alabama Development Offce
and strategically important organizations, including the
Economic Development Partnership of Alabama, electric
power producers, the Alabama community college system,
Alabama universities and private research entities, and
local economic development offcials.
29
Education for the 21st Century Economy
For the state to continue to compete in the global economy,
Alabama’s workforce needs the skills to work in the
state’s growing high-tech manufacturing industries. To
accomplish this, the state is conducting a systemic change
in its education and training system to produce graduates
with the science, technology, education, and math (STEM)
knowledge and skills they need to compete for new jobs.
Alabama’s skilled workforce program goals include:
Increasing the percentage of students demonstrating •
profciency in STEM-related skill areas.
Continuing the development of an integrated, effcient •
distance-learning program to provide educational
offerings for all Alabama public high school students.
Increasing the number of students taking Advanced •
Placement courses and those scoring 3–5 on AP
Exams by 15 percent by 2012.
Increasing access to workforce training and •
postsecondary educational programs for Adult
Education clients.
These efforts to increase profciency levels in STEM and to
improve workforce-related training are paying dividends.
The state saw a 9.6 percent increase in STEM-related job
growth from 2001 to 2010 (18th best in the nation) and a
4.8 percent increase in middle-skill jobs over the the same
period.
Industry Strengths—Building on
Existing Capacity and Competitive
Advantages
Alabama has a long and storied history in aerospace,
aviation and defense industries. The state is home to
hundreds of aerospace companies working in space and
defense, aviation, and maintenance, refurbishment and
overhaul (MRO). These companies have created more
than 73,000 direct jobs for Alabamians, with a combined
annual payroll of more than $3 billion. The Alabama
aerospace industry is composed of four primary business
sectors: manufacturers of aerospace, aviation and defense
hardware, software and equipment; MRO of existing
assets; parts manufacturers and suppliers for the aerospace
industry; and companies providing business and technical
services and support to the industry.
Many well-respected automobile companies have
realized that the state is well positioned for automotive
manufacturing and have set up shop there. Others have
also located in Alabama to build engines and other auto-
related parts and services. Today, there are over 300
automotive-related companies, a 286 percent increase since
1991, including an extensive supplier network.
The state has made key investments and pledged a strong
commitment to research and biotechnology projects. More
than 90 biotechnology-related companies are either doing
business or have headquarters in Alabama. The Hudson-
Alpha Institute for Biotechnology, located in Huntsville,
is anticipated to bring 900 new scientists to the area.
The institute’s genomics research will complement the
University of Alabama at Birmingham’s clinical research
base. The University of Alabama is conducting more
than $450 million in externally funded research annually,
mostly in the biosciences.
Auburn University, the University of Alabama, University
of South Alabama and the University of Alabama in
Huntsville all have strong specialized bioscience research
programs. This research activity places Alabama fourth
among all states in federal and academic research intensity.
In addition to this research capacity, the state boasts
several communities—including Birmingham, Huntsville,
Auburn and Mobile—with outstanding research and
industrial parks and incubator programs available for
relocation or spin-outs of new enterprises organized around
products based on local research.
Clusters in Alabama
Largest Cluster: Business & Financial Services,
224,768 jobs
Largest Growth Cluster: Business & Financial
Services, 47,876 new jobs since 2002
Most Competitive Cluster: Transporatation
Equipment Manufacturing, 18,444 new or retained jobs
due to state competitive advantage
Most Concentrated Cluster: Primary Metal
Manufacturing, 3.11 times the national concentration
level
30
Alaska has capitalized on the traditional engines of
its economy, including logging, mining, oil and gas
exploration, and seafood, to maintain and grow the state’s
economy during rough national economic times. The state
is working to expand critical infrastructure to support its
natural resource-based industries. These efforts have paid
dividends; the state currently ranks second nationally in
job growth from 2009 to 2011.
Spending Discipline and a Strong
Economy
Alaska has worked diligently to create a climate for
investment and economic growth. In an effort to boost
private sector jobs and economic development, Governor
Parnell introduced legislation to provide Alaskans with tax
relief for individuals, invest in new energy opportunities,
and create incentives for companies that invest in job
creation, workforce development, and construction of
critical infrastructure. The focus of the state’s ongoing
efforts has been on keeping taxes low, expanding access to
energy resources, and initiating development efforts around
undeveloped resources and regions.
State efforts to expand new energy opportunities with
focused infrastructure investments mirror the Alaskan
Chamber of Commerce’s priorities, which call for review
and reform of oil tax policies to encourage new oil
production, concise and predictable permitting, and the
creation of an Alaska Transportation Infrastructure Fund
that will invest in Alaska’s economy and mobility. These
priorities are intended to encourage more investment in
new oil production and foster economic vitality throughout
the state.
Nearly 60 percent of the state’s FY2012 budget goes to
communities, organizations, and individuals through
grants, contracts, and capital spending, much of which
ends up in the private sector. Over 21 percent of the budget
is devoted to goods and services, contracts, equipment
and travel, some going to the private sector, with the
remaining 20 percent paying for state employees’ salaries
and benefts.
Besides a balanced budget, Alaska has almost $12
billion in savings, excluding the Permanent Fund. That
is essentially enough for two years of state funding for
operating and capital budgets, should anything catastrophic
happen to oil markets or the state’s ability to transport
oil to market. Strong spending discipline and willingness
to invest is helping to secure Alaska’s future, as refected
in the state’s upgraded AAA bond rating. The fnancial
community recognizes Alaska’s sound fnancial footing,
and the AAA rating lowers the cost of debt for the state.
ALASKA
Alaska’s Place in the Rankings
1st Budget Gap
1st State and Local Tax Burden
2nd Business Tax Climate
2nd Short-term Job Growth
2nd Economic Output Per Job
3rd Long-term Job Growth
3rd Small Business Lending
3rd High Speed Broadband Intensity
5th Academic R&D Intensity
5th College Affordability
6th Gross State Product Growth
6th STEM Job Growth
8th Productivity Growth
10th Per Capita Income Growth
12th Job Placement Effciency
13th STEM Job Concentration
15th Small Business Survival Index
24th Business Birth Rate
30
31
Investing in Energy, Infrastructure and
Knowledge
To enhance its ability to capitalize on its extensive
natural resources, the state has embarked on a signifcant
infrastructure development program called Roads to
Resources. In 2010, Alaska funded more than 300
infrastructure projects that directly employed its citizens
while supporting industry growth. The Roads to Resources
Initiative increases access for communities and continued
responsible development of the state’s fsh, timber, mineral,
and petroleum reserves.
The goals of this infrastructure program include road
construction, permitting and environmental work along
a 90-mile transportation and pipeline corridor aimed at
increasing access to gas and high-quality oil reserves. The
budget also includes about $175 million to continue efforts
to develop Alaska’s natural gas resources, including the
Alaska Natural Gas Pipeline project and the in-state gas
line project team.
Through the Alaska Performance Scholarship
program, the state has placed a priority on providing
transformational education to all students by helping to
prepare them for post-secondary education and good
jobs within the state. Every student willing to accept the
challenge of a more rigorous curriculum can earn these
scholarships. The program’s goal in the next three years
is to provide these opportunities for up to 30,000 Alaska
high school students. As part of this program, the state has
renovated entire schools and added gyms, classrooms, and
space for vocational education all across the state.
The Economy
Alaska is one of two states that have added private sector
jobs over the past year, and its unemployment rate stands
almost a full point-and-a-half better than the national
average. This stability is supported by the state’s balanced
budget, tax cuts and the decision to pay off debt that once
exceeded $5 billion.
Nine features comprise Alaska’s economic growth and
well-being strategy:
Individual tax relief with a two-year suspension of the •
motor fuel tax.
Energy initiatives including in-state gas and •
commercialization of North Slope natural gas.
Increased oil production and job growth with tax •
incentives for oil and gas exploration and production.
Increasing the number of visitors to the state with •
critical investment in Alaska’s tourism industry.
Creation of private sector jobs by building roads to •
natural resources.
New construction, including a Public Safety Crime •
Lab and University Life Sciences Research Facility.
Promoting business development with a micro-loan •
program for small businesses.
The Alaska Performance Scholarships intended to •
position the state’s economy for workforce growth.
These initiatives and the state’s focus on its strengths in the
productive economy have already paid dividends with the
state ranking sixth in science, technology, engineering and
math (STEM) job growth and fourth in growth of middle-
skill jobs over the past decade.
Alaska is also considering funding a strategic assessment
to determine what steps are needed to capitalize on the
state’s vast storehouse of resource wealth. The state has
huge reserves of oil and gas: at least 43 billion barrels
of oil and 250 trillion cubic feet of natural gas have yet
to be developed. In addition, there are rich deposits of
minerals on more than 40 million acres of state lands.
New opportunities include rare-earth minerals that are of
increasing importance in the world economy. These rare-
earth elements are used in almost every piece of electronic
equipment including fat screen TVs, iPods, cell phones,
aircraft radar systems, and more. The state is poised, once
again, to help meet America’s resource needs.
31
Clusters in Alaska
Largest Cluster: Energy (Fossil & Renewable),
36,539 jobs
Largest Growth Cluster: Energy (Fossil &
Renewable), 8,265 new jobs since 2002
Most Competitive Cluster: Energy (Fossil &
Renewable), 5,581 new or retained jobs due to state
competitive advantage
Most Concentrated Cluster: Mining, 3.79 times
the national concentration level
32
ARIZONA
Arizona’s Place in the Rankings
1st Higher-ed Degree Output
3rd Academic R&D Intensity
5th Business Birth Rate
7th Entrepreneurial Activity
7th Gross State Product Growth
10th Small Business Lending
12th Long-term Job Growth
13th State and Local Tax Burden
13th Small Business Survival Index
13th Productivity Growth
13th Job Placement Effciency
13th High Speed Broadband Intensity
14th Higher-ed Effciency
15th High-tech Share of All
Businesses
19th Economic Output Per Job
19th STEM Job Concentration
24th High Speed Broadband
Availability
25th STEM Job Growth
32
Home to well-established aerospace, electronics and
semiconductor manufacturing sectors, Arizona parlayed
these industry strengths into what had been one of the
strongest economic and population growth rates in the
nation. Those heady days have come to a standstill.
However, while confronted with job and population
losses and a defated housing market, the state still hosts
emerging environmental, life and bioscience industry frms
that hold the potential to reinvigorate the economy and
provide quality jobs for Arizonans.
Streamlining Services and Education
Faced with a $3.2 billion defcit and ongoing budget
concerns, Arizona passed a budget of $8.3 billion without
new borrowing. The state’s plan calls for $1 billion in cuts
to avoid borrowing and to balance what remains of this
year’s budget, as well as the budget for FY2012. The state
must also replace approximately $800 million in revenue
gained from a voter-approved sales tax set to expire this
year. The main benefactor of the sales tax funding has
been the K-12 education system.
The steepest cuts will be to education, where universities
face the loss of $198 million in state funding and K-12
education faces reductions of $183 million (with $35
million backflled by the federal government). State aid to
community colleges will be reduced by half. In addition
to these cuts, the Senate has proposed eliminating the
Arizona Financial Aid Trust, a state-supported student
loan program.
The budget cuts $500 million from state Medicaid
programs (pending federal approval), $50 million from
the state’s safety net programs, and $53 million from the
Department of Health Services. The budget also shifts
some highway and prison-related costs to counties.
In addressing these fscal issues and obstacles, the state has
made signifcant budget reductions that total 31 percent of
unprotected funds. As part of these reductions, the state
has reduced its workforce by 10 percent since 2008, not
including universities. As Arizona works to counter the
devastating impact of the recession, it continues to look for
opportunities and growth in the future.
Targeted Business Incentives and Tax
Reforms
To recapture the momentum that helped propel the state to
new heights in job creation, Arizona has embarked on an
initiative that it hopes will serve as a magnet for business
relocation, formation and growth; capital formation and
investment; employment and personal income growth and
prosperity for all the state’s businesses and citizens. The
Four Cornerstones of Reform initiative includes a mix of
business incentives and broad tax reforms designed to spur
the Arizona economy.
33 33
Economic competitiveness in the global marketplace is
the frst of the Four Cornerstones of Reform. Realizing
that government can serve as an obstacle to new business
growth, the state is working to remove unnecessary
barriers that impede economic growth and to provide a
stable, predictable, business-friendly environment in which
private employers can grow. One element of this effort is
the elimination of the Arizona Commerce Department and
its replacement with the Arizona Commerce Authority.
The single focus of the Authority will now be the retention
and recruitment of quality jobs for Arizona. It will be
overseen by a public-private board composed of Arizona
leaders in business and policy that will have access to
a $25 million deal-closing fund for added fexibility in
negotiations.
Other specifc elements of this initiative include the
creation of a Quality Jobs Program, with corporate tax
credits of up to $9,000 for each qualifying new job ($3,000
per job per year, with a 400-job cap), and an increase in
the electable state corporate income tax sales factor to 100
percent, up from the current 80 percent. Knowing that a
trained workforce is key to job development, the state is
proposing the reauthorization of the Arizona Job Training
Program, providing job-specifc, reimbursable grants to
train employees for new careers.
The appropriate use of tax dollars and subsequent credits
is critical for job creation. To meet the needs of business
and industry, the state has called for a four-year, phased-in
reduction of the state’s corporate income tax to 4.9 percent,
beginning in January 2014. This will give the state the
nation’s ffth most competitive corporate income tax rate.
Additionally, the state is ready to provide a 10 percent
increase in the research and development tax credit,
encouraging further collaboration between Arizona’s
research universities and the private sector, and a 5 percent
acceleration of the depreciation schedule for business
personal property, which is forecast to spur purchases of
new equipment and other capital investments.
Education and training are another component of the Four
Cornerstone initiative. Employers need a skilled workforce,
and employees want a good school system for their
children. To meet this goal, Arizona has developed a path
to achieve specifc benchmarks by 2020. These include
raising the high school graduation rate by 18 points to 93
percent, increasing the number of third graders who meet
reading standards by 25 points to 94 percent, and doubling
the number of college students who complete their studies
and receive a four-year degree.
The state has also worked to develop a series of reforms in
budgeting and operations. These include budget reforms
that encourage private-sector job growth, economic
vitality, higher state revenues, and improved opportunities
for the state to provide appropriate support for its core
functions: public safety, education, and assistance for the
truly needy. Beyond budget reforms, the state is working to
become more business-friendly by reviewing right-to-work
laws, as well as reforms to the health care and retirement
system.
Targeting High Tech, High Innovation
The state has worked to address economic development
in a broad sense by providing support and incentives to
businesses across the board. Arizona also recognizes
its strengths and capacities, and has targeted aerospace/
defense, semiconductor/electronics, advanced
manufacturing, communications, green energy (including
solar), IT and optics industry sectors as those holding the
most promise and highest potential return on investment.
These industries capitalize on the state’s robust high-tech
capacity and infrastructure, skilled workforce and the
ability to garner both public and private support in moving
these industries forward.
Clusters in Arizona
Largest Cluster: Business & Financial Services,
416,361 jobs
Largest Growth Cluster: Business & Financial
Services, 93,524 since 2002
Most Competitive Cluster: Biomedical/
Biotechnical (Life Sciences), 40,023 new or retained
jobs due to state competitive advantage
Most Concentrated Cluster: Mining, 1.86 times
the national concentration level
34
ARKANSAS
Arkansas’ Place in the Rankings
1st Budget Gap
3rd Entrepreneurial Activity
4th Cost of Living
6th Higher-ed Effciency
6th High School Advanced Placement
Intensity
6th Academic R&D Intensity
9th Short-term Job Growth
9th Productivity Growth
9th Per Capita Income Growth
10th Export Intensity Growth
17th STEM Job Growth
17th Job Placement Effciency
18th Gross State Product Growth
19th Long-term Job Growth
22nd Small Business Lending
24th Small Business Survival Index
24th College Affordability
25th Business Birth Rate
34
education, job training and lifelong learning programs.
The Quick Action Closing Fund comes from $50 million
in the General Improvement Fund specifcally directed at
economic development. This program’s fexible structure
and performance-based incentives allow the state to focus
Home to national food and retail giants, Arkansas
has capitalized on the stability and growth of its food
and fber manufacturers to ride out the worst of the
national recession and realize job growth (ranked ninth
nationally) from 2009 to 2011. The state’s success is built
on conservative budgeting and cautious spending, along
with fast and fexible economic development incentive
tools that attract and close deals quickly and effectively.
Coupled with a broad array of incentives and active
cooperation between entities at the local, regional and state
level, Arkansas is an enterprise-friendly environment that
provides signifcant opportunities for growth.
Conservative Budgeting and Cautious
Spending
With Arkansas one of only four states in the U.S. to
enter FY2011 without an offcial defcit, Governor Mike
Beebe has said that “conservative budgeting and cautious
spending have put Arkansas in an advantageous position.”
Over the past fve years, Arkansas state government grew
by an average of about 7 percent, with the biggest year of
growth in FY2005, when the state budget grew by 10.88
percent. The state met its $4.4 billion budget for FY2010
with $23.7 million left over, according to the state’s fscal
offce, doing so by tapping its newly established “rainy
day” fund, using unspent educational facilities funds, and
making $206 million in budget cuts.
The governor cut the state budget twice: by $100 million
in October 2009 and by $106 million in January 2010,
due to a shortfall in revenues. However, the state did
not lay off employees or reduce services for FY2010.
The Arkansas economy has been less affected by the
national recession than most other states because of its
concentration on the thriving agricultural sector, leading to
the state outperforming others in gross state product and
employment growth. In 2010, the unemployment rate was
7.9 percent, compared to the U.S. unemployment rate of 9.6
percent.
Doing Business at the Speed of
Business
Arkansas’ Quick Action Closing Fund has brought more
than 26,000 jobs to Arkansas, offsetting some of the
thousands lost in the recession. The fund’s nonpartisan
board formulates long-term economic development
strategies and integrates economic development with
35 35
in the state. The ARCMF invests in technology-based
enterprises in the early stages of development and not
yet able to attract adequate private sources of traditional
venture or investor-backed fnancing. A portion of this
fund will be used to validate early-stage technology before
other investments can be made.
Target Industries
Natural and cultivated resources are the basis for many
of the state’s industries. The leading industry is food
manufacturing of chicken. Rice, soybeans and cotton
are also processed in Arkansas. Major national food
manufacturing companies are headquartered in Arkansas,
as well as major retailers. Metal, lumber and paper
products are also important to the state’s economy, as
well as agriculture and manufacturing. Other targeted
business opportunities for the state stand to help transition
the state’s economy to one supported by higher-paying,
knowledge-based jobs. These target industries are seen
as niche opportunities based on existing strengths and
competitive advantages. The state’s targeted opportunities
include advanced manufacturing, information technology,
and green energy.
on businesses’ specifc needs, giving Arkansas the ability
to design incentive packages tailored to projects in specifc
high-value industries within the state. These programs,
which are based on payroll instead of jobs, provide a
clear metric requiring investment in high-wage jobs by
recipients.
Discretionary incentives for start-ups in emerging and
research-based industries include the refund of sales and
use taxes for building materials, machinery, and equipment
for approved projects, a transferable income tax credit
equal to 10 percent of payroll for up to fve years, and
a transferable income tax credit equal to 33 percent of
eligible research and development expenditures.
The state has several research and development (R&D)
incentive programs to provide incentives for university-
based research, in-house research, and R&D in start-up
technology-based enterprises. The University Based
Research and Development program focuses on eligible
businesses that contract with one or more Arkansas
colleges or universities to perform research. These
companies may qualify for a 33 percent income tax credit
for qualifed research expenditures.
Another R&D tax credit program targets new and existing
businesses conducting “in-house” research that qualifes
for federal R&D tax credits. These projects may qualify
for income tax credits of up to 20 percent of new and
incremental expansions of research for a period of up to
three years. The income tax credit earned for in-house
research and development may be used to offset 100
percent of the frm’s state income tax liability. Any unused
credit may be carried forward for a period of nine years.
The Strategic Value Research and Development
incentives are for qualifying businesses that invest in in-
house research in an area of strategic value or a research
and development project sponsored by the Arkansas
Science and Technology Authority. The “strategic value”
research areas are in felds with long-term economic
or commercial value to the state, as identifed in an
Arkansas Science and Technology Authority research and
development plan.
Another key program within the state, targeted at early-
stage businesses, is the Arkansas Risk Capital Matching
Fund (ARCMF), which works to strengthen the fnancial
infrastructure supporting technology-based enterprises
Clusters in Arkansas
Largest Cluster: Agribusiness, Food Processing &
Technology, 118,277 jobs
Largest Growth Cluster: Business & Financial
Services, 25,810 new jobs since 2002
Most Competitive Cluster: Business & Financial
Services, 7,481 new or retained jobs due to state
competitive advantage
Most Concentrated Cluster: Agribusiness,
Food Processing & Technology, 2.57 times the
national concentration level
36
California boasts the eighth largest economy in the
world; the state’s 2009 Gross State Product (GSP) was
approximately $1.88 trillion. California’s strengths lie in
the size, diversity, and adaptability of its economy, as well
as in the talent and range of its population. Despite the loss
of more than a million jobs during the recession, California
remains a center of venture capital and the entrepreneurial
spirit.
To help address some of the issues facing the state,
Governor Jerry Brown and other Golden State leaders
have developed a list of priority issues to be resolved in
order to address California’s budget shortfall and move
the state forward. These priorities include creating jobs for
California’s future, improving education, addressing the
budget, tackling pension reform, and developing a plan for
the creation of clean energy jobs.
Addressing the Budget
The recent recession and housing market bust have left
California with a serious projected budget defcit for
FY2012, greater than just three other states. Governor
Brown began his budget restructuring effort with revenue
projections viewed as much more reasonable than those
used for previous budgets. While conservative forecasts
may increase the projected defcit, the governor’s
assumptions have provided a realistic budget framework
within which to make tough decisions.
Brown’s budget plan relies equally on tax increases
and signifcant cuts to state programs. The governor
is reviewing the extension of previously enacted tax
increases, including increases in income taxes, sales
taxes, and vehicle license fees, as well as major spending
reductions.
While California’s university system—with over two
million students enrolled at nearly 300 colleges and
universities and over 270,000 graduates each year—has
been considered one of the foundations of the state’s
success in the innovation economy, the system could
suffer under the state’s current budget situation. Governor
Brown has proposed reducing funding for the state’s two
university systems by $1 billion. This would bring nominal
spending for the University of California system down to
the FY1999 level, a time when the system had 31 percent
fewer students than it does today. However, the governor’s
current plan exempts cuts to the K-12 education system.
Additional budget cutting initiatives include reducing
funding for the Medi-Cal (Medicaid) program by $1.7
billion. The governor’s budget would limit the use of
Medicaid services by setting an annual dollar limit on
the amount the state will pay for certain services such as
hearing aids and durable medical equipment, reducing
prescriptions (except for life-saving drugs) to six per year,
and limiting doctor visits to ten per year. The governor
also would eliminate a program that helps elderly residents
at risk of being placed in a nursing home to remain in
their communities, and would cut long-term care provider
payments by 10 percent. Governor Brown also proposes
scaling back the state’s Healthy Families (children’s
health insurance) program by eliminating vision benefts,
increasing premiums for families with incomes between
150 and 250 percent of poverty, and increasing co-
payments.
CALIFORNIA
California’s Place in the Rankings
1st Academic R&D Intensity
7th Productivity Growth
7th Economic Output Per Job
7th STEM Job Concentration
7th Small Business Lending
8th High School Advanced Placement
Intensity
11th High Speed Broadband Availability
13th Entrepreneurial Activity
19th Gross State Product Growth
21st High-tech Share of All Businesses
23rd Business Birth Rate
36
37
Globally Connected and High-Tech
California remains one of the largest economies in
the world, due in part to its world-class transportation
infrastructure and seaports. The state’s export shipments
of merchandise totaled $142.3 billion in 2010, a 16
percent increase from 2009. The state is home to 12 cargo
airports and 11 cargo seaports, as well as 18 foreign trade
zones and 42 enterprise zones that provide access to a
global clientele, especially from the Pacifc Rim. To help
maintain this competitive advantage, the state created the
California Infrastructure and Economic Development
Bank (I-Bank) which was intended to promote economic
revitalization, enable future development, and encourage
a healthy climate for jobs in California. The I-Bank has
broad authority to issue tax-exempt and taxable revenue
bonds, provide fnancing to public agencies, provide credit
enhancements, acquire or lease facilities, and leverage state
and federal funds focused on industrial development and
infrastructure.
California continues to be one of the nation’s leading
high-tech states, ranking in the top 10 in concentration of
science, technology, engineering and mathematics (STEM)
workers. Historically, California has been the leading
high-tech export state with $41.3 billion in exports in
2009, almost $6 billion more than the next closest state.
California is home to 40 federal laboratories. In 2009, over
23,000 patents originated in California, far more than any
other state. This represented one quarter of all U.S. patents
issued in 2009.
To help harness and enhance California’s innovative
spirit, the state launched the forward-thinking Innovation
Hub (iHub) initiative. The iHub initiative improves the
state’s national and global competitiveness by stimulating
partnerships, economic development, and job creation
around specifc regional research clusters. These iHubs
link and leverage assets such as research parks, technology
incubators, universities, and federal laboratories to provide
an innovation platform for startup companies, economic
development organizations, business groups, and venture
capitalists. The state designated six initial iHub regions in
early 2010.
Access to capital is key to starting and growing new
companies, and California remains a center for venture
capital (VC) investment. In 2010, California companies
received more than $11 billion, or 47.8 percent of all VC
invested in the U.S. Top sectors receiving VC funding
were software, biotechnology, energy, medical devices and
telecommunications. California is No. 1 in our rankings
of federal and academic research and development (R&D)
intensity. The state is home to 40 federal labs and 30
percent of the nation’s NASA centers. The University of
California Technology Transfer Program is frst in the
number of patents and the number of inventions reaching
the market. To help spur investments in the private sector,
the state offers a 15–24 percent R&D tax credit to
businesses.
A recent survey conducted by the California Employment
Development Department found that the state is leading
the nation in the percentage of the labor force working
in green jobs; indeed, green-oriented jobs have grown
faster than other sectors of employment in the state since
1995. The governor’s green jobs plan calls for building
12,000 megawatts of localized electricity generation,
building 8,000 megawatts of large-scale renewables (and
the necessary transmission lines), and developing more
cogeneration projects to increase combined heat and power
production by 6,500 megawatts.
37
Clusters in California
Largest Cluster: Business & Financial Services,
2,646,918 jobs
Largest Growth Cluster: Business & Financial
Services, 424,029 new jobs since 2002
Most Competitive Cluster: Energy (Fossil &
Renewable), 33,233 new or retained jobs due to state
competitive advantage
Most Concentrated Cluster: Computer &
Electronic Product Manufacturing, 2.15 times the
national concentration level
38
With a strong core of energy-related assets and capacities,
Colorado has pushed to make green and renewable energy
a contender for development opportunities within the state.
Working to capitalize on the National Renewable Energy
Laboratory (NREL), which is located in the state, Colorado
launched the Colorado Renewable Energy Collaboratory,
which is backed by the NREL and the state’s three leading
research universities. These institutions are working with
private-sector partners to develop advanced renewable-
energy and energy-effciency solutions that are ready for
the marketplace.
Controlling Spending Key to Addressing
Budget
Facing an estimated $1 billion defcit, the state is working
to control spending through cuts in spending on education
and Medicaid, as well as increasing state employees’ salary
contributions to beneft plans. These reductions have led to
cutbacks at state institutions; for example, the University
of Colorado system laid off 79 employees in FY2011 and
has increased employee workloads. This year’s defcit
was cut in half when a spring forecast improved revenue
projections.
With this year’s $18 billion spending plan, the state has
reduced public school spending by $250 million, a 5
percent decline from the previous year. This cut amounts
to more than $400 per student. The budget also closes a
prison in the state, consolidates the Division of Wildlife
with the Colorado state park system, and increases state
workers’ pension contributions while limiting raises.
As outlined above, the budget enacted by Governor
John Hickenlooper entails $36 million in cuts to higher
education, a 6.5 percent reduction. On top of the cuts made
necessary by the more conservative economic forecast
for the next fscal year, Governor Hickenlooper has also
proposed raising the amount of the general fund kept in
reserve from 2 to 4 percent. The increased reserve will
need to be offset by an additional $141.5 million in cuts.
The Governor has suggested he will not raise taxes to
offset the cuts. Colorado also repealed sales taxes of online
software sales and agricultural products.
COLORADO
Colorado’s Place in the Rankings
1st Small Business Lending
2nd High-tech Share of All Businesses
2nd Academic R&D Intensity
3rd Entrepreneurial Activity
5th STEM Job Concentration
7th High School Advanced Placement
Intensity
8th Median Family Income
10th Small Business Survival Index
10th Educational Attainment
12th State and Local Tax Burden
14th Business Birth Rate
15th Business Tax Climate
15th Higher-ed Degree Output
15th Productivity Growth
16th High Speed Broadband Availability
17th Gross State Product Growth
18th Economic Output Per Job
19th Transportation Infrastructure
Performance
22nd Higher-ed Effciency
24th Long-term Job Growth
25th College Affordability
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39
A Bottom-up Approach to Economic
Development
Colorado is making a concerted effort to cut red tape and
create new jobs through a community-based, “bottom-
up” initiative that is driven by local and regional
priorities. The intent is to create sustainable jobs driven
by the private sector, with the state playing a supportive
role. This approach is designed to identify and defne the
needs, priorities, strengths, and weaknesses of each of the
state’s counties, and incorporate them into 64 economic
development plans tailored to each county. These plans
will roll up into fourteen regional plans that will comprise
a comprehensive statewide economic development plan.
Again, the intention is to coordinate and catalyze job
creation and attract investment.
The bottom-up initiative team traveled over 20,000 miles
completing three state-wide tours and regional input
sessions to synthesize summaries from each county
and to reach consensus on top regional priorities. The
14 regional plans and county summaries were placed
online for a rigorous public review and comment period.
The resulting state-wide plan will address many of the
common denominators throughout the state while allowing
for local competitive advantages and strengths to show
through. This approach will allow each of the various
regions of Colorado – including urban, suburban and
rural constituencies, and a vast geography of mountains,
plains and plateaus – to develop a cohesive economic
development approach that will work for them.
Colorado relies on several key incentives and tax credits
to bolster businesses’ ability to create jobs. Key programs
include the Investment Tax Credit, which allows
businesses that invest in equipment used exclusively in an
enterprise zone to claim a credit against their Colorado
income taxes equal to 3 percent of the amount of the
investment, subject to limitations on the amount that can
be claimed in any one year.
Other programs targeted at new business facilities include
the New Business Facility (NBF) Jobs Credit, which
provides businesses hiring new employees in connection
with a new facility located in an enterprise zone a tax
credit against state income taxes of $500 per employee.
The New Business Facility (NBF) Agricultural
Processing Jobs Credit provides an additional credit
of $500 per new facility employee adding value to
agricultural commodities through manufacturing or
processing. With the New Business Facility (NBF)
Health Insurance Credit, a taxpayer with a qualifying
new facility is allowed a two-year $200 tax credit for each
new facility employee who is insured under a qualifying
employer-sponsored health insurance program.
Workforce is Key
Colorado places in the top 25 in fve of six workforce and
training measures, including in the top 10 for its educated
workforce and high school Advanced Placement courses.
The state offers workforce development and training
services to rural residents free of charge with its Colorado
Rural Workforce Consortium, which serves some 52
rural counties. This attention to workforce training and
development is further augmented by programs like the
Colorado Business and Education Talent Readiness Project
(BETR) and the Work, Education and Lifelong Learning
Simulation Center (WELLS).
The Colorado BETR Project, a science, technology,
engineering and mathematics (STEM) collaboration
between business, education and industry, has been
created to facilitate the promotion of STEM education and
workforce readiness to meet the needs of both job seekers
and employers. The WELLS Center, for its part, offers
a complete array of state-of-the-art patient simulation
tools and curricula for building clinical knowledge.
Students, faculty, nurses and physicians from throughout
the state can enhance their diagnostic and clinical skills
at the WELLS Center, either on site or at their healthcare
facility or academic institution. Program elements
include computer-based mannequins that can simulate
virtually any type of clinical experience, as well as faculty
development workshops, critical care nursing training, and
consulting services.
39
Clusters in Colorado
Largest Cluster: Business & Financial Services,
473,876 jobs
Largest Growth Cluster: Business & Financial
Services, 98,587 new jobs since 2002
Most Competitive Cluster: Energy (Fossil &
Renewable), 20,747 new or retained jobs due to state
competitive advantage
Most Concentrated Cluster: Information
Technology & Telecommunications, 1.39 times the
national concentration level
40
With a strong foundation of high-tech industries such
as aerospace, bioscience, medical technology and
defense, Connecticut is well positioned to compete in
the 21st century economy. The state has been heralded
as a research and development hub, and a leader in
emerging fuel cell technologies, alternative energy and
nanotechnology. Connecticut is home to many of the
leading insurance companies, earning it the nickname
“Insurance Capital of the World,” and the state’s fnancial
services sector is often recognized for its workforce talent
and innovation.
State Priorities—Jobs, Making
Government More Effcient
Governor Dannel Malloy has proposed cutting state
spending, while at the same time working to create new
jobs and retain and grow existing businesses to increase
revenue coming into the state. Governor Malloy’s
administration is making key cuts in spending to address
budget concerns and to get its fscal house in order, making
state government less costly and more effcient. There is a
concerted effort to restructure state government to provide
services to Connecticut residents at a substantially lower
cost to taxpayers.
Alongside these efforts to rein in spending, the state has
proposed increasing income tax rates for many flers,
expanding the sales tax base to include more services,
increasing the sales tax rate, eliminating select property
tax credits, and instituting a rule that would make it harder
for corporations to avoid income taxes.
Connecticut is projecting $2 billion in personnel-related
savings over the biennium to be negotiated with the state’s
public employee unions. Savings will be achieved by
freezing state employee wages, moving state employees to
a health plan similar to that provided to federal workers,
extending furloughs of three days a year until the end of
the biennium, and raising the retirement age.
Governor Malloy has also identifed an additional $1.5
billion in new revenue, 81 percent of which is to be paid for
by individuals, and 19 percent of which is to be paid for by
businesses. For flers who qualify for the federal Earned
Income Tax Credit (EITC), a new state EITC at 30 percent
of the federal level will help reduce the overall tax burden
incurred through other state taxes.
To help repair and refurbish the state’s aging transportation
infrastructure, Governor Malloy is proposing over $1
billion in capital investments, as well as an additional $130
million for affordable housing and $15 million for tourism
marketing to help attract visitors to the state.
The governor is proposing an additional $758 million
in spending reductions, including the elimination of the
CONNECTICUT
Connecticut’s Place in the Rankings
2nd High Speed Broadband Availability
3rd Productivity Growth
5th Educational Attainment
5th Entrepreneurial Activity
10th High School Advanced Placement
Intensity
12th Median Family Income
14th STEM Job Concentration
16th Export Intensity Growth
16th High-tech Share of All Businesses
17th College Affordability
17th Growth in Share of National Exports
19th Export Intensity
20th Academic R&D Intensity
21st Job Placement Effciency
23rd Higher-ed Degree Output
24th High Speed Broadband Intensity
25th Export Growth
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41
government unit that regulates charitable gaming and
the elimination of outside management contracts for CT
Transit. In addition, risk reduction credits for inmates will
help save the state $3.8 million.
Jump-Starting the Economy
To help attract business relocations and new business start-
ups, the state has implemented the First Five Program.
Governor Malloy has proposed signifcant expansions
of the Reinvestment Tax Credit, the Manufacturing
Assistance Act and the Job Creation Tax Credit; removed
caps on credits for companies meeting job creation
targets and allowed the credit programs to be combined
in order to increase the benefts to businesses. These
programs are structured to reward the “frst fve” new or
existing companies adding 200 new full-time jobs within
Connecticut in the next two years. Businesses adding 200
jobs over fve years are required to make a $25 million
investment in the state to access the incentives.
To make the case for Connecticut to expanding companies,
state leaders emphasize that employee productivity is at
an all-time high, with output per worker more than 33
percent above the national average. In addition, a highly
trained and educated workforce is a major selling point for
business attraction and retention efforts. Thirty-six percent
of the state’s population aged 25 and older has a college
degree. Connecticut is ranked 10th in our Enterprising
States workforce rankings and third in employee
productivity. The state boasts over 45 colleges and
universities, ranging from Ivy League research institutions
to community colleges offering two-year degrees and job
training programs. Connecticut is a top 25 state for college
affordability and for the number of degrees produced.
The state also has a wide array of incentives aimed at
helping businesses to strengthen their competitive edge.
Whether the area of need is equity investment, fxed-asset
purchases of land, working capital, or buildings, machinery
and equipment, fnancing programs are available to
support both large and small businesses. State programs
include direct funding from the Department of Economic
and Community Development (DECD), Connecticut
Development Authority, and Connecticut Innovations,
a program offering assistance and funding to high-tech
entrepreneurs. In addition, the state maintains a network of
local and regional revolving loan funds to assist businesses
with their fnancing needs.
Industry Cluster Initiative
Connecticut’s cluster-based economic development
initiative is built around the idea that nurturing the state’s
key industries improves the competitiveness of businesses
within those industries, in turn boosting the state’s
economy as a whole.
The state is focusing on several key clusters, including
biosciences, aerospace and information technology. The
bioscience cluster is overseen by Connecticut United
for Research Excellence (CURE), which was initially
launched with $300,000 in state seed money and $700,000
from industry contributions. The cluster has since received
more than $370,000 in additional funds from DECD and
$61.5 million in public funds. Currently, more than 110
Connecticut organizations are members of CURE.
The aerospace cluster operates under the direction of
Aerospace Components Manufacturers (ACM). The
state’s investment of $769,000 was leveraged by $2.3
million in industry funds and $140,000 in other public
funds. ACM is made up of more than 40 manufacturers
from the aerospace industry and is at work in areas
such as progressive and lean manufacturing, workforce
development, consolidated purchasing, multi-company
teaming, and new business identifcation in the worldwide
aerospace market.
The software or information technology cluster, also
known as eBizCT, is an affliate of the Connecticut
Technology Council (CTC). This cluster has worked to
identify and address obstacles in areas such as workforce
development and the state’s regulatory environment. To
date, the group has received more than $1 million in state
and industry dollars. The CTC continues to develop a
strategic plan to strengthen the IT industry, to promote
growth, visibility and competitiveness, and to support
e-business strategies for all Connecticut companies.
41
Clusters in Connecticut
Largest Cluster: Business & Financial Services,
345,465 jobs
Largest Growth Cluster: Business & Financial
Services, 47,348 new jobs since 2002
Most Competitive Cluster: Transportation
Equipment Manufacturing, 9,270 new or retained jobs
due to state competitive advantage
Most Concentrated Cluster: Transportation
Equipment Manufacturing, 2.53 times the national
concentration level
42
Delaware has growing strength in exports, ranking seventh
in export growth from 2002 to 2010, and an innovative
and entrepreneurial business environment. It placed
seventh in science, technology, engineering, and math job
concentration and ffth in share of high-tech business. With
these advantages, plus a business-friendly tax environment
(ranking eighth in the state business climate tax index),
Delaware is poised to capitalize on its strengths to build
the state’s future now.
A Balanced Budget through
Consolidation and Lean Budgeting
While Delaware faced a more than $300 million defcit
early in 2011, the state now fnds itself with a surplus of
about $320 million as payments of taxes and fees and
revenue from abandoned properties have rolled in. The
state is now deciding how to balance the allocation of
these surplus funds between tax reductions and targeted
investments. Proposals include the restoration of assistance
to low-income residents, job creation and tax breaks; the
repeal of 2009 gross receipts, corporate franchise and
personal income tax increases; and the addition of $30-
40 million to the Transportation Trust Fund for highway
improvements.
The governor has requested the ability to realize full-
year savings from FY2010 statewide position reductions,
and worked to drive down employee health costs by
renegotiating the state’s contract for prescription drugs and
implementing a new beneft tier for employees hired after
January 1. Additional efforts to trim the budget include a
push to drive public education administrative effciencies
through consolidated procurement and purchasing,
reducing funding for public school transportation to refect
reduction in fuel costs, and consolidating government
agencies to realize cost savings.
Building Delaware’s Future Now
To maintain fscal discipline while investing in economic
growth, Governor Jack Markell is calling for the creation
of the Building Delaware’s Future Now program.
This proposal would use new state revenues to address
Delaware’s most important needs: putting state residents
to work while upgrading critical public infrastructure,
responsible reductions in taxes and state debt, and
investments in early childhood and higher education. These
initiatives will be funded, in part, by an additional $320
million in expected state revenues as a one-time chance to
invest responsibly in core priorities.
The frst element of the plan is aimed at rebuilding some
of Delaware’s eroding assets in order to attract and retain
external investment. A New Jobs Infrastructure Fund
is intended to give the state the fexibility to address
immediate needs for new businesses that seek to locate
in Delaware and to provide expansion opportunities
for existing businesses. The $40 million set aside for
this initiative would be supplemented by $20 million of
bonding authority.
DELAWARE
Delaware’s Place in the Rankings
1st Economic Output Per Job
5th High-tech Share of All Businesses
5th High Speed Broadband Intensity
6th Median Family Income
6th Export Intensity Growth
7th Export Growth
7th STEM Job Concentration
8th Business Tax Climate
10th Higher-ed Degree Output
13th Budget Gap
13th Export Intensity
14th High Speed Broadband Availability
15th Growth in Share of National Exports
18th High School Advanced Placement
Intensity
23rd Educational Attainment
24th Gross State Product Growth
42
43
Additional components of Delaware’s infrastructure push
include a $40 million supplement to the Transportation
Trust Fund, aimed at making investments in maintaining
roads and other multimodal transportation, including
train stations, bike paths, and air and water routes.
Other programs include the $35 million Delaware
Asset Preservation Fund, aimed at capital investments
to maintain key infrastructure; a $10 million Housing
Preservation Fund, targeting housing stock for families
of low and modest incomes; and the $10 million Open
Space Preservation, which will help preserve critical
open space and address quality-of-life issues. In each case,
the intention is to upgrade the infrastructure needed for
businesses to grow while putting Delaware residents to
work.
The second part of Building Delaware’s Future Now is
aimed at making responsible reductions in taxes and state
debt. In addition to lowering income taxes, the state’s
focus is on reducing energy rates for some of the state’s
core employers: small businesses, fnance frms, and
manufacturing. The plan would reform the gross receipts
tax hitting small businesses and put $20 million towards
debt reduction. The intent is to give businesses incentives
to grow while lowering their long-term energy costs. The
state is also working to reduce its debt, putting people to
work on capital projects paid for in cash instead of bonds.
The third part of Building Delaware’s Future Now
proceeds from the assumption that education is critical to
improving the state’s economic future. The plan targets
investments to help children arrive for their frst day of
public school more ready to learn, and supports new efforts
to help graduates succeed in work and college. To that end,
the state is dedicating money to improving the quality of
early childhood education.
Delaware is also working to expand research and job
training facilities at its three publicly funded universities.
Building Delaware’s Future Now would make $30
million in onetime investments in the state’s research
and technology infrastructure: $10 million for the Optics
Center Research Lab at Delaware State, $10 million to
expand lab capacity at the University of Delaware, and $10
million for facilities expansion at state community colleges
to train for jobs in the sciences.
Targeting Industries Focused on Growth
Delaware has targeted industry clusters that capitalize
on existing strengths and relationships that have proven
important for the state. These industries include automotive
manufacturing, biotechnology and life sciences, chemistry
and advanced materials, fnancial services, and health
sciences and medical devices.
Key infrastructure to support ongoing development and
future growth in these clusters includes the Delaware
Technology Park, a 40-acre research center supporting
Delaware’s science-based growth. A partnership between
the State of Delaware, the University of Delaware, and
the private sector, the Delaware Technology Park is home
to some of the most innovative start-up companies and
research centers in the region, including the Delaware
Biotechnology Institute and the Fraunhofer Center for
Molecular Biotechnology. Delaware’s infrastructure and
workforce have proved to be attractive to biotechnology
and life science companies. With leading academic
institutions, targeted state and local economic development
programs, and venture capital funding, this cluster
represents the fastest growing industry in the state.
For more than two decades, Delaware has been renowned
for its banking, fnancial services and insurance industries.
Delaware has partnered with many innovative and dynamic
fnancial companies around the globe, establishing the
state as the place for international fnancial institutions
looking to enter U.S. markets. Delaware’s pro-business
legal and regulatory environment, strategic positioning,
and landmark legislation such as the Financial Center
Development Act have paved the way for the fnancial
services industry to become a key component of
Delaware’s economic strength and growth.
The fnancial services cluster is composed of a large,
interconnected community of credit card banks,
commercial banks, non-banking fnancial entities,
investment advisors, insurance companies, trust entities,
and service providers. In all, this cluster represents more
than 1,000 employers and nearly 40,000 employees in
Delaware.
43
Clusters in Delaware
Largest Cluster: Business & Financial Services,
81,263 jobs
Largest Growth Cluster: Business & Financial
Services, 24,620 new jobs since 2002
Most Competitive Cluster: Business & Financial
Services, 12,369 new or retained jobs due to state
competitive advantage
Most Concentrated Cluster: Business
& Financial Services, 1.31 times the national
concentration level
44
With the state’s unemployment rates at over 10 percent
and a sizeable budget defcit looming, Governor Rick
Scott took offce with an agenda focusing heavily on
jobs, government effciency, reducing state spending, and
lowering taxes.
Reducing State Spending and Cutting
Taxes
Governor Scott’s frst months on the job have focused
on what he calls the “jobs budget” and a pledge to veto
any provisions that do not create private-sector jobs.
The governor has proposed to cut the corporate income
tax to 3 percent from 5.5 percent in the coming fscal
year and to eliminate the tax by 2018. Governor Scott
also would signifcantly ratchet down Florida’s existing
cap on local property taxes. To help offset this loss in
revenue, the state’s 11 public universities raised tuition by
15 percent for the 2010–11 academic year. This tuition
hike combined with a similar increase in 2009–10, results
in a total two-year increase of 32 percent. The state is
also reviewing efforts to reduce the state workforce by 8
percent, requiring around 8,100 layoffs and the elimination
of about 2,000 vacant positions. Scott would also require
$5,000 health insurance premium contributions from state
employees.
Ultimately, the state passed a $70 billion budget,
overcoming a $3.7 billion defcit without raising taxes.
The budget plan cuts education funding by $1.3 billion (8
percent), offers $300 million in tax cuts, eliminates 4,500
state positions, and includes $30 million in business tax
breaks. An important priority in the “jobs” budget is to
consolidate the state government’s economic development
efforts into a single, highly focused agency. Working with
its public and private partners, the state aims to have the
resources to be effective and the fexibility to adapt to
particularly promising opportunities.
7–7–7 equals 700,000 Jobs
The state has embarked on an ambitious seven-step plan
to create 700,000 jobs over the next seven years. The
7–7–7 Plan is focused on job growth that will accelerate
the number of new business start-ups, increase wages
and salaries, and shore up the productivity and vitality of
Florida’s economy. In addition to creating new jobs, the
program is focused on increasing the state’s GDP by $74
billion, increasing personal incomes by $41 billion, and
providing $1 billion in new state tax revenues as a direct
result of increased economic growth.
The frst step of the plan is to use transparent, outcome-
based budgets and accountability budgeting that is aimed
at “performance” and “effectiveness,” while returning
Florida’s state and local government expenditure burden
to 2004 levels and cutting the number of budget line items
from over 3,200 to 469.
FLORIDA
Florida’s Place in the Rankings
1st High School Advanced Placement
Intensity
1st Job Placement Effciency
2nd Higher-ed Effciency
3rd College Affordability
5th Growth in Share of National Exports
5th Business Tax Climate
6th Small Business Survival Index
7th Entrepreneurial Activity
12th High Speed Broadband Availability
13th Small Business Lending
16th Gross State Product Growth
16th High Speed Broadband Intensity
19th Higher-ed Degree Output
20th Long-term Job Growth
20th Export Intensity Growth
20th State and Local Tax Burden
21st STEM Job Growth
21st Business Birth Rate
22nd Export Growth
22nd High-tech Share of All Businesses
24th Export Intensity
25th Per Capita Income Growth
25th Cost of Living
44
45
The second step is to reduce government spending
by using what the state calls common-sense business
solutions, including operational effciencies, saving almost
$1 billion; making an 8 percent reduction in the state
workforce; aligning state employee pensions and health
care with policies in other states and the private sector; and
reforming health care provisions for Medicaid recipients.
Enacting additional effciencies in various state programs
could save $982 million, including a further 2 percent
reduction in the state workforce.
Third, Florida aims to reform regulations that currently
burden job creation. Efforts would include making
unemployment benefts more affordable, limiting frivolous
lawsuits by implementing tort reform, instituting a
regulatory freeze and implementing a comprehensive
review of existing and proposed regulations, and
expediting permits for job-creating businesses. Governor
Scott’s administration has reviewed over 11,000 regulations
and identifed more than 1,000 for repeal.
The fourth, and perhaps most critical, piece of the state’s
job creation activities is to restructure the state’s economic
development program using public-private partnerships
to improve effciency, remove duplication, and ensure
continued access to industry expertise. The plan would
align economic development activities with others that
perform similar functions, such as workforce training and
community development. Other structural changes would
include combining several incentive funds into a single,
more fexible fund, and improving the overall fexibility of
the economic development system to better help existing
businesses. Another element would use state grants to
create university and private partnerships to support
clustering activities in the state.
The ffth element of the plan would improve school choice
and virtual education, while the last two elements of the
plan would reduce the state’s property tax and eliminate its
corporate income tax. State leaders are working to reduce
the statewide property tax by $1.1 billion, conduct a two-
year, 25 percent water management district tax “holiday,”
and provide additional property tax relief as state revenues
grow in the future. Finally, Governor Scott has called for
the phasing out and eventual elimination of the corporate
income tax.
High Impact Job Creation Initiatives
The Qualifed Defense and Space Contractor Tax
Refund (QDSC) targets defense, homeland security,
and space business contractors, industries in which the
state has traditionally excelled. The 2001 legislative
session designated over $43 million for aerospace-related
economic development. The state’s space-related economic
development agency will get $10 million and another $16
million will be invested in improvements at Kennedy
Space Center and Cape Canaveral. The Space Business
Incentives Act includes $10 million in tax credits and
another $7.1 million in credits to diversify space research
and development. Another bill improves the regulatory
environment for the industry by exempting launch
companies from risk liability associated with space fight.
The Capital Investment Tax Credit (CITC) is used to
attract and grow capital-intensive industries in Florida.
It is an annual credit, provided for up to twenty years,
against the corporate income tax. The following sectors are
eligible for projects: clean energy, biomedical technology,
fnancial services, information technology, silicon
technology, transportation equipment manufacturing,
and corporate headquarters facilities. The High Impact
Performance Incentive is a negotiated grant used to
attract and grow high-impact facilities in Florida. In order
to participate in the program, the project must operate
within designated high-impact portions of target sectors
like the ones listed above.
Workforce training incentives include the Quick Response
Training Program (QRT), an employer-driven training
program designed to assist new value-added businesses
and provide existing Florida businesses with the necessary
training for expansion.
The state also offers infrastructure incentives including
the Economic Development Transportation Fund.
Commonly referred to as the “Road Fund,” this incentive
is a tool designed to alleviate transportation problems that
adversely affect a specifc company’s location or expansion
decision. The award amount is based on the number of
new and retained jobs and the eligible transportation
project costs, up to $3 million. The award is made to local
government entities on behalf of a specifc business for
public transportation improvements.
45
Clusters in Florida
Largest Cluster: Business & Financial Services,
1,285,730 jobs
Largest Growth Cluster: Business & Financial
Services, 300,013 new jobs since 2002
Most Competitive Cluster: Business & Financial
Services, 86,806 new or retained jobs due to state
competitive advantage
Most Concentrated Cluster: Arts,
Entertainment, Recreation & Visitor Industries, 1.35
times the national concentration level
46
Long a crossroads for trade and commerce, Georgia
has capitalized on its strong logistics and transportation
networks to continue to be a leader in exports—a critical
element of its economy and future opportunity for growth
and revenue generation.
Addressing the Defcit
Georgia faces a structural defcit. The state’s FY2010
budget closed a $3.3 billion budget defcit, which resulted
from revenue shortfalls, but used $1.35 billion in American
Recovery and Reinvestment Act (ARRA) funds, almost
$500 million in various reserve funds, and cuts of
approximately $1.5 billion from state agencies. Even with
projected revenue growth of approximately 5 percent in
FY2011 and 6 percent in FY2012, Georgia would still face
an FY2011 budget defcit of $823 million and an FY2012
budget defcit of $1.94 billion.
The state’s new $18.3 billion spending plan contains no
pay raises for teachers and state employees and cuts higher
education funding, while maintaining funding for K-12
education. Because of a shortage of more than $275 million
in the state’s health care plan, Georgia public employees
will see their premiums increase at least 10 percent next
year.
Georgia is one of only eight states in the nation with a
AAA bond rating by all three major bond rating agencies.
Governor Nathan Deal has proposed a bond package of
less than $563 million, approximately 50 percent less than
bond packages in recent years.
Competitive Innovation
Governor Deal recently launched the Georgia
Competitiveness Initiative focused on job creation and
the development of a statewide economic development
strategy. The effort concentrates on strategic issues in
attracting and keeping high-paying jobs in Georgia
including infrastructure, innovation, education and
workforce development; maintaining a friendly business
climate; gaining more access to global commerce and
increasing government effciency.
According to Governor Deal, “The growth and stability
of our job base must come from private businesses. This
Initiative will create an environment that helps Georgia
businesses thrive, expand and attract new companies.”
Because of the broad scope and nature of the initiative, the
commissioner for the Georgia Department of Economic
Development and the president and CEO of the Georgia
Chamber of Commerce were asked to co-chair it. Twenty-
three business leaders from across the state will serve
on the steering committee, with a group of government
GEORGIA
Georgia’s Place in the Rankings
1st Entrepreneurial Activity
5th High School Advanced Placement
Intensity
6th Growth in Share of National Exports
8th High-tech Share of All Businesses
8th Business Birth Rate
9th Cost of Living
9th Higher-ed Effciency
9th Job Placement Effciency
12th Export Intensity Growth
14th Budget Gap
17th Export Growth
19th State and Local Tax Burden
20th Small Business Survival Index
22nd Median Family Income
23rd Export Intensity
23rd College Affordability
25th Economic Output Per Job
25th Business Tax Climate
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47
offcials assisting as ex-offcio members. The group
will work to deliver a plan that enhances Georgia’s
competitiveness and economic growth, while ensuring that
the 12 regions and the diverse industries across the state
are recognized. Initiative members will meet with business
leaders in each region this summer to gain a better
understanding of local needs and perspectives.
To help realize the promise of this effort, Georgia will
need to utilize existing tools to help drive new business and
job creation. These tools include a wide variety of statutory
and negotiated incentives to help eligible businesses grow,
as well as public-private partnerships that will be integral
in the success of these economic development efforts. The
state offers a range of corporate tax credits that enable
companies to minimize or eliminate state corporate
income taxes that, at 6 percent, are already among the
lowest in the nation. The state also offers an incentive to
new and existing business entities performing qualifed
research and development (R&D) in Georgia. Companies
may claim a 10 percent tax credit for increased R&D
expenses, subject to a base year calculation.
Georgia provides opportunities for companies to accelerate
their growth by connecting with the state’s broad menu
of business resources. The state regards innovation as
the key to maintaining competitiveness, and the Georgia
Department of Economic Development (GDEcD) assists
to innovative companies that create new products and
services which both generate revenue and advance society.
To assist innovative companies, the state has developed
the Georgia Centers of Innovation, which bring industry,
academic institutions and investment together around six
strategic industries that are already prominent in the state.
These industries include aerospace, agribusiness, energy,
life sciences, logistics, and manufacturing. Working
with the Georgia Research Alliance, the Advanced
Technology Development Center, and the university
system’s Board of Regents, the program harnesses the
power of collaboration to help these targeted industries
grow.
Exports Help Grow the State’s Economy
Georgia moved up six places to ninth in this year’s
export rankings, due to its growth in export intensity and
its increasing share of the nation’s total export market.
The state’s largest merchandise export category is
transportation equipment, which accounted for $6 billion
of Georgia’s total merchandise exports in 2010. Other
top merchandise exports were chemicals ($3.6 billion),
machinery ($3.5 billion), paper products ($3.1 billion),
and computers and electronic products ($2.4 billion). The
state has the world’s busiest passenger airport, two deep-
water ports, and the most extensive surface transportation
network in the nation. In 2010, $28.7 billion in exports
and $60.2 billion in imports passed through these ports,
making the state the 12th-largest export state and 9th-
largest import state in the U.S.
To support businesses looking to develop new markets
or expand international trade efforts, the GDEcD has
developed programs to help export-oriented business gain
access to research, online assistance, training, fnancial
opportunities and in-country market assessments. These
programs contribute signifcantly to the state’s economy,
in that companies that sell overseas grow an average of
18 percent faster and their workforces are typically 10
to 15 percent more productive than those that do not.
International sales volume lowers overall production costs
and leads to increased proftability.
The GDEcD, in collaboration with the U.S. Chamber
of Commerce, also provides access to TradeRoots,
a program offering customized workshops in seven
communities—Columbus, Douglas, Gainesville, Rome,
Savannah, Thomasville and Tifton—to educate companies
and economic developers about free trade agreements
and trade as an economic development tool. Furthermore,
the GDEcD provides assistance with trade shows,
international trade missions, in-country matchmaking
appointments, connections with international buyers, and
trade opportunity alerts to help the state’s small businesses
access international markets.
47
Clusters in Georgia
Largest Cluster: Business & Financial Services,
589,312 jobs
Largest Growth Cluster: Business & Financial
Services, 116,722 new jobs since 2002
Most Competitive Cluster: Biomedical/
Biotechnical (Life Sciences), 15,575 new or retained
jobs due to state competitive advantage
Most Concentrated Cluster: Apparel & Textiles,
2.10 times the national concentration level
48
While the island state has long been known for its idyllic
geography and tourism industry, Hawaii is currently facing
a more than $800 million defcit. To address this shortfall,
Governor Neil Abercrombie submitted his administration’s
budget with three essential goals including restoring basic
government functions, accelerating the state’s economic
recovery with immediate job creation, and reorienting
government toward investment in human capital and the
creation of a sustainable economy.
Required Spending for a New Day in
Hawaii
To meet the immediate needs of its citizens, Hawaii has
moved to restore critical government services, provide
temporary assistance for needy families, and address
infrastructure repairs and maintenance in what it terms
“required spending.” Key elements of these efforts include
$262 million in special funds to provide extended benefts
to unemployed workers and $54 million for public workers’
health care and retirement funds. The state is also looking
to restore positions at the State Historic Preservation
Division that will accelerate the permitting process
and shore up Hawaii’s building and tourism industries.
Plans are also in place to rebuild the state’s agricultural
inspection system in order to prevent invasive species from
compromising the state’s farm industry. Recognizing that
both commerce and tourism require safe highways, the
budget also provides $22 million in needed repairs and
maintenance.
Still, Governor Abercrombie recognizes that short-term
fxes are inadequate, and his administration has set
longer-term priorities in a plan called the New Day in
Hawaii. Priorities of this effort include education: the
state is targeting $14 million for student transportation,
nursing services for special needs students, new textbooks
and instructional tools, athletics programs, and tuition
assistance for the Hawaii National Guard. The governor
is also calling for $5 million to invest in the repair and
maintenance of Hawaii’s state parks to help stabilize and
grow the tourism industry within the state.
Hawaii passed an $11 billion annual budget, closing a $1.3
billion two-year projected shortfall with a combination of
$600 million in cuts and tax increases that will total $500
million over the next two years. The Legislature repealed a
state income tax deduction for higher-income earners, but
defeated proposals to begin taxing pensions in the state.
Growing a Sustainable Economy
Hawaii is working to create and grow a sustainable
economy with the Hawaii Five Point Economic Plan, a
series of programs aimed at creating and retaining new
jobs, as well as helping to build industry. These programs
hope to address problems created by the economic and
fscal crisis, including the decline in visitor arrivals,
business activity and investment, rising unemployment
HAWAII
Hawaii’s Place in the Rankings
3rd High Speed Broadband Availability
4th High Speed Broadband Intensity
5th STEM Job Growth
10th Long-term Job Growth
14th Small Business Lending
15th Gross State Product Growth
15th Budget Gap
16th Per Capita Income Growth
16th College Affordability
16th Educational Attainment
20th Short-term Job Growth
20th Economic Output Per Job
20th High-tech Share of All Businesses
22nd Business Tax Climate
24th Productivity Growth
48
49
and reduced consumer spending. To meet these demands,
the state is working collaboratively with counties, the
Congressional delegation, county Chambers of Commerce,
the Building Trades Council, the Pacifc Resource
Partnership, the Hawaii Economic Stabilization Initiative,
and other private sector and nonproft groups to spur
investment and create a workable plan to address the issues
hampering the state’s economy.
Elements of the plan include the Hawaii Clean Energy
Initiative, which targets the transformation of Hawaii’s
energy system to achieve 70 percent clean energy by
2030. Partly because of geography, Hawaii has some
of the highest energy costs in the nation, affecting both
consumers and businesses. By identifying new energy
sources, the state hopes to decrease energy cost volatility,
address the issue of exporting of up to $7 billion a year
out of the state to purchase foreign oil, and confront the
problem of Hawaii’s vulnerability to supply disruptions,
natural or man-made.
The Hawaii Innovation Initiative aims to build capacity
in the state’s creative and entrepreneurial workforce to
compete in an innovation-driven global economy. This
program works to support increased competitiveness,
productivity and effciency in both existing and emerging
industries.
The Global Links effort targets increases in the range and
value of goods and services exchanged between Hawaii
and its export markets. Reaching new external markets
for goods and services can be challenging for Hawaii’s
existing and emerging businesses, as can increasing
external investment capital fows. The Hawaii Open for
Business initiative works to maintain a more competitive
business environment in the state.
Another element of Hawaii’s larger economic
development program is a focus on developing world-
class infrastructure. The state has pledged to analyze,
recommend, advocate and then implement plans to upgrade
Hawaii’s infrastructure. Hawaii sees modern infrastructure
as the basis of a strong economy, particularly in a state
dependent on transportation links for both visitors and
shipping. The state recognizes the need to play “catch
up” with infrastructure investments throughout the state,
creating jobs for its citizens in the process.
Industry Targets Focused on Long-Term
Strengths
The is relying on many of its traditional strengths for
job development efforts. Tourism has long been a major
revenue generator, although increasingly the state has
sought to reform business rules and regulations in order
to attract outside capital and create new jobs. Two of
the state’s economic development initiatives focus on
increasing the range and value of goods and services
exchanged between the state’s export markets, as well as
enhancing infrastructure within the state to better serve
tourists and commerce alike.
Other industries targeted by the state fall into three
primary groups: technology, creative industries, and
agribusiness. The focus on these industries is driven by
potential growth and the capacity the state has to meet
workforce and infrastructure needs of the businesses. The
technology cluster includes computer and engineering
services, biotechnology, and technical consulting services.
Creative industry targets include engineering research and
development, computer and digital media, and architecture
and design services. Agribusiness, long a staple of the
state, includes agricultural packaging and warehousing,
aquaculture, and advanced agricultural processing, all
sectors that capitalize on existing strengths in the island
state.
49
Clusters in Hawaii
Largest Cluster: Business & Financial Services,
74,567 jobs
Largest Growth Cluster: Business & Financial
Services, 16,152 new jobs since 2002
Most Competitive Cluster: Energy (Fossil &
Renewable), 4,157 new or retained jobs due to state
competitive advantage
Most Concentrated Cluster: Arts,
Entertainment, Recreation & Visitor Industries, 2.13
times the national concentration level
50
Idaho has long been seen as a center of innovation and
advanced research, serving as home to the Idaho National
Laboratory. While science and technology has been at
the forefront, the state also offers signifcant industry
muscle in diverse industries including food processing,
lumber and wood products, machinery, chemical products,
paper products and electrical manufacturing. To frm up
this foundation, the state has developed three primary
initiatives to help diversify and grow the state’s economy.
Three Priorities for Economic Security
To build on the state’s seventh best job growth ranking
this decade, Governor Butch Otter has laid out three
priorities for maintaining growth and diversifying Idaho’s
industry base. The three priorities are enhancing economic
opportunity, empowering Idahoans with education
and affordable health care, and promoting responsible
government. While easier said than done, the state has laid
out actionable steps to attain these goals and help create
new economic opportunity for the people of Idaho.
Governor Otter’s signature initiative is known as Project
60, a plan for growing Idaho’s economy to $60 million
in Gross State Product by capitalizing on homegrown
talent and the experience of its citizens. The state plans
to work collaboratively with business leaders to sell more
to the world and to showcase what it describes a stable
and predictable tax and regulatory environment where
businesses can thrive. Designed in three tiers to strengthen
both rural and urban communities, Project 60 is designed
to create quality jobs by fostering systemic growth,
recruiting new companies to the state, and selling Idaho’s
trade and investment opportunities to the world.
The “systemic growth” element of the Project 60 plan
focuses primarily on workforce training and recruitment
and technology transfer. Maintaining a skilled workforce
is a critical concern for Idaho businesses. At a time when
many states are concerned about “brain drain” and the
departure of highly skilled workers, Project 60 focuses
on recruiting new workers to Idaho. While the state has
signifcant research activity, the plan will work to establish
methods for getting research from the Idaho National
Laboratory and from state universities to the market.
Idaho has also set out to promote responsible government,
including a focus on innovative solutions developed at
the local and state levels, which have led to a top ten
ranking in our state budget gap metric. As part of this
effort, the state has developed a zero-base budgeting
program, which means every agency and operation of the
state government must continually justify its spending
and ongoing existence. The state has not imposed new or
increased taxes on citizens and businesses, but has worked
to fnd effciencies and new and better ways of fulflling
government’s important but properly limited role in
citizens’ lives.
IDAHO
Idaho’s Place in the Rankings
2nd Business Birth Rate
2nd Small Business Lending
7th Long-term Job Growth
9th Budget Gap
10th Gross State Product Growth
10th Entrepreneurial Activity
10th Job Placement Effciency
11th Export Growth
11th College Affordability
12th Cost of Living
15th Productivity Growth
14th Transportation Infrastructure
Performance
15th STEM Job Concentration
18th Business Tax Climate
23rd State and Local Tax Burden
24th Growth in Share of National Exports
24th Higher-ed Effciency
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Supporting Job Creation
Idaho has not been complacent in advancing other
measures to support job creation. The state is working
to create a niche in renewable and alternative energy
resources, as well as improving Idaho’s energy
transmission capabilities. To expedite this, the state has
developed the Offce of Energy Resources, and the team
of experts there hit the ground running with an ambitious
agenda aimed at putting Idaho ahead of the curve in energy
development, transmission and innovation. One state report
boasts that Idaho is already eighth in concentration of
green jobs.
To assist companies already located in the state as part
of its “systemic growth” initiative, Idaho is focusing its
in-state effort on helping its businesses maintain a skilled,
highly trained workforce that is essential for growth. The
state has created a Workforce Development Training
Fund offering companies up to $2,000 per employee
for training. The state also offers up to 50 percent
reimbursement for on-the-job training of new employees,
and will provide customized training programs for
businesses agreeing to cover 50 percent of the cost of the
coursework.
To aid in recruiting new workers to the state, the Idaho
Department of Labor has established IdahoWorks, a
database of 176,000 job seekers that now sees 6,000 to
8,000 searches per day. The Department of Labor also
assists businesses with recruiting and human resource
needs such as job description writing, employee matching,
promoting employer recruitment events, and even
managing interview schedules.
In 2009, the state formed the Idaho Innovation Council,
a committee composed of private sector representatives
tasked with advising state government on technology
transfer and entrepreneurship policies and initiatives.
The private, member-driven Idaho Technology Council
is creating a new collaborative initiative called IGem,
which aims to build the innovation networks necessary
to increase research and spin out new technologies to
businesses in the state.
Synergistic Industry Clusters
The state targets businesses that will ft with its existing
industry clusters. Currently, the state has targeted
alternative energy, recreational technology, manufacturing,
aeronautics and information technology. These industries
are supported with an orchestrated marketing and public
relations campaign, both nationally and internationally.
The Meridian, Idaho region is working in partnership
with Idaho State University to create The CORE, a
health care research and technology clustering initiative.
The initiative includes recently completed fex space for
health technology companies, and already hosts 43 related
enterprises in the six square mile area. The partnership
includes 18 organizations in business, education and
government, which have provided seed investments
totaling $100,000 to fund support activities for the cluster.
The CORE is also home to Idaho State’s Meridian Health
Sciences Center, a new magnet school, and a university
school district partnership involving a repurposed health
care manufacturing facility, which allows high school
students to earn college credit in health care felds from
state institutions.
Idaho sees foreign direct investment (FDI) as a source
of new technologies, capital, processes, products,
organizational technologies and management skills,
which stands to provide a strong impetus for economic
development. The state’s FDI efforts include taking
advantage of the EB-5 Immigrant Investor Program
granting foreigners permanent U.S. residency in exchange
for helping to create U.S. jobs. The program requires
a $1 million investment in urban areas or a $500,000
investment in rural or targeted employment areas and the
creation of at least ten permanent jobs. The investment
must also remain “at risk,” without repayment, for a period
of two full years.
FDI recruitment has been successful in Idaho, helping
to expand the state’s reach into Canada, Europe, Latin
America and Asia. Traditional trade offces have not
been opened, but the state has focused on establishing
relationships with frms that can assist in matching foreign
investors with Idaho investment opportunities. In the
future, the state hopes to expand the global market reach
of Idaho companies through international trade offces,
trade missions, investment seminars, and hosting of inward
buying delegations.
51
Clusters in Idaho
Largest Cluster: Business & Financial Services,
83,565 jobs
Largest Growth Cluster: Business & Financial
Services, 22,585 new jobs since 2002
Most Competitive Cluster: Business & Financial
Services, 9,395 new or retained jobs due to state
competitive advantage
Most Concentrated Cluster: Agribusiness,
Food Processing & Technology, 2.5 times the national
concentration level
52
Facing a daunting budget defcit and pension shortfalls,
Illinois is taking big steps to address fscal issues while
continuing to promote and support the creation of new
jobs and businesses. The state has worked to develop a
comprehensive approach to addressing the defcit through
tax and regulatory actions and enacting proactive,
sustainable programs aimed at job creation, innovation and
workforce retention.
Tax Increases with Spending Limits
With a budget defcit of more than $13 billion, the state has
moved to raise the individual income tax rate to 5 percent
from its current rate of 3 percent and the corporate tax rate
from its current 4.8 percent to 7 percent in order to avert
what Governor Pat Quinn has called a “fscal emergency.”
In addition to the looming defcit, the state has roughly
$8 billion in unpaid bills to social service agencies,
pharmacies and others, and a sinking bond rating.
As part of this legislation, the state’s spending growth
would be limited from one year to the next over the next
four years. Efforts to borrow $8.75 billion to take care
of the state’s months of unpaid bills failed, meaning that
social service agencies and others who have waited to be
paid by the State of Illinois for their services will have to
wait still longer.
The four-year tax increase would be accompanied by state
spending limits through FY2015. For FY2012, the limit
would be $36.8 billion, which would mark a 10 percent
increase from FY2011 spending levels. If the state breaches
the limit, then the higher-income tax rates would revert
to current levels, unless the governor declares a fscal
emergency to raise spending by a set amount for a single
fscal year. Revenue from the tax hikes would enable
Illinois to sell about $12.2 billion in bonds to pay off a
huge bill backlog and to make a $3.7 billion pension fund
payment for FY2011.
Jobs Now and in the Future
While confronted with a daunting budget defcit, Illinois
is pressing ahead with efforts to make the state a better
place for businesses and citizens alike. To this end, the
state is continuing to support programs aimed at business
stimulation, including the state’s Illinois Jobs Now! capital
program and the Economic Development for a Growing
Economy Tax Credit Program (EDGE). Creating jobs
remains an ongoing priority for the governor and state
alike.
As part of the recent legislative push, $25 million would
be set aside to assist companies that will create or retain
well-paying, sustainable jobs. Funding would be available
to help construct or rehabilitate facilities, purchase or
upgrade equipment, or install necessary infrastructure
improvements. The program would also include funding
to assist small businesses operating or wanting to locate
ILLINOIS
Illinois’ Place in the Rankings
3rd Median Family Income
11th Economic Output Per Job
11th High-tech Share of All Businesses
12th Growth in Share of National Exports
13th Higher-ed Degree Output
14th Educational Attainment
20th Export Intensity
20th Cost of Living
20th Job Placement Effciency
22nd High School Advanced Placement
Intensity
23rd Business Tax Climate
23rd Higher-ed Effciency
25th Export Intensity Growth
25th STEM Job Concentration
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in economically depressed areas. The current credit crisis
has particularly hurt small business access to needed
credit. Therefore, $15 million has been made available to
help these small businesses survive and thrive. Another
$15 million has been set aside to help small, high-growth
technology companies to expand and put more people to
work in Illinois. Thanks to the state’s research institutions,
these business development opportunities are particularly
strong in information technology and biotechnology. Yet,
too often, frms in these sectors lack needed access to
capital and locate to other states.
The Increasing Investment in the Employer Training
Investment Program (ETIP) program has emerged as
a critical tool for promoting the continued training and
development of Illinois workers. Investing to upgrade
workers’ skills increases productivity, reduces costs,
improves quality and increases competitiveness. Currently,
Illinois companies are reimbursed up to 50 percent of the
cost of training their employees through an ETIP grant.
Perhaps no other industry has been hit harder by the
current economic downturn than the domestic automotive
industry. The EDGE (Economic Development for a
Growing Economy) program provides corporate tax
credits to companies that create or retain jobs in Illinois
rather than locating or relocating them to other states.
Because the auto companies are experiencing operating
losses, though, they are not in a position to take full
advantage of these credits, a situation that puts further jobs
in jeopardy and threatens to hamper future investment.
Legislation passed by the General Assembly enables auto
manufacturing companies to retain employee income tax
withholdings as an alternative to the EDGE corporate tax
credits.
Supporting Public Private Partnerships
and Innovation
To encourage more economic development and create new
jobs, Illinois is working to promote public- and private-
sector cooperation in order to bring in more federal dollars.
Governor Quinn is developing a grant program that would
pair technology companies with an Illinois-based research
entity (university or national laboratory) for new product
development, technology transfer, commercialization,
or the improvement of manufacturing processes. The
program would bring private-sector experts to the table
to attract strategic investments. The Illinois Science and
Technology Coalition (ISTC) is a public-private economic
development organization founded in 2008 to promote
collaboration between public and private partners to
attract and retain R&D resources and talent. In addition
to managing the new grant program, the ISTC will house
the Illinois Innovation Council, which will assist the state
in developing an innovation agenda and be responsible for
coordinating joint proposals from private companies and
research labs to the federal government.
The ability to translate these ideas into new products,
services, technologies and jobs will be one of the marks
of success in the 21st century economy. Supporting an
innovation-based economy in Illinois will require the
strategic investment of both public and private resources
in technology and research-based sectors. The state is in
the process of building a foundation of partnerships with
the private sector that seek to increase access to capital
for small businesses, provide mentoring opportunities to
emerging entrepreneurs, and take advantage of growing
sectors like biotechnology and new energy solutions.
53
Clusters in Illinois
Largest Cluster: Business & Financial Services,
942,941 jobs
Largest Growth Cluster: Business & Financial
Services, 118,017 new jobs since 2002
Most Competitive Cluster: Apparel & Textiles,
8,597 new or retained jobs due to state competitive
advantage
Most Concentrated Cluster: Machinery
Manufacturing, 1.77 times the national concentration
level
54
Spend Less, Make Cuts Early
When Governor Mitch Daniels took offce in early 2005,
he inherited a sizeable budget defcit in a manufacturing-
intensive state vulnerable to the economic downturn.
Governor Daniels went to work improving the effciency
of state government, eliminating redundancies, and
making cuts where necessary. By 2009, the state had
reduced government spending by 20 percent (excluding
K-12 education and Medicaid), and had reduced the
number of state employees by 10 percent, or roughly 3,000
workers. Yet just 5 percent of the layoffs were involuntary,
facilitated by a special task force charged with reviewing
the need to replace workers after any state job was vacated.
While Indiana avoided much of the housing boom and
bust, its manufacturing-driven economy was hit hard
by the recession. Yet the state was able to maintain its
balanced budget and is one of the few to hold a AAA credit
rating. This year’s two-year state budget does not increase
taxes, and is projected to leave Indiana with a $1.1 billion
surplus by 2013, which will trigger a taxpayer refund and
pension fund replenishment if reserves exceed 10 percent
of revenue. The 2012–2013 budget includes an increase of
$150 million in education funding after $300 million cuts
in both 2010 and 2011.
The 21st Century and Beyond
To help drive economic development and job creation,
the state has created the 21st Century Research and
Technology Fund, also known as the 21 Fund. The
fund identifes and vets technology-based companies
conducting business in Indiana and helps provide fnancial
support and assistance to make the transitional leap from
research to product development. By supporting high-tech
companies during this crucial stage—often known as “the
valley of death”—the 21 Fund encourages entrepreneurial
success and is intended to keep the state’s most promising
technologies within its borders.
The 21 Fund does not focus on a particular technology
or area of application in selecting companies to work
with. This allows the state’s market-driven competitive
advantages to direct investment intelligently through
a rigorous review process. Avoiding pre-selection of
technology focus areas ensures that the 21 Fund plays an
unbiased role in diversifying the state’s economy.
The 21 Fund stimulates an environment of innovation and
cooperation among the state’s universities and businesses
to promote research activity through collaborative
partnerships. These partnerships consequently lead to a
higher incidence of technology transfer, a process that has
been proven to create jobs for Indiana communities.
The 21 Fund also sets aside a portion of its budget for
a Small Business Innovation Research (SBIR) Program
Offce, created to support companies that are applying
for or have received competitive federal SBIR or Small
INDIANA
Indiana’s Place in the Rankings
7th Export Intensity
7th Budget Gap
8th Growth in Share of National Exports
10th Business Tax Climate
14th High School Advanced Placement
Intensity
15th Cost of Living
17th Small Business Survival Index
17th Higher-ed Degree Output
20th Export Growth
20th Transportation Infrastructure
Performance
23rd Export Intensity Growth
24th Short-term Job Growth
24th Median Family Income
25th Productivity Growth
54
55
Business Technology Transfer (STTR) awards. The 21
Fund’s SBIR/STTR Phase I Matching Program has
been expanded to support later-stage commercialization
activities of Phase II SBIR/STTR awardees. With
the support of the Indiana Economic Development
Corporation, these programs make awards through a set-
aside of 20 percent of the 21 Fund’s annual appropriations.
In recent years, the 21 Fund has reformed its business
model to shift its investment focus towards small business
and high-tech startups, while increasing the role of job
creation as a criterion for funding and supplementing
its technical review process with an enhanced business
review. The Fund also adjusted its strategy to focus on
projects near commercialization and prepared to execute
a rollout plan. In 2011, Indiana is using its $34.3 million
allocation from the federal State Small Business Credit
Initiative (SSBCI) for qualifed seed funds, angel networks
and high-growth lending opportunities. The state also
plans to use $1.5 million of the SSBCI funds to fully fund
the state’s Capital Access Program for the next two years.
Recognizing the increasing importance of transportation
as it relates to commerce and the fow of commodities and
trade, in 2005 the state launched a ten-year, $12 billion
transportation plan, known as Major Moves, to improve
and expand Indiana’s highway infrastructure. A total of
$2.6 billion was committed to Major Moves from the $4
billion long-term lease of the Indiana Toll Road. The Major
Moves plan called for 104 new roadways with 1,600 lane
miles by 2015. With $11 billion being invested between
2005 and 2012, the Indiana Department of Transportation
(DOT) is now investing an average of more than $1.5
billion in construction dollars annually to improve
Indiana’s transportation infrastructure, with no increase in
gasoline or diesel fuel taxes. At the end of 2010, the ffth
year of the Major Moves plan, 41 roadway projects were
completed and opened to traffc, nearly 600 bridges were
rehabbed or replaced, and nearly $5.7 billion was invested
in major new construction and preservation projects.
By 2012, the DOT is looking to have 65 roadway projects
complete or substantially under construction, and as many
as 800 bridges rehabilitated or replaced—15 percent of
the state’s inventory. By the end of calendar year 2015,
state offcials project that 88 roadways will be completed
or substantially under construction and 4,000 miles of
highway will be resurfaced (36 percent of the state’s
inventory). In addition, 1,190 bridges will be rehabilitated
or replaced (21.6 percent of the state’s inventory), and more
than $10 billion will be invested in major new construction
and preservation projects. These efforts are having a
positive impact on state employers, with roughly 94 percent
of contracts awarded to Indiana companies.
Bringing Outside Dollars Home
Indiana’s ranking of seventh-highest state export intensity
and its increasing national export market share place it
in a tie for ninth on our list of export states. The state
shipped $28.7 billion in exports in 2010, of which $8.0
billion was in transportation equipment and $7.6 billion in
chemicals. The state has been supported in these efforts
by a partnership with the U.S. Department of Commerce’s
Export Assistance Center (EAC). The EAC assists Indiana
frms seeking to enter new markets or expand overseas
sales, by helping them to develop an effective export
strategy, locate the best markets for their product, fnd
international buyers, and identify sources of fnancing.
This partnership exemplifes Indiana’s continuing efforts to
position itself as one of the nation’s leading exporters.
55
Clusters in Indiana
Largest Cluster: Biomedical/Biotechnical (Life
Sciences), 305,821 jobs
Largest Growth Cluster: Biomedical/
Biotechnical (Life Sciences), 44,973 new jobs since
2002
Most Competitive Cluster: Apparel & Textiles,
5,730 new or retained jobs due to state competitive
advantage
Most Concentrated Cluster: Primary Metal
Manufacturing, 5.41 times the national concentration
level
56
Iowa touts the state’s pro-business policies, nationally
recognized research centers and legendary Midwestern
work ethic to give the state a competitive edge. Those
business advantages fuel an economy organized around
growth industries including renewable energy, information
technology, advanced manufacturing, biosciences and
food processing and packaging. To continue to grow
the economy, the state is looking at reducing taxes and
developing an action plan to create 200,000 new jobs
within the state.
Reducing Taxes and Helping Business
Iowa’s state budget provides nearly $160 million in direct
property tax relief to Iowans. It fully funds the state’s share
of school funding commitments, erasing the need for local
school districts to make up the difference in property taxes.
The budget also makes a clear case that the state is ready
for job creation, proposing to cut one of the nation’s highest
small business income tax rates in half.
Small businesses are the engines of growth throughout the
country, but Iowa small businesses pay an income tax rate
that is the highest in the nation at 12 percent. The small
business income tax rate proposed by the state will be a fat
6 percent. Commercial property taxes will be reduced by
40 percent over the next fve years. New investment will be
immediately taxed at 60 percent of its valuation. Existing
commercial property taxes will be rolled back by 8 percent
a year over fve years. The budget plan includes funding
for these tax cuts through the use of new revenues coming
to the state due to economic growth and by a restoration
of the gaming tax to the level at which it was originally
approved.
Combined with the efforts to reduce the state’s high
corporate income taxes, thousands of Iowa businesses,
both large and small, will see their income taxes reduced
by nearly half, allowing them the opportunity to reinvest
those savings to expand their operations and hire more
Iowans. This rate reduction, coupled with Iowa’s single-
factor corporate income tax structure, will make Iowa one
of the most competitive states for business in the Midwest.
Iowa is also working to transform the current Department
of Economic Development into a public-private partnership
that will draw on best practices from both the public
and private sectors to recharge the state’s job creation
programs.
Two Hundred Thousand New Jobs for
Iowans
The state has set a goal of 200,000 new jobs for Iowans
over the next fve years. To accomplish this, state leaders
have set a course to develop a business environment that
is competitive with other neighboring states. According to
the 50-State Property Tax Study by the National Taxpayers
Conference, commercial property valued at $500,000 in
IOWA
Iowa’s Place in the Rankings
3rd Higher-ed Degree Output
5th Transportation Infrastructure
Performance
6th Productivity Growth
8th Budget Gap
8th High Speed Broadband Intensity
10th Export Growth
11th Educational Attainment
13th Median Family Income
13th Export Intensity Growth
13th Growth in Share of National Exports
14th Cost of Living
17th Short-term Job Growth
17th Export Intensity
19th Per Capita Income Growth
21st Long-term Job Growth
21st Higher-ed Effciency
22nd Gross State Product Growth
23rd STEM Job Growth
56
57
Des Moines bears a greater tax levy than similar property
in New York City. A comparison of rural commercial
property tax rates yields similar results. The state is
working with local governments to reduce commercial
property taxes to less than the regional average, in hopes of
attracting new businesses and jobs to Iowa. To streamline
its development efforts and make them more business-
friendly, the state is also working to establish the Iowa
Partnership for Economic Progress, a private-public
partnership. With these two elements in place, the state’s
ambitious goal of 200,000 new jobs may well be within
reach.
The Iowa Partnership for Economic Progress (IPEP)
aims to support all aspects of a successful economic
development portfolio: business attraction, retention,
innovation, and expansion. The entity will replace the
current laundry list of incentive programs with a more
focused set of incentives providing maximum fexibility
for meeting the needs of potential employers. One element
of the IPEP program will be developing a customer
service attitude among the state’s economic development
professionals, promoting aggressive and proactive problem
solving so that Iowa can make the “sale” to keep and
create jobs. The state will look to best practices from both
the public and private sectors in order to achieve a more
dynamic, results-oriented, and accountable economic
development organization.
IPEP will include a private 501(c)3 non-proft arm that can
house the Iowa Innovation Council (ICC), a business-
led group that developing strategies and long-term plans
for how Iowa can better compete in the global economy.
Eventually, the private entity will take charge of marketing
and tourism activities, giving these critical development
activities a long-term, stable, and predictable funding
stream with which to operate in good and bad times. This
new structure will leverage public and private resources
in order to maximize efforts to attract more jobs and
investment in Iowa.
Targeting High Growth Industries
Iowa has targeted high-growth industries that capitalize
on the state’s resources including raw materials, workforce
and existing strengths in the marketplace to help create
new, high wage jobs for Iowans. These industries include
renewable energy, advanced manufacturing, information
technology, fnancial service, biosciences and food
manufacturing. To help spur development, the state offers
tax incentives including reduced or eliminated corporate
tax and a 50 percent deductibility of federal taxes from
Iowa corporate income. Iowa is one of only fve states
that provide this deductible. It offers a single-factor, non-
unitary tax based only on the percentage of total sales
income within the state. Other key tax initiatives include
no personal property tax and no sales and use tax on
manufacturing machinery and equipment purchases. The
state also offers a refundable credit for increasing research
activities of up to 6.5 percent of the company’s allotted
share of qualifying research expenditures in Iowa.
Iowa’s targeted industry initiative capitalizes on the state’s
existing diverse industrial base, central location, advanced
infrastructure and pro-business approach to attract and
grow new and emerging businesses and industry within the
state. Iowa has targeted fve different industry subsectors
that already have a strong foundation and could beneft
from state-level workforce and infrastructure support to
grow and succeed.
These industries include:
Advanced manufacturing that is focused on agricultural •
and construction machinery, aerospace engineering,
aluminum, and steel.
Renewable energy including wind, biomass, ethanol •
and biodiesel.
Biosciences, where university research concentrated in •
plant, animal and human genomics form the foundation
for a system of interrelated disciplines and areas of
study that support and assist one another.
Information technology. •
Financial services, where the state is already regarded •
as a major center for the insurance and fnancial
services industries.
Food manufacturing, with the state being home to 32 •
of the 100 largest food manufacturers and processors,
creating a critical mass of food companies and industry
knowledge.
57
Clusters in Iowa
Largest Cluster: Agribusiness, Food Processing &
Technology, 190,931 jobs
Largest Growth Cluster: Business & Financial
Services, 26,277 new jobs since 2002
Most Competitive Cluster: Agribusiness, Food
Processing & Technology, 12,254 new or retained jobs
due to state competitive advantage
Most Concentrated Cluster: Agribusiness,
Food Processing & Technology, 3.29 times the
national concentration level
58
Known as a major agricultural producer, Kansas has
capitalized on its growing production sector, central
location and strong public-private partnerships to create
new jobs and add technology and value to products and
services produced in the state. A strong aerospace and
telecommunications industry presence provide additional
high-paying and high-tech jobs to the state.
Growing the Kansas Economy
In a state known as a major agricultural producer, it is no
surprise that the rallying cry of the current administration
is to “grow the Kansas economy.” A central element
of Governor Sam Brownback’s economic development
agenda is to pay for job creation initiatives by eliminating
corporate tax subsidies enjoyed by only a few. Regulatory
and tax reforms include enhanced expensing, allowing
Kansas businesses to immediately deduct a higher
percentage of the cost of an investment, and a Rural
Opportunity Zones initiative that will provide a state
income tax waiver for any individual relocating from out
of state to any participating county that has experienced
double-digit percentage population decline over the last ten
years.
Other aspects of the governor’s agenda include a three-
year, $105 million university economic growth initiative
to enhance job growth in key economic sectors such as
aviation, cancer research, animal health, and engineering.
Each university will be required to provide 50 percent of
the cost of the initiative, through either private-sector or
reprogrammed funds. The governor is also calling for the
creation of a Governor’s Economic Council, which will
consist of private-sector business leaders and will seek to
assure strategy integration, coordination and accountability
across all of the state’s economic development agencies
and initiatives. This Council stands to replace the recently
eliminated Kansas, Inc., an independent economic research
and policy organization for the state.
One of Governor Brownback’s frst tasks was to create
Rural Opportunity Zones. This new law designates
50 rural counties in the state—many of which have lost
10 percent of their populations or more over the past
decade—for a set of incentives for new residents, including
income tax exemptions for those locating in these counties
and a student loan repayment program of up to $15,000
per qualifying student. The state is also exploring new
opportunities for expanding its agriculture exports,
particularly with an eye toward animal agriculture.
“Tending their garden” is an apt term for other efforts
afoot within the state. Kansas is working to support
the competitiveness and growth of the state’s aviation
manufacturing sector, working to ensure that Kansas
remains the premier location for the design and
manufacture of general and business aviation aircraft,
military training aircraft, and large commercial air
vehicles, as well as the modifcation and maintenance of
military aircraft.
The state is working to promote energy development and
growth in wind power and ethanol, as well as responsible
KANSAS
Kansas’ Place in the Rankings
6th Transportation Infrastructure
Performance
7th Cost of Living
9th College Affordability
10th Median Family Income
14th Export Intensity Growth
15th Higher-ed Effciency
16th Productivity Growth
16th Export Intensity
18th Growth in Share of National Exports
18th Budget Gap
21st Per Capita Income Growth
21st Export Growth
22nd Higher-ed Degree Output
23rd High-tech Share of All Businesses
24th Academic R&D Intensity
20th Educational Attainment
58
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energy development from other sources of energy,
including traditional sources such as oil, natural gas, coal,
and nuclear.
The state is working to stabilize higher education funding
so its public universities remain strong and power a robust
economy. To help meet this goal, the state, in collaboration
with the State Board of Higher Education, is promoting
efforts to build the biosciences. These efforts include
working to get the National Cancer Institute designation
at the University of Kansas (KU) Cancer Center, and
building the National Bio- and Agro-Defense Facility
at Kansas State University (K-State). The state is also
supporting the Kansas Polymer Research Center at
Pittsburg State University and encouraging the National
Institute for Aviation Research at Wichita State
University (WSU) to continue to explore new orthopedic
uses for composite materials.
Other efforts related to higher education in the state
include working with Fort Hays State and Emporia
State Universities to meet the state’s future demand for
international business leaders and teachers and improving
rankings for KU’s School of Medicine, K-State’s School
of Veterinary Medicine, and WSU’s aerospace research
and development mission. The state is also promoting
innovative programs at the state’s community colleges to
meet future industry needs.
The state approved a proposal for $10.5 million per year
in new funding to boost engineering programs at the
University of Kansas, Kansas State, and Wichita State
University. The program will be funded by revenue from
state-owned casinos along with matching funds from each
university. The bill also gives KU the authority to issue
$65 million in bonds for an engineering classroom and lab
facility.
Increasing Entrepreneurship
Kansas recently voted to eliminate its longstanding
technology-based economic development organization,
the Kansas Technology Enterprise Corporation (KTEC).
The state plans to move many of KTEC’s functions to the
state Department of Commerce, including the regional
entrepreneurship centers (including Wichita Technology
Corporation), the Mid-America Manufacturing Technology
Center, and the angel investment tax-credit programs. The
Kansas Board of Regents will now manage the National
Science Foundation’s Experimental Program to Stimulate
Competitive Research (EPSCoR). The state does not plan
to divest previous equity investments made by KTEC in
state companies.
There are several regional networks of angel investors
dedicated to identifying and funding promising start-up
business opportunities in Kansas. These include Kansas
income tax credits available to individuals willing to
provide seed capital fnancing for emerging Kansas
businesses engaged in development, implementation and
commercialization of innovative technologies, products
and services.
Other programs include the Kansas Opportunity
Initiatives Fund provided by the state legislature to
address opportunities or emergencies that may have
substantial impact on the Kansas economy. This
performance-based fnancial assistance is used to secure
economic benefts and avoid or remedy economic losses.
Eligible projects may include major expansion of an
existing Kansas commercial enterprise, potential location
of a major employer in Kansas, matching a signifcant
federal or private-sector grant, the departure or substantial
reduction of the operations of a major employer, or the
closing of a major federal or state institution.
The High Performance Incentive Program (HPIP)
provides tax incentives to employers that pay above-
average wages and have a strong commitment to skills
development for their workers. This program recognizes
the need for Kansas companies to remain competitive and
encourages capital investment in facilities, technology and
continued employee training and education. A substantial
investment tax credit for new capital investment in Kansas
and a related sales tax exemption are the primary benefts
of this program.
HPIP offers employers four potential benefts including a
10 percent income tax credit for eligible capital investment
that exceeds $50,000 at a company’s facility, with a carry-
forward that can be used in any of the next 10 years in
which the qualifed facility re-qualifes for HPIP. It also
offers a sales tax exemption to be used in conjunction with
the company’s eligible capital investment at its qualifed
facility.
59
Clusters in Kansas
Largest Cluster: Business & Financial Services,
173,272 jobs
Largest Growth Cluster: Business & Financial
Services, 28,855 new jobs since 2002
Most Competitive Cluster: Energy (Fossil &
Renewable), 16,670 new or retained jobs due to state
competitive advantage
Most Concentrated Cluster: Transportation
Equipment Manufacturing, 2.95 times the national
concentration level
60
Kentucky’s lowest cost of living in the nation helps move
it into this year’s top ten for taxes and regulation; the
state has also clocked in as the 12th fastest for job growth
over the past two years. This is independent recognition
of the strategic and sound approaches the state has taken
to rebuilding its economy. In order to further streamline
business interactions with state government, Kentucky
recently passed legislation that will lead to the creation
of a business “One-Stop” web site. The online interface
will simplify business flings and cut down on the need for
business owners to complete multiple forms.
Shrinking Government and Slashing
Spending
Despite repeated budget shortfalls, Governor Steve Beshear
has balanced Kentucky’s budget eight different times,
while preventing signifcant cuts to the state’s priorities of
education, critical public safety programs, and job creation
efforts. The state, too, has not allowed any broad-based tax
increases on Kentucky families and businesses.
The governor, along with a proactive legislature, has
shrunk state government to its smallest size in a generation,
and continues to fnd ways to improve government
effciency with fewer taxpayer dollars. Some steps that
have been taken include cutting political appointees and
contracts, as well as selling off unneeded state property
and vehicles. In addition, the governor, his senior staff,
and Cabinet secretaries have each taken 10 percent pay
cuts and reduced the so-called non-merit workforce by $5
million, starting at the highest levels.
Kentucky also made the tough decision to save $24
million by furloughing most state workers for six days.
Recognizing the growing cost of the state employees’
pension system, the governor has proposed and signed a
landmark pension reform to reduce out-of-control costs
while honoring the state’s commitment to teachers, police
offcers, frefghters and state employees. This reform also
helped ease the burden on the budgets of county and local
governments and school districts. This was accomplished
by reducing benefts for new employees, eliminating
pension double-dipping and requiring appropriate expertise
for those making investment decisions.
Job Retention and Creation Key
The state’s top priority continues to be creating and
retaining jobs. To accomplish this, Kentucky created
new incentive programs in the summer of 2009. Thus
far, 248 projects have been approved and are moving
forward. These programs point to a potential investment
of $2.2 billion that has helped create 14,700 new jobs and
retain more than 4,800 existing jobs. Creating new jobs is
important, but from the state’s perspective, retaining jobs
that are in jeopardy is just as critical.
The state’s economic development toolbox includes several
programs aimed at new and emerging businesses and
job retention efforts. Through the Kentucky Economic
Development Finance Authority (KEDFA), established
within the Cabinet for Economic Development to
KENTUCKY
Kentucky’s Place in the Rankings
1st Cost of Living
4th Export Intensity
8th Job Placement Effciency
12th Short-term Job Growth
15th Export Intensity Growth
19th STEM Job Growth
19th Academic R&D Intensity
19th Budget Gap
19th Business Tax Climate
21st State and Local Tax Burden
21st High Speed Broadband Intensity
22nd Small Business Survival Index
23rd Entrepreneurial Activity
25th High School Advanced Placement
Intensity
60
61
encourage economic development, business expansion, and
job creation, the state is able to provide fnancial support
through an array of fnancial assistance and tax credit
programs.
One of those programs is the Kentucky Small Business
Investment Credit program, the frst tax credit program
of its kind for small businesses in Kentucky. The program
is designed to encourage small business growth and job
creation by providing a nonrefundable state income tax
credit to small businesses hiring one or more eligible
individuals and investing at least $5,000 in qualifying
equipment or technology. With certain exceptions, most
for-proft businesses with ffty or fewer full-time employees
are considered eligible for this program, which allocates a
total of $3 million in tax credits per fscal year.
The Kentucky Business Investment Program is aimed
at any business entity engaged in manufacturing or
agribusiness or that is a regional or national headquarters,
regardless of the underlying business activity. The program
is designed to serve companies doing business in a multi-
state, national or international market where services are
provided to a customer base that includes more than 50
percent non-residents. Eligible businesses include call
centers, centralized administrative or processing centers,
telephone or Internet sales order or processing centers,
distribution or fulfllment centers, data processing centers,
and research and development facilities.
Any business entity primarily engaged in manufacturing,
service, or technology activities, or in operating or
developing a tourism attraction in Kentucky, has access to
the Kentucky Enterprise Initiative Act program. Service
and technology companies must use technology or provide
a service to customer or affliate entities primarily outside
the state and serve a multi-state, national or international
market. To qualify for the incentives, an eligible company
must make a minimum investment of $500,000 in an
economic development project. Eligible investment
costs include expenditures for building and construction
materials, research and development equipment, and
acquisition of real property to be owned, used or occupied
by the approved company.
Two other state programs are aimed at reinvestment within
the state. The frst is the Kentucky Reinvestment Act
program, which is targeted at any Kentucky company
engaged in manufacturing and related functions operating
within the commonwealth on a permanent basis for a
reasonable period preceding the request for assistance.
Benefts, including a tax incentive, are available for up
to ten years, including tax credits for up to 100 percent
of corporate income or limited liability entity tax
liability. The other program is the Kentucky Industrial
Revitalization Act. Companies approved under the
program may receive state income tax credits, Kentucky
Corporation License Fee credits, and job assessment fees
for up to ten years. These incentives can add up to 75
percent of the cost of the rehabilitation or construction
of buildings, as well as the refurbishing or purchasing of
machinery and equipment.
The One-Stop Shop
Kentucky has worked to ease the burdens of doing business
in the state by creating a one-stop shop to conduct
business in the commonwealth. This effort authorizes
the establishment of an electronic portal that will serve
as a single, unifed entry point for business owners to
access information about state services and requirements
for operating a business in Kentucky. Additionally, the
portal will allow Kentucky companies to submit forms and
applications, make payments, and complete other required
transactions as part of doing business in the state.
As part of this effort, an advisory committee was
created to oversee the implementation of the portal. The
committee includes the Secretary of State, secretary
of the Governor’s Executive Cabinet; secretary of the
Finance and Administration Cabinet, secretary of
the Cabinet for Economic Development, secretary of
the Education and Workforce Development Cabinet,
secretary of the Public Protection Cabinet, secretary of
the Transportation Cabinet, secretary of the Tourism, Arts
and Heritage Cabinet and and the secretary of the Energy
and Environment Cabinet. This effort aims to reduce
government red tape and ease the burden on businesses,
small and large alike, that have chosen to invest in
Kentucky’s future.
61
Clusters in Kentucky
Largest Cluster: Business & Financial Services,
197,197 jobs
Largest Growth Cluster: Business & Financial
Services, 38,247 new jobs since 2002
Most Competitive Cluster: Business & Financial
Services, 3,866 new or retained jobs due to state
competitive advantage
Most Concentrated Cluster: Transportation
Equipment Manufacturing, 2.25 times the national
concentration level
62
The port state of Louisiana remains at the top of our
exports list this year. The state ranks in the top fve in
all four export measures. Much of the state’s exports
are related to the agriculture and energy economies, but
manufactured exports include various chemicals and
machinery. The state’s primary trading partners are China,
Japan, and Mexico.
Cuts and Savings
Louisiana is facing a $1.6 billion budget shortfall, which
Governor Bobby Jindal has sought to close with roughly
$1 billion in proposed cuts and savings. The remaining
shortfall will be covered by one-time revenues generated
by, among other things, the sale of state prisons and
surplus property. The governor’s 2011–12 spending plan
also includes more than $400 million in one-time revenues
that will be used to make up for the loss of federal
stimulus dollars. In the proposed budget, public colleges
and universities would face no net loss of revenues next
year when money from tuition increases is factored in.
Private doctors, hospitals and other health care providers
treating Medicaid patients also would not see their rates
reduced, nor would any Medicaid patients lose eligibility
for services. Louisiana State University public hospitals,
however, would see a 4.5 percent cut, and many state
employees who now contribute 8 percent of their salaries
toward their pensions would be asked to contribute 11
percent.
Programs to Create Quality Jobs
Louisiana is home to strong traditional industries, such
as petrochemicals and shipbuilding, as well as newer
growth industries with strong foundations in technology
and research. These growth industries include advanced
manufacturing, agribusiness, clean tech, and energy-
related industries. The state has designed programs and
competitive advantages specifcally tailored for each
industry.
The Technology Commercialization Credit and Jobs
program provides tax credits for companies that invest
in the commercialization of Louisiana technology and
create new jobs. Qualifying businesses that invest in the
commercialization of technology in the state may be
granted a refundable tax credit on any income or corporate
franchise tax liability and earn a refundable tax credit
based on new jobs created. Qualifying research centers
that develop Louisiana technology to be commercialized
may be granted a refundable tax credit based on new jobs
created. Such credits are granted for a period of no less
than fve years.
The Quality Jobs program provides a cash rebate to
companies that create high-paying jobs and promote
economic development in the state. The program provides
5–6 percent cash rebate on annual gross payroll for new
jobs for up to ten years. It also allows for 4 percent sales/
use tax rebate on capital expenditures, or a 1.5 percent
investment tax credit for qualifed expenses that help the
industry’s bottom line.
LOUISIANA
Louisiana’s Place in the Rankings
2nd Per Capita Income Growth
2nd Growth in Share of National Exports
2nd College Affordability
3rd Business Birth Rate
4th Export Intensity Growth
4th Export Growth
5th Export Intensity
9th State and Local Tax Burden
10th Entrepreneurial Activity
13th Economic Output Per Job
17th Higher-ed Effciency
19th Short-term Job Growth
19th Small Business Lending
21st Cost of Living
22nd STEM Job Growth
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The Research and Development Tax Credit encourages
existing businesses with operating facilities in Louisiana to
establish or continue research and development activities
within the state. As part of this program, Louisiana
taxpayers who incur research and development expenses
may be able to receive credits against state income
and corporate franchise taxes. The program provides
businesses that employ fewer than 50 Louisiana residents
a credit of up to 40 percent of the apportioned amount
of their expenditures. Additionally, businesses that claim
federal income tax credits for research activities can
receive a credit of up to 20 percent of their apportioned
increase in research activities, or 25 percent of their
apportioned federal credit, depending on the number of
resident employees.
To assist Louisiana businesses in fnding and recruiting
critical employees, the state’s FastStart program provides
customized recruitment, screening, and training to new
and expanding companies, all at no cost. Recognized for
its innovation, effectiveness and effciency, the program
has established a presence among workforce solutions
programs nationwide. Based on a company’s immediate
and long-term workforce needs, FastStart crafts unique
programs that ensure workers are prepared on day one and
beyond. The relationship between FastStart and Louisiana
companies is often multi-year, lasting until the fnal
employee is hired and trained. Working with companies, a
team of industry experts assesses workforce needs and then
designs turnkey training products and solutions specifcally
for each company. They use the latest technology to create
modules that can eliminate training time by up to two-
thirds, helping businesses to open their doors quickly when
productivity matters most. Designed to be service-minded
and fexible, the program also offers new or expanding
companies round-the-clock availability and immediate
response time.
Certain energy companies may also be able to take
advantage of the state’s Digital Media Incentive. As
part of this program, businesses that develop software
for purposes such as accounting, lease management, well
design, seismic evaluation and 3D visualization may
qualify for the program, which provides a 35 percent tax
credit for payroll expenditures and a 25 percent tax credit
on production expenditures. Businesses paying taxes in
Louisiana can use these credits to reduce their tax liability.
For companies without a large tax liability, there is a well-
developed market for selling the credits.
Research centers and universities throughout the state are
fueling innovation and providing skilled workers to energy
companies. A number of Louisiana universities graduate
new petroleum engineers each semester, including the
University of Louisiana at Lafayette and Louisiana State
University. Both of these universities are also pioneering
research into new eco-friendly alternatives to fossil fuels.
Exports are King
Capitalizing on its proven prowess in exports, the state
provides incentives and an extensive transportation
and logistics infrastructure to bolster trade and export
opportunities. Louisiana’s port system is one of the most
extensive in the world, transporting tons of cargo in and
out of the country. Businesses in the state have access to a
variety of robust logistics choices, including six Class One
railroads, seven commercial service/primary airports, an
integrated interstate grid and a vast deepwater port system.
For advanced manufacturing, the state effectively provides
a zero corporate income tax environment for items
produced in Louisiana and shipped out of state (single
sales tax apportionment). Electricity, water, natural gas,
machinery and equipment used by manufacturers are all
exempt from Louisiana sales taxes.
The state’s robust transportation and distribution
infrastructure is a strong foundation for export-oriented
agribusiness and clean tech industries. With approximately
$30 billion generated each year, agribusiness is a
well-established industry that benefts from abundant
local commodities and raw materials, as well as value-
added growth opportunities. Louisiana’s strong energy
legacy serves as a foundation for the nation’s growing
clean tech industry. The state also offers a business-
friendly regulatory climate for clean tech companies,
illustrated recently by the elimination of the sales tax on
manufacturing machinery and equipment and the franchise
tax on corporate debt.
63
Clusters in Louisiana
Largest Cluster: Energy (Fossil & Renewable),
242,346 jobs
Largest Growth Cluster: Business & Financial
Services, 36,864 new jobs since 2002
Most Competitive Cluster: Energy (Fossil &
Renewable), 14,196 new or retained jobs due to state
competitive advantage
Most Concentrated Cluster: Energy (Fossil
& Renewable), 1.94 times the national concentration
level
64
Maine is a top ten state in all three infrastructure
measures, including the highest share of broadband
connections in the nation over three megabits per second.
A coalition of state and university offcials and private
companies created the Three Ring Binder project, a dark
fber network designed to provide the “middle mile”
telecommunications infrastructure needed to serve the
state’s business, academic, and telemedicine needs. The
network is funded with federal and private sources.
Cuts and More Cuts
Maine’s Governor Paul LePage has proposed eliminating
in 2012 the state’s alternative minimum income tax. He
would also lower the top income tax rate for income above
$50,000 from 8.5 percent to 7.95 percent. In 2014, he
would also double income exempted from the state’s estate
tax from $1 million to $2 million. These proposed cuts
would cost the state $203 million in the coming two-year
budget cycle and would widen the two-year budget gap by
25 percent, dropping the top income tax rate to its lowest
level since 1975.
One of the most pressing concerns in Maine is the $4.4
billion unfunded liability in the state pension system.
Without reform, payment for pension liabilities will total
$449 million in the frst year of the upcoming biennium.
That is 15 percent of projected general fund revenue.
Within ten years, the total annual cost to taxpayers will
be more than $700 million. The governor’s budget called
for changes to the retirement system that would save $524
million over the current biennium, with most of the savings
accruing to the general fund. Governor LePage argues
that over the longer term, these changes would reduce
the state’s unfunded pension liabilities by $2.5 billion,
reduce retiree health liability by almost $1 billion, and
keep almost $7 billion in Maine’s private sector economy
through 2028.
Recent estimates put the state’s budget gap at $164 million.
Proposals to close the gap, some of them controversial,
have included include cutting health insurance coverage
for childless adults who qualify for Medicaid to save
$35 million; reducing the tax cut package by $4 million;
taking $30 million from the rainy day fund; booking $16.8
million in federal aid for a computer billing system; cutting
$10–20 million in transportation funding; eliminating 259
vacant state positions and cutting $2 million in funding for
the Maine Public Broadcasting network.
Comprehensive Incentives
Maine offers a wide range of funding assistance programs
to businesses of most sizes and areas of expertise. From
tax incentives to fnancial assistance and grants, the State
of Maine is working to position itself as a partner in
long-term business growth and success. To accomplish
this, the state has developed several programs that offer
what the state terms “comprehensive incentives.” These
programs include progressive tax reimbursement policies
and a nationally recognized Community Development
Block Grant program that provides funds to projects like
infrastructure development.
The Pine Tree Development Zone (PTDZ) program
offers eligible businesses the chance to greatly reduce
or virtually eliminate state taxes for up to ten years.
The program’s goal is to create quality jobs in targeted
industries and support new or expanding Maine businesses,
as well as businesses relocating or establishing a Maine
MAINE
Maine’s Place in the Rankings
1st High Speed Broadband Intensity
4th Small Business Lending
7th High Speed Broadband Availability
8th Transportation Infrastructure
Performance
12th High School Advanced Placement
Intensity
13th Short-term Job Growth
19th Job Placement Effciency
20th Per Capita Income Growth
22nd Entrepreneurial Activity
25th Higher-ed Effciency
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presence. Targeted industries include biotechnology,
aquaculture and marine technology, composite materials
technology, environmental technology, advanced
technologies for forestry and agriculture, precision
manufacturing, information technology and fnancial
services. Benefts provided by the PTDZ include corporate
income tax credits, insurance premium tax credits,
Maine payroll and property tax credits, income tax
reimbursement, and several sales and use tax reductions
and credits.
The state also offers assistance and support in bolstering
innovation-based technology businesses. The Maine
Technology Institute (MTI) is one element of the state’s
economic development strategy, which contributes to
the long-term development of a statewide research,
development and commercialization infrastructure.
As a state-funded, private nonproft organization, MTI
offers capital and commercialization assistance for the
research and development of innovative, technology-
based projects that create new products and services and
generate jobs in the state of Maine. This effort offers
commercialization grants and early-stage fnancing for
research and development projects, and in collaboration
with State University Innovation Centers, fosters
innovation in life sciences, renewable energy, and advanced
materials. The state relies on excellent research facilities
including Jackson Laboratory, the Gulf of Maine Research
Institute, Mount Desert Island Biological Laboratory,
Bigelow Laboratory, and the University of Maine’s AEWC
Advanced Structures and Composites Center to provide
commercialization and technology support and assistance.
The Three Ring Binder Broadband
Project
The Three Ring Binder is a $32 million project that will
create an open access fber optic network extending into
the most rural and disadvantaged areas of the state of
Maine. The project will help to make “middle mile” fber
available for broadband service providers in order to bring
cost-effective, high-speed broadband services to areas that
do not have access to it today.
The project will also improve the reach and effectiveness
of Maine’s rural health care system, by providing
infrastructure that benefts clinics and hospitals. It will
improve health awareness for impoverished communities
in Maine, allow more immediate contact with clinical
health care specialists, increase the collaboration of local
community-based health care providers with specialists in
major metropolitan areas, and allow quicker, more accurate
diagnoses and care for health-related problems.
The Three Ring Binder project is being executed as a
public-private collaborative effort between the internet
provider Great Works Internet, multiple other commercial
service providers (including Pioneer Broadband), and the
University of Maine system. Multiple levels of service will
be provided by the various entities involved. The higher
education and government locations will receive 100 Mbit
or gigabit level services from NetworkMaine, a partnership
recently created between Maine state government and the
University of Maine system to operate the MaineREN
backbone and the Maine School and Library Network.
Commercial broadband providers will be able to gain
access to dark fber optic strands via Indefeasible Right to
Use agreements or other leasing arrangements.
These efforts will solidify Maine’s current top ranking for
high-speed broadband intensity and seventh place position
for high-speed broadband availability. The 1,100 miles of
fber optic cable will enhance not only the state’s health
care system, but will also positively impact academia and
small business alike, providing a competitive advantage in
meeting the the state’s ongoing connectivity needs. This
project will ultimately provide “dark fber” broadband
service to more than 100 rural Maine communities with
110,000 households, 600 anchor community institutions,
and 38 government facilities that are not served today.
65
Clusters in Maine
Largest Cluster: Biomedical/Biotechnical (Life
Sciences), 75,372 jobs
Largest Growth Cluster: Biomedical/
Biotechnical (Life Sciences), 9,520 new jobs since
2002
Most Competitive Cluster: Chemicals &
Chemical Based Products, 1,227 new or retained jobs
due to state competitive advantage
Most Concentrated Cluster: Forest & Wood
Products, 2.32 times the national concentration level
66
With a strong orientation toward science, technology,
engineering and mathematics (STEM), Maryland has
focused its resources on shoring up and reenergizing its
economy by supporting businesses and jobs in advanced
technology, defense systems and health sciences. Initiatives
within the state have focused on workforce training, tax
programs and infrastructure development that stand to
enhance the state’s competitive advantages in retaining,
growing and attracting businesses in these sectors.
Balancing, Cutting & Reducing
Faced with a $1.4 billion gap between expenditures and
the state’s recession-battered revenues, Governor Martin
O’Malley is proposing an approach to balancing the budget
that cuts spending and reduces the size of government.
This is no easy task with 87 cents of every general fund
dollar that the state spends allocated to public education,
public health and public safety.
In order to close this gap, the governor has proposed a plan
that would draw $950 million from the state’s general fund
and would cut about $250 million in Medicaid payments to
hospitals. Keeping education dollars at current levels would
save nearly $100 million. Additional proposals would cut
$60 million from state aid to counties and save $40 million
through buyouts of more than 1,000 state workers. These
buyouts would be coupled with potential savings of $100
million through an overhaul of the pension system for
public employees.
The current fscal year budget has been supplemented
by $1.3 billion in federal stimulus money and a one-time
transfer of $350 million from the income tax reserve fund.
The governor’s proposed budget relies heavily on one-
time transfers from cash-rich programs to fund operations.
The plan would shift $430 million, with nearly half ($200
million) coming from the state’s capital budget and $60
million from the Transportation Trust Fund, which is
ordinarily used for projects such as the proposed light rail
lines in Baltimore and the Washington suburbs. Nearly $20
million would be moved from the Chesapeake Bay trust
fund.
Creating Jobs in a Tough Economy
While confronted with tough budgetary constraints,
Maryland has not recoiled in the face of adversity. In fact,
the state and its businesses worked collaboratively to create
26,000 jobs in 2010, marking the state’s best year of job
creation since 2006 and putting Maryland ahead of 36
other states. To accomplish this, the state has marketed a
dedicated workforce, quality product development, quality
MARYLAND
Maryland’s Place in the Rankings
2nd STEM Job Concentration
2nd High School Advanced Placement
Intensity
3rd High-tech Share of All Businesses
5th Median Family Income
8th Export Intensity Growth
8th Educational Attainment
10th STEM Job Growth
10th High Speed Broadband Availability
11th High Speed Broadband Intensity
12th Economic Output Per Job
13th College Affordability
14th Short-term Job Growth
14th Gross State Product Growth
14th Productivity Growth
15th Per Capita Income Growth
16th Growth in Share of National Exports
18th Long-term Job Growth
19th Export Growth
23rd Budget Gap
24th Higher-ed Degree Output
25th Job Placement Effciency
66
67
of physical plants, affordable wages rates, geographical
access, and initiatives to improve business climate in the
state, including Maryland Made Easy, which focuses
on developing specifc strategies for state agencies to
streamline processes, simplify regulations, and improve
communications.
The Invest Maryland program is a premium tax credit
program designed to fuel venture capital investment in
Maryland businesses by offering insurance companies
the opportunity to forward-pay taxes at a discounted rate
in exchange for an up-front investment in the program. A
minimum of 50 percent of these investments will fow into
the Maryland Venture Fund, and the balance would fow
into Maryland-based venture capital frms for the purposes
of getting critical capital to businesses so they can create
jobs and advance innovation in felds like biosciences and
nanotechnology. The 2011 legislative session funded the
program at $75 million.
Another initiative is the One Maryland Tax Credit that
allows businesses that invest in an economic development
project in a qualifed distressed county the ability to
qualify for project tax credits of up to $5 million and
start-up tax credits of up to $500,000. This program offers
up to $5 million based on qualifying costs and expenses
incurred with the acquisition, construction, rehabilitation,
installation, and equipping of eligible projects including
land acquisition, performance and contract bonds,
insurance, architectural and engineering services,
environmental mitigation, and utility installation.
The state also offers a Start-up Tax Credit that helps
cover the expense of moving a business from outside
Maryland and helps minimize the costs of furnishing and
equipping a new location. Eligible costs include the cost
of fxed telecommunications, offce equipment, and offce
furnishings. The credit is capped at the lesser of $500,000
of eligible costs or $10,000 times the number of new
positions created. In years one through fve, the business
may apply the start-up credits against its Maryland income
tax liability. In years six through ffteen, it may apply the
start-up credits against its Maryland income tax liability
and, in addition, claim a refund subject to the payroll
withholding of the qualifed employees.
Investing in Innovation
Maryland has been a leader in innovation and
entrepreneurship, ranking second in STEM job
concentration in 2010 and third in high-tech share of
all establishments. This strong performance has been
supported by broadband initiatives that will provide much
needed backbone infrastructure throughout the state. In a
knowledge economy, this initiative is critical to creating
the infrastructure required to compete and win in a
globally competitive market.
The state is focused on supporting its workforce through
increased skill sets and a competitive training process.
The state’s Skills2Compete program is a workforce
development and skills initiative focused on increasing the
number of Marylanders prepared for middle- and high-
skill jobs. The initiative aims to promote the importance of
middle-skill jobs while providing information on training
and fnancing programs for skills upgrades.
Knowing that small business is a major driver in job
development, the state has developed the Small Business
Credit Recovery Program that supports the ongoing
economic recovery and continued limited activity
in private-sector lending. This program helps small
businesses obtain private loans by allowing the state to
share in some of the risk. The Maryland Department of
Business and Economic Development has extended the
Small Business Credit Recovery Program through 2011
to continue encouraging banks to provide needed capital.
The program became a model for the federal State Small
Business Credit Initiative Act of 2010, unlocking federal
funds to support small business loan guarantee programs
across the nation.
67
Clusters in Maryland
Largest Cluster: Business & Financial Services ,
472,994 jobs
Largest Growth Cluster: Business & Financial
Services, 85,545 new jobs since 2002
Most Competitive Cluster: Information
Technology & Telecommunications, 17,320 new or
retained jobs due to state competitive advantage
Most Concentrated Cluster: Defense &
Security, 1.50 times the national concentration level
68
Long renowned as a leader in research and development
(R&D) capacity, the Commonwealth has continued its
dominance as a top-tier state for measures of degree
attainment (fourth), educational attainment of its
young workforce (frst), share of high school seniors
taking Advanced Placement exams in 2010 (ninth). But
Massachusetts doesn’t stop there; it also ranks ninth in
share of broadband connections that are high-speed and
ffth in regions with high-speed broadband penetration. It
is no wonder they are so smart.
Creating Jobs and Expanding Economic
Opportunity
Governor Deval Patrick’s broad-based growth agenda
covers investments in education, innovation industries,
small businesses, and infrastructure, stating, “We can’t be
satisfed until every single resident who seeks work can
fnd it.” To meet that challenge, the state is executing a
strategy for bringing more good jobs and new economic
growth to all parts of the state. The strategy is focused
on four pillars: investing in public education, supporting
innovation industries, strengthening the infrastructure, and
reducing business costs.
Investing in Public Education
A well-trained workforce and a strong system of public
education are some of the state’s calling cards, and they
remain critical to expanding economic opportunity. To that
end, the commonwealth is supporting public education at
the highest levels in the history of the state. Using state
Chapter 70 funding to schools and federal Race to the Top
funds, the commonwealth has committed record funding to
public schools, despite the challenges of a global economic
recession. Other initiatives include more autonomous
Innovation Schools based on detailed innovation plans, and
competitive grants awards for higher education.
Supporting the Commonwealth’s
Innovation Industries
Massachusetts is well suited for high-tech industries
including clean technology, biotechnology, life sciences,
information technology, and precision manufacturing.
It has implemented a $1 billion, ten-year Life Sciences
Initiative that, with targeted investments in growing sectors
and employment at solar panel construction facilities, has
increased almost 150 percent since 2007.
Strengthening Infrastructure
The state has recommitted to renewing its aging and
neglected infrastructure, ensuring that the state has a 21st-
century system of roads, bridges, and broadband networks.
By investing in these growth platforms and streamlining
the state’s transportation bureaucracy, the state has helped
created immediate employment opportunities and set
Massachusetts on a long-term growth trajectory. The state’s
FY2012 budget will increase funding for its Chapter 90
Local Road Program to $200 million, an increase of $45
MASSACHUSETTS
Massachusetts’ Place in the
Rankings
1st Median Family Income
1st Educational Attainment
2nd Job Placement Effciency
3rd STEM Job Concentration
4th Higher-ed Degree Output
5th High Speed Broadband Availability
6th High-tech Share of All Businesses
8th Economic Output Per Job
9th High School Advanced Placement
Intensity
9th High Speed Broadband Intensity
11th Short-term Job Growth
11th Budget Gap
21st Export Intensity
22nd Academic R&D Intensity
25th Higher-ed Effciency
68
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million or 29 percent over the current fscal year. Capital
spending for municipalities will expand from $7.9 billion
in the frst phase to a projected $11.5 billion in the second
phase. Additionally, the state will continue supporting
large-scale transportation projects such as South Coast Rail
and enhancing existing platforms, such as the commuter
rail and state highway systems.
Reduce Costs and Streamline
Regulations for Small Businesses
The state has reduced its corporate tax rate from 8.75
percent in tax year 2010 to 8.25 percent in 2011. The
Department of Revenue estimates that this will save 35,000
businesses statewide roughly $185.1 million. Additionally,
the state has streamlined and consolidated its economic
development agencies, which has helped to lay out a more
coherent, effcient network of support for businesses
investing in Massachusetts, as well as marketing initiatives
designed to promote the state.
Massachusetts will continue to review and simplify the
interactions between business and government, particularly
through efforts to support small businesses doing business
with the state. The state is working to encourage banks to
start lending again to small businesses through the state’s
Growth Capital Fund.
Stimulating Growth with Programs that
Work
While incentives shouldn’t be the driving force to
developing business in any state, incentives play an
important role in helping small and emerging business
develop, grow and prosper, especially in these tough
economic times. To that end, Massachusetts has developed
a series of incentives that are affecting the state and
helping to create jobs.
The state’s Economic Development Incentive Program
(EDIP) is a tax incentive program designed to foster job
creation and stimulate business. Participating companies
may receive state and local tax incentives in exchange
for job creation, manufacturing job retention and private
investment commitments. Reforms to the program in
2010 added fexibility to award incentives based upon the
number of jobs created and added the requirement that
qualifying projects have substantial sales outside the state.
The Massachusetts Investment Tax Credit (ITC)
offers a 3 percent credit for qualifying businesses against
their Massachusetts corporate excise tax. The credit
is to be used for the purchase and lease of qualifed
tangible property used in the course of doing business.
Massachusetts recognizes that growing business and
investing in new jobs requires time and money. The state
helps to encourage capital investment, and in return, the
ITC can reduce the cost of expansion. Additionally, the
ITC includes a carry-forward provision and is considered a
permanent incentive.
Massachusetts offers a tax incentive for research and
development (R&D) investment for both manufacturers
and R&D companies, suggesting why it may lead in
R&D businesses. This tax incentive was designed to
remove obstacles to R&D investment and spur growth
and innovation throughout the state. The R&D tax credit
closely resembles the federal credit program; however,
it specifcally offers qualifying companies a number of
unique features for doing business in Massachusetts.
Massachusetts’ Single Sales Factor tax apportionment
signifcantly reduces the tax burden for manufacturers
and other qualifying companies. The Single Sales Factor
adds to the attractive tax environment for businesses
in Massachusetts. While many states use a three-factor
apportionment formula to determine a frm’s net income,
creating a greater burden for businesses, Massachusetts
only uses a single sales factor apportionment formula.
Massachusetts’ version of Tax Increment Financing
allows municipalities to provide fexible targeted incentives
to stimulate job-creating development. Elements of
this program include an opportunity for a negotiated
agreement between a business and host municipality; a
fve-year minimum and 20-year maximum; an exemption
from property tax on all or part of the increased value
accrued as a result of development (the “increment”); and
a percentage of exemption that can range from 5 percent to
100 percent.
69
Clusters in Massachusetts
Largest Cluster: Business & Financial Services,
566,811 jobs
Largest Growth Cluster: Biomedical/
Biotechnical (Life Sciences), 71,666 new jobs since
2002
Most Competitive Cluster: Advanced Materials,
7,285 new or retained jobs due to state competitive
advantage
Most Concentrated Cluster: Computer &
Electronic Product Manufacturing, 2.30 times the
national concentration level
70
Facing a daunting budget gap, 11 percent unemployment
and a net population loss since 2000, Michigan has worked
to develop programs and tools to reshape its economic
climate and create new, exciting jobs for its citizens. These
programs are focused on emerging industries but also
pay heed to tourism, a key component to bringing outside
dollars into the state. By targeting scarce resources to key
areas of development, the state is defning a strategy that
builds on its existing strengths.
Tough Times—Tough Decisions
With the state facing a $1.4 billion budget defcit, Governor
Rick Snyder has proposed a budget that would make $1.2
billion in cuts to schools, universities, local governments
and other areas, while asking public employees for $180
million in concessions. The Snyder plan restructures
Michigan’s tax system, which includes a promised
elimination of the Michigan Business Tax, to be replaced
with a fat corporate income tax set at 6 percent. The
plan includes the scheduled reduction in the individual
income tax rate from 4.35 percent to 4.25 percent. Because
Michigan is one of only three states in the nation that
exempts most or all of earned pension income, Snyder’s
plan will broaden the base of taxpayers by including those
earning private and public pensions. In addition, the plan
proposes to eliminate all credits and deductions related
to the individual income tax with the exception of the
personal exemption, homestead property tax credit and
other minor subtractions.
To streamline and right-size government, the budget
proposes the elimination of statutory revenue-sharing
payments for cities, villages and townships in FY2012, to
be replaced with a new incentive-based revenue sharing
program available to municipalities that meet state
standards and adopt best practices. Additionally, the state
has proposed the elimination of the dairy farm inspection
program within the Department of Agriculture and
revenue adjustments and administrative effciencies in the
Department of Environmental Quality, as well as seeking
to make programs self-supporting relative to the cost of
regulation and employee concessions, resulting in savings
of $180 million.
The state has dedicated $2.6 billion in both 2012 and 2013
to state and local bridge construction and maintenance
projects. Programming efforts include the creation of
the IT Innovation Fund for technology improvements
that create savings in state government and the creation
of the Quality of Place Fund for the arts and cultural
development. The budget also identifes funding for
Michigan’s workforce, the 21st Century Jobs Fund, to
promote economic development, and the Pure Michigan
campaign, an effort to promote Michigan and enhance
tourism.
Job One is Jobs
Even with a looming budget defcit and an unemployment
rate nearing 11 percent, the state is moving to build a more
robust economy in the face of adversity by using new
and existing programs to retool and restore the economy.
With several programs targeting innovation, information
technology and 21st century jobs, the state is very specifc
about its priorities: job one is jobs, the mantra goes. The
retention and creation of jobs will create new revenue
streams for the state and reverse patterns of outmigration
that are challenging the state.
MICHIGAN
Michigan’s Place in the Rankings
8th Export Intensity
11th STEM Job Concentration
11th Job Placement Effciency
12th Budget Gap
17th Business Tax Climate
18th Median Family Income
20th Higher-ed Degree Output
21st Small Business Lending
22nd High Speed Broadband Availability
22nd Transportation Infrastructure
Performance
25th Higher-ed Effciency
70
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The 21st Century Jobs Fund was created to reshape
and diversify Michigan’s economy by sparking new
investments to rapidly create companies and jobs. The
21st Century Jobs Fund addresses four primary areas of
focus, including commercialization of competitive-edge
technologies: life sciences, alternative energy, advanced
automotive manufacturing and materials, and homeland
security and defense. Priorities include increasing capital
investment activity by attracting and growing venture
capital, private equity and mezzanine fnancing in
Michigan and increasing commercial lending activity to
stimulate additional lending by fnancial institutions across
the state. The 21st Century Jobs Fund has the ability to
create commercial loan enhancement programs and new
industry clusters.
With clear competitive advantages in manufacturing
and engineering, the state is still number eleven for
concentration of science, technology, engineering and math
jobs. Michigan is poised to translate leading manufacturing
and supply chain expertise, coupled with competitive-edge
technologies, to launch and diversify into new vertical
markets.
To help accelerate job creation and enhance quality of life
within the state, Michigan has designed the IT Innovation
Fund for technology improvements that save money for
the state government and created the Quality of Place
Fund for arts and cultural development. By supporting
technology improvements for business and government
alike, the state is identifying the key infrastructure of the
new economy and is working to create new higher-wage
jobs with it.
To capitalize on these programs, the state has focused
many of its efforts on a triad of industry clusters. As auto
production continues to contract, the state’s economy is
making the transition to a more diversifed and resilient
industrial base. Companies are fnding opportunity in the
production of everything from medical devices to military
hardware and increasingly alternative energy technologies
and the state is working to support these efforts. Michigan
is developing new state and nationwide markets for
alternative energy sources as bio energy and fuels, wind
generation and advanced energy storage. Another point
of focus includes homeland security support industries.
Michigan is home to an impressive number of military and
defense-related facilities, including advanced research labs,
testing grounds, and bases. Michigan has placed special
emphasis on the sector, helping both entrepreneurs and
established frms to expand into the industry and to secure
contracts with the Department of Defense and its prime
contractors.
Measuring Performance—the Michigan
Dashboard
True success is based on achieving real results based
on hard measurements that refect either achievements
or lack of progress. In this vein, the state has developed
the Michigan Dashboard, which will provide real-time
data composed of 21 different measures in fve key areas.
These measures include the overall strength of the state’s
economy, benchmarks for future academic success and the
well-being of Michigan citizens, fscal metrics that show
the spending and borrowing of government, population
and popularity of outdoor activities, and crime and traffc
injury rates.
The Dashboard is designed to promote transparency by
giving information at a glance. It will include Michigan’s
current standing in particular categories, such as
unemployment. It will also allow Michigan citizens and
stakeholders to see whether that trend is moving in a
positive or negative direction. In addition, where feasible, it
will include Michigan’s national rank for comparison with
other states.
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Clusters in Michigan
Largest Cluster: Business & Financial Services,
541,426 jobs
Largest Growth Cluster: Biomedical/
Biotechnical (Life Sciences), 41,954 new jobs since
2002
Most Competitive Cluster: Agribusiness, Food
Processing & Technology, 7,213 new or retained jobs
due to state competitive advantage
Most Concentrated Cluster: Transportation
Equipment Manufacturing, 3.36 times the national
concentration level
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While Minnesota has long been characterized as a national
leader in higher education and innovation, ranking ffth
in degree output, second in educational attainment and
tenth in science and technology jobs, lower rankings
related to the state’s budget, taxes and regulations may
pose challenges in the state’s continuing efforts to grow its
economy.
The Budget Blues
With a $5 billion budget gap, Governor Mark Dayton and
legislative leaders are set to make hard decisions to help
alleviate the budgetary burden. Governor Dayton has
proposed a new top income tax bracket and an additional
property tax charge for homes valued over $1 million.
Dayton is also proposing to close corporate tax loopholes,
and put in place health care surcharges that allow the state
to capitalize on additional federal funding for health care.
In a state known for its educational prowess, budget issues
are forcing the state to look at higher education funding
cuts, under which approximately 9,400 students are
projected to lose their state fnancial aid grants entirely and
the remaining recipients will see grants cut by 19 percent.
Additionally, Governor Dayton has proposed reducing
by one-third support for the state’s work-study program.
Approximately 2,600 fewer students would have a work-
study opportunity at Minnesota colleges and universities
as a result of the cut. Dayton’s budget also would phase out
state funding for a college savings program that helps low-
income families save for college expenses.
The employment picture within Minnesota has seen
improvement recently, but the state is still working to
recover jobs lost during the height of the recession, when
offcials estimated that 51,000 manufacturing jobs were
lost during the period from 2007 to 2009. While these
trends are reversing, many companies have resumed
revenue growth without adding workers. Moreover,
manufacturing jobs in Minnesota had already fallen from
400,000 in 1999 to 350,000 before the recession hit.
Creating Jobs Using Existing Strengths
The regional economy is expected to grow in the frst
half of 2011, even as Minnesota is held back by job
losses suffered during the recession. The state’s economy
has fared better recently, due in part to expanded
business activity for frms with close ties to agricultural
commodities. Looking at these successes, the state has
focused its job creation efforts on competitive advantages
already at play in the marketplace, including agriculture
and biosciences.
The Minnesota Agriculture Innovation Triangle
(The Triangle) encompasses 36 contiguous counties in
southwest, west central and south central Minnesota. This
region is defned by two primary industries: agriculture
and agricultural manufacturing. The mission of The
Triangle Initiative is to boost innovation and cultivate new
technologies in order to achieve a competitive advantage
through business and talent development. This initiative
is based on strategic partnerships providing the expertise
and assets needed to drive regional transformation. The
initiative has been supported by a highly integrated public-
MINNESOTA
Minnesota’s Place in the Rankings
2nd Median Family Income
2nd Educational Attainment
3rd Job Placement Effciency
5th Higher-ed Degree Output
10th STEM Job Concentration
10th Transportation Infrastructure
Performance
13th High-tech Share of All Businesses
17th High Speed Broadband Availability
20th Growth in Share of National Exports
21st High School Advanced Placement
Intensity
22nd Export Intensity
23rd Short-term Job Growth
23rd Economic Output Per Job
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private partnership that is working to increase place-
based innovation and heighten educational attainment by
promoting workforce development and skills. The partners
include regional councils, investment boards, the state,
institutions of higher education, foundations and private
companies that are looking to accelerate job growth and
workforce capacity.
The Bioscience Business Development Public
Infrastructure (BBDPI) program is focused on job
creation and retention through the growth of new and
emerging bioscience businesses and organizations. The
BBDPI provides grants to local governmental units on a
competitive basis for up to 50 percent of the capital cost of
the public infrastructure needed to expand or retain jobs.
The projects must be of publicly owned infrastructure
related to a particular bioscience development project,
including wastewater collection and treatment, drinking
water, storm sewers, utility extensions, telecommunications
infrastructure, roads, bridges, parking ramps, and other
facilities that support basic science and clinical research.
Sectors eligible for these incentives include manufacturing,
technology, warehousing and distribution, research and
development, bioscience business incubators, agricultural
bio-processing, and industrial, offce or research park
development associated with a bioscience business.
To maintain economic growth, the state is focused on
upgrading the skills of a workforce that uses more and
better technology and delivers more productivity. The
state has developed regional economic and workforce
development strategies to help cultivate a more productive
environment for Minnesota’s businesses. These initiatives
look to stimulate and train the workforce by focusing on
industry needs. FIRST Grants, or the Framework for
Integrated Regional Strategies, is a funding framework
that requires K-12 education, postsecondary education,
economic development, workforce development and
business entities to defne their regional economies and
then develop strategies that will align each stakeholder’s
resources to accomplish the vision for the region. These
strategies must be business-led.
With its Job Skills Partnership Program, Minnesota is
pursuing industry cluster strategies by awarding multiple
grants within regional industries to maximize investment
in training within an industry sector. The program has
also focused on grants that help low-income workers to get
industry training tied to career ladder opportunities.
STEM Jobs Critical in Jump Starting
Economy
With a strong concentration of science, technology,
engineering and mathematics (STEM) jobs in the state,
regional and state-led economic developers have worked
to defne and promote regional, or place-based, industry
clusters focused on fnancial services, medical devices
and information technology. These efforts have paid off
as Minnesota is ranked tenth in STEM job concentration
for 2010, showing that the state has capitalized on its
strong, diverse and mature bioscience and medical device
industries to help reverse job losses realized at the height
of the recession. The bioscience cluster is benefting
and growing because of concerted efforts by the state’s
bioscience infrastructure initiative, which has helped to
provide the required capital support for infrastructure for
this critical industry.
73
Clusters in Minnesota
Largest Cluster: Business & Financial Services,
382,841 jobs
Largest Growth Cluster: Biomedical/
Biotechnical (Life Sciences), 59,797 new jobs since
2002
Most Competitive Cluster: Biomedical/
Biotechnical (Life Sciences), 18,871 new or retained
jobs due to state competitive advantage
Most Concentrated Cluster: Computer &
Electronic Product Manufacturing, 2.08 times the
national concentration level
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Mississippi remains in this year’s exports top ten as the
ffth fastest growing state exporter. The state is rapidly
increasing exports to South and Central American
countries, including Panama, Brazil, Honduras, Columbia,
and Guatemala. With proven export capacity and
programs, the state counts on exporting as one major
component of its job creation strategy.
Cutting Costs and Streamlining
Government
Facing a potential $715 million budget gap in FY2011
and projections indicating that the state will be faced
with a budget gap of more than $1.2 billion during 2012,
Governor Haley Barbour has proposed a reduction of 12
percent for most state agencies below fscal year 2010
appropriations, with some exceptions for those line items
that the state is not legally allowed to cut as well as for
specifc priority services. The plan recommends just a
fve percent reduction for the Mississippi Development
Authority because it plays a crucial role in creating new
jobs by attracting new employers to Mississippi and
encouraging existing businesses to continue investing
within the state’s borders.
The Department of Corrections and the law enforcement
budgets of the Department of Public Safety will see cuts
of six and eight percent, respectively. On the other hand,
some agencies, like the Attorney General’s Offce, which
had much smaller reductions in FY2009 and 2010, will
see budget reductions of more than 12 percent in order to
bring them into parity with the rest of state government
as compared to FY2009 appropriations. Others like the
Department of Marine Resources will see cuts above 12
percent.
Revenue is unlikely to signifcantly rebound, and the
state will lose $370 million of federal stimulus money
used to prop up the $5.5 billion FY2011 budget. Along
with declining revenue streams, Mississippi also will face
several rising expenses for the 2011 and 2012 fscal years.
One particular area of projected increase is Medicaid,
where the state expects expenses to climb $200 million in
2011 and $220 million in 2011.
The governor’s budget recommendation for FY2011 relies
heavily on six main principles:
Creating more and better jobs; increasing the budget of •
the Tax Commission, so it can hire additional auditors
to collect money the state is already owed.
Assuring that law enforcement programs or budgets •
take less of a spending reduction so they can continue
their vital service of protecting Mississippi families.
Identifng signifcant cost savings that don’t diminish •
educational opportunities.
Establishing budget priorities and investing in state •
government entities that generate revenue.
MISSISSIPPI
Mississippi’s Place in the Rankings
3rd Export Intensity Growth
5th Export Growth
10th Cost of Living
11th Per Capita Income Growth
11th Growth in Share of National Exports
11th Higher-ed Effciency
12th Productivity Growth
12th Business Birth Rate
15th State and Local Tax Burden
16th Small Business Survival Index
18th Export Intensity
18th Transportation Infrastructure
Performance
20th STEM Job Growth
20th Entrepreneurial Activity
20th Small Business Lending
21st Short-term Job Growth
21st Business Tax Climate
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75
Streamlining government by seeking effciencies and •
savings.
Allowing Medicaid to achieve spending reductions •
without harming the quality of services provided to the
state’s citizens.
Creating More And Better Jobs
Confronted by budgetary issues and still recovering from
the impacts of Hurricane Katrina, the governor and state
stand ready to grow the regional economy and create jobs
that will impact the livelihood of the state and its citizens.
To help drive this agenda the governor outlined priorities
for the state:
Enact real, comprehensive tort reform. •
Reform of job training systems. •
Balance the budget without raising taxes. •
Realign the state’s economic development programs. •
Improve education. •
By addressing tort reform, Mississippi was able to reduce
its liability rates for automobile, homeowner’s, and other
property insurance rates, and more than 50 new insurance
programs have entered the state. Tort reform created more
competition, more affordable insurance, and created jobs
by reducing unnecessary costs for small businesses.
The Legislature, working collaboratively with the
governor’s offce, worked to overhaul the state job training
system under the reformed Department of Employment
Security. The state workforce training budget was
doubled over two years and a new, stable funding source
was created without raising taxes. The legislature approved
the governor’s proposal to reform the unemployment tax
system to provide dedicated funding to workforce training
while cutting state payroll taxes by 25 percent.
To assist in the goals and objectives of economic
development within the state, a group of business,
education, and government leaders from every area of
the state dedicated to planning for long-term economic
development created Momentum Mississippi. The intent
of the program is to pursue high-value, high-growth
business opportunities by identifying specifc industries
by aligning incentives to attract them. These industries
include a mix of manufacturing and service industries.
Goals of this initiative include improving productivity
and proftability of existing businesses and spurring job
creation by increasing the development and deployment of
new technologies in Mississippi.
Programs that Work
The state has developed several programs that are focused
on job creation and revenue enhancement. These include
the Jobs Tax Credit Program (income tax credit for
companies) which rewards businesses for increasing
employment numbers and payroll levels. Available credit
amounts are based upon the conditions for development in
the business’s local county, and can be used to offset up to
50 percent of an entity’s income tax liability.
The MBFC Revenue Bond Debt (RED) Tax Credit
Program (Corporate Income Tax Credit) has added
national and regional corporate headquarters, data/
information processing, research and development
(R&D) pilot manufacturing, research and development/
high technology to the list of eligible businesses that may
qualify – targeting high growth and innovative companies
that can prosper under the program. The Sales/Use and
Property Tax Exemption Incentive Programs modify
existing code sections to create a new category within
the defnition of manufacturing to include R&D pilot
manufacturing facilities, This allows for a reduction of the
sales and use tax rate to 1.5 percent, and provides authority
for local government units to offer up to a 10-year local
property tax exemption (except school taxes) for R&D pilot
manufacturing and data/information processing facilities.
75
Clusters in Mississippi
Largest Cluster: Business & Financial Services,
102,313 jobs
Largest Growth Cluster: Business & Financial
Services, 20,518 new jobs since 2002
Most Competitive Cluster: Transportation
Equipment Manufacturing, 7,116 new or retained jobs
due to state competitive advantage
Most Concentrated Cluster: Forest & Wood
Products, 2.32 times the national concentration level
76
Missouri remains at seventh this year on the tax and
regulation list. The state ranks better than 20th on all fve
measures, topping out eighth in cost of living. In recent
years, Missouri has enacted comprehensive reforms in
its workers’ compensation system and enacted one of the
strongest tort reform laws in the country.
Making Prior Cuts Help Stem Crisis
While facing a potential $600 million defcit in FY2012,
the state has maintained that the biggest contributor to
the shortfall will be the loss of about $860 million in
federal funding. The state has been proactive in working
to address potential shortfalls, and efforts included $301.4
million in budget cuts for the current fscal year due to
slumping revenues.
The state has approved a $23 billion operating budget and,
despite budget cuts and low revenue growth, the state is in
relatively good fnancial shape. Missouri lands at seventh
in our tax and regulation measures, helping the state
maintain its AAA bond rating. However, the current budget
relies on short-term federal funding sources set to expire,
an issue that will need to be addressed by future sessions.
Basic aid for public schools in this year’s budget remains
fat, while school transportation funding was cut by $45
million. Aid to state colleges and universities is reduced by
more than 5 percent. As proposed, the state will continue
to subsidize prescription drugs for seniors and the disabled.
Other legislation will phase out the state’s franchise tax
over a period of six years, saving employers in the state
$80 million.
Partnerships Lead the Way
The Strategic Initiative for Economic Growth
program, spearheaded by the Missouri Department
of Economic Development, represents a public-private
partnership including business, labor, higher education,
and economic development across the state to chart a path
for transforming the state’s economy into a long-term,
sustainable growth economy. The intent of the plan is to
identify a vision for transforming the state’s economy
within fve years, using data-driven strategic and tactical
plans for specifc high-growth industries important to the
state and addressing factors that support economic growth
including innovation, workforce, access to capital, quality
of life, tax structure and incentives.
Missouri’s clusters represent the state’s strongest
possibilities for job creation and economic growth. These
clusters include advanced manufacturing of transportation
equipment, aerospace and defense, energy solutions,
biosciences including plant and agriculture technology and
animal sciences, health sciences and services, information
technology, fnancial and professional services, and
transportation and logistics. While not excluding other
industries or businesses, this focus helps to target scarce
state resources towards businesses and industries that
are best able to capitalize on the state’s competitive
advantages.
To support this effort the state has several programs that
provide fnancial support and incentives for growing and
retaining new and emerging jobs and businesses. The
Action Loan program provides capital to start-up or
expansion businesses for the purchase of new machinery
and equipment, working capital, building acquisition and
construction, and land acquisition. The Grow Missouri
Loan facilitates the funding of an expansion project
that would create or retain full-time jobs for targeted
businesses. Under this program, principal and interest
payments may be deferred for up to three years to aid in
obtaining approval for the other project fnancing. After
the initial deferral period, payments may be structured as
interest-only for up to three additional years.
MISSOURI
Missouri’s Place in the Rankings
8th Cost of Living
8th Higher-ed Degree Output
16th Business Tax Climate
17th State and Local Tax Burden
19th Budget Gap
19th Small Business Survival Index
19th Higher-ed Effciency
21st Median Family Income
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Business Friendly Taxes and
Regulations
To continue to be a leader in business-friendly tax and
regulatory climate, the state has worked to optimize its
tax, incentive and regulatory policies to best support
the growth of high-value target sectors. Following the
recommendations of the Economic Development Tax
Credits subcommittee of the Missouri Tax Credit Review
Commission, Missouri is streamlining and optimizing
existing tax credits and providing a research and
development tax credit and an angel investment tax credit
in the state.
These programs and the tax structure within the state
provide corporations with one of the most favorable
situations in the nation. An important tax advantage for
businesses is the amount of income considered taxable;
only income earned in the state is taxed. Manufacturers’
inventories (raw materials, goods in process and fnished
goods), as well as goods and wares of retailers, distributors
and wholesalers, are exempt from property taxes. Other
advantages include a state law that sets the corporate
income tax rate at a percentage of net taxable income
earned by a business and allows a portion of federal
income tax payments to be deducted before computing
taxable income, as well as the state’s recent repeal of the
franchise tax.
Boosting Innovation and Manufacturing
The Missouri IDEA (Innovation, Development, and
Entrepreneurship Advancement) Fund promotes the
formation and growth of businesses that engage in the
transfer of science and technology into job creation. The
funds provide fnancing to eligible businesses through four
components corresponding to the four stages of growth for
investment-grade, high-growth enterprises: pre-seed capital
stage fnancing, seed capital stage fnancing, venture
capital stage fnancing, and expansion stage debt.
The Missouri Automotive Manufacturing Jobs Act
allows qualifed manufacturing facilities or suppliers that
bring next-generation production lines to Missouri to retain
withholding taxes typically remitted to the state. Beginning
January 1, 2012 a qualifed manufacturing company may
retain 100 percent of the withholding taxes from full-
time jobs at the facility for ten years if it manufactures
a new product, or may retain 50 percent of withholding
taxes from full-time jobs for seven years if it modifes or
expands the manufacture of an existing product. It also
allows qualifed suppliers to retain 100 percent of the
withholding taxes from new jobs for three years. If the
qualifed supplier pays wages for the new jobs that are
equal to or greater than 120 percent of the county average
wage for Missouri, it can retain the withholding taxes for
fve years.
To get back on the right track and to create good-paying
jobs, Missouri is working to encourage the development
and growth of small businesses. The Show Me JOBS
initiative is working to put Missourians to work and to
support small-business growth. Governor Jay Nixon has
noted that “too often, those starting up small businesses
are willing to take the risks needed but face obstacles
such as obtaining suffcient capital from lenders. State
government needs to help such entrepreneurs.” To help
bolster these efforts the state, the Department of Economic
Development is working collaboratively with the Missouri
Development Finance Board to create a pool of funds for
low-interest or no-interest direct loans for small businesses.
These loans can be a real step toward allowing small
businesses to expand and create jobs.
77
Clusters in Missouri
Largest Cluster: Business & Financial Services,
356,496 jobs
Largest Growth Cluster: Business & Financial
Services, 56,957 new jobs since 2002
Most Competitive Cluster: Information
Technology & Telecommunications, 2,605 new or
retained jobs due to state competitive advantage
Most Concentrated Cluster: Agribusiness,
Food Processing & Technology, 1.60 times the national
concentration level
78
Montana ranks seventh or better in fve innovation and
entrepreneurship measures including science, technology,
engineering, and mathematics (STEM) job growth
(fourth), business birth rate (sixth), R&D intensity
(seventh), entrepreneurship activity (second), and small
business lending activity (ffth). The state has added 3,200
STEM jobs to its economy since 2002, led by growth in
engineering services, computer systems design, custom
computer programming, and energy industries.
Montana’s Budget
After operating in the black with a $300 million surplus
during the past budget cycle, Montana’s recently approved
two-year budget cuts general fund spending by 6 percent to
$3.6 billion. The state is holding education spending steady
through the recession, while not raising any taxes. At the
same time, the state will reduce from 3 to 2 percent the
tax on the frst $2 million of equipment for businesses and
individuals, and will include triggers to reduce the tax to
1.5 percent and raise the cap to $3 million. Like the budget
from the last biennium, the 2011–2013 framework does not
include raises for state employees, though employees at the
top level are in line for raises according to state law.
Big Sky Programs That Work
To continue to provide support for innovation and
entrepreneurship in Montana, the state has developed
a variety of programs aimed at improving, enhancing,
and diversifying its economic and business climate. The
Business Resource Division of the Montana Department
of Commerce works closely with the private sector,
regional economic and community development partners,
as well as other state agencies and federal programs, to
enhance the economic base of Montana through business
creation, expansion, and retention efforts.
Technical and fnancial assistance is provided to local
development groups, Chambers, and similar organizations
to help Montana communities develop their full economic
potential.
The state-funded Big Sky Economic Development Trust
Fund (BSTF) grant program provides grant dollars to
local or tribal governments that can be used to assist
businesses creating new jobs in Montana. Program funds
can be utilized to assist a business with the purchase of
land, building or equipment, the reduction of a lease rate
for lease of public or privately owned property, relocation
costs incurred in connection with moving the assisted
MONTANA
Montana’s Place in the Rankings
1st Budget Gap
2nd Export Intensity Growth
2nd Export Growth
2nd Entrepreneurial Activity
4th Per Capita Income Growth
4th STEM Job Growth
4th Transportation Infrastructure
Performance
5th Long-term Job Growth
5th Small Business Lending
5th Higher-ed Effciency
6th Business Birth Rate
6th Business Tax Climate
7th Academic R&D Intensity
11th Gross State Product Growth
15th Short-term Job Growth
16th State and Local Tax Burden
18th Small Business Lending
19th Productivity Growth
21st College Affordability
22nd Educational Attainment
25th Growth in Share of National Exports
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business’ physical assets to Montana, or employee training.
The BSTF program is designed to provide fnancial
assistance in two key areas. Seventy-fve percent of BSTF
set-asides are awarded to local and tribal governments
in the form of direct grants. Funding may not exceed
$5,000 for each new job created, or $7,500 for each new
job created in a high-poverty county. Program funding
is also available to assist with the completion of project
development activities such as Preliminary Engineering
Reports, Preliminary Architectural Reports, feasibility
studies and business plans.
Montana understands the importance of workforce training
for new and expanding companies, but it also understands
the cost. To meet this need, the state utilizes multiple
funding sources to award workforce training grants. The
bulk of these funds are reserved for new worker training,
but some funds are available to train workers in existing
positions. The Montana Department of Commerce
manages a state-funded workforce training program that
requires $1 of private funds for every $3 of state grant
funds. The ceiling is $5,000, and the maximum award
amount depends on the number of jobs to be trained.
The Primary Sector Workforce Training Grant,
administered by the Department of Commerce, funds
the training of both new and existing full-time workers.
$5,000 of grant funds can be provided for training each
full-time employee. This program is targeted at businesses
that demonstrate that 5 percent of their sales are outside of
Montana, that the business is a manufacturing company
with 50 percent of its sales from companies that have
50 percent of their sales outside of Montana, or that the
business provides a product or service that is not available
in Montana.
The Montana Board of Research and
Commercialization Technology provides a
predictable, stable source of funding for research and
commercialization projects to be conducted in Montana.
The purpose of the program is to encourage economic
development through investment in research projects that
have a clear path to commercialization. Key criteria for
this program are that the business has the potential to
diversify or add value to a traditional basic industry of the
state’s economy, shows promise for enhancing technology-
based sectors or commercial development of discoveries,
and employs or takes advantage of existing research and
commercialization strengths within the state.
TechRanch is a leading business development assistance
organization that is focused on the high-tech sectors. By
offering programs and events targeted at specifc types of
companies, TechRanch aims to speed the development of
tech start-ups and to minimize their cash burn. TechRanch
helps entrepreneurs pursuing ventures in high-tech markets
to grow their businesses faster, more effciently and
with less investment capital than they could otherwise.
TechRanch has also developed expertise in bootstrapping,
recruiting talent in rural markets, raising fnance capital
outside of traditional regions, and developing near-term
strategic plans for getting a company to cash fow positive
as soon as possible.
Different program elements of the TechRanch effort
include the Bozeman Technology Accelerator (BTA),
where select businesses have access to offce space,
broadband (wireless and wired), audio-visual equipped
conference space, fax, copier, networked laser printer and
other executive suite services. BTA clients receive a very
high degree of advising from TechRanch staff, pro bono
service providers, advisors, and other professionals in the
TechRanch network. Another key program is the Bridger
Private Capital Network (BPCN) that is Montana’s frst
and largest angel investor network. This network is a vital
part of Montana’s thriving entrepreneurial community.
It convenes throughout the year to hear presentations
and learn about innovative companies and investment
opportunities.
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Clusters in Montana
Largest Cluster: Business & Financial Services,
57,608 jobs
Largest Growth Cluster: Business & Financial
Services, 12,552 new jobs since 2002
Most Competitive Cluster: Energy (Fossil &
Renewable), 5,057 new or retained jobs due to state
competitive advantage
Most Concentrated Cluster: Mining, 4.33 times
the national concentration level
80
Boasting one of the nation’s lowest unemployment rates,
low foreclosure rates, and rising per capita personal
incomes, Nebraska has continued to show signs of relative
economic strength as other states have struggled through
the recession. That said, the state was not immune to
the downturn and did see modest job losses during the
recession. Still, local observers note that the economy
has begun to shake off its sluggishness, with strong
commodities markets, record farm incomes, and increased
retail sales setting the stage for steady economic growth
over the next year.
Building New Economic Momentum to
Enhance Job Creation
Entering the 2011 session with a biennial defcit
approaching $1 billion, the state’s unicameral legislature
has been forced to consider cuts to state educational
aid funding and to debate potential delays in funding
infrastructure investments. Discussions surrounding state
funding of pensions and collective bargaining rights for
public employees also made their way onto the legislative
agenda, with legislators examining new policy proposals
focused on controlling costs.
In the face of such fscal challenges, Governor Dave
Heineman has pressed for continued and increased
investment of state resources towards policies and
programs designed to support innovation, investment,
and job training. Building on job creation and economic
development priorities identifed by recent studies
conducted on behalf of the state’s government, Governor
Heineman has made calls for a Talent and Innovation
Initiative, the center of his current priorities. The proposal
is focused on supporting state efforts to enhance job
creation and building new economic momentum through
a four-part plan. The Nebraska Internship Program
would provide grants to private businesses to create
internship programs, in order to keep Nebraska students
in state. The Business Innovation Act is a sweeping
proposal focused on enhancing technology transfer by
supporting R&D efforts, providing prototyping and
technology commercialization funding, supporting Small
Business Innovation Research (SBIR) funding grants, and
restructuring small business investment programs. The
Site and Building Development Act would provide grants
and loans to support acquisition and development of prime
business sites. Finally, the governor has proposed creating
an angel investment tax credit to support investment in the
state’s high-tech companies.
The Nebraska Advantage
One of Nebraska’s major job creation initiatives over the
past several years has been the Nebraska Advantage, a
package of incentives and enterprise-friendly tax credits
and refunds designed to support business start-ups and
expansion of existing businesses. Benefts to businesses are
built around a tiered system, based on the type of business
and number of jobs created. Depending on the tier,
businesses are eligible for investment tax credits between
3 and 10 percent, wage credits based on job pay levels,
property tax exemptions and sales tax credits on capital
purchases. The program’s top tier, the Nebraska Super
Advantage, includes enhanced incentives packages focused
on supporting larger employers making multi-million
NEBRASKA
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Nebraska’s Place in the Rankings
3rd Transportation Infrastructure
Performance
6th Cost of Living
7th Short-term Job Growth
8th Academic R&D Intensity
11th Productivity Growth
12th Higher-ed Degree Output
12th College Affordability
13th Long-term Job Growth
13th Export Growth
13th Educational Attainment
16th Median Family Income
16th Higher-ed Effciency
19th Growth in Share of National Exports
21st Budget Gap
22nd Export Intensity Growth
22nd Job Placement Effciency
23rd Gross State Product Growth
23rd Per Capita Income Growth
23rd High Speed Broadband Intensity
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dollar investments in job creation. Small businesses are not
overlooked, however, as the state also offers the Nebraska
Small Business Advantage, focused on providing a
range of support to smaller entrepreneurs. Since the
program’s creation, it has been credited with supporting
the establishment or expansion of around 250 businesses in
the state, creating over 18,500 new jobs and spurring $5.5
billion of business-driven investment.
In order to better leverage the potential of the University
of Nebraska as an engine for job creation and economic
growth, in 2010 Nebraska created the Nebraska
Innovation Campus adjacent to the University of
Nebraska-Lincoln’s city campus. This 249-acre space
is designed to serve as a “public/private research and
technology development center.” Companies located
in the new campus will be able take advantage of their
proximity to the university in order to work collaboratively
with university researchers, directly recruit interns and
employees from the pool of recent graduates, and access
university facilities and infrastructure, such as UNL’s
supercomputing facility. Infrastructure development at
the site is ongoing, and Governor Heineman has made
increasing funding for the new campus one of his job
creation and education priorities.
As part of the Nebraska Advantage program, the state has
adopted a research and development tax refundable tax
credit, which supports advanced research by businesses
in the state. In order to encourage public-private research
and development (R&D) partnerships, the state offers an
increased tax credit for R&D expenditures incurred at
Nebraska’s colleges and universities.
Nebraska has also enacted a 20 percent refundable
microenterprise tax credit, which may be accessed by
companies with fve or fewer employees at their launch.
Hoping to encourage investment in in-state companies, the
state has also created a capital gains exemption in the
state income tax, which extends some exemptions from
taxes on capital gains realized by employees who have
invested in the stock of their Nebraska-based employer.
Other tax reform packages enacted by recent legislative
sessions eliminated the state’s estate tax, lowered state
income taxes, and repealed some sales taxes focused on
construction.
Nebraska continues to focus on building trade relationships
with targeted overseas partners, including China, Brazil,
and Japan. The state maintains an international trade
offce in Japan, supports trade missions, and continues
to actively pursue investment from foreign companies,
supporting transition teams to support business location
from abroad into Nebraska. The state also supports efforts
by the Nebraska Logistics Council to help businesses in
connect to import/export routes and distribution channels,
capitalizing on the state’s central location as a selling
point to companies interested in building new or expanded
operations in the United States.
Governor Heineman has made increased use of internships
to retain Nebraska’s best and brightest one of his current
priorities for job training. In addition to this proposal, the
state already has a group of workforce training initiatives
designed to better prepare its existing workforce to
exploit emerging economic opportunities. As part of the
Nebraska Advantage, the state offers employers access to
a customized job-training program, with grants from
$500 to $4,000 per job available for each new position.
In order to encourage job development in rural areas, the
state offers increased job training incentives for qualifed
jobs created in rural areas, and support from state staff in
designing and implementing needed training programs.
Moving Forward
As part of its efforts to hone its future economic
development efforts, Nebraska has identifed twelve
base industry clusters which have a strong presence in
the state, with three identifed as emerging strengths,
including health services, tourism, and engineering. In
order to better capitalize on new and existing areas of
growth, studies conducted for the state government have
suggested supporting increased cluster organization efforts,
consolidation of clusters into more focused groups, support
for workforce and talent initiatives, and an increased
emphasis on business innovation efforts. Governor
Heineman, in rolling out his four-part plan and refocused
job development policy, appears to be using this guidance
to set his economic development policy priorities as the
state begins to recover from the relatively modest setbacks
it experienced during the past few years of economic
diffculty.
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Clusters in Nebraska
Largest Cluster: Business & Financial Services,
133,244 jobs
Largest Growth Cluster: Business & Financial
Services, 22,382 new jobs since 2002
Most Competitive Cluster: Transportation &
Logistics, 5,163 new or retained jobs due to state
competitive advantage
Most Concentrated Cluster: Mining, 3.98 times
the national concentration level
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The year 2010 continued a string of diffcult years for
the state. Facing one of the largest budget defcits in the
nation, battered property markets, and unemployment
rates firting with 15 percent, Nevada remains saddled
with some of the most vexing economic challenges of any
state in the nation. However, these challenges come on the
heels of yet another decade of strong population growth
for the state, as confrmed by last year’s Census. Signs of
a turnaround have begun to emerge, with unemployment
rates dropping, state revenues increasing, and signs of
increased economic activity being reported in the state’s
large tourism and gaming industries.
A Complete Overhaul
As noted, Nevada entered the year facing one of the
nation’s largest budget defcits as a percentage of its
previous budget. The state’s $1.5 billion shortfall was
equal to 45.2 percent of its FY2011 budget. As a result,
it was no surprise that newly elected Governor Brian
Sandoval made dealing with the budget one of his chief
priorities. Sandoval proposed cutting spending by 8 percent
compared to the previous biennium. He also pledged to
hold the line on taxes, stating that he will oppose attempts
by the legislature to raise revenue through tax increases.
Proposals for freezes in pay raises and across-the-board
pay cuts for state employees were also included in the
governor’s budget.
The governor has also proposed sweeping changes
to the state’s economic development and job creation
activities. Calling for a “complete overhaul” of existing
structures, Sandoval also proposed increasing funding
for the state’s Commission on Economic Development.
The administration has also proposed creation of new
public-private job creation effort, Nevada Jobs Unlimited,
organized along private sector lines but with cabinet
level status. The governor has also called for creation of
a Catalyst Fund for closing deals and funding needed
infrastructure upgrades for business recruitment.
Global Business Development
Nevada has been a national leader in export growth
over the past decade, and remains strong in this year’s
performance measures. In order to support trade activity
by Nevada companies, the state offers several programs
and support services through its division for Global
Business Development. The state maintains a network
of independent trade representatives around the globe,
in locations including Shanghai, Beijing, Hong Kong,
Germany, Brazil and Italy. The state is seeking to expand
the network to Spain and the United Kingdom, in order to
register increased trade with new markets. The independent
representatives work on contract with the state to support
outreach by Nevada companies in their countries, while
acting as points of contact for foreign frms exploring
potential investment and expansion opportunities in
Nevada. The state also hosts inbound buying missions
where foreign buyers are brought to Nevada and connected
NEVADA
Nevada’s Place in the Rankings
1st Export Intensity Growth
1st Export Growth
2nd State and Local Tax Burden
2nd Small Business Survival Index
3rd STEM Job Growth
4th Business Birth Rate
4th Business Tax Climate
4th Job Placement Effciency
5th Entrepreneurial Activity
9th Long-term Job Growth
9th Gross State Product Growth
9th Growth in Share of National Exports
14th High-tech Share of All Businesses
16th Economic Output Per Job
16th Small Business Lending
17th High School Advanced Placement
Intensity
18th Academic R&D Intensity
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with local companies producing products they might be
interested in purchasing. The state also works with local
development agencies throughout the state to coordinate
efforts to attract foreign direct investment, working with
the federal government to identify and support foreign
companies interested in establishing operations in the state.
Efforts to designate a Las Vegas World Trade Center also
came to fruition early this year, giving the state a high-
profle venue to attract international corporations to the
region, potentially laying the foundation for increased trade
and associated job creation.
Nevada maintains two foreign trade zones, in Las Vegas
and Reno, in partnership with the federal government.
These zones allow businesses access to expedited customs
processing and decreased duties and excise taxes. Nevada
continues to promote access to foreign trade shows for
businesses in the state interested in export possibilities,
targeting markets in Asia, Europe, and the Middle East.
The state also hosts workshops designed to train Nevada
entrepreneurs about the challenges and opportunities faced
when accessing foreign markets. The Nevada District
Export Council is another program offered in affliation
with the federal government, providing trade support
services to small and medium-sized businesses in the state.
The Council offers entrepreneurs access to trade-savvy
volunteers for one-on-one advisory services, offers training
sessions and seminars on trade-related issues, hosts trade
missions visiting the state, and helps businesses exploring
trade opportunities gain access to needed fnancing.
Nevada’s job creation efforts are supported by a set of tax
incentives and an enterprise-friendly tax code. Nevada has
no corporate income tax, personal income tax, franchise
tax on income, estate tax, or gift tax. While the state
collects a sales and use tax, businesses are eligible for sales
and use tax abatements and deferrals. The abatements
are applicable to purchases of capital equipment, offering
reduced taxes to companies that meet job creation and
wage provision thresholds. The sales tax deferrals also
apply to investments made in capital equipment, and allow
the company to put off paying taxes for a period of 12 to
60 months, depending on the size of capital investment.
Nevada has also targeted a tax abatement at intellectual
property development businesses. Under terms of the
program, such companies are eligible for breaks in sales,
modifed business, and personal property tax bills if they
meet job creation and investment requirements. In order to
support conservation of energy and adoption of substitutes
for fossil fuels in the state, Nevada also offers businesses
that recycle materials, including for power generation,
tax abatement incentives. This recycling property tax
abatement is available to eligible businesses that recycle
on-site and create a minimum of 10 new jobs, among
several other requirements.
Innovation and entrepreneurship-driven job creation is
also a point of focus for Nevada’s economic development
plans. The Nevada Center for Entrepreneurship and
Technology (NCET) is a nonproft organization providing
programming and support services to entrepreneurs
throughout the state. NCET sponsors entrepreneurship
conferences, venture capital events, and an annual
business plan competition for entrepreneurial college
students, all designed to increase entrepreneurial activity,
commercialization efforts, and job creation in high-
tech industries. Small businesses in search of support
services are also served by the Nevada Microenterprise
Initiative. The NMI offers entrepreneurs access to
microloans for startup and expansion of businesses.
Loans of up to $35,000 are available, along with access to
entrepreneurship workshops and training course designed
to help budding businesspeople get up and running.
To support workforce training activities by Nevada
businesses, the state created the Train Employees Now
program. Qualifed new and expanding businesses with a
minimum of ten employees are eligible to receive funding
from the state in support of their employee screening
and training activities. The beneft is limited to $1,000
per employee, employees must be Nevada residents, and
positions created and offered training must meet certain
wage and beneft standards.
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Clusters in Nevada
Largest Cluster: Arts, Entertainment, Recreation
& Visitor Industries, 249,354 jobs
Largest Growth Cluster: Business & Financial
Services, 54,533 new jobs since 2002
Most Competitive Cluster: Business &
Financial Services, 26,737 new or retained jobs due to
state competitive advantage
Most Concentrated Cluster: Arts,
Entertainment, Recreation & Visitor Industries, 5.07
times the national concentration level
84
Boasting the strongest employment growth rates in New
England, New Hampshire is showing notable signs of
economic recovery. According to the Federal Reserve,
New Hampshire showed one of the strongest job growth
rates nationally in 2010, and now enjoys the lowest
unemployment rate in New England. However, while
progress has been made, personal income gains have been
below national average, unemployment rates are still above
pre-recession levels, and the state has had to deal with
budget challenges created by decreased revenues. Still, as
the nation recovers from a deep economic trough, New
Hampshire appears poised to be a regional growth leader.
Job Creation and Basic Infrastructure a
Priority
With estimates showing up to a $1 billion defcit looming
over the next biennium and state revenues down over 10
percent from their pre-recession level, New Hampshire’s
policymakers entered the year facing a set of diffcult
fnancial decisions. Both the governor and legislature
proposed budgets making substantial cuts from spending
levels seen in the prior biennium. However, while calling
for cutbacks, Governor John Lynch has continued to
press support for programs and initiatives focused on job
creation and economic recovery. Although the state faces
budget challenges, the Lynch administration has remained
openly committed to keep tax rates as they are, working
with the legislature to avoid raising any tax rates as part
of budget negotiations. In order to support innovation
and entrepreneurship in New Hampshire, the governor
has proposed doubling the state’s existing research and
development tax credit program.
Upgrading the state’s roads and other basic infrastructure
has also emerged as a priority, and the administration has
supported implementation of a comprehensive ten-year
highway plan. To further upgrade the state’s transportation
infrastructure, Governor Lynch has proposed creation
of a State Infrastructure Bank, which would give local
communities throughout the state access to a revolving
loan fund to fnance infrastructure improvements. The
administration has also called for continued and steady
state investment in workforce training programs to help
provide a channel of skilled workers ready to support
expansion at existing companies and to attract new
employers to the state.
Job Creation Initiatives
New Hampshire continues to tout itself as a low-tax
environment in which to conduct business. Unlike other
states in its region, New Hampshire does not have sales
taxes or income taxes on wages. Corporate income taxes
are relatively low. In addition, the state offers a series
of tax incentives to spur business development. The
state’s Economic Revitalization Zone Tax Credits
are designed to offer businesses an incentive to create
new jobs in distressed areas of the state. Communities
NEW HAMPSHIRE
New Hampshire’s Place in the
Rankings
1st High Speed Broadband Availability
2nd High Speed Broadband Intensity
4th High-tech Share of All Businesses
7th State and Local Tax Burden
7th Business Tax Climate
7th Educational Attainment
7th Job Placement Effciency
9th Median Family Income
9th Export Growth
11th Higher-ed Degree Output
12th STEM Job Concentration
12th Higher-ed Effciency
18th Short-term Job Growth
19th Export Intensity Growth
22nd Growth in Share of National Exports
23rd Long-term Job Growth
23rd Small Business Survival Index
84
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looking to promote job growth in such areas are able to
gain Economic Revitalization Zone status and access
these credits if they meet certain minimum requirements
showing need. Qualifed projects focused on the creation,
expansion, or remodeling of an industrial or commercial
facility receive credits based on the number and wage level
of jobs created.
New Hampshire’s Research and Development (R&D)
Credit program, which Governor Lynch has targeted for
expansion, offers tax credits to businesses conducting
manufacturing research and development activities.
The credit is calculated based on wages paid to New
Hampshire-based employees involved in R&D activities,
with credits of up to 10 percent of wages paid available to
offset a company’s state corporate tax burden. The credit is
capped at $50,000 per business per fscal year.
Looking to help strengthen the economy of northern
New Hampshire, the state offers the regionally focused
Coos County Job Creation Tax Credit program.
Having identifed Coos County as a struggling area in
need of targeted support, the state offers businesses that
hire new full-time employees in the county a tax credit
of up to $1000 per employee, depending on wage level
of the positions created. Enacted in 2008, the program
is designed to run through 2013 in order to address the
continued effect of job losses in the region. Businesses are
able to carry forward credits earned for up to fve years.
Businesses in New Hampshire are also able to take
advantage of the state’s Community Development
Investment Program tax credits. Designed to encourage
businesses to support innovative community development
projects, the credits are granted to companies that donate
to eligible projects. The credit is equal to 75 percent of
a company’s donation. The program allows businesses
to invest property, cash, or securities into programs that
improve their communities, while receiving a sizable tax
credit to offset their input.
In order to connect green businesses and entrepreneurs
to the research and business support infrastructure of the
University of New Hampshire, the state has established
the Green Launching Pad. The program, designed to
bring together interdisciplinary public-private teams
focused on supporting green business ventures, supports
implementation of the state’s Climate Action Plan, creating
new economic opportunities while reducing the state’s
carbon footprint. The goal of the plan is to incubate new
companies with the support of the university, creating jobs
for graduates. The state’s Innovation Research Center
also offers coordination services and grants designed to
facilitate public-private technology commercialization
partnerships between New Hampshire companies and
research institutions.
Created in 1992, New Hampshire’s Business Finance
Authority provides businesses with access to a variety
of fnance programs designed to expand credit access in
the state. Programs are often offered in partnership with
the state’s banks. The authority’s Capital Access Program
helps banks offer loans to companies that are starting up or
expanding, mitigating some of the risk inherent in lending
to small start-up frms. The state’s Working Capital Line of
Credit Guarantee program provides banks that offer lines
of credit to New Hampshire companies with a guarantee
of up to 75 percent of the line of credit. The Authority also
sponsors a Guarantee Asset Program, which guarantees up
to 90 percent of a line of credit extended by a participating
bank to a qualifed nontraditional capital-intensive
company. In addition, the Authority coordinates a set of
programs focused on small business lending and bond
fnancing, including industrial development bonds.
Workforce development efforts in New Hampshire have
included the state’s Job Training Fund, which provides
businesses with matching grants for workforce training
activities conducted through the state’s community college
system. The state’s New Hampshire Working program
offers companies undergoing economic stress with
workforce support services such as retraining employees
and offering employees facing reduced schedules partial
unemployment compensation, helping companies facing
temporary rough patches to hold on to valued employees.
The state also maintains a Rapid Response Team, tasked
with offering workforce support services to businesses
facing economic diffculty on an expedited schedule.
85
Clusters in New Hampshire
Largest Cluster: Business & Financial Services,
93,065 jobs
Largest Growth Cluster: Business & Financial
Services, 15,487 new jobs since 2002
Most Competitive Cluster: Apparel & Textiles,
2,082 new or retained jobs due to state competitive
advantage
Most Concentrated Cluster: Computer &
Electronic Product Manufacturing, 3.01 times the
national concentration level
86
made efforts to place consideration of changes to public
employee pensions and benefts on the state’s budget
agenda.
Technology and Innovation
New Jersey offers a large and varied set of programs
and opportunities focused on supporting and attracting
innovative businesses to the state, with over 80 different
incentives available to entrepreneurs. While the state is
looking at restructuring some programs in order to help
balance its budget, the administration and legislature have
continued to affrm support for incentives and programs
designed to spur job growth efforts in the state.
NEW JERSEY
New Jersey’s Place in the Rankings
4th High Speed Broadband Availability
6th Economic Output Per Job
6th STEM Job Concentration
6th Educational Attainment
6th Job Placement Effciency
7th Median Family Income
7th High-tech Share of All Businesses
7th High Speed Broadband Intensity
17th Academic R&D Intensity
18th Small Business Lending
23rd Growth in Share of National Exports
24th Export Intensity Growth
24th High School Advanced Placement
Intensity
25th Short-term Job Growth
86
Long a home to cutting-edge research and education
institutions, industry-leading innovators, and boasting one
of the nation’s top per capita income levels, New Jersey
has recently found itself facing a diffcult set of economic
challenges. Since 2008, the state has lost over 200,000
jobs, and seen unemployment rates double to between 9
and 10 percent. This hard hit from the recession has forced
state policymakers to confront one of the nation’s largest
projected budget gaps for FY2012. However, even in the
face of one of the most diffcult economic climates seen
in decades, New Jersey has continued to support a variety
of job creation incentives and initiatives, and is showing
signs that job losses have stopped and that the worst of the
recession is behind it.
Streamline Processes, Cut Red Tape
and Reduce Spending
New Jersey entered 2012 with the nation’s second largest
budget defcit when measured as a percentage of its
FY2011 budget. With a projected shortfall of $10.5 billion
facing the state, Governor Chris Christie’s administration
has made closing the anticipated gap one of its chief
priorities. As part of this process, the administration
has led state efforts to review programs throughout New
Jersey’s government to identify economic development
initiatives with the highest rate of return on investment in
order to prioritize state spending in a challenging budget
environment.
The Christie administration has also put forward plans
that it says will streamline regulatory processes, cut red
tape, and reduce state spending in order to cut the defcit.
One highlight of the administration’s activities has been
a focus on comprehensive tax reform, with the governor
offering multiple tax reform proposals, including cutting
taxes on small businesses and pressing for adoption of a
single sales factor formula in corporate taxes, which would
enable businesses in the state to simplify tax compliance.
In all, the administration offered proposals for almost $200
million in tax cuts in its FY2011 budget proposal. The
governor has also made a push to make use of zero-based
and performance budgeting procedures in the state to
enable government to better adapt to changes in revenue on
a year-to-year basis, removing old programs from baselines
and allowing the state to put more focus on funding new
and emerging priorities. As in many other states facing
challenging budget situations, the administration has
87
In order to support job creation in the technology and
life sciences industries, New Jersey created the Edison
Innovation Fund, which contains a portfolio of programs,
incentives, and funding sources designed to “develop,
sustain, and grow technology and life sciences businesses
that will lead to well-paying job opportunities.” Since
its launch in 2006, the Fund has provided hundreds of
millions of dollars in support to early-stage technology
companies throughout the state. It offers competitively
awarded commercialization funding to new companies,
helping them bring new products to market and bridge
the gap toward other funding sources. Research and
development (R&D) efforts are also supported through
low-interest loans backed by the state. Grants for proof-of-
concept efforts are also available, supporting companies
at earlier stages of development. Other focused programs
within the Fund also look to support growth in targeted
industries, including energy innovation, digital media
production, and advanced manufacturing.
In order to better leverage the monies committed through
the Innovation Fund, New Jersey has also created a
group of Innovation Zones. These zones are located
near research and educational facilities in order to spur
increased public-private innovation and collaboration.
Technology companies located in the zones have access to
special funding, tax credits, grants, and support from the
state’s two technology centers, which offer laboratory and
production space.
As two of the state’s targeted growth industries, high
technology and biotechnology companies are offered
lowered thresholds for accessing job creation tax credits.
While companies in other industries are required to create
25 jobs in order to make use of available tax credits,
technology companies may take advantage of such credits
when they create 10 jobs.
While the state offers R&D tax credits to qualifed
businesses, not all early-stage technology companies are
proftable and thus able to make use of the credits. In
order to support such ventures and the jobs they create,
New Jersey has created a Technology Business Tax
Certifcate Transfer Program. This program, which
the administration has slated for expansion, allows
unproftable technology and biotechnology companies to
sell their unused R&D tax credits to unaffliated businesses
for at least 80 percent of their value. By doing so, such
companies are able to raise funds to procure the equipment
and facilities they need to build and strengthen their
business, enhancing potential future proftability and job
creation.
Regulatory Policy
As part of an effort to streamline government, the Christie
administration launched a Red Tape Review Group led
by the Lieutenant Governor. Charged with reviewing the
state’s rules, regulations, and processes, and exploring
changes to build a better business environment, the group
offered a set of proposed rulemaking reforms and proposed
modifcations and revocations of existing rules. While
originally intended to be a temporary effort, the review
group has now been made permanent, in order to exercise
continual oversight of rulemaking processes in the state.
By way of easing the process of business establishment and
development, New Jersey also recently adopted “time of
application” rules for development project applications in
the state. Under the new rules, proposed developments will
be allowed to follow the rules and regulations that applied
at the time their initial development application was
made, simplifying the process towards completion of an
application. The new rules give new business developments
increased regulatory certainty, and will allow them to
avoid costly changes and setbacks as new rules are adopted
by local governments.
87
Clusters in New Jersey
Largest Cluster: Business & Financial Services,
723,686 jobs
Largest Growth Cluster: Business & Financial
Services, 93,489 new jobs since 2002
Most Competitive Cluster: Computer &
Electronic Product Manufacturing, 2,084 new or
retained jobs due to state competitive advantage
Most Concentrated Cluster: Chemicals &
Chemical Based Products, 1.57 times the national
concentration level
88
Buoyed by the presence of world-class research facilities
such as Los Alamos and Sandia National Labs, New
Mexico remains a leader in innovation and entrepreneurial
activity in this year’s study. While the economic downturn
did drive unemployment rates up and leave the state
facing a sizable budget defcit for FY2012, the state has
seen signs of economic rebound, backed by growth in its
energy and tourism sectors. State tax collections are up, a
sign of increased economic activity, unemployment rates
have begun to drop, and severance tax receipts are up,
a refection of strong commodity prices and increasing
activity in the state’s signifcant oil and natural gas felds.
Wholesale Changes
Newly elected Governor Susana Martinez and the New
Mexico legislature convened in Santa Fe this year facing
a budget defcit estimated at up to $450 million. Taking
a strong stance against tax increases in her State of the
State address, Martinez instead pushed for a package of
spending cuts, tax credit adjustments, and pension and
other program reform in order to reduce state obligations
and reduce the defcit. Martinez has outlined several
different ideas designed to aid business development
and encourage job creation, including pressing for red
tape reduction legislation to identify unneeded business
regulations, cutting down on the cost of regulatory
compliance for businesses in New Mexico. While proposed
legislation related to this aim was not completed during
this year’s session, action was taken to create a Small
Business-Friendly Task Force, which conducted a
review of state rules and regulations, and forwarded
recommendations for future revisions and legislative
changes.
The administration has also forwarded the idea of
making use of unemployment funds to subsidize hires of
unemployed workers by small businesses in the state. Tax
reform was also made a key priority by the administration,
with the governor calling for “wholesale changes” in the
state’s tax structure, and a new focus on moving beyond a
“piecemeal” focus on industry-specifc tax credits toward
restructuring the overall tax code to make the state more
attractive to business. The administration plans to bring
legislation aimed towards such ends before the legislature
in 2012. As noted above, the governor also pushed for
changes to public employee pension plans. Reforms
requiring greater contributions from state workers were
passed by the legislature and coupled with cuts to spending
and new caps on specifc tax credits in order to close the
state budget defcit faced this year.
Eliminate Barriers to Business
While the Martinez administration has called for a re-
evaluation of the use of industry-targeted tax credits in
New Mexico, the state has and continues to offer a slate of
general and targeted tax credits and incentives designed to
support job creation and business growth.
New Mexico policymakers have increased their focus
on reducing and streamlining regulation to cut down on
barriers to business. As part of this initiative, the state has
created an Offce of Business Advocacy in its economic
NEW MEXICO
New Mexico’s Place in the Rankings
5th Per Capita Income Growth
8th STEM Job Growth
9th STEM Job Concentration
10th Entrepreneurial Activity
10th State and Local Tax Burden
10th Higher-ed Effciency
11th Long-term Job Growth
14th College Affordability
15th Small Business Lendin
16th Business Birth Rate
17th High-tech Share of All Businesses
17th Budget Gap
21st Gross State Product Growth
21st Academic R&D Intensity
25th Small Business Survival Index
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development department. This offce is designed to
act as a “caseworker” for business in the state, helping
entrepreneurs deal with regulatory hurdles they encounter
in New Mexico’s government. Working in partnership with
communities and economic development organizations
around the state, the new offce will work with referred
businesses to work their way through the system, reduce
roadblocks, and fnd ways to aid job creation efforts.
Increasing jobs in high technology felds continues to
be an area of key focus for New Mexico. The state has
identifed four industry clusters as areas of strength and
potential growth, including aerospace, nanotechnology,
information technology and software, and biotechnology.
In order to attract and support companies in these
industries, New Mexico offers workforce training options
and higher education programs focused on these clusters
at universities throughout the state. The state also provides
tax incentives targeted to support high-tech business
development. Aerospace companies in the state can take
advantage of tax deductions for aircraft manufacturing and
maintenance, aerospace research and development, and
spaceport operation. The state has also attempted to spur
development of an advanced energy sector with credits and
incentives, including alternative energy manufacturing tax
credits and renewable energy production tax credits.
The latter offers energy generators an income tax credit of
2.7 cents per kilowatt hour for up to ten years.
In addition to more industry-specifc tax incentives, New
Mexico offers a set of general tax incentives designed to
attract businesses to the state and spur job growth. The
state’s high-wage jobs tax credit offers businesses a
tax credit of up to 10 percent of wages on qualifed jobs
for four years. The credit has lower wage requirements
for smaller communities, in order to help drive job
creation in the state’s smaller cities and towns. Looking
to support manufacturing jobs, New Mexico also offers a
manufacturer’s investment tax credit of up to 5 percent for
qualifed equipment and property investments. Another
tax incentive showing the state’s commitment to rural
development while focusing on its overall goal of high-tech
job growth is the technology jobs tax credit. Businesses
with qualifed research and development (R&D) expenses
may take a tax credit of 4 percent if the R&D is conducted
in urban areas and 8 percent if it is conducted in rural
areas.
New Mexico has also made a concerted effort to attract
the flm and television production industries to the state.
The state’s flm production tax credit, created in 2002, has
been credited with creating thousands of jobs and drawing
hundreds of millions of dollars of flm activity to the state.
The state has placed a rolling cap of $50 million on the tax
credit as of this year, in an effort to help address the budget
defcit, but still offers the flm industry a 25 percent tax
credit. In addition, the state offers other incentives to the
flm industry, including access to job training support and
a flm investment loan program of up to $15 million per
project.
Small, local business development has also been a focus
in the state. New Mexico’s MainStreet Program is a
community-focused approach to redevelopment and job
creation in downtown business districts throughout the
state. Working with community nonprofts, the program
supports efforts to improve the physical appearance of
business districts, support and promote small business
development and market efforts, collect economic
information needed to design effective business attraction
and retention efforts, and provide professional guidance to
local agencies looking to build new plans for job creation
in their downtown cores.
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Clusters in New Mexico
Largest Cluster: Energy (Fossil & Renewable),
103,540 jobs
Largest Growth Cluster: Biomedical/
Biotechnical (Life Sciences), 22,053 new jobs since
2002
Most Competitive Cluster: Energy (Fossil &
Renewable), 12,509 new or retained jobs due to state
competitive advantage
Most Concentrated Cluster: Mining, 2.21 times
the national concentration level
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New York entered the year with a projected budget
gap of up to $10 billion to be dealt with during this
year’s session of the general assembly. While moves by
incoming Governor Andrew Cuomo to change the state’s
accounting methodologies moved some projections down
by billions, the state still was left facing diffcult decisions
regarding spending levels and tax rates moving forward
into FY2012. Governor Cuomo pressed a job creation
agenda that will create ten regional economic development
councils, bringing more local direction to state efforts. The
administration also argued in favor of greater university
involvement in job creation efforts, in order to leverage
higher education’s abilities to coordinate intergovernmental
efforts and create “one-stop shops” for job creation
coordination. The governor has also pressed for re-
evaluation of the state’s many departments to streamline
government services, eliminate unnecessary regulatory
pitfalls, and identify potential cost savings. The state was
able to pass a budget by the legally mandated date of April
1, and held the line on taxes while making slight cuts to
spending levels and adjusting some health care spending
procedures.
JOBS Now Focused on Private Sector
Projects
New York’s JOBS Now initiative is focused on supporting
large-scale private sector job creation projects. Companies
that will create over 300 jobs are eligible for loans and
grants of up to $10,000 per position. These funds may be
used to purchase needed equipment, site and infrastructure
preparation, and construction of needed facilities. The
program also provides grants that can be used to conduct
workforce training needed to facilitate the attraction or
expansion of a business. The initiative is focused on target
industries, including manufacturing, distribution, and high
technology-related felds.
To give state job creation efforts more fexibility to
deal with opportunities that present themselves, New
York created a general Economic Development Fund
(EDF). Funds from the program can be used to support
job creation activities driven by private companies or
facilitated in partnership with the private sector by
municipalities and nonproft organizations. Funds are
available for a wide range of uses, including workforce
training, site acquisition, feasibility planning, and
construction.
Entrepreneurial activity in New York is supported through
the state’s Entrepreneurial Assistance Program.
The program supports a network of 24 entrepreneurial
assistance centers throughout the state. These centers
offer budding entrepreneurs a one-stop solution to access
business training, support services, and other state assets
related to small business creation and expansion. The
assistance centers are operated in partnerships between the
state, nonproft organizations, and community colleges.
Small businesses in New York can also seek access to
capital needed for expansion through the state’s Small
Business Revolving Loan Fund (SBRLF). Backed by $50
million, the loan fund offers entrepreneurs access to both
micro and regular small business loans. Loans of up to
$125,000 are available, and require a private sector match.
NEW YORK
New York’s Place in the Rankings
4th Educational Attainment
4th High School Advanced Placement
Intensity
5th Economic Output Per Job
6th Higher-ed Degree Output
6th High Speed Broadband Intensity
10th Short-term Job Growth
11th Academic R&D Intensity
15th Job Placement Effciency
15th High Speed Broadband Availability
16th Entrepreneurial Activity
17th Small Business Lending
18th Per Capita Income Growth
22nd STEM Job Concentration
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With an eye towards spurring increased growth in
high-tech jobs, New York launched the Excelsior Jobs
Program. This initiative is focused on support of
manufacturing, clean tech, biotech, and other high-tech
sectors in the state. Companies that create jobs in targeted
industries may be eligible for up to four tax credits under
the program. The Excelsior Jobs Tax Credit offers job-
creating employers a credit of up to 6.85 percent of the
wages of each new job created. The Excelsior Investment
Tax Credit supports investment in equipment by expanding
companies through a 2percent tax credit. The initiative’s
research and development tax credit can be worth up to
3 percent of a company’s qualifed spending on research
and development in the state. Finally, the program’s
real property tax credit is available to businesses that
are willing to establish operations and create jobs in
economically distressed areas of the state.
A strong performer in workforce development measures,
New York provides several programs and tax credits
designed to support business workforce training efforts,
create jobs, and help workers gain the skills they need to
compete in an increasingly demanding workplace.
The Workers with Disabilities Tax Credit (WETC) is
a state program designed to help disabled workers fnd
employment by offering employers a tax credit of up to
$2,100 to help offset wages. The program provides the tax
credit in the second year of employment, as a follow-up
to similar federal tax credits that are available in the frst
year of employment. In doing so, the state helps businesses
reduce wage costs and incentivizes employment of an
at-risk group of workers. The state’s Qualifed Emerging
Technology Companies Training Credit offers small
companies in targeted high-tech industries refundable
tax credits of up to $4,000 per employee for expenses
incurred during “high technology training.” The state also
makes use of the 64 campuses of the State University of
New York (SUNY) system to offer various tailored job
training programs to employers throughout the state. The
vast reach of the system allows for regional solutions to
local employers’ needs. The state also offers employers
in need of help fnding qualifed entry-level employees to
fll vacancies recruitment and staffng assistance. Offered
through the NYS Jobs program, these services maintain
pools of job seekers who can be placed according to an
employer’s needs.
Seeking to aid small and medium-sized companies
in accessing export market opportunities, New York
launched the Global Export Market Services (GEMS)
program. This initiative offers small entrepreneurs seeking
to tap foreign markets grants of up to $25,000. These
funds can be used to procure technical and marketing
support services, such as hiring export market consulting
professionals. The grant can be used to cover up to 50
percent of total project costs, thus requiring a 1:1 match in
investment on the part of the company looking to seek out
export opportunities.
New York uses its Empire Zone Program to help
stimulate economic growth in 72 economically distressed
regions of the state. The program offers wage tax credits
of up to $3,000 for jobs paying at least 135 percent of
minimum wage and employing lower-income individuals
and a series of income, property and sales and use tax
exemptions for qualifed businesses operating inside an
enterprise zone. Each zone is staffed with professionals
ready to assist with business expansion or relocation into
the zone.
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Clusters in New York
Largest Cluster: Business & Financial Services,
1,628,269 jobs
Largest Growth Cluster: Business & Financial
Services, 258,402 new jobs since 2002
Most Competitive Cluster: Printing &
Publishing, 14,018 new or retained jobs due to state
competitive advantage
Most Concentrated Cluster: Education
& Knowledge Creation, 1.85 times the national
concentration level
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After years of economic diffculty, North Carolina appears
to be showing signs of turning the corner. Tax receipts
are up, and unemployment rates have eased from the
peaks seen during the depths of the recession. While the
state faces budget challenges moving forward, the state’s
historically strong technology and innovation performance
may place the state in a competitive position as demand for
science and technology-driven growth builds.
Budget and Policy Agenda
North Carolina entered 2011 facing a budget defcit
approaching $2.4 billion. While the state’s policymakers
have had to make cuts to government programs in order
to close the gap, Governor Beverly Purdue has advanced
an economic development agenda that calls for increased
tax incentives, tax cuts, and further investment in job
creation activities. In order to help bring the defcit
under control, Purdue has called for consolidation of
government agencies, cuts in the number of state boards
and commissions, and a hiring freeze for government
positions. The administration also conducted a review of
state regulations, and submitted lists of proposed changes
and eliminations to the general assembly. The governor
has made calls for rethinking the state’s business tax
structure, hoping to cut tax rates on small businesses and
corporations in order to remain regionally competitive
and spur new job growth. The governor also supported
continued and increased state investments in business
incentives and tax credit programs designed to support job
growth.
Public-Private Partnerships are Key
Home to the nationally renowned Research Triangle Park,
North Carolina continues to show strong performance
in innovation and entrepreneurship. In addition to the
Research Triangle, the state is home to six other research
parks, with several sited in conjunction with higher
education institutions throughout the state. The state also
has a network of over 25 core public and private research
laboratories supporting research in biotechnology and life
sciences.
The North Carolina Biotechnology Center manages
programs and incentives designed to build up the state’s
strong biotech and life sciences clusters. The center’s
Centers of Innovation grant program gives fnancial
support for the creation of virtual technology hubs backed
by public-private research partnerships. Focused on a
specifc technology area, these centers are designed to
drive commercialization efforts, build regional research
capacities, and support ongoing tech development efforts,
in order to drive biotech job creation. The Biotechnology
Center also offers business fnancing and venture capital
access support services to nascent biotech frms located in
the state. The Center’s BATON (Business Acceleration
and Technology Out-licensing Network) program works
to grow North Carolina biotech frms, by providing access
to professional services, funding sources, and recruitment
of skilled entrepreneurs to join companies in need of
more professional support to attain sustainable growth.
The Center also supports an Industrial Fellowship
Program, which connects recent doctoral graduates from
the state’s universities to professional opportunities at
NORTH CAROLINA
North Carolina’s Place in the
Rankings
9th Small Business Lending
10th College Affordability
11th Business Birth Rate
14th High Speed Broadband Intensity
15th High School Advanced Placement
Intensity
16th Academic R&D Intensity
19th High-tech Share of All Businesses
22nd Economic Output Per Job
22nd Cost of Living
24th STEM Job Growth
24th Educational Attainment
25th Export Intensity
25th Entrepreneurial Activity
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companies in the state. The program provides up to two
years of funding to aid the company in bring the researcher
onboard, helping companies gain access to highly educated
professionals, and keeping talented graduates in the
state. The center also provides companies with access
to competitive research grants, technology enhancement
grants, and maintains a “funding gateway” database of
potential funding sources from both public- and private-
sector sources, easing access to funding information for
start-up companies.
The One North Carolina Fund provides funding
to support recruitment and retention of high-wage,
knowledge-sector jobs. Funding is provided on a
competitive basis, and requires a local government
match. Funds can be used for equipment purchase and
infrastructure upgrades needed to attract a company.
North Carolina also offers tax incentives designed to
foster innovation-driven job creation. The Technology
Development Tax Credit is offered to businesses
conducting North Carolina-based research and
development efforts. The credit ranges between 1.25
percent and 3.25 percent depending on the level of
investment, and gives added support to research
conducted by small businesses by offering them the
3.25 percent credit regardless of expenses incurred. The
credit incentivizes research conducted in public-private
partnerships by offering a tax credit of 20 percent on
qualifed expenses for research performed by North
Carolina universities.
Looking to job business establishment and job creation
in the biofuels, green building, and clean technology
industries, North Carolina created the North Carolina
Green Business Fund. The fund offers competitive
grants to public and private sector organizations focused
on supporting related green innovation activities at North
Carolina businesses with less than 100 employees. Awards
of up to $500,000 are available to help small businesses
and communities build the state’s green economy.
North Carolina has also focused energy and resources
on building support structures for job creation by
entrepreneurs and small businesses. The state’s Biz
Boost initiative offers economically vulnerable small
and mid-sized businesses access to an expanded range of
direct state services, including business analysis support,
marketing research, cash management counseling, and
debt restructuring advisement, in order to help businesses
increase competitiveness and create new jobs. While the
program does not provide direct fnancial assistance to
businesses, it does offer businesses funding identifcation
support. In order to give small businesses easier access to
support networks, North Carolina’s community college
system serves as host to the state’s Small Business Center
Network. The SBCN offers entrepreneurs access to state
and federal business support programs, and connects
businesses to resources available through the community
college system. North Carolina’s Capital Access Network
(CAN) is a public-private partnership between state
agencies and private fnancial institutions to provide
small and mid-sized businesses in the state with access
to the bank loans they need to build their businesses and
create jobs. CAN connects entrepreneurs and lenders
through federally guaranteed loan structures and provides
businesses seeking fnancing with access to experienced
business advisors to help them prepare more successful
loan proposals.
In order to assure that North Carolina government does
its part to support local businesses, the state launched
the North Carolina Preference program by executive
order. The program requires government agencies letting
contracts for goods to allow North Carolina companies that
have submitted competitive bids the opportunity to match
the lowest bid, if the lowest bid came from an out-of-state
frm.
One of the oldest programs of its type in the nation,
the North Carolina Industrial Extension Service
offers services and support to the state’s manufacturing
sector. Offered through North Carolina State
University, the program allows companies in the state
to access information and professional support in lean
manufacturing techniques, management systems, safety
and environmental technologies, and industrial engineering
support needed to streamline processes and implement
more effcient production methods.
93
Clusters in North Carolina
Largest Cluster: Business & Financial Services,
492,233 jobs
Largest Growth Cluster: Business & Financial
Services, 110,708 new jobs since 2002
Most Competitive Cluster: Biomedical/
Biotechnical (Life Sciences), 35,646 new or retained
jobs due to state competitive advantage
Most Concentrated Cluster: Apparel & Textiles,
2.31 times the national concentration level
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North Dakota is a top fve state in short- and long-term job
growth, GSP growth, productivity growth, and per capita
personal income growth. Alaska’s rapid ascension nudged
North Dakota from the number one spot in our overall
top economic performance states. The energy boom has
created 15,000 jobs in the state in the last decade and the
state has added another 9,400 in business and fnancial
services. North Dakota avoided the housing market
collapse, its construction employment is up 29 percent
since 2002, and its manufacturing sector has not seen the
decline occurring in other states.
Let the Good Times Roll
With an unemployment rate of 3.9 percent, North Dakota
largely avoided extended job losses during the recession,
and its booming energy industry has led to a sizeable
budget surplus. The state recently passed an initiated
measure changing the state’s constitution to create a long-
term savings Legacy Fund for oil extraction tax revenue,
while other oil tax revenues were diverted to fund road
improvements in heavy drilling areas and to property tax
relief. The Legacy Fund measure sets aside approximately
$619 million throughout the upcoming biennium.
The state anticipates total reserves at the end of the current
biennium of just over $1 billion. At the end of 2013,
reserves are expected to grow an additional $200 million
to a signifcant reserve of $1.237 billion, including the
Legacy Fund.
With ongoing one-time expenditures accounted for
and the reserves secured, the state’s fnancial position
still provides the state with the resources necessary to
provide additional tax relief. In the last biennium, the
state reduced property taxes by $300 million through
a reduction of approximately 75 mills in school district
levies, simultaneously raising the state’s share of school
funding from about 48 percent to the long-sought goal of
70 percent.
The recently approved $9.9 billion two-year budget added
another $342 million in local school funding used to
cut property taxes. The state cut individual income tax
rates by 18 percent and corporate tax rates by close to 20
percent. This produces a total of roughly $900 million in
cumulative tax relief over four years.
North Dakota ranks frst in the U.S. Chamber of
Commerce’s transportation performance index. The state’s
recently passed budget diverts oil extraction and mining
revenues directly to fund road improvements in the western
half of the state, improving transportation infrastructure
that is needed by the booming drilling activities. However,
the state budget addresses infrastructure needs in every
NORTH DAKOTA
North Dakota’s Place in the
Rankings
1st Short-term Job Growth
1st STEM Job Growth
1st Budget Gap
1st Transportation Infrastructure
Performance
2nd Long-term Job Growth
2nd Gross State Product Growth
3rd Per Capita Income Growth
3rd Educational Attainment
4th College Affordability
5th Productivity Growth
6th Export Growth
7th Export Intensity Growth
14th Job Placement Effciency
17th Median Family Income
18th Small Business Survival Index
18th Higher-ed Degree Output
18th Higher-ed Effciency
19th Cost of Living
20th Business Tax Climate
20th High Speed Broadband Intensity
21st High Speed Broadband Availability
25th Entrepreneurial Activity
25th State and Local Tax Burden
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region of the state, and transportation investments alone
come to $1.7 billion statewide.
The budget includes $371 million to repair state and local
roads in western North Dakota’s oil country, along with
$100 million in grants that local governments may tap for
public works improvements and repairs in oil-affected
regions. The state also approved $110 million for a new
water pipeline system to feed the large and growing needs
of the extraction business, a project leaders believe can be
fnanced by selling water to drillers.
North Dakota ranks third in educational attainment of its
25–44 year old population, associate degrees conferred,
above average for the, and fourth in college degree
affordability. Unemployment rates have held very low
throughout the recession, and the state’s Department of
Commerce and Job Service North Dakota are working
diligently with businesses to address shortages of skilled
workers and recruit new residents to the state. The state
has continued to work on education adequacy, and has
proposed signifcant improvements in the quality of
instruction in the K-12 school system.
North Dakota’s new education bill increases aid to local
school districts by 13 percent, up more than $700 per
student, and funds a new Gearing Up for Kindergarten
program. To assist rapidly growing schools in oil-
producing parts of the state, the plan sets aside $5 million
in grants for schools showing enrollment increases of more
than 7 percent The education bill also includes $700 per
semester college scholarship aid for students scoring at
least 24 out of 36 points on their ACT, capped at $6,000
per student.
The $646 million state higher education budget represents
a roughly 9 percent increase over last year, and includes
another $16 million in funding aimed at bringing up
funding at certain universities to “peer” levels, while
attempting to limit tuition increases to 2.5 percent.
Job Creation, Fiscal Discipline & Private
Sector Participation
Economic development and job creation have been
priority number one over the past ten years. By following a
strategic plan for economic development, working to build
the strongest business climate possible, and establishing
effective tools like the Department of Commerce and the
North Dakota Trade Offce, the state has been able to grow
and diversify the economy. This strategy, combined with
good fscal discipline and partnerships with the private
sector, are the reasons for the current surplus and solid
fnancial situation.
To continue to grow the economy, the state has developed
several key programs targeted towards job creation and
new revenue generation. Energy was designated as one of
fve targeted industries in the strategic plan for economic
development drafted nearly a decade ago. To continue to
support this activity, the state established the Oil and Gas
Research Fund and Council, established appropriate
incentives, and worked to cultivate North Dakota’s oil
patch. Today the state is second only to Texas in land-
based drilling activity.
North Dakota’s Centers of Excellence program is built
on the concept of partnering the research capacities
found at its public colleges and universities with private-
sector companies to generate jobs and new business
opportunities. The state will extend the Centers of
Excellence program for the next biennium with an
additional $12 million. The state also created the Small
Business Technology Investment Program, a $1 million
fund to provide grants of up to $50,000 matched 2:1 with
an angel fund investment.
ND Trade Offce
Just as the energy industry has met with success, so have
North Dakota’s exporters. North Dakota exports grew
nearly 250 percent between 2000 and 2009. During the
same time, the nation’s exports grew by just 35 percent.
To help solidify this trend, the state developed the North
Dakota Trade Offce. The state’s budget recommends
increasing funding for the Trade Offce by about $490,000
to continue its activities in marketing North Dakota
businesses, products, and services to the world. The funds
will be used to acquire services in shipping logistics for
all North Dakota exporters, to help businesses master the
complexity of serving customers throughout the world.
The state and the governor’s offce further recommend
supplying services to all entrepreneurs seeking assistance
in capital formation.
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Clusters in North Dakota
Largest Cluster: Agribusiness, Food Processing
& Technology, 49,728 jobs
Largest Growth Cluster: Energy (Fossil &
Renewable), 15,903 new jobs since 2002
Most Competitive Cluster: Energy (Fossil &
Renewable), 13,687 new or retained jobs due to state
competitive advantage
Most Concentrated Cluster: Agribusiness,
Food Processing & Technology, 3.33 times the
national concentration level
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Create Platform for Entrepreneurship
Ohio’s General Assembly and newly elected Governor John
Kasich gathered in Columbus this year facing a two-year
budget hole estimated at between $8 and 10 billion, with
a $3 billion gap projected for FY2012. Having faced the
third largest number of job losses nationally over the past
decade, the incoming governor has argued that the state is
“under siege” and needs to change direction and “create a
platform for entrepreneurship.” Expressing concern over
jobs unflled due to a lack of qualifed workers, Governor
Kasich has called for an examination of how the state’s
community college system interfaces with workforce
training and the secondary education system. Outlining a
reform agenda for job development, Kasich has called for
reductions to programming and streamlining bureaucracy
in the economic development departments. His signature
proposal, JobsOhio, called for reforming how such
departments do business, reforming their organization
around a more business-like structure directed by a
private nonproft organization. Furthermore, in an effort to
restructure programs and make progress towards closing
the budget gap, the governor has proposed a complete
review of all economic development programs in the state,
with an eye towards consolidation and elimination of some
programs.
Ohio’s Third Frontier Focuses on Access
to Capital and Commercialization
Ohio has created a variety of tax credits and incentives
to support job creation, with many focused on targeted
innovation support and manufacturing enhancement.
One key program is the state’s Ohio Job Creation Tax
Credit, which provides income and franchise tax credits
to businesses that choose to locate or expand operations
in Ohio. To be eligible, companies must create at least 25
jobs that pay 150 percent of minimum wage. The program
has lower requirements for job creation numbers if the
jobs created are particularly well paid. In addition to
attempting to lure new businesses to the state, Ohio also
offers a Job Retention Tax Credit. Directed at large,
existing employers, the credit provides income tax relief
to businesses that employ over 1,000 workers and commit
to making capital investments of over $200 million. As
with the job creation credit, there are lower thresholds
for eligibility if the jobs created are particularly well
compensated, supporting high-tech job retention.
Innovation-focused tax credits are also offered by Ohio.
Looking to support entrepreneurial innovation and
create jobs for researchers, Ohio continues to support
a Research and Development Investment tax credit.
Investments made by Ohio taxpayers in qualifed
research and development activities are eligible for a 7
percent tax credit that may be carried forward for up to
seven years, providing job-creating businesses with tax
fexibility. Innovation support is also at the heart of the
state’s Technology Investment Tax Credit. This credit is
granted to Ohio taxpayers who make investments in small,
entrepreneurial frms involved in research and development
activities. It is equal to up to 25-30 percent of a qualifed
investment, depending on certain restrictions. Businesses
targeted for investment must be primarily Ohio-based and
show a net book value of less than $1 million, assuring
that credits are focused in support of small businesses. The
state also offers a variety of sales tax exemptions tailored
to support capital investments in manufacturing equipment,
warehousing, and research and development activities.
The exemptions are intended to cut down on barriers to
investment, helping businesses to expand and offer new job
opportunities.
In conjunction with local governments, Ohio has
established a set of enterprise zones in cities and counties
throughout the state. Businesses that choose to locate or
OHIO
Ohio’s Place in the Rankings
9th Small Business Survival Index
10th Export Intensity
12th Academic R&D Intensity
13th Cost of Living
15th Median Family Income
21st Higher-ed Degree Output
24th STEM Job Concentration
24th High Speed Broadband Availability
25th Budget Gap
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expand in one of these zones are eligible for property tax
exemptions as an incentive. The total exemption varies
by zone type, but lasts for up to ten years, supporting
continued job retention and creation activity in the zone.
In addition to the enterprise zones, the state has also
created a set of Community Reinvestment Areas, which
allow additional property tax exemptions to commercial
and industrial property investments made in the region.
The exemption may be up to 100 percent and last for up
to 15 years, giving job-creating businesses an incentive to
expand facilities in designated areas.
The Ohio Workforce Guarantee provides workforce
training assistance to employers in any of nine targeted
industries. Support is both technical and monetary in
nature. The program reimburses employers for workforce
training expenses, either internal or external in nature. The
program is available for training both new and existing
employees. The state has also targeted workforce training
support for the advanced energy industry, available
through its Energizing Careers Program. Administered
by the Governor’s Workforce Policy Advisory Board, the
initiative provides workforce training grants to companies
that manufacture clean energy components, helping the
sector increase employee skill sets, stay competitive,
and expand to offer new job opportunities. In addition to
job expansion, fnding ways to help companies make it
through economic rough patches and retain jobs is also of
importance to Ohio’s economic development efforts.
The state’s Early Warning Network facilitates state-
local government partnerships to identify resources that
can rapidly be put into play to help companies in danger
of laying off workers. The program seeks to identify
troubled companies before they are caught in a downward
spiral, offering workforce support services as well as other
public and private resources to stand behind the company
and its employees. The state has also pressed to offer
more of its university students in high-tech felds access
to in-state internship opportunities through its Third
Internship Program. The program reimburses up to 50
percent of a qualifed intern’s wages, encouraging Ohio
technology companies to provide valuable work experience
and potential career paths to the state’s most promising
students.
In 2010, Ohio’s electorate made an extended commitment
to support technology-driven job creation by voting to
provide continued funding to the state’s Ohio Third
Frontier program. The goals of the program include
providing increased access to capital for innovators,
increasing high-tech research throughout the state,
supporting growth at existing technology companies,
and ensuring that Ohio’s workforce has the needed
skills to attract cutting-edge companies. Ohio’s New
Entrepreneurs Fund (ONE Fund) recruits young
technology entrepreneurs to create companies in Ohio,
offering funding for professional development and business
formation support services.
In order to help new entrepreneurs more easily overcome
potential regulatory pitfalls involved in creating and
registering a new business, Ohio created the 1st Stop
Business Connection program. Offered in conjunction
with the state’s network of small business development
centers, the connection provides new businesspeople
with a tailored business information kit to help them
through regulatory and licensing processes. Participating
entrepreneurs receive basic information needed to
work their way through the regulatory process, and can
access a centralized, online process to receive forms
and applications needed to set up their business. If a
new business runs into challenges dealing with state
agencies and processes, they can contact the state’s Small
Business Advocate. The Offce of the Advocate works
with entrepreneurs to investigate and resolve potentially
harmful or unfair treatment by state agencies, helping
small companies deal with challenges that might otherwise
harm their business.
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Clusters in Ohio
Largest Cluster: Business & Financial Services,
667,118 jobs
Largest Growth Cluster: Business & Financial
Services, 77,715 new jobs since 2002
Most Competitive Cluster: Apparel & Textiles,
6,263 new or retained jobs due to state competitive
advantage
Most Concentrated Cluster: Primary Metal
Manufacturing, 2.78 times the national concentration
level
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With one of the nation’s lowest unemployment rates,
stable housing markets, and strong growth in its major
cities, Oklahoma has bounced back from the depths of
the recession with relative strength. Tax revenues are on
the rise, refecting increased economic activity, and the
state’s energy and agricultural sectors have been buoyed
by recent strength in commodity markets. Still one of the
nation’s leading energy producers, Oklahoma continues to
look for ways to diversify its economy, looking to growth
in industries including aerospace and manufacturing as a
source of new jobs and economic momentum.
Quick Action Can Mean New Jobs and
Wealth Creation
While strong growth and prices in the state’s energy
extraction industries have recently helped to increase
state revenues, Oklahoma still entered the year facing
a budget defcit of approximately $500 million, a gap
equal to 9.4 percent of the state’s FY2011 budget. Newly
elected Governor Mary Fallin and the state legislature
have focused on making cuts to existing state programs
and shifting balances in existing state funds to cover
the shortfall. Governor Fallin also entered this year’s
legislative session with several policy proposals centered
on job creation and economic development. These included
calls for workers’ compensation system reform, which the
governor argues will create a more effcient system at less
cost to employers. The governor has advanced proposals
to cap noneconomic damage awards in lawsuits against
businesses and to reform the state’s pension system, which
faces a long-term defcit of up to $16 billion.
Tax policy reform has also been an agenda item for
the administration, which has argued in favor of a
comprehensive review of the state’s tax credits for business
development and the elimination of those found to be
ineffective. Furthermore, Fallin has argued in favor
of expanded implementation of triggered income tax
reductions, which are designed to kick in when the state
meets certain benchmarks for revenue collection. One
of the governor’s more notable economic development
proposals has been calling for creation of an Oklahoma
Quick Action Closing Fund, also referred to as the
Governor’s Closing Fund. This Fund, to be administered
by the state’s Department of Commerce, would allow the
governor to quickly access funding needed to provide
incentives to companies considering locating in Oklahoma.
Access to Capital is Paramount
A major focus of Oklahoma’s job creation efforts is the
Oklahoma Quality Jobs Program. Under the terms of
the program, Oklahoma makes direct cash payments to
businesses in targeted industries that create and maintain
jobs in the state. Businesses may receive a payment of up
to 5 percent of their payroll expenses for a period of up to
ten years if certain growth benchmarks are met. Jobs must
OKLAHOMA
Oklahoma’s Place in the Rankings
3rd Cost of Living
4th Gross State Product Growth
4th Productivity Growth
6th Per Capita Income Growth
8th Higher-ed Effciency
8th College Affordability
14th Long-term Job Growth
14th State and Local Tax Burden
15th Export Growth
16th STEM Job Growth
16th Transportation Infrastructure
Performance
18th Business Birth Rate
18th Entrepreneurial Activity
21st Growth in Share of National Exports
21st Small Business Survival Index
22nd Budget Gap
24th Economic Output Per Job
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meet certain wage and beneft requirements to be eligible
for the state payment. Designed to help the state increase
its manufacturing base, the program has been credited
with the creation of up to 400,000 jobs over the past two
decades. The state has created a similar program targeted
specifcally at small businesses, which offers payments in
support of created jobs for up to seven years. The related
21st Century Oklahoma Quality Jobs Program targets
the creation of jobs in high-wage, knowledge-based
industries, providing cash incentives of up to 10 percent
of payroll for jobs which pay well above regional median
wage levels.
Tax credits are another tool used by the state to create a
business-friendly environment. Under the terms of the
Investment/New Jobs Income Tax Credit, manufacturers
in Oklahoma can receive up to fve years of tax credits
for making qualifed investments in property while also
creating new jobs. The credit can be for up to 5 percent
of the investment. Oklahoma has also made attracting
aerospace industry jobs a priority, offering Aerospace
Industry Engineer Work Force Tax Credits equal to 10
percent of wages to companies hiring engineers. The credit
offers incentives to hire engineers educated at Oklahoma
universities and offers tax credits of up to 50 percent to
offset tuition reimbursements made to engineers hired
from the state’s university system. The state has also made
an effort to attract insurance company regional offces to
the state by offering an Insurance Premium Tax Credit
to companies that expand or locate in the state and create a
minimum of 200 jobs.
In order to support access to fnancing for business
development and expansion, Oklahoma’s Capital
Investment Board operates two programs in conjunction
with private sector partners. The state’s Venture
Investment Program works with private sector investors
to guarantee investments made in venture capital
partnerships that then agree to prioritize investment
in Oklahoma businesses. The board also operates the
Oklahoma Capital Access Program, working with
Oklahoma banks to support small business lending by
using its $100 million of funding to support access to lines
of credit and underwrite loans with state-backed credit
insurance. The state’s Industrial Finance Authority
works to provide needed fnancing for expanding and
relocating businesses in the manufacturing, agricultural
processing, and mining and extraction industries. Eligible
businesses can receive loans of up to $5 million dollars,
with most loans offered in partnerships between the
Finance Authority and local banks. In order to aid small
businesses in the state, Oklahoma has also offered a linked
deposit loan program. Oklahoma-based small businesses
can receive fnancing of up to $1 million, in partnership
with Oklahoma banks, in support of efforts to preserve or
create jobs.
Hoping to drive entrepreneurial innovation in the state,
Oklahoma has instituted a New Products Development
Income Tax Exemption. Entrepreneurs working through
the state’s Oklahoma Center for the Advancement of
Science and Technology (OCAST) are able to collect tax-
free royalties on products developed and made in the state
for up to seven years. Innovative companies that choose
to locate at qualifed technology incubators are eligible
for income tax exemptions on income earned through
activity at the incubator for up to ten years, supporting
new business start-ups. OCAST also offers innovative
businesses access to commercialization support structures,
including seed and pre-seed funding sources and the
Oklahoma Technology Commercialization Center,
which offers a variety of entrepreneurial support services
for early-stage tech companies.
99
Clusters in Oklahoma
Largest Cluster: Energy (Fossil & Renewable),
224,938 jobs
Largest Growth Cluster: Energy (Fossil &
Renewable), 79,550 new jobs since 2002
Most Competitive Cluster: Energy (Fossil &
Renewable), 67,247 new or retained jobs due to state
competitive advantage
Most Concentrated Cluster: Energy (Fossil
& Renewable), 2.01 times the national concentration
level
100
Struck by downturns in its manufacturing and construction
industries, Oregon was hit particularly hard by the
recent recession. Unemployment rates in 2010 were more
than twice as high as before the downturn, and among
the highest in the nation. While economic measures
have shown signs of recovery over the past year and
unemployment rates are off their peak levels, the state
still faces the specter of a period of “below trend” growth
as it struggles to regain economic footing. However,
even through a period of economic stress, the state has
continued to be a magnet for growth, outpacing the
national growth rate in the 2010 Census fgures. Moving
forward, the state hopes to capitalize on its proximity to
and experience in accessing Asian markets to help spur
future growth.
Bipartisan Approach to Jobs
State legislators and incoming Governor John Kitzhaber
have committed to making job creation the state’s top
priority during 2011, with a bipartisan group of legislators
choosing to wear pins labeled “JOBS” to reaffrm their
continued support for a jobs-focused agenda. However,
also high on the state legislative assembly’s agenda has
been dealing with a large budget defcit for the upcoming
biennium. Estimated at up to $3.5 billion over two years
and $1.8 billion for FY2012, the state’s defcit entering the
session was equal to 20 percent of the state’s general fund.
Governor Kitzhaber, entering offce for a third,
nonconsecutive term in 2011, has proposed several agenda
items and budget changes to bring the defcit under control
and pursue job creation in the state. The governor called
for cuts in pay to government workers, changes in revenue
structures to collect unpaid taxes, reforms to educational
funding structures, fat spending in many government
agencies, and no tax increases. The administration has also
reiterated support for several proposed and pending job
creation initiatives and programs, including continued state
funding for technology transfer efforts, new bond backing
for infrastructure improvements, increased funding for
some existing economic development funds, and enhanced
funding for business expansion efforts.
State Looks to BOOST Small Business
Retention and Growth
Oregon has created several tax incentive programs
designed to help new and growing business ventures. The
Standard Enterprise Zones program offers businesses
that choose to locate or expand in one of the state’s
enterprise zones an exemption from certain property taxes
for 3–5 years. These exemptions may also be coupled with
other tax breaks for building a business and creating jobs
in rural areas or in the e-commerce industry. The Oregon
Investment Advantage gives job-creating businesses in
much of the state a ten-year income tax exemption. In
addition, companies that choose to locate in one of the
nearly ninety eligible communities can receive a ten-year
waiver on excise taxes. Oregon supports expansion in its
manufacturing sector through its Strategic Investment
Program. The program makes frms located in certain
zones of the state eligible for property tax exemptions on
large capital investments, encouraging manufacturers to
add equipment, facilities, modernize lines, and create jobs.
OREGON
Oregon’s Place in the Rankings
1st Higher-ed Effciency
3rd Productivity Growth
5th Gross State Product Growth
10th Business Birth Rate
10th Academic R&D Intensity
11th Transportation Infrastructure
Performance
14th Business Tax Climate
14th High Speed Broadband Intensity
15th Export Intensity
16th STEM Job Concentration
16th Entrepreneurial Activity
18th Economic Output Per Job
24th High-tech Share of All Businesses
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Oregon has also worked to support continued jobs
development in its renewable energy sector through the
use of several incentives. The state’s business energy
tax credit lets manufacturers of renewable energy
components offset the cost of machinery, equipment, and
facilities with a tax credit of up to 50 percent of eligible
costs. Low interest loans to build new manufacturing
facilities are provided through Oregon’s State Energy
Loan Program. The state has also incentivized
renewable energy production by creating rural renewable
energy development zones, which receive property
tax exemptions for certain renewable energy generation
facilities and equipment. Demand for energy from such
facilities is backed by a state-enacted renewable portfolio
standard.
Small business creation and development are also
part of Oregon’s job creation approach. The Building
Opportunities for Oregon Small Business Today
(BOOST) Fund offers loans and grants to promising small
businesses in the state looking to build up their operations.
The program’s operations are focused on companies with
under 100 employees in the manufacturing, processing,
and distribution industries. The program’s grant program
offers businesses a grant of up to $2,500 per job created
or trained, supporting job creation and cultivation of new
workforce skills in order to increase business capacity
and competitiveness. Oregon also offers small and micro
businesses in the state access to needed fnancing through
the Entrepreneurial Development Loan Fund. The
fund provides qualifed entrepreneurs with loans of up to
$50,000 to help set up their business ventures, providing
fnancing to a category of job-creating businesses that
traditional lenders may overlook.
The Oregon Innovation Council (Oregon InC) continues
to be the spearhead of the state’s efforts to build its
knowledge-driven economy. Created in 2005, the Council
offers the state guidance on how to more effectively shape
and direct its technology-based economic development
efforts. Audit committees composed of private-sector
businesspeople have been formed to evaluate existing
policies and program implementation. The goal of the
program is to identify and support innovation initiatives
that will eventually be able to achieve sustainable operation
without state funding. The Council currently operates a
set of signature research centers focused on renewable and
green energy, nanoscience and microtechnologies, and
pharmaceutical and biotech research in affliation with the
state’s university system. The state’s High Tech Extension
Service offers businesses interested in research and
development partnerships access to the research center’s
facilities and services, including lab space, researchers,
prototyping assistance, and workforce training.
In order to provide infrastructure needed to drive job
creation, Oregon offers several fnance support programs
through its Infrastructure Finance Authority. The
state’s Special Public Works Fund offers communities
and public agencies throughout the state access to funds
for infrastructure design, improvement, construction, and
planning conducted in support of economic development
activities. Multiple classes of infrastructure project are
eligible for loans of up to $10 million. The state also
provides grants of up to $500,000 to fnance infrastructure
developments tied to the creation or retention of jobs in
manufacturing and related sectors. Overall grant size is
based on the number of jobs created. In order to maintain
the infrastructure needed to drive the state’s export sector,
Oregon also offers infrastructure fnance options for port
expansion and improvement. These programs include a
matching fund for marine navigation improvements, a
port revolving fund for construction of port facilities and
support infrastructure, and a port marketing fund.
101
Clusters in Oregon
Largest Cluster: Business & Financial Services,
223,978 jobs
Largest Growth Cluster: Business & Financial
Services, 42,574 new jobs since 2002
Most Competitive Cluster: Agribusiness, Food
Processing & Technology, 11,135 new or retained jobs
due to state competitive advantage
Most Concentrated Cluster: Computer &
Electronic Product Manufacturing, 2.48 times the
national concentration level
102
Budget Situation and Policy Priorities
Entering the legislative session with a budget defcit
projected at over $4 billion, incoming Governor Tom
Corbett called on the general assembly to hold the line
on taxes and to enact spending cuts in order to help
close the gap. The governor also called for a renewed
focus on free enterprise and reform in laying out his
vision for the commonwealth. In addition to his “no
new taxes” pledge, the governor and his administration
entered this year’s session with a variety of agenda items
and proposals focused on job creation. In order to spur
development of the commonwealth’s oil and gas resources,
the administration created a task force to identify growth
strategies and review regulatory standards. The governor
has called for cuts to taxes on business inventories, and has
made a commitment to continuing support for job-creating
tax credit programs. Privatization of state-run functions
is also on the table, with the governor backing a study on
what functions might be successfully spun off to private
interests, potentially cutting costs and creating private-
sector business opportunities.
Encourage Commercialization, Support
Startups
Pennsylvania has made a focus on trade a key part of its
economic development activities, and continues to be a
solid performer in trade measures. The commonwealth’s
network of Pennsylvania Trade Representatives is
located in over 20 countries around the globe, offering
liaison services for Pennsylvania companies interested
in accessing new markets and for foreign companies
interested in doing business in the commonwealth.
Pennsylvania’s Center for Direct Investment offers
foreign companies support services for accessing the
Pennsylvania market and identifying promising business
opportunities. The Center is focused on creating a friendly
environment for foreign investment by helping foreign
companies to set up U.S. subsidiaries, deal with labor
issues, identify sites for development and expansion, act
as a point of access to business incentive programs, and
connect investors with Pennsylvania-based partners.
The Center for Trade Development was created to help
the commonwealth’s exporters expand their reach and
trade capacity, offering services including market research,
connections to potential trade partners, and access to trade
shows and trade missions. Pennsylvania also offers Market
Access Grants to small and mid-sized companies in the
commonwealth that are interested in accessing global
markets. The grants are offered on a matching basis, and
can be used to pay for expenses incurred in attending
trade shows, participating trade missions, and conducting
marketing trips abroad. Pennsylvania also offers an online
“virtual trade advisor” which allows small companies
to explore potential trade options and examine market
information before approaching other commonwealth
offces for support.
The Ben Franklin Technology Partners is one
Pennsylvania’s longest running innovation-based
economic development programs. Active for over 25
years, the program works to encourage technology
commercialization, support entrepreneurial technology
PENNSYLVANIA
Pennsylvania’s Place in the Rankings
4th Growth in Share of National Exports
8th Short-term Job Growth
9th Higher-ed Degree Output
11th Export Intensity Growth
12th High Speed Broadband Intensity
13th High Speed Broadband Availability
14th Median Family Income
16th Export Growth
18th Educational Attainment
21st Economic Output Per Job
21st STEM Job Concentration
24th Per Capita Income Growth
25th Long-term Job Growth
102
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startups, and fnd public and private lines of funding
for technology development in the commonwealth. The
program has four regional offces throughout the state.
Financing is a key part of the program, which makes
direct seed investments in technology start-ups, supports
technology investor groups, and helps entrepreneurs gain
access to tools needed to attract private-sector fnancing.
The program also offers mentoring and business support
services to new technology entrepreneurs, and connects
start-up companies to university research facilities around
the state.
The Pennsylvania Innovation Partnership (IPart) is
another program focused on helping technology start-ups
thrive and create high-quality jobs in the commonwealth.
The program works to connect entrepreneurs in clean
tech, energy, life sciences, and other target industries to
access federal research funding in support of technology
commercialization activities. The program offers
companies on the hunt for federal grant opportunities
support in creating effective proposals, with proposal
writing assistance and draft review services. As a
supplement to the Keystone Innovation Zone program,
the commonwealth offers Innovation Grants to build out
research infrastructure in support of technology transfer
and commercialization efforts. The grants are provided
to institutions of higher education, nonproft research
promotion organizations, and academic medical centers,
and they must be matched by funding not sourced from the
commonwealth.
In order to assure that communities throughout the
state maintain a strong inventory of development-ready
sites for potential business creation and expansion,
Pennsylvania created a Business in Our Sites grant and
loan program. The program offers communities support
in site identifcation and preparation in order to make sites
“shovel ready” for business use and job creation. Private
developers may also qualify for support. Backed by a $300
million loan pool, the program offers developing agencies
up to $5 million in support of a project, with a matching
requirement. Infrastructure fnancing in the commonwealth
is also supported through Pennsylvania’s Infrastructure
Development Program. The program is designed to
provide low-interest fnancing options for both public and
private infrastructure development. Low-interest loans are
used to back the building of infrastructure in support of
economic development, including transportation, rail and
port, and telecommunication installations.
Pennsylvania has also looked to use university resources
to help drive modernization of its manufacturing sector,
thereby protecting and creating jobs. The commonwealth’s
Agile Manufacturing program, offered in partnership
with Lehigh University, works to support manufacturing
companies looking to increase their effciency. Grants
provided by the program are used to pay for support
services from Lehigh faculty and staff, purchase needed
equipment for upgrades, and hire outside consultants to
drive adoption of advanced manufacturing techniques.
A variety of small business job creation supports also
fgure into Pennsylvania’s economic development
agenda. The Small Business First Program provides
small entrepreneurs with low-interest loans of up to
$200,000 for use in acquiring land, equipment, or
facilities and for working capital. Loan availability is
tied to the number of jobs created by a company and the
specifc projects it is undertaking. The commonwealth’s
Business Opportunities Fund also provides fnancing
to small entrepreneurs, with a particular focus on
women- and minority-owned enterprises. Businesses
located in qualifed counties are eligible for loans to be
used as working capital and for equipment and property
acquisition.
103
Clusters in Pennsylvania
Largest Cluster: Business & Financial Services,
793,462 jobs
Largest Growth Cluster: Business & Financial
Services, 101,328 new jobs since 2002
Most Competitive Cluster: Defense & Security,
16,600 new or retained jobs due to state competitive
advantage
Most Concentrated Cluster: Primary Metal
Manufacturing, 2.38 times the national concentration
level
104
Rhode Island found 2010 to be a challenging year.
Unemployment rates, which had stayed between 4 and 6
percent prior to the recession, peaked at nearly 13 percent
early in the year. The state also faced a sizeable defcit
entering 2011, hit by projections of up to $7 billion in
unfunded pension liabilities. However, while the state
faces multiple fnancial challenges, there are signs that the
economic outlook is beginning to improve. Unemployment
rates have retreated slightly from their highs, and tax
revenues are running ahead of projections for 2011, giving
state policymakers hope that the worst is behind them and
that the state’s economy is beginning to pick up steam.
Budget Situation and Gubernatorial
Priorities
Newly elected Governor Lincoln Chafee entered offce
this year facing a budget defcit estimated at $331 million,
equivalent to 11.3 percent of the state’s total FY2011
budget. While paling in comparison to the gaps faced by
some states, the gap has still led the Chafee administration
to call for cuts to programs throughout the state and for
reform of the state’s tax structures. Chafee has launched
reviews of government programs to identify potential cost
savings, operational changes, and cuts, and has called for
tens of millions of dollars in cuts to programs throughout
Rhode Island’s government. His administration has also
argued in favor of sales tax “modernization” reforms,
which would cut the sales tax rate but broaden its base by
applying it to classes of goods and services not currently
taxed. Chafee has also supported corporate tax reform,
including changes to income reporting for multi-state
companies and cuts to the overall corporate tax rate.
The administration has singled out infrastructure as a
point of focus, calling for creation of a new transportation
infrastructure fund, supported by revenue from licensing
and title fees, in order to provide the state with more
fexibility in sourcing funds for transportation upgrades.
Chafee has also proposed increasing state employees’
contributions to pension funds as a frst step towards
restoring balance to the pension system. He has expressed
willingness to work with public employees and the
legislature on more comprehensive reforms that would
close the remaining budgetary gap.
Job Creation Initiatives
Rhode Island offers several notable programs and
incentives aimed at workforce training and development.
To support employers interested in fnancing training
for their employees, the state offers employer credits
that reduce an employer’s corporate income tax burden.
Qualifed employees receiving training in state are eligible
for up to $5,000 of tax credit over three years for their
employer. Credits are limited to 50 percent of qualifed
expenses, and may be received for direct training expenses,
employee benefts, and wages paid during training. Rhode
Island also offers employers grants to fund on-the-job
training, including reimbursement for employee wages
during training. In order to assist companies training their
employees in tactics to access foreign markets and promote
exports, the state offers qualifed businesses up to $5,000
in a matching grant for export training through its Export
Management Training Grant Program. The state has
also offered employers access to an apprenticeship tax
credit program, which provides a 50 percent tax credit
RHODE ISLAND
Rhode Island’s Place in the Rankings
2nd Higher-ed Degree Output
3rd High Speed Broadband Intensity
9th High Speed Broadband Availability
10th High-tech Share of All Businesses
12th Per Capita Income Growth
14th Academic R&D Intensity
15th Educational Attainment
17th Economic Output Per Job
17th Productivity Growth
22nd Short-term Job Growth
22nd STEM Job Concentration
104
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on qualifed apprentice wages up to a cap of $4,800.
The credits are focused on apprenticeships in targeted
manufacturing felds, including machine tools, metal
trades, and plastics processing. Rhode Island has offered
other workforce training grants to companies on a broader
basis, including a Comprehensive Worker Training Grant,
which awards matching grants of up to $50,000 to a single
company to support worker skill development.
The state adopted the Jobs Development Act to
incentivize new hiring by Rhode Island companies. The
act offers corporate tax breaks to companies that create
new jobs in the state over a period of at least three years.
Tax breaks are based on company size and number of
jobs created, with smaller companies eligible for a quarter
point tax reduction for every 10 jobs created, and larger
companies a quarter point reduction for each 25 jobs
created. Created jobs must meet certain wage standards.
When combined, the job creation tax breaks allow a
company to reduce its corporate tax rate from 9 percent to
3 percent.
Rhode Island has made a commitment to support continued
development of manufacturing in the state. The state’s
manufacturing investment tax credit gives qualifed
manufacturers a 4 percent tax credit on investments made
in buildings, machinery, and equipment used in production.
Credits can be carried forward for up to seven years. The
state also offers a High Performance Manufacturing
Investment Tax Credit of up to 10 percent for companies
in targeted advanced manufacturing sectors, including
biotechnology. Other manufacturing incentives include
accelerated amortization and depreciation options for
defense manufacturers and apportionment exclusions
directed at medical and pharmaceutical manufacturers.
Hoping to support job creation in the state’s small business
sector, Rhode Island has launched the Every Company
Counts (ECC) initiative. This program offers existing and
start-up small businesses access to a variety of business
support services and learning opportunities tailored to
smaller companies. ECC staff will work directly with
small businesses to help them access customized technical
support, seminars, and direct consultation services. The
goal of the program is to act as a clearinghouse and point
of access to Rhode Island’s business support services
for small companies that might otherwise overlook
opportunities and incentives available to them.
Recognizing that access to fnancing can be a challenge
for small businesses, Rhode Island supports programs
designed to increase credit accessibility for small frms.
The state’s small business loan fund offers fully secured
loans of up to $250,000 for existing manufacturing,
processing, and selected services companies. Funding
can be used for working capital, land, equipment, or
buildings needed for expansion. To support small start-
ups with fewer than fve employees, the state maintains a
Micro-Business Emerging Growth Fund. Loans of up to
$10,000 can be used for multiple purposes, including start-
up costs and equipment.
Seeking ways to streamline government regulations in
order to create a better environment for job creation,
Rhode Island opened an Offce of Regulatory Reform in
2010. The goals of the new offce include helping small and
medium-sized businesses to navigate state and municipal
regulatory processes, coordinating state and local efforts
to improve permitting processes, recommending state
regulatory changes, and creating a more effcient and
business-friendly regulatory environment in the state.
105
Clusters in Rhode Island
Largest Cluster: Business & Financial Services,
71,028 jobs
Largest Growth Cluster: Business & Financial
Services, 10,726 new jobs since 2002
Most Competitive Cluster: Education &
Knowledge Creation, 1,255 new or retained jobs due
to state competitive advantage
Most Concentrated Cluster: Education
& Knowledge Creation, 1.99 times the national
concentration level
106
South Carolina remains one of the top states for export
performance, repeating last year’s strong showing. The
state has continued to press efforts to expand access to
foreign markets in an effort to improve overall economic
performance. Building on such points of strength is of
particular importance to South Carolina, which was hit
particularly hard by the recent recession. In early 2010,
the state had unemployment rates above 12 percent—one
of the highest rates in the nation. However, since that
inauspicious start to the year, the state has seen measurable
drops in its unemployment and surprisingly strong revenue
collections, giving state leaders hope that a much-needed
economic recovery may be gaining momentum.
Budget Situation and Policy Agenda
As unemployment rates rose in the state, revenues collected
by government fell measurably. South Carolina entered
2011 facing a projected budget defcit of around $800
million for the fscal year beginning July 1. While the
General Assembly and incoming Governor Nikki Haley
have since received positive updates to the budget outlook,
indicating that the state revenues are running ahead of
initial projections, the state’s policymakers continue to face
a challenging budget situation.
Governor Haley, in addition to calling for cuts to help
cover the defcit, has stated that economic development
and job creation are the top priorities of her incoming
administration. The governor has made calls for red tape
reduction, proposing efforts to harmonize local and state
regulations to create a less challenging environment for
small businesses in the state. Haley has also pressed the
general assembly to pass tort reform legislation, capping
maximum awardable damages, bringing South Carolina’s
laws into line with surrounding states. In order to make
sure that business and job creation are at the top of the
agenda throughout state government, the administration
has committed to appointing businesspeople to openings
on state boards and councils, to ensure that business
concerns are heard. Haley has also argued in favor
of comprehensive tax reform, including reducing or
eliminating the state’s corporate and small business income
taxes, in order to give the state a competitive edge in
attracting, retaining, and growing businesses.
Leader in Export Performance
As noted, South Carolina remains a national leader in
export performance, exporting to nearly 190 nations
around the globe. In order to build on this strength,
the state offers several programs designed to support
businesses actively involved in foreign trade or interested
in pursuing trade opportunities. The state’s export
development program offers interested South Carolina
businesses access to training programs and workshops
designed to offer “how to” information on exporting to
targeted countries. The program also maintains two foreign
offces, in Munich, Germany and Shanghai, China. These
offces help South Carolina companies gain access to
foreign markets in Europe and Asia, while acting as a point
of contact for foreign companies interested in establishing
SOUTH CAROLINA
South Carolina’s Place in the
Rankings
3rd Export Intensity
7th Growth in Share of National Exports
8th State and Local Tax Burden
8th Small Business Survival Index
9th Export Intensity Growth
9th Academic R&D Intensity
12th Export Growth
13th STEM Job Growth
15th Business Birth Rate
20th High School Advanced Placement
Intensity
24th Business Tax Climate
24th High Speed Broadband Intensity
25th Small Business Lending
25th Transportation Infrastructure
Performance
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operations and creating jobs in the state. Services
offered to foreign companies exploring direct investment
opportunities include site identifcation, industry data
and market information, and access to South Carolina’s
workforce training solutions. The state’s Global Business
Resource Center is a program offered by the College
of Charleston. Exploiting relationships with the South
Carolina World Trade Center and the South Carolina Ports
Authority, the resource center offers management training
and degree programs in international business and trade.
The program offers companies in the region access to a
trade knowledge base and potential employees educated in
global business. South Carolina has also attempted to build
up collaboration between federal, state, and local assets
interested and involved in international trade through the
South Carolina International Trade Coalition. The state
also continues to support export-enabling infrastructure
through the South Carolina State Ports Authority, which
maintains public marine terminals at two ports in the state.
Run like a private-sector business, the ports invest money
made during operations into upgrades and expansions,
taking advantage of public bonding authority to raise
capital for major projects.
South Carolina maintains a set of tax incentives and
credits designed to support job creation and small business
development. The state’s Job Tax Credit supports
job growth in the state by offering businesses a credit
against state income taxes for creating new jobs in the
manufacturing, distribution, research and development
(R&D), and other targeted industries. The tax credit
can remove up to 50 percent of a company’s state tax
obligation. South Carolina has also classifed a group of
counties as “Economic Impact Zones.” Manufacturers
establishing operations in such counties are given a one-
time credit against income taxes equal to up to 5 percent of
the company’s investment made in production equipment
for their new facility. Companies located in such zones
seeking to conduct workforce development activities
are also eligible for a Retraining Credit Program,
which reimburses up to 50 percent of workforce training
expenses. In order to support technological innovation in
the state, South Carolina offers a research and development
tax credit, capped at 5 percent of a company’s in-state
spending on R&D activities.
South Carolina also makes use of tax credits to support use
and expansion of its export infrastructure. The state’s Port
Volume Increase Credit offers credits to manufacturers,
warehousers and distributors that use state ports and meet
benchmarks for increased cargo volume. The state also
maintains a fund that may be used to give up to $1 million
towards development of a distribution facility shipping
through state ports that invests at least $40 million in
infrastructure and creates 100 jobs.
South Carolina also offers channels for business fnance in
support of job creation, including for small entrepreneurs.
The South Carolina Capital Access Program (SC CAP)
leverages public resources to operate a reserve fund, which
backs loans made by private sector fnancial institutions
in the state. By offering backing, the state is able to drive
capital to small businesses and entrepreneurial start-ups
at more favorable rates, helping them to get off the ground
and create jobs. The SC CAP reserve fund is not a loan
insurance program, but instead keeps funds in reserve to
cover potential loan losses experienced by private-sector
lending partners. In order to build access to venture
capital for South Carolina businesses, the state’s Jobs-
Economic Development Authority created InvestSC, Inc.
This venture capital “fund of funds” works with the state
Venture Capital Authority and four private sector funds to
identify and invest in promising companies interested in
locating or expanding in the state.
107
Clusters in South Carolina
Largest Cluster: Business & Financial Services,
231,228 jobs
Largest Growth Cluster: Business & Financial
Services, 57,418 new jobs since 2002
Most Competitive Cluster: Business &
Financial Services, 19,824 new or retained jobs due to
state competitive advantage
Most Concentrated Cluster: Electrical
Equipment, Appliance & Component Manufacturing,
2.03 times the national concentration level
108
A leader in tax policy and overall job growth rankings,
South Dakota continues to show steady economic
performance, even in the face of a sizeable budget defcit.
While cuts to government programs, education, and health
care carry the potential to cause fallout over the upcoming
biennium, the state continues to boast one of the lowest
unemployment rates in the nation. With strong commodity
prices boosting its agricultural sector and tourism
showing its strongest one-year gains in state history, South
Dakotans have reasons to be optimistic moving forward.
Budget Situation and Gubernatorial
Priorities
South Dakota entered 2011 facing a budget defcit of
around $127 million, equal to around 10.9 percent of the
FY2011 budget. In proposing his frst budget, incoming
Governor Dennis Daugaard took a hard line on taxes,
calling for any budget solution to focus on spending
cuts. Daugaard presented a budget proposal in January
that called for a minimum of 10 percent cuts in all state
agencies, with some programs taking hits as large as 22
percent. In addition to cuts, the administration proposed
holding the line on other spending, including no increase in
pay for state workers. While there was some resistance to
the depth of cuts, particularly in health care and education,
the legislature did follow through on many of the
governor’s budget recommendations, covering the entire
budget defcit with cuts and no tax increases.
While the central focus of the administration this year
was closing the budget defcit, Governor Daugaard did
make efforts to revamp the state’s economic development
and job creation activities and programs. The governor
called for elevating the economic development offce
(GOED) to a Cabinet-level department, acknowledging its
key importance to state government. Daugaard outlined
a vision of economic development built around inviting
new business to the state, increasing the footprint of
existing businesses, and encouraging innovation and
entrepreneurial activity. Daugaard also called for upgrades
to key economic development loan funds, training more
rural development specialists, reducing paperwork and
streamlining regulations related to economic development
programs in the state. The governor also pushed for
executive reorganization, including restructuring and
eliminating programs and giving seats on the Cabinet
to others, in order to realize greater effciencies and cost
savings.
SOUTH DAKOTA
South Dakota’s Place in the
Rankings
1st Business Tax Climate
1st Small Business Survival Index
2nd Productivity Growth
2nd Transportation Infrastructure
Performance
3rd Gross State Product Growth
3rd State and Local Tax Burden
5th Short-term Job Growth
6th College Affordability
7th Higher-ed Effciency
8th Long-term Job Growth
8th Per Capita Income Growth
8th Export Growth
8th Small Business Lending
15th STEM Job Growth
18th Export Intensity Growth
18th High Speed Broadband Intensity
19th Educational Attainment
20th Business Birth Rate
23rd Academic R&D Intensity
23rd Entrepreneurial Activity
24th Budget Gap
24th Job Placement Effciency
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Leveraging Public-Private Partnerships
As one of the nation’s leaders in providing a business-
friendly tax environment, South Dakota offers a unique
set of policies, tax refunds and incentives to businesses
located in the state. South Dakota has no corporate income
tax, personal income tax, personal property tax, business
inventory tax, or inheritance tax. While the state does
have sales, use, and excise taxes, it has established a tax
refund program offering targeted refunds in these tax
classes to qualifed business building projects. Focused on
larger corporate investments, the program offers refunds
on projects exceeding $10 million in scope that involve
construction or expansion of a business facility. Projects
valued between $10 and $500 million are eligible for
refunds ranging between 45 and 55 percent. Above $500
million, the tax refund phases out. While smaller projects
and business investments are not eligible for such refunds,
the state’s sales tax rate of 4 percent remains below the
national median.
In addition to low taxes, South Dakota offers a package
of fnancing programs to help businesses in the state
gain access to the credit they need to expand and create
jobs. The state’s Revolving Economic Development and
Initiative Fund (REDI) can provide low-interest fnancing
for up to 45 percent of a project’s cost. Qualifed projects
include land, machinery, and equipment purchases and
construction, acquisition, and renovation of buildings.
In order to support value-added agricultural production,
South Dakota maintains an Agricultural Processing and
Export Loan Program (APEX), in partnership with the
U.S. Department of Agriculture. Loans made through this
program cover up to 75 percent of the cost of a qualifed
project focused on developing agricultural processing
businesses. In order to identify promising ag industry
business opportunities, the state also supports a Value-
Added Ag Subfund, which provides funding for feasibility
and marketing studies to businesses and entrepreneurs
exploring potential ag business ventures in the state.
Small business and entrepreneurial start-ups in search of
low-interest fnancing can make use of South Dakota’s
MicroLOAN South Dakota Loan Program. Conducted
in partnership between the South Dakota Development
Corporation and GOED, program loans are provided to
businesses for use as working capital and to purchase
equipment, real estate, and other fxed assets. Each
applicant must access the program through a primary
bank, which funds at least half of the loan being secured.
State funding for any one loan is capped at $50,000. Small
businesses seeking access to larger capital sources in order
to back more capital-intensive investments can seek access
to the state’s pooled loan program. The program issues
bonds to individual fnancing projects or to those that are
pooled in groups to help lower the overall cost of issuance.
Like many states, South Dakota is working to leverage
its universities and their research infrastructure as launch
pads for public-private research and commercialization
partnerships. The Innovation Campus at South Dakota
State University (SDSU) is a fne example of this model,
providing technology entrepreneurs with incubator offce
and lab space, access to light manufacturing assets and
development sites, conference facilities, and access to seed
and venture capital networks. Located next to SDSU, the
campus has almost 125 acres of space available to support
construction of research facilities focused on agriculture,
energy, infectious diseases, and medical biotechnology,
among other target industries. Companies located at
the Innovation Campus also have access to the Dakota
Seeds Program, a project designed to steer South Dakota
students into internships and assistantships at in-state
companies. Firms participating in the program receive
grants that cover up to 50 percent of the wages for a
student employee, gaining access to a potentially valuable
employee at less cost than would otherwise be possible.
In addition to providing support for internship programs,
South Dakota also supports workforce development
efforts focused on new and existing employees. The state’s
Workforce Development Program supports companies
seeking to train employees by funding up to 50 percent of
total training costs incurred. The program gives priority
to training in “hard skills” which focus on technical and
functional aspects of a job. However, the program will
also support other types of job training when offered in
conjunction with “hard skills” training.
109
Clusters in South Dakota
Largest Cluster: Business & Financial Services,
52,233 jobs
Largest Growth Cluster: Business & Financial
Services, 11,871 new jobs since 2002
Most Competitive Cluster: Energy (Fossil &
Renewable), 3,649 new or retained jobs due to state
competitive advantage
Most Concentrated Cluster: Agribusiness,
Food Processing & Technology, 3.02 times the
national concentration level
110
Regionally Tailored Strategies
Tennessee’s General Assembly gathered in Nashville
this March facing projections of up to $1 billion less in
revenue in state coffers. According to some estimates,
when coupled with previous spending obligations and
budgets, the lower revenue level left state policymakers
to deal with a budget defcit of up to $1.4 billion. While
unemployment levels in the state remain relatively
high, spring has brought some signs of recovery, with
tax revenues beginning to recover, and jobless rates
beginning to recede from recessionary highs. With the
state facing a challenging economic environment, newly
elected Governor Bill Haslam has made dealing with the
pending budget shortfall his central policy focus. Haslam
has called for reductions in government employment,
cutting administrative budgets, extending collection of
some “temporary” fees, and making cuts to government
departments averaging around 2.5 percent.
The governor has also laid out several agenda items related
to the state’s economic development environment and job
creation policies. Haslam has proposed expanding reviews
of the state’s economic development assets and programs,
in an effort to identify successful programs, eliminate
lagging ones, and create a more cohesive approach to job
creation statewide. The governor has also argued in favor
of investing in infrastructure that would support business
expansion and job creation, even in the face of the diffcult
budget situation. This includes backing over $180 million
in economic development projects around the state, and
supporting construction of intermodal and port facilities to
expand transport and export capabilities. As in other states,
rule and regulation review is also being discussed, with the
governor calling for a review of the state’s 140 boards and
commissions to see which remain necessary, and which
may be hindering future development.
Since taking offce, Haslam has also launched a new
job creation initiative. The administration’s Jobs4TN
plan will make use of existing economic development
assets to identify and prioritize growth-ready industry
clusters, establish nine regional “jobs base camps” which
will work to produce more regionally tailored economic
development strategies throughout the state, coordinate
innovation activities, and reduce regulations that get in the
way of business and job growth. The plan also includes the
INCITE initiative, a planned $50 million project designed
to increase the state’s investment in innovation activities
by providing early-stage companies with access to capital
and increasing funding to support commercialization
partnerships between the public and private sectors.
FastTrack to Job Creation
A national leader in its overall business tax and regulatory
environment, Tennessee offers new and expanding
businesses in multiple industries access to a wide array
of tax incentives to help spur job creation. Boasting a
relatively low state and local tax burden, the state touts the
fact that it has no tax on personal income and no state
property tax in its business attraction efforts. While the
state does collect a franchise tax, excise taxes, and sales
and use taxes, it offers businesses several exemptions and
incentives related to each. Businesses are charged no sales
tax on qualifed installation of machinery and industrial
equipment, renewable energy production equipment,
qualifed equipment for data centers, and certain industrial
supplies, among other exemptions largely tailored to
TENNESSEE
Tennessee’s Place in the Rankings
2nd Cost of Living
4th State and Local Tax Burden
10th Growth in Share of National Exports
10th Budget Gap
11th Export Intensity
11th Small Business Survival Index
14th Entrepreneurial Activity
18th Export Growth
19th Business Birth Rate
21st Export Intensity Growth
22nd College Affordability
24th Transportation Infrastructure
Performance
110
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support production and manufacturing. Manufacturers
are also offered sales tax reductions on energy, fuel, and
water used in their production processes. The state also
offers businesses benefts related to excise taxes, including
the ability to carry forward net operating losses for 15
years. Large industrial employers, investing in projects
over $100 million, receive even more fexibility in the tax
code, and are able to carry forward losses beyond the 15-
year threshold, giving them the ability to offset future tax
burdens when proftable.
The state’s Job Tax Credit also offers job-creating
businesses in the state relief from franchise and excise
taxes. Companies in targeted industries creating at least
25 jobs in a year and meeting minimum investment levels
are able to claim a tax credit of up to $4,500 per job. The
credits can be used to offset up to 50 percent of their tax
liability in a year. If unused immediately, the business is
able to carry the credit forward up to 15 years, obtaining
future tax relief. In order to give more support to job
creation activity in areas of need, the state offers expanded
timeframes to meet job creation thresholds for the credit
in certain counties. There are also lowered job creation
standards to gain access to the credit if a company is
involved in creating specifcally targeted high-wage jobs.
Tennessee also offers a version of the program focused on
larger-scale industries called the Job Tax Super Credit.
Qualifed companies creating at least 100 jobs meeting
specifed wage standards are eligible for a tax credit of up
to $5,000 per created job, which can be used to offset up to
100 percent of the companies state tax liability and carried
forward under certain circumstances for up to 20 years.
To further support manufacturing development in the state,
Tennessee maintains an industrial machinery tax credit
for qualifed investments. The credit is based on size of
investment, varying from 1 to 10 percent. Tennessee has
also made efforts to attract business headquarters facilities
to the state, offering job creation tax credits and relocation
benefts to companies interested in centering their
operations in the state. The state has also implemented
a data center tax credit, supporting the construction and
expansion of such facilities.
Tennessee has also made increasing exports one of its
areas of emphasis in its job creation platform. The state
has sought to attract foreign direct investment, particularly
through the use of aggressive manufacturing incentives.
Areas such as automotive and clean tech manufacturing
have been areas of notable success. The state also
maintains a group of foreign trade offces throughout
the globe, acting as ambassadors for the state’s business
community.
Tennessee’s FastTrack program offers grants for use
in conducting job training activities and infrastructure
upgrades proposed by communities for use in business
attraction and expansion activities. The program’s
Infrastructure Development Program allows
Tennessee’s communities to apply for funding to build
and improve infrastructure needed to create new jobs.
Applications for funding must be tied to a private sector
partner’s commitment to locate in a community and create
new jobs.
Supporting small business establishment and growth is
the focus of Tennessee’s Business Resource Enterprise
Offce (BERO). The offce works in conjunction
with other state agencies and programs to offer small
entrepreneurs the information and resources they need to
fourish. Services offered include connecting businesses
to grant and loan opportunities, offering small businesses
connections to potential public and private sector
partnerships, information and technical support services,
aid in expansion and location efforts, and connection to
educational opportunities for entrepreneurs. The state has
also made increasing opportunities for rural entrepreneurs
a focus, through its Creating a Rural Entrepreneurial
System in Tennessee (CREST) program. Operated in
partnership with the University of Tennessee, CREST
takes a community-centered approach to small business
development. The program offers rural communities
throughout the state aid in developing strategic plans
to support small business creation, organizational
development support, and assistance in identifying
community economic strengths and weaknesses with an
eye towards small business job creation.
111
Clusters in Tennessee
Largest Cluster: Business & Financial Services,
333,477 jobs
Largest Growth Cluster: Business & Financial
Services, 70,107 new jobs since 2002
Most Competitive Cluster: Biomedical/
Biotechnical (Life Sciences), 18,577 new or retained
jobs due to state competitive advantage
Most Concentrated Cluster: Electrical
Equipment, Appliance & Component Manufacturing,
2.28 times the national concentration level
112
The Lone Star State has worked to provide a combination
of low taxes, a reasonable and predictable regulatory
structure and a capable, diverse workforce to develop
a business climate that is economically strong and an
environment that is business-friendly. These efforts have
continued to pay off as the state is identifed as the best-
performing large state in terms of job growth, ranking
fourth in short- and long-term employment growth. This
has been coupled with solid overall economic expansion, as
the state ranked 13th in GSP growth and 14th in GSP per
job. Since 2002, the state’s business and fnance, energy,
and biomedical/biotechnical clusters each expanded
more than 30 percent, adding more than 960,000 jobs to
the Texas economy. Of the major industry sectors, only
manufacturing and information lost jobs since 2002, and
the state’s manufacturing sector still outperformed national
manufacturing performance by a signifcant margin.
Cutting Bureaucracy, Reducing
Spending
To help address a FY2012 budget shortfall, Governor Rick
Perry, the state legislature and comptroller have proposed
implementing $800 million in cuts. The administration
also looks to take advantage of $300 million from
increased sales tax collections over the last few months,
and a one-time drawdown not to exceed $4 billion from
the state’s Economic Stabilization Fund (also known as
the Rainy Day Fund) to bring the budget into balance.
Ongoing and proposed efforts to contain the budget also
include consolidating certain government agency functions,
reducing spending on areas including public schools and
Medicaid providers, and improving effciencies within
state agencies to help manage the shortfall. State leaders
and lawmakers have worked collaboratively to balance the
current budget, and continue to focus on a more effcient,
fscally responsible government, essential state services,
and private-sector job creation. By working to aggressively
confront the current shortfall, state leaders can focus future
efforts on completing the 2012–2013 biennial budget
without raising taxes.
Innovation, Entrepreneurship & Exports
While Texas is known for its energy industry, it is also
a strong performer in innovation and entrepreneurship,
ranking 16th or better in every category but research
intensity, overall job growth and its above average
rankings in small business lending and business birth
rate. To accomplish this, the state has developed a series
of initiatives and programs to spur new job and revenue
creation. Coupled with signifcant participation from
the private sector, the state utilizes two primary tools to
incentivize and support efforts to continue to grow jobs
TEXAS
112
Texas’ Place in the Rankings
1st Growth in Share of National Exports
2nd Export Intensity
3rd Small Business Survival Index
3rd Higher-ed Effciency
4th Long-term Job Growth
4th Short-term Job Growth
5th Cost of Living
5th Job Placement Effciency
6th State and Local Tax Burden
7th Entrepreneurial Activity
12th High-tech Share of All Businesses
12th Small Business Lending
13th Gross State Product Growth
13th Business Birth Rate
13th Business Tax Climate
13th High School Advanced Placement
Intensity
14th Economic Output Per Job
14th Export Growth
14th STEM Job Growth
16th STEM Job Concentration
19th College Affordability
22nd Per Capita Income Growth
25th Median Family Income
113
and bolster the state’s economy.
As the largest “deal-closing” fund of its kind in the nation,
the Texas Enterprise Fund (TEF) is an incentive used
to help to close a deal or to attract businesses to a Texas
site that is competing with another viable out-of-state
option. Projects that are considered for TEF funding must
demonstrate a signifcant rate of return on the public
dollars being invested, competition with another state for
the project must exist, the business must not have already
announced a location decision, and projected new job
creation must be signifcant. Past recipients have typically
created more than 100 jobs in urban areas or more than
50 in rural areas. Additionally, the new positions created
must be high-paying jobs—above the average wage of the
county where the project would be located. The potential
capital investment by the company must be signifcant
and the applicant’s business sector must be an advanced
industry that could potentially locate in another state or
country. Since its inception in 2003, the Texas Enterprise
Fund has attracted more than 56,000 new jobs to the
state and generated more than $14.7 billion in capital
investment.
The state’s Emerging Technology Fund is focused
on creating a competitive advantage in the research,
development, and commercialization of emerging
technologies. Key elements of the program include
commercialization and matching awards, as well as
research superiority acquisition. The goal of the ETF
Commercialization Awards is to grow new small
businesses and to help existing businesses accelerate new
products and services to the marketplace. The design of
these investments is to ensure a vibrant economy and
create a global leadership position in the technology
marketplace. Commercialization awards provide early-
stage investments in new technology-based private
entrepreneurial entities that collaborate with public or
private institutions of higher education, and that provide
signifcant economic beneft to the state. The goal of
the ETF Research Superiority Acquisition program is
to bring the best and brightest researchers in the world
to the state of Texas. This enables the state’s academic
institutions to build expertise in key research areas, attract
and encourage students to pursue advanced degrees in
math, sciences, and engineering, and foster innovation and
commercialization in Texas-based companies.
Exports, too, are a critical component of job creation and
economic development within the state. Of the more than
26,000 businesses exporting from Texas, 92 percent were
small and medium-sized enterprises, the fourth highest
total of any state. Of its $206 billion in exports in 2010,
$72.4 billion was exported to Mexico, and its top exported
merchandise categories included computers and electronic
products ($39.1 billion), chemicals ($38.9 billion), and
petroleum and coal products ($32.9 billion). To bolster
and promote this important element of the economy, the
state has developed the TexasOne program. This initiative
works to effectively market and communicate the state’s
assets and resources to an international market focusing
on both exports and foreign direct investments. TexasOne
acts as a critical tool for job creation in Texas, providing a
deal-opening fund to generate leads and create promotional
materials to competitively promote the state in foreign
markets.
Targeted Industries Energize the
Economy
Long a leader in energy development, the state has
continued to capitalize on this industry sector, working
collaboratively with the private sector to grow and support
the still-vital industry. The energy cluster is made up of
three sub-clusters: oil and gas exploration and production,
electric/coal/nuclear power generation, and renewable
and sustainable energy generation. Texas leads the nation
in petroleum refning and chemical products production,
and is a global leader in the closely related petrochemical
industry. Additionally, it leads the nation in production and
reserves of crude oil and natural gas.
Other clusters and industry targets include advanced
technology and manufacturing which is made up of
three sub-clusters: nanotechnology, semiconductors and
automotive manufacturing; aviation; biotechnology and life
sciences; and information technology including computers,
software, telecommunications and IT services. All three
industry clusters have been able to gain economic traction
and grow as the state has used its assets and resources
to give them a competitive advantage in the global
marketplace.
113
Clusters in Texas
Largest Cluster: Business & Financial Services,
1,667,677 jobs
Largest Growth Cluster: Business & Financial
Services, 412,797 new jobs since 2002
Most Competitive Cluster: Energy (Fossil &
Renewable), 216,642 new or retained jobs due to state
competitive advantage
Most Concentrated Cluster: Energy (Fossil
& Renewable), 1.71 times the national concentration
level
114
Regaining Footing Through Startups
and Exports
The economic downturn did not leave Utah unscathed.
While the state’s unemployment rates have remained below
national averages, they nearly tripled during the recession,
ranging between 7.5 and 8.5 percent over the past year
and up from remarkably low levels of 2–3 percent in 2006
and 2007. Utah’s budget has also shown signs of economic
stress, as the state entered the current year facing a FY2012
shortfall of around $400 million. While this defcit is
smaller than that faced by many other states, Utah has
faced a challenging structural defcit over the past several
years, which has forced it to tap into its fnancial reserves.
The state’s economy is showing signs of rebound from the
depths of the recession, but there remains some way to go
before it regains its footing completely.
In order to help drive a sustained economic recovery,
Governor Gary Herbert has made job creation one
of the cornerstones of his agenda, along with energy
development, education, and increasing the state’s capacity
to solve problems independently. In an effort to drive
innovation and attract high-tech frms to the state, the
administration has set a goal of expanding the number of
citizens with degrees and professional certifcations to 66
percent of adults by 2020. The governor has also called for
an increased focus on science and engineering careers in
the state’s educational system.
Hoping to capitalize on inexpensive sources of energy in
Utah and create opportunities for energy development,
the administration has launched preparation of a ten-year
strategic energy plan. The administration has also called
for a three-pronged effort to cut unemployment in the
state, focused on increasing access to development capital
for businesses, increasing the state’s export base, and
supporting legislation and programs designed to enhance
business expansion and retention. Governor Herbert
has made calls for increased coordination of economic
development activities, supporting and signing legislation
that created a Governor’s Economic Development
Coordinating Council to work with public- and private-
sector partners to identify opportunities and coordinate
policies for job development in Utah.
Job Creation Initiatives
Utah continues to focus its job development efforts
around several key established and emerging industry
UTAH
Utah’s Place in the Rankings
1st Business Birth Rate
3rd Growth in Share of National Exports
3rd Export Growth
4th Higher-ed Effciency
5th Export Intensity Growth
6th Long-term Job Growth
6th Export Intensity
6th Small Business Lending
7th College Affordability
8th Gross State Product Growth
9th STEM Job Growth
9th High-tech Share of All Businesses
9th Business Tax Climate
12th Small Business Survival Index
13th Transportation Infrastructure
Performance
15th Academic R&D Intensity
15th Budget Gap
16th STEM Job Concentration
16th Higher-ed Degree Output
16th High School Advanced Placement
Intensity
17th Cost of Living
18th Entrepreneurial Activity
19th High Speed Broadband Availability
23rd Productivity Growth
23rd Median Family Income
25th Educational Attainment
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sectors. Organized through the Governor’s Offce for
Economic Development, the state’s Economic Clusters
Initiative has identifed seven economic sectors: aerospace,
defense, energy, fnancial services, life sciences, software
development, and outdoor products and recreation as
targets for future job growth and development.
Innovation and Entrepreneurship
In 2006, the state launched the Utah Science, Technology
and Research Initiative (USTAR) to promote excellent
research and associated job growth at Utah’s universities.
The program, designed as a lasting effort to build the
state’s “knowledge economy,” views the state’s existing
public university research base as a source of leverage for
public-private research partnerships leading to private
start-ups and spin-offs. The program has invested in
additional research infrastructure at state universities,
created research teams in “strategic innovation focus
areas,” and built up the state’s regional technology outreach
activities. These outreach initiatives, organized through
the state’s Technology Outreach Innovation Program
(TOIP), offer services including business consulting,
market analysis, and prototyping grants to entrepreneurs
conducting research at and in partnership with the state’s
universities.
The Utah Legislature has shown continued support for the
USTAR program, passing continued funding for both its
research team and outreach programs. The state’s Cluster
Acceleration Partnerships have also received increased
funding to build out target clusters by creating industry-
focused training and educational programs and connecting
the state’s institutions of higher education to private
industry in new ways.
Hoping to ensure that job-creating entrepreneurs will have
access to needed venture capital, the state of Utah launched
the Utah Fund of Funds. Backed by an initial $300
million state commitment, the fund makes investments
into venture capital and equity funds that are interested in
investing in promising Utah start-up companies. Since its
creation, the Fund of Funds has directed over $200 million
into approximately 35 companies; today, it boasts a total
of $5 billion of investable capital in conjunction with its
partner funds.
The state’s Technology Commercialization and
Innovation Program offers grants to businesses looking
to commercialize technologies created in partnership with
the state’s university researchers. Grants can also be made
to companies interested in licensing university-created
technology for further development. The program is a
continuation of the state’s Centers of Excellence Program,
working to promote successful public-private partnerships
that will spur job growth in Utah.
Exports
Utah continues to be a leader in export measures. The
state has trumpeted the fact that its international exports
have increased by 45 percent per year since 2009, and it
continues to offer a variety of programs and incentives
to drive further growth. The state’s International Trade
and Diplomacy Offce serves as an intermediary between
Utah companies and international markets, promoting
Utah products and helping companies prepare themselves
to operate globally. The Offce hosts trade seminars,
information sessions for companies interested in export
opportunities, trade missions, and works with partners
such as the Utah U.S. Export Assistance Center to support
Utah companies in their efforts to access new markets.
Governor Herbert, aiming to double Utah’s exports over
the next fve years, has taken an active role in supporting
such initiatives, recently leading a trade mission of Utah
interests to China. The Governor’s Offce of Economic
Development also works with the World Trade Center
Utah to promote increased exports. Located in Salt Lake
City, the Center offers export-minded businesses a variety
of support services, including opportunity assessments,
global trade education materials, and matchmaking to
potential trade partners around the globe.
Regulatory Policy
In an effort to increase government effciency, state
leaders launched an advisory committee to optimize state
government. Composed of public- and private-sector
experts, the committee made over 50 recommendations,
including calls for review of regulatory processes that
affect businesses in the state. Greater coordination between
regulatory agencies was identifed as a way to maintain
a business-friendly environment and avoid harmful
duplication of services and unneeded red tape.
115
Clusters in Utah
Largest Cluster: Business & Financial Services,
235,349 jobs
Largest Growth Cluster: Business & Financial
Services, 73,528 new jobs since 2002
Most Competitive Cluster: Business &
Financial Services, 38,527 new or retained jobs due to
state competitive advantage
Most Concentrated Cluster: Mining, 1.83 times
the national concentration level
116
Shaped by its largely rural environment and its large
number of small companies, Vermont has built an
economic development strategy around retaining and
expanding existing frms while maintaining and promoting
quality of life. The state has seen a recent rebound from
peak unemployment rates experienced during the recent
recession, and is focused on making new investments in
infrastructure needed to help it overcome the challenges of
promoting job growth in a rural state.
Multi-Point Approach to Job Creation
Faced with a daunting $176 million defcit entering the
year, the Vermont legislature was able to close the gap
through a package of cuts, unanticipated receipts, shifted
funding, and new taxes. While cuts were wide-ranging,
the governor and legislature were still able to support
continuation of key economic development initiatives.
Entering his frst term, Governor Peter Shumlin called
for a multi-point approach to job creation, including
increased investments in workforce education, tax fairness
and credits for expanding businesses, and broadband
infrastructure expansion throughout the state.
The governor also pressed strongly during the session
for adoption of legislation outlining a path towards a
single-payer healthcare system in the state, which led
to passage of legislation that will lay the foundation for
implementation of such a program by 2017. Shumlin has
argued that adoption of single-payer reforms will reduce
the burden of healthcare provision on entrepreneurs,
freeing them to focus on business-related issues, and help
control overall costs.
Infrastructure development in support of economic growth
was also a key priority of the administration, which backed
legislation investing over $100 million in roads and other
transportation infrastructure upgrades. Broadband and
related telecommunications infrastructure were also a
key part of the Shumlin agenda, with the administration
proposing and the legislature approving major investments
in telecom infrastructure and changing regulatory
processes to speed private investment. Moving on another
of the governor’s priorities, the legislature was able to pass
bills supporting continued and expanded investment in job
training programs and support for seed capital funding for
agricultural frms in the state.
Infrastructure Initiatives
Vermont has made the improvement of its rural technology
infrastructure a point of emphasis. Governor Shumlin
recently launched ConnectVT, a coordinated effort to
expand broadband and wireless communications access to
all parts of the state by 2013, in an effort to support rural
business job creation. The initiative also convened experts
to identify areas of need and examine ways to coordinate
ongoing public and private efforts. With funding support
passed in the recent legislative session, ConnectVT plans
to couple state efforts with federal and private-sector
funding sources to install and upgrade infrastructure in
underserved areas throughout the state.
VERMONT
116
Vermont’s Place in the Rankings
3rd Short-term Job Growth
6th High Speed Broadband Availability
7th Higher-ed Degree Output
7th Transportation Infrastructure
Performance
9th Export Intensity
9th Educational Attainment
10th High Speed Broadband Intensity
11th High School Advanced Placement
Intensity
13th Per Capita Income Growth
13th Academic R&D Intensity
14th Entrepreneurial Activity
18th High-tech Share of All Businesses
20th Median Family Income
20th STEM Job Concentration
22nd Productivity Growth
22nd Long-term Job Growth
117
The Vermont Economic Development Authority’s
Technology Infrastructure Financing Program attempts
to address private-sector needs for vital infrastructure
upgrades. Under the terms of the program, qualifed
technology service providers, businesses, and nonprofts
can access funding to drive construction, equipment
provision and installation, and the creation of loan funds
used to install and upgrade technology infrastructure.
Funding comes in the form of low-interest loans, with
applicants required to provide at least 15 percent of the
funding for projects themselves. Vermont sponsors a
Technology Loan Program, which provides fnancing
for capital projects and debt refnancing for technology
companies. Qualifying frms must be involved in providing
technology-based goods or services.
Workforce and Training
Vermont offers a variety of workforce development
programs and incentives designed to support existing and
expanding businesses. The Vermont Training Program
offers funds to companies that create jobs that will pay at
least twice the minimum wage. Regions with persistently
high unemployment have lower wage thresholds for
eligibility. The program offers supplementary fnancial
support to qualifed companies conducting training for
new employees and crossover and skill upgrade training
for existing employees. The focus of the program is
on creating and retaining jobs in the manufacturing,
technology, healthcare, and telecommunications sectors
in the state. Vermont also maintains an active Registered
Apprenticeship Program, which connects interested
workers with apprenticeship opportunities, while providing
employers supporting apprentices with access to job
training programs and classes offered through state
educational institutions.
In order to support enhanced job training initiatives,
Vermont maintains ffteen Career and Technology
Centers throughout the state. The Centers work directly
with businesses and communities to create workforce
training solutions tailored to their needs. The Centers also
offer career development services and a broad array of
work training programs to support workers in search of
a new career or retraining. The University of Vermont is
also involved in workforce development activities through
its Vermont Business Center (VBC). The VBC offers a
variety of management and business training programs
and seminars, including programs focused on supporting
family-owned businesses through the Vermont Family
Business Initiative. The VBC also serves as a point of
connection between businesses throughout the state and
programs and resources at the university.
Innovation and Entrepreneurship
The University of Vermont is engaged in promoting
the development of high-tech companies through the
Vermont Center for Emerging Technologies (VCET),
located on the Burlington campus. Launched in 2005,
this technology incubation program couples research
and commercialization efforts at the University of
Vermont with those underway at partner higher education
institutions throughout the state. VCET provides start-up
companies with access to offce space, university research
facilities, product development support services, and
venture capital opportunities.
The Vermont Employment Growth Incentive (VEGI)
provides direct support, in the form of cash payments,
to companies engaged in new job creation. In order to
be eligible for the incentive, any job created undergoes a
cost-beneft analysis and must generate more new revenue
for the state than is granted through the VEGI program.
Qualifed companies must show progress toward job
creation goals in order to remain eligible for support. The
goal of the program is to support companies undertaking
job creation efforts that would not occur without the
incentive and to create an environment favorable to the
creation of higher-paying jobs.
Exports
Located along the Canadian border, Vermont has launched
initiatives to promote and expand international trade. The
Vermont Global Trade Partnership connects businesses
with opportunities to promote their products and services
through trade shows, trade missions, and marketing
support. The Partnership also provides educational and
informational services to companies interested in pursuing
export opportunities. Furthermore, the state offers
access to international trade market development grants,
which qualifed companies can use to support their trade
development and market identifcation efforts.
117
Clusters in Vermont
Largest Cluster: Business & Financial Services,
37,542 jobs
Largest Growth Cluster: Business & Financial
Services, 5,321 new jobs since 2002
Most Competitive Cluster: Electrical
Equipment, Appliance & Component Manufacturing,
488 new or retained jobs due to state competitive
advantage
Most Concentrated Cluster: Computer &
Electronic Product Manufacturing, 2.54 times the
national concentration level
118
Steep Cuts Lead to Surplus
Entering 2010, Virginia faced a daunting budget defcit
approaching nearly $2 billion for 2012 and $4 billion
for the biennium. Forced into action, Governor Bob
McDonnell and the Virginia general assembly were able
to close the gap with a budget package centered on steep
cuts to government programs and services, use of federal
stimulus dollars, accessing rainy day funds, new fee
structures, and changes to contribution rates and pension
structures for Virginia state employees. Government
spending was taken back to levels last seen in 2006. As a
result of the changes made, as well as increased revenues
due to economic recovery, the assembly’s 2011 session was
able to convene in Richmond with a surplus estimated at
up to $400 million.
Faced with a healthier budget picture, the McDonnell
administration has pressed for investments in several
programs and initiatives focused on job creation and
enhancing Virginia’s economic competitiveness. The
administration has made calls for increased funding to
programs that act as tools for job creation, including
funding for a research and technology innovation
program, increased resources for small business
fnancing authorities, focused investments in incentives
for the commonwealth’s tourism industry, and more
funding for workforce and industrial site development
efforts. The administration has also said there is a need
to realign efforts at the commonwealth’s universities
to provide better access to education and training in
science, technology, engineering, and math-related felds.
Infrastructure development in Virginia is another one of
the governor’s priorities. The governor has argued that
Virginia’s job creation activities “will not be sustainable”
if the commonwealth does not make upgrades to its
transportation infrastructure.
Translational Research = Jobs
Among the nation’s leaders in innovation and
entrepreneurship, Virginia continues to press development
of advanced research and development through multiple
programs and incentives. The Virginia Innovation
Partnership is an innovation grant program launched by
the commonwealth in conjunction with the University of
Virginia and Virginia Tech to fund “translational research”
leading to potential technology commercialization and
job creation. Grants made are intended to spur public-
private collaboration, support small tech start-ups, and
attract companies from outside the commonwealth to
relocate, bringing new high-tech jobs to the area. Virginia
has also established partnerships with a series of nine
university research parks throughout the commonwealth.
These parks offer technology companies access to public
research assets, as well as a variety of support services.
VIRGINIA
118
Virginia’s Place in the Rankings
1st High-tech Share of All Businesses
3rd STEM Job Concentration
3rd High School Advanced Placement
Intensity
7th STEM Job Growth
10th Economic Output Per Job
10th Productivity Growth
12th Gross State Product Growth
12th Business Tax Climate
12th Educational Attainment
12th Transportation Infrastructure
Performance
14th Per Capita Income Growth
14th Small Business Survival Index
15th Long-term Job Growth
16th Short-term Job Growth
18th State and Local Tax Burden
19th High Speed Broadband Intensity
20th Higher-ed Effciency
20th High Speed Broadband Availability
22nd Business Birth Rate
24th Cost of Living
119
Entrepreneurial and high-tech start-ups throughout the
commonwealth also have access to a network of over 30
small business incubator facilities, which promote job
creation at innovative small companies. The state is home
to a vast array of advanced federal research institutions,
including 11 R&D centers and 19 laboratories, which
attract research talent and help to create an environment
attractive to private innovation activity. In order to support
local high-tech job attraction and creation efforts, Virginia
enables communities to create technology zones. Creation
of a technology zone enables local governments to offer
job-creating businesses access to special incentives,
including reductions in government fees, special zoning
rules, exemption from local ordinances, and other local tax
incentives.
Established in 1992, the Governor’s Opportunity Fund
is another tool used by Virginia to attract businesses and
create jobs in the commonwealth. The fund acts as a deal-
closing fund, allowing the governor to give an extra push to
local efforts to attract new businesses and jobs to the state.
Loans or grants from the fund are allocated under caps
based on the size of the community, and cannot be used
to move a business already existing in Virginia to another
community in the commonwealth.
Tax stability is another plank of Virginia’s job creation
efforts. The commonwealth touts the fact that it has not
raised corporate income taxes in almost three decades,
and has tax rates that are below national and regional
medians. The state also offers tax incentives and credits
to businesses that create jobs in economically distressed
areas, and offers grants to support job creation in such
areas through its Virginia Enterprise Zone program.
The Virginia Jobs Investment Program (VJIP) is one
of Virginia’s central tools for workforce development
activities. The program is designed to spur private-sector
job creation by providing funding to offset workforce
development activities for companies interested in
expanding or retooling their workforce. The VJIP is
organized around three areas of focus, including support
for new jobs creation, programming specifcally designed
to help small businesses create new jobs, and retraining
assistance for companies in targeted sectors. The VJIP’s
New Jobs Program focuses on supporting companies
establishing a new or expanding presence in Virginia
and creating at least 25 jobs. The Small Business New
Jobs Program also provides support to companies with
workforce training expenses, but is limited to companies
located in Virginia and only requires companies to
create fve jobs to qualify for assistance. The industry-
specifc portion of the VJIP’s activities is in its Retraining
Program, which provides job training services and funding
to companies in the manufacturing and distribution
industries. Support is designed to help companies merging
new technology into their operations, requiring employees
to gain new work skill sets.
Virginia has made workforce development outreach a
priority. The Virginia Workforce Network supports a
system of “one-stop career centers” at the commonwealth’s
community colleges. These centers offer workers
throughout Virginia easy access to job retraining services
and other programs designed to support skill development.
In order to assure that the commonwealth’s workforce
development efforts are aligned with the needs of private
industry, Virginia established the Virginia Workforce
Council, which sets policy guidelines for the local
workforce training centers. This business-led body also
serves as an advisory council to the governor on issues
related to workforce training and development throughout
the commonwealth.
One notable tool used to drive infrastructure improvement
and investment in Virginia is the Private-Public
Transportation Act (PPTA) program. Established in
1995, the PPTA allows Virginia and its local governments
to enter into agreements with private companies for the
development and operation of transportation infrastructure
facilities. The program is designed to attract private
investment in needed infrastructure investment to Virginia,
thus reducing the burden of infrastructure provision
and fnancing placed on the commonwealth and local
governments. Virginia uses funds placed in the program
to leverage investment by private entities, which fnance
and develop projects in return for a share of revenues
generated. Projects can be solicited or unsolicited in
nature, giving private entities the ability to propose
potentially economically benefcial infrastructure upgrades
overlooked by the public sector.
119
Clusters in Virginia
Largest Cluster: Business & Financial Services,
681,128 jobs
Largest Growth Cluster: Business & Financial
Services, 161,335 new jobs since 2002
Most Competitive Cluster: Business &
Financial Services, 48,906 new or retained jobs due to
state competitive advantage
Most Concentrated Cluster: Defense &
Security, 1.86 times the national concentration level
120
Home to major employers such as Boeing, Starbucks, and
Microsoft, the state of Washington continued to suffer
the economic effects of the recent recession in 2010.
Unemployment rates peaked near 11 percent, before
showing some signs of easing later in the year. Like
most states, Washington also faces a budget defcit for
the current year. Beyond its headline corporate citizens,
Washington has focused its economic development and
job creation efforts on several established and emerging
industries, including aerospace, clean energy, life sciences,
IT, manufacturing, marine technologies, agriculture and
food, and tourism.
Budget Situation and Gubernatorial
Priorities
Entering the budgeting period for the upcoming biennium,
Washington state legislators and Governor Christine
Gregoire were presented with a biennial defcit of around
$5 billion, an FY2012 budget defcit of approximately $2.5
billion. The debate over closing this gap has, as in many
other states, proved to be challenging. With the state’s
House, Senate, and governor all pushing for different
combinations of cuts and revenue increases, the budgeting
process was forced into overtime in the form of a special
session.
Governor Gregoire presented a biennial budget that called
for an increased focus on core services throughout state
agencies. Cuts were found throughout the proposal, along
with calls for restructuring government agencies, including
rolling 21 existing departments into nine new ones, in
order to save money on administration and operations.
The governor has also placed pension reform on the policy
agenda, calling for halting automatic increases, which
held the potential to save the state up to $2 billion over
the next four years, and north of $11 billion over 25 years.
In order to support the state’s businesses, Gregoire asked
for legislative support for cuts to workers’ compensation
and unemployment insurance, allowing the state to invest
the savings in other activities including job creation. The
administration has supported continued funding for tax
incentives to attract and retain business, including tax
credits for new hires. The governor has also advanced a
10-point job creation plan that calls for regulatory changes
and streamlining permitting processes.
Job Creation and Enterprise-Friendly
Initiatives
Innovation and technology-based economic development
efforts are a central part of Washington’s job creation
agenda. The state offers multiple tax incentives and
programs focused on attracting, retaining, and growing
job opportunities in key advanced industries. The state’s
WASHINGTON
Washington’s Place in the Rankings
1st Export Intensity
1st STEM Job Concentration
5th Small Business Survival Index
9th Economic Output Per Job
9th Business Birth Rate
11th Median Family Income
11th STEM Job Growth
11th Business Tax Climate
15th College Affordability
16th Long-term Job Growth
16th Job Placement Effciency
17th Educational Attainment
17th High Speed Broadband Intensity
17th Transportation Infrastructure
Performance
18th High Speed Broadband Availability
19th High School Advanced Placement
Intensity
20th Gross State Product Growth
22nd State and Local Tax Burden
120
121
high technology business and occupation tax credit
is available to businesses in the advanced computing,
advanced materials, biotech, electronic device, and
environmental tech industries that conduct research and
development (R&D) activities in the state. Companies
in the same industry set also have access to a sales and
use tax deferral program for qualifed R&D and initial
manufacturing activity expenses. Biotech and medical
devices companies also receive sales and use tax breaks
on qualifed equipment purchases used in expansion and
job creation.
Aerospace manufacturing and product development
continues to be an industry of vast importance in
Washington, a fact refected in the state’s tax incentive
structure. The state offers several special aerospace tax
incentives, including a business and occupation tax rate
decrease, aerospace research and development tax credits,
aerospace specifc property and excise tax credits, and
a sales and use tax exemption on computers used in
aerospace design.
Multiple other tax credits for research and development,
sales and use taxes, and capital investment activities
are offered to other target industries, including timber
extraction, manufacturing, food processing, biofuel and
renewable energy production, semiconductor manufacture,
smelting, farming, and warehousing.
Washington’s Innovation Partnership Zones are locally
driven technology job development efforts focused around
key industry clusters throughout the state. Local economic
development agencies, workforce development councils,
and local governments work together with private sector
partners to build technology commercialization efforts,
offer incubation services for entrepreneurial start-ups,
support tech transfer, and provide needed workforce
training to companies located in the innovation zones.
University researchers are also actively involved in the
partnerships, which last for four years before a community
must reapply.
Washington also offers an array of workforce development
services and incentives. These include a workforce
business and operations tax credit equal to up to 50 percent
of qualifed training expenses incurred through the state’s
Customized Employment Training Program (CTP).
The CTP pays the upfront costs for customized training,
which businesses can later repay free of interest. Back
payments for training can be made over an 18-month
period, and businesses receiving training services are only
required to pay for 25 percent of the costs upon completion
of the training. Such repayment options remove cost
barriers that might otherwise keep a business from pursing
workforce training that will make it more competitive.
Washington also maintains an active apprenticeship
funding program, which offers one-year program
development funding in support of creation and expansion
of apprenticeship programs through the state’s Board for
Community and Technical Colleges.
Washington’s Community Economic Revitalization
Board (CERB) provides infrastructure funding support
to communities throughout the state. CERB focuses on
fnancing projects that support business growth and job
creation opportunities. Since 1982, CERB has provided
local governments throughout Washington with $149
million of infrastructure investment, which was used to
leverage $5.2 billion in private business investment. In
addition to funding, CERB offers communities support
in evaluating potential infrastructure projects and
development of overall funding strategies for proposed
projects.
Rural areas are not overlooked in Washington’s job
creation efforts. The Rural Washington Loan Fund
(RWLF) provides gap fnancing for up to one-third of the
cost of a business project that will create or retain jobs in
a rural area of the state. Funding is focused on property
acquisition, improvement, or construction, with up to $1
million of fnancing available to any one project.
In order to help reduce the regulatory burdens on small
businesses, Washington’s Department of Licensing offers
businesses seeking to apply for or renew licenses access to
a Master Business Application. The master application
gives applicants a simplifed form that can be used to apply
for multiple classes and types of license, at both the state
and local level. When coupled with the state’s online fle
and pay system, the master application helps entrepreneurs
access needed licensing more quickly and easily, allowing
them to focus on business matters instead of paperwork.
121
Clusters in Washington
Largest Cluster: Business & Financial Services,
415,931 jobs
Largest Growth Cluster: Business & Financial
Services, 89,290 new jobs since 2002
Most Competitive Cluster: Information
Technology & Telecommunications, 37,215 new or
retained jobs due to state competitive advantage
Most Concentrated Cluster: Transportation
Equipment Manufacturing, 3.06 times the national
concentration level
122
West Virginia entered 2011 as one of just a handful of
states facing a budget surplus, instead of a budget defcit.
With estimates placing the state’s windfall approaching
$250 million, West Virginia’s policymakers entered this
year’s legislative session in an enviable position. While
the budget entered the year in relatively strong shape, the
same could not be said of West Virginia’s overall economic
condition. Joblessness remains near 10 percent, well above
pre-recession levels. The state also faces projected future
budget shortfalls, a graying workforce, and the specter of
decreased coal production and accompanying severance
tax receipts in the long term. However, the strength and
stability of West Virginia’s current budget situation have
placed the state and its leaders in a position to make moves
calculated to improve the state’s long-term economic
outlook.
Policy Priorities
The election of Governor Joe Manchin to the U.S. Senate
in late 2010 left West Virginia in the position of having
to fll the vacancy with an acting governor. West Virginia
has no Lieutenant Governor, so the vacant offce of
the governor was flled by State Senate President Earl
Ray Tomblin. Since taking the reins, Acting Governor
Tomblin has argued in favor of making business climate
improvement and job creation the state’s highest priorities.
In order to support this agenda, Tomblin has called
for making improvements in the state’s tax increment
fnancing structures in order to give municipalities more
control over projects, introducing sales tax credits for
distribution businesses to create jobs, and conducting a
comprehensive review of the state’s business recruitment
efforts. Energy development, including continued support
for the state’s massive coal industry as well as exploration
and exploitation of natural gas resources, are also a major
administration focus. The state’s strong budget situation
allowed Tomblin and the state legislature to construct a
budget that included no tax increases, no cuts to existing
government programs, and no state employee layoffs, all
while also increasing wages for the state’s teachers.
Five-For-Ten Helps Job Creation
Decreasing tax burdens on business has and continues to
be a point of emphasis for West Virginia. Over the past fve
years, the state has removed nearly $250 million dollars of
taxes on business, and has passed legislation to continue
cuts by implementing a series of phased reductions to the
state’s corporate net income tax through 2014.
The state also offers a variety of tax programs designed
to support development in specifc industries. Support for
manufacturing industries and jobs has been a particular
area of note. The state’s “Five-For-Ten” Program
offers decreased property taxes to manufacturing
businesses in the state, by valuing capital improvements to
manufacturing equipment at 5 percent of their true value
for up to ten years, thus offering support to companies
interested in expanding or modernizing their facilities.
West Virginia offers manufacturing businesses access
to investment credits for qualifed investments made
in productive property. These can be used to offset up
to 60 percent of a company’s income and franchise tax
liabilities. The state also provides tax breaks, in the form
of a manufacturing inventory credit, on raw materials and
goods held in inventory by manufacturers in the state.
In support of high-tech manufacturing, the state offers a
WEST VIRGINIA
West Virginia’s Place in the
Rankings
1st Budget Gap
1st Higher-ed Degree Output
6th Short-term Job Growth
7th Per Capita Income Growth
12th STEM Job Growth
13th Small Business Survival Index
13th Job Placement Effciency
14th Higher-ed Effciency
17th Long-term Job Growth
22nd High Speed Broadband Intensity
24th State and Local Tax Burden
122
123
targeted High-Tech Manufacturing Credit, which can
be used to offset up to 100 percent of a company’s tax
obligation, if job creation benchmarks are met.
In fact, West Virginia has tailored special tax incentives
to attract high-tech frms, under the auspices of the High-
Technology Business Property Valuation Act. Because
of this legislation, property taxes on qualifed property
and machinery owned by high-tech and Internet marketing
companies are set at a level equal to 5 percent of what they
would otherwise be. The Act also provides such companies
with sales tax breaks on certain classes of inputs used in
conducting business, including software and computer
hardware.
Small business fnancing in the state is supported by the
West Virginia Jobs Investment Trust. This publicly
funded venture capital fund works in tandem with private
sector venture funds to provide loans to small companies
seeking capital to expand in West Virginia. In addition
to providing access to capital, the trust offers businesses
selected for investment with access to experts who
can provide assistance in developing effective growth
strategies and management recruitment support. The goal
of the Trust is to create an environment supportive of
entrepreneurial success in the state. The West Virginia
Economic Development Authority also works to further
such goals through its West Virginia Venture Capital
program. The program works with seven venture capital
funds that have an interest in investing in and supporting
entrepreneurship in West Virginia. To encourage
investment in the identifed frms, the program offers tax
credits to individuals and private institutions that make
investments in the frms, expanding the amount of capital
available for investment in West Virginia companies.
In order to support technology transfer from the
state’s university system to private businesses, driving
commercialization and job creation, West Virginia has
created an Economic Development and Technology
Advancement Center program. The Centers are
designed to act as points of connection between university
research institutions and private sector frms, through
which research collaboration and assistance can be
organized. The program includes a focus on acquisition
and management of research and development grants, and
provides tax credits to incentivize private sector investment
in such research partnerships.
Recognizing the importance of quality infrastructure to
job creation activity, the state created the West Virginia
Infrastructure and Jobs Development Council. The
Council manages a revolving loan fund used to support the
installation of economically important water infrastructure,
as well as other economic development projects throughout
the state.
West Virginia offers businesses access to a package of
export assistance services through the West Virginia
Development Offce’s Export Promotion Program.
The program subsidizes costs for businesses to exhibit
at international trade shows, and offers access to foreign
trade missions. The program also provides businesses free
evaluations of their trade readiness and logistical support
to prepare for attending and taking part in trade missions
and international shows. For businesses that are interested
in accessing foreign trade channels but do not have the
capability to make trips abroad to promote their goods and
services, the state organizes meetings with foreign buyer
delegations that are touring West Virginia. The state also
maintains outreach offces in Japan and Germany, which
act as entry points to Asian and European markets for West
Virginia businesses.
123
Clusters in West Virginia
Largest Cluster: Energy (Fossil & Renewable),
88,989 jobs
Largest Growth Cluster: Energy (Fossil &
Renewable), 19,109 new jobs since 2002
Most Competitive Cluster: Energy (Fossil &
Renewable), 12,699 new or retained jobs due to state
competitive advantage
Most Concentrated Cluster: Primary Metal
Manufacturing, 2.52 times the national concentration
level
124
Wisconsin has adopted a cluster-based approach to
economic development and identifed eight established
and two emerging clusters as points of focus for job
creation. The state relies on private-sector leadership to
support public efforts to develop its clusters, building its
economic development strategy around successful public-
private partnerships. Although 2010 was a year of high
unemployment and burgeoning budget defcits, recent
revenue projections, unemployment reports, and job
outlooks show an economy transitioning back towards
health.
Budget Situation and Policy Priorities
While Wisconsin’s budget defcit of $1.8 billion only
ranks it in the middle of the pack nationally, the fallout
from debates over potential solutions to the defcit has
been one of the most dramatic in the nation. Driven by
partisan disagreement over pension reforms and collective
bargaining, Wisconsin’s legislative session became a
national fashpoint for debates over setting state budget
priorities. Incoming Governor Scott Walker has pressed for
more aggressive reforms than have some other governors,
leading to consternation among state employees and
nationally publicized debates.
As much of the spotlight in Madison focused on protests
and legislative wrangling, Governor Walker had advanced
a set of proposals focused on job creation and economic
development upon entering offce. These included pressing
for increased tax credits for relocation and economic
development, introduction of regulatory reform legislation,
adoption of more aggressive business recruitment policies,
and avoiding tax increases on business in the state.
Immediately upon taking offce in January, Governor
Walker called the legislature into a special session to
address several other economic development-related
proposals, including elevation of the Wisconsin Economic
Development Corporation to replace the state’s Department
of Commerce. Organized along public-private partnership
lines, the corporation will take the reins of economic
development in the state in July 2011, tasked with driving
new job creation efforts. Other proposals made by the
governor have involved lawsuit reform, business tax cuts,
and chartering of a commission to explore potential waste,
fraud, and abuse in government programs, in order to
identify ways to cut down on spending where possible.
Job Creation Initiatives and Enterprise-
Friendly Policies
Wisconsin maintains several programs and support
structures designed to promote exports of the state’s
products. The state’s Export Development Managers
work directly with companies throughout the state,
assessing their readiness for international trade, giving
marketing direction and advice, connecting companies
with the needed professional trade services, and educating
companies about foreign business practices they may
encounter when entering new markets. Wisconsin’s
International Offce Network consists of a group of
four offces around the globe where trade professionals
contracted by the state act as liaisons for Wisconsin
business interests in key markets. Wisconsin’s outreach
WISCONSIN
Wisconsin’s Place in the Rankings
4th Median Family Income
12th Export Intensity
13th High Speed Broadband Intensity
14th Growth in Share of National Exports
17th Export Intensity Growth
18th College Affordability
21st Educational Attainment
22nd High School Advanced Placement
Intensity
23rd Cost of Living
23rd Job Placement Effciency
23rd High Speed Broadband Availability
24th Export Growth
124
125
efforts currently include support for offces in China,
Canada, Brazil and Mexico. The overseas offces are
able to provide Wisconsin businesses interested in trade
with market assessments, and can conduct searches for
distributors and end users for companies and products
seeking access to export markets. In addition to sponsoring
and taking part in trade shows and trade missions,
Wisconsin operates a Trade Show Grant program.
This program encourages small businesses to explore
international trade possibilities by offering reimbursement
of up to $5000 of travel expenses incurred to attend
trade shows or trade matchmaking events. The state has
also created a Division of Global Ventures tasked with
seeking out potential foreign direct investment (FDI)
opportunities. The state has targeted provision of FDI in
several high-tech felds. With the governor’s support, the
division has launched a new pilot Regional Marketing
Grant Program. The new grants are available to regional
economic development organizations on a matching basis,
designed to help create “unique and innovative” regional
branding strategies to market the state.
The Business Employees’ Skills Training (BEST)
Program helps small businesses in markets that are
experiencing severe labor shortages fund skills upgrade
training for their existing employees. Businesses must not
have over 25 employees, and must be in one of several
targeted industry clusters. Qualifed businesses receive
a tuition reimbursement grant to help cover part of the
training costs incurred.
Entrepreneurs starting new businesses also receive
support in their job creation activities from the state. The
Early Planning Grant (EPG) program provides new
businesses with a grant of up to $3,000 to hire professional
business planning services. Due to limited funds, the
program is restricted to entrepreneurs in targeted industry
clusters, and will cover up to 75 percent of qualifed
business planning expenses. The state also offers an
Entrepreneurial Training Program (ETP). This program
allows entrepreneurs starting businesses that are not in
the targeted industry clusters the opportunity to apply for
grants which will cover up to 75 percent of the expenses
for qualifed training programs offered through a Small
Business Development Center.
The state’s Customized Labor Training fund supports
Wisconsin companies that are in the process of adopting
new processes or technologies by helping pay for
workforce training needs that such a transition may create.
In order to be eligible for the program, training must be
focused on a new technology or process, and must not be
available from another source in the state, necessitating a
customized plan of training. If a company is found to be
eligible, it may receive a grant offsetting up to 50 percent
of the costs incurred in provision of the training.
Tax exemptions and incentives are also part of Wisconsin’s
job creation toolbox. Many are targeted towards support
of manufacturing businesses. The state offers property
tax exemptions for machinery and equipment used in
manufacturing, farm and manufacturing inventories,
business computer hardware and software, and through
tax increment fnance districts set up by local governments
to spur development. Sales and use tax exemptions are
also offered on manufacturing equipment, on pollution
abatement and recycling equipment, and on production
fuel and electricity. Innovation activities in the state are
eligible for the state’s research expenditure credit and
research facilities credit. Both provide companies with
tax incentives to increase research activity conducted in
the state. The Angel Investment Tax Credit Program
offers investors in qualifed high-growth potential new
businesses a tax credit worth up to 25 percent of their
investment. Credits are issued up to an annual limit, with
total state funding varying from year to year. The state’s
Early Stage Seed Investment Credit is another credit
offered to spur investment in Wisconsin businesses, driving
job creation. The program offers venture capital seed funds
a credit for investments made in qualifed high-growth
potential companies that is worth up to 25 percent of their
investment.
125
Clusters in Wisconsin
Largest Cluster: Business & Financial Services,
315,739 jobs
Largest Growth Cluster: Business & Financial
Services, 44,500 new jobs since 2002
Most Competitive Cluster: Advanced Materials,
8,608 new or retained jobs due to state competitive
advantage
Most Concentrated Cluster: Electrical
Equipment, Appliance & Component Manufacturing,
2.93 times the national concentration level
126
A top performer in last year’s measures of overall
growth, Wyoming has continued to show signs of steady
economic momentum. Driven by strong performance in
the mining and natural resource sectors, the state’s two
main cities of Cheyenne and Casper are national leaders
in real GDP growth, with the latter leading the nation in
2009. This economic growth, supported by continued
strong commodity prices, has translated into broad-based
population growth in the state’s urban and rural areas, with
21 of the state’s 23 counties showing increased counts in
the 2010 census. While other High Plains states have seen
rural areas lose population, the Cowboy State appears to be
bucking regional trends.
Robust Sectors Drive Job Growth
Unlike most other states around the nation, Wyoming
entered 2011 in possession of a large severance tax-
supported budget surplus, which some estimates placed
at near $1 billion. As a result, the state’s newly elected
governor, Matt Mead, took offce facing a budget situation
that many other governors would have envied. Given the
state’s relatively strong economic performance, Governor
Mead called for continued efforts to invest in the state’s
robust energy, agriculture, and tourism sectors to drive
continued job growth. However, given Wyoming’s
dependence on the production of energy and natural
resources, the Mead administration has argued that
diversifcation of the economy should be among the state’s
chief goals moving ahead. Having identifed the technology
sector as a target for growth, the Mead administration
supported legislation that would increase funding to recruit
large data centers to the state, expanding on efforts already
underway at the University of Wyoming and federally
supported research centers. The administration has made
streamlining government functions a focus, proposing
merging departments and reviewing and repealing
executive orders seen as unnecessary. The administration
also supported legislation to increase investments in
transportation infrastructure, arguing that effective
infrastructure would “lay the groundwork to attract new
businesses and employers.”
Community Development Key to Jobs
In order to connect more effectively with private-sector
employers, Wyoming has focused on supporting its job
creation efforts with the Wyoming Business Council,
an entity with a more corporate structure than the state’s
previous economic development agencies. The Council
is directed by a board of successful businesspeople from
throughout the state. The Council organizes its efforts
on a regional basis, with seven offces around the state
serving as points of access to state government for new and
expanding businesses.
Wyoming has made community development and
assistance a central focus in its economic development
efforts. The state offers a suite of programs and incentives
WYOMING
Wyoming’s Place in the Rankings
1st Long-term Job Growth
1st Gross State Product Growth
1st Productivity Growth
1st Per Capita Income Growth
1st College Affordability
2nd STEM Job Growth
3rd State and Local Tax Burden
4th Economic Output Per Job
4th Business Tax Climate
5th Budget Gap
7th Business Birth Rate
9th Transportation Infrastructure
Performance
11th Small Business Lending
19th Median Family Income
23rd Export Growth
25th Academic R&D Intensity
25th High Speed Broadband Availability
126
127
focused on making its communities, large and small,
more attractive to private-sector development. Investments
have been made in infrastructure, community amenities,
business recruitment and promotion activities, and
enhancement of community facilities and downtowns. The
Business Ready Community Grant and Loan Program
provides fnancial support to local governments seeking
to build up public infrastructure and amenities needed
to support business development. In order to support
economic development in rural areas of Wyoming, the
state maintains a rural development council, which
focuses on supporting community, leadership, and land
use enhancement efforts in the state’s rural communities.
The state also assists rural communities in conducting
economic development assessments, and communities
of all size have access to a centralized library of local
development plans and templates to guide their planning
efforts. Similarly, the state maintains a database of sites
and structures available for business development, aiding
entrepreneurs in the rapid identifcation of suitable sites to
locate a new or expanding venture.
Aiming to diversify its economy even within the
energy sector, Wyoming has made efforts to support
the development of its abundant wind power. The state
offers access to an anemometer loan program, which
provides site owners with data collection and analysis
equipment, needed to gauge a site’s suitability for wind
energy development. Governor Mead has recently called
for increased efforts to attract wind energy component
manufacturers to the state. In order to help the state’s
existing businesses cut costs and increase energy
effciency, the state also offers matching grants to small
businesses that would like to conduct an energy audit of
their equipment and operations.
Trade and Manufacturing Support
Wyoming has sought to enhance exports of its products
through several channels. The state promotes its products,
particularly livestock, through international trade missions
organized by the Agriculture Business Development and
International Trade Development agencies. The state
actively promotes international sales of livestock genetic
stocks and offers marketing support to organic livestock
producers. To support the creation of new exporters, the
Wyoming International Trade Assistance Program
works with individual businesses seeking access to foreign
markets, offering services including product development
support and links to funding sources. The Wyoming
Market Research Center offers companies in the state
access to market and competitive analysis services,
information on dealing with regulations, and marketing
material evaluations at little to no cost.
Wyoming has also made creation of manufacturing jobs
a priority in its economic development plans. The state’s
Manufacturing-Works program supports manufacturing
companies with business assessments, integration of
advanced manufacturing techniques, workforce training,
and product and prototype testing. The 2011 legislative
session saw passage of legislation continuing the state’s
manufacturing tax exemption. Manufacturers taking
advantage of the law are able to receive a sales and use
tax exemption on equipment purchases, aiding them in
expanding production lines and creating new jobs.
Wyoming has continued to focus on building up its
technology sector in its effort to increase economic
diversifcation. Hoping to capitalize on its access to
relatively low-cost energy, Wyoming has made efforts
to attract data centers to the area. Targeting larger
developments, the state has enacted and expanded a sales
and use tax exemption for data center investments of over
$2 million in a calendar year. Purchases of equipment
and software needed to start a center are included in the
exemption.
Recognizing that capital markets remain tight and that
large-scale business developments in the state often face
challenges in landing funding from big banks, Wyoming
has greatly expanded its industrial development bond
program. Originally authorized to invest $100 million,
the program was increased in size six fold by the 2011
legislature; it now has the ability to buy up to $600 million
of bonds issued by local governments in support of
business development activities. While the state appears
open to supporting larger business developments, the
legislature must approve bonding for any project exceeding
$100 million.
127
Clusters in Wyoming
Largest Cluster: Energy (Fossil & Renewable),
57,234 jobs
Largest Growth Cluster: Energy (Fossil &
Renewable), 17,646 new jobs since 2002
Most Competitive Cluster: Energy (Fossil &
Renewable), 13,887 new or retained jobs due to state
competitive advantage
Most Concentrated Cluster: Mining, 6.81 times
the national concentration level
128
Puerto Rico’s dual mission of fostering multi-sector
growth while reducing costs and barriers to business and
investment is lifting the commonwealth incrementally out
of a recession that has been more severe than the downturn
on the mainland. According to the Federal Reserve Bank
of New York, by mid-2010, total employment in Puerto
Rico had fallen by 13 percent or 138,000 jobs from its peak
in 2005, representing almost double the 7 percent job loss
on the mainland from the employment peak to its lowest
point. Furthermore, the recession in Puerto Rico has lasted
about fve years—three times as long as the mainland
downturn.
Since mid-2010, however, there have been some
encouraging signs: job growth on the island improved
modestly. The unemployment rate has come down by a full
percentage point since its peak; nevertheless, it remains
among the highest in America, lingering at about16
percent. Unemployment has remained especially persistent
in construction and manufacturing.
Fiscal Reconstruction
A committee of private-sector leaders convened in early
2009 to offer ideas on how to address the government’s
looming fscal crisis. The committee’s report detailed
more than 30 proposed measures to increase revenue, cut
spending and raise temporary fnancing.
Fiscal and economic reforms comprising signifcant
expenditure controls and revenue enhancement measures
have substantively improved Puerto Rico’s situation.
Responsible budgetary practices eliminated the
Commonwealth’s practice of overestimating revenues to
sustain high expenses. This has resulted in a 70 percent
reduction in the defcit with a target of a balanced budget
in just four years.
In 2008–2009 Puerto Rico’s budget defcit, measured as a
percentage of revenues, was the highest among all states
and territories. By 2010–2011 it was ranked 20th, moving
from 43.6 percent to 10.9 percent. This lifted the outlook
on the Commonwealth’s credit to positive from stable in
2010, the frst upgrade since 1983.
Strategic Choices
Puerto Rico’s administration is emphasizing initiatives to
enhance the Commonwealth’s competitive position: (1)
overhauling the permitting process; (2) reforming the labor
market; (3) reducing energy costs; (4) reforming the tax
system; (5) promoting the development of various projects
through public-private partnerships; (6) implementing
strategic initiatives targeted at specifc economic sectors;
and, (7) promoting the development of certain strategic/
regional projects.
The new Strategic Model considers each one of the sectors
in the economy and contains the projects and reforms
necessary to promote the competitiveness and sustained
growth of Puerto Rico and its business partners. These
advantages are providing opportunities for the development
of strategic sectors, which include manufacturing,
agriculture, commerce, tourism and entertainment,
banking/insurance and credit unions, and flm and creative
services.
Puerto Rico has natural or structural competitive
advantages in several areas, such as medical device,
pharmaceutical and biotechnology manufacturing.
Puerto Rico has a proven 40-year track record as a major
pharmaceutical and medical devices center in the world
with 25 percent of the world’s biological manufacturing
capacity now located in Puerto Rico.
Puerto Rico’s Strategic Model for a New Economy focuses
on growth, competitiveness and jobs. Funds are being
made available for strategic projects to develop a world-
class physical infrastructure to stimulate the economy
and reduce the operational costs of doing business by
addressing regulatory barriers.
Regional Initiatives
The Administration has also targeted strategic/regional
projects that are intended to generate investments in all the
regions of the Island in order to foster balanced economic
development.
These include:
An urban redevelopment project of the area called the •
Golden Triangle is developing San Juan Bay into a
major tourism, recreation, commercial and residential
sector that serves the local community and will
become a major attraction for leisure and business
travelers.
The development of the Port of the Americas, an •
international trans-shipment Post Panamax port of
PUERTO RICO
128
129
global caliber.
Science City, in the heart of San Juan, to move Puerto •
Rico to the forefront of science, technology and
research and development. Science City is leveraging
Puerto Rico’s signifcant competitive advantages in
the knowledge-based sectors to integrate medical
centers, research centers and university campuses.
Efforts intended to transition Puerto Rico to a
knowledge-based economy are leveraging the Island’s
highly educated work force and existing industrial
base to create new jobs and businesses by creating
new industry clusters and consortia with a focus on
innovation.
The development of a section of the Caribbean Riviera •
to be a tourist complex which will include hotels,
casinos, eco-tourist attractions, international airport,
retail, yacht marina, and cruise ship ports.
Exports and International Trade
Advantages
The major pillars of Puerto Rico’s long-term growth
strategy also include initiatives focused on increasing
exports. The island currently runs a surplus with the
mainland that accounts for much of the island’s overall
export volume. However, Puerto Rico’s export markets
also extend overseas, including, the top export markets
of Germany, Netherlands, Belgium and Spain. Exports
to these four countries combined exceeded $11 billion in
2009 and have grown by more than 30 percent since 2007.
Puerto Rico has many attributes to attract investment and
take advantage of international trade opportunities. It
enjoys intellectual property protection under U.S. law and
banking regulation under the U.S. system (FDIC). The
Commonwealth participates in the trade agreements of
the U.S and is under the U.S. customs border jurisdiction.
Tax treatment for Controlled Foreign Corporation (CFC),
where Federal income taxes for U.S. based multinational
corporations are deferred until profts are repatriated to the
U.S.
Tax incentives and Credits available through the Economic
Incentives for the Development of Puerto Rico Act enable
local and foreign companies to operate successfully in
Puerto Rico enjoying the benefts of operating within a
US jurisdiction, while taking advantage of a foreign tax
structure.
Economic incentives in 2008’s Development of Puerto
Act provided attractive tax and other incentives to
foster investment in key sectors of the Commonwealth’s
economy. Manufacturing and export services such as
Financial Services, Insurance and Consulting are eligible
for some of the incentives provided under this law.
In 2010, Puerto Rico passed into law a comprehensive
series of incentives to attract investment to the island.
These programs include:
Housing incentives for purchasing residential and •
commercial properties.
Incentives for continued development of flm industry •
infrastructure and tax incentives to attract foreign
capital.
World-class tourism incentives. •
Amendments to the Insurance Code of Puerto Rico •
to secure a tax regime that will apply to international
insurers.
Measures to stimulate the development of sustainable •
energy systems by establishing the Green Energy
Fund.
Taxes and regulation laws are being passed and
implemented to reform Puerto Rico’s institutional and
regulatory framework, to turn government into a facilitator
and to strengthen the private sector. On December 1, 2009,
the Governor signed Act No. 161, which overhauled the
permitting and licensing process in Puerto Rico in order to
provide a lean and effcient process that fosters economic
development. This restructuring eliminated the signifcant
backlog of unprocessed permits that were in the pipeline
of various government agencies. Longer term, this law
signifcantly reduces the number of inter-agency processes
and transactions required by creating a centralized, client-
focused system that simplifes and shortens the permitting
process for applicants.
In sum: Puerto Rico has responded diligently and
deliberately through its Fiscal Reconstruction Plan and the
Strategic Model for a New Economy aimed at addressing
the current fscal and economic challenges. Improvements
are now detectable in key sectors, capital injections
are being made in infrastructure projects and a rise in
business and consumer confdence is helping to drive the
performance of the economy in 2011.
129
130
END NOTES
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