PA Standing at the Ready: Creating Proactive Strategies for Potential Changes in Defense Spending

PA-Defense-ManufacturingDefense Department budgets are in flux. Factors such as the Budget Control Act, reductions or shifts in spending related to the drawdowns in Iraq and Afghanistan and responses to future threats could all create significant economic disruptions for Pennsylvania’s defense industry sectors and the regions they call home.  The state’s defense industry leaders and the communities that support them cannot afford to risk being caught unprepared by waiting for news of budget changes and then reacting to them.  Instead, it is imperative that the sector understands potential risks and prepares for them proactively.   Continue reading “PA Standing at the Ready: Creating Proactive Strategies for Potential Changes in Defense Spending”

Ignorance Is Bliss, and It Gets the Job Done for Now…

Would you cut your personal budget today by $1,000 if you knew, as a result, you would lose $3,500 five years from now?

Pennsylvania and many other states are contemplating significant reductions in their funding of programs that support economic diversity. While I recognize that government has not done well to reign in spending, the rationale for reductions must be thought through much more than what is currently being proposed. I am increasingly fearful that the actions being taken, not just in Pennsylvania but also in many other capitols across the country, are going to have mid- to long-term ramifications for U.S. competitiveness and future economic recovery.

Pennsylvania’s Acting DCED Secretary recently summed my concerns up best:

“Just as a farmer doesn’t eat the seed corn during a drought, you don’t cut economic development programs during a recession,” Walker said. “This is actually when we need new tools in our arsenal to survive and grow.”

As many in the field of economic development have begun to focus on ‘economic gardening,’ providing assistance to local firms to support growth, his statements are right on the mark.

The issue before us is that the easy path to balanced budgets is to eliminate anything that is not understood. The example formula above is being played out in Pennsylvania as the state cuts millions from its budget. The ratio of $1 in state investment equaling $3.5 in tax returns is taken from the actual impact measures shown from the Ben Franklin Technology Partners. Over the past few years over $10 million in annual investment has been taken from this program. Two years of these reductions represents over $70 million in lost future tax revenue.

Pennsylvania’s state government has been a pioneer and decades-long leader in supporting technology-based economic development. In 1983, then Governor Thornburg responded to the serious economic threats caused by the demise of the steel industry employment base by calling for the creation of the Ben Franklin Technology Partnership. In similar fashion the Governor of Ohio announced the creation of the Edison Center Network. These two efforts have led the way and today are still being replicated in state’s that are seeking to diversify their economies and create an environment that supports high growth, high wage companies. The visionary leadership has benefited us well for almost three decades.

Today we all must make hard choices but I hope that we can start doing so with informed and deliberative decision-making rather than the sound bite-filled rhetoric that has guided the current proposed cuts. The science of program evaluation is often difficult to understand, but so is the reality that we have eaten our seed corn and have nothing left for the future.

Ideas Wanted

The other day I attended a Team Pennsylvania Foundation regional forum that focused on Pennsylvania’s new economic development budget.

Even if you are not a resident of Pennsylvania my guess is that your state is also looking at doing things differently with respect to their economic development programs. The economy and financial concern in most state capitals require a hard look at economic development delivery system and investment priorities.

What struck me by the presentation by staff from the Department of Community and Economic Development and conversation that followed was that more people need to be involved in the process. Governor Corbett in his 2011-2012 budget is calling for significant changes to the DCED budget. Foremost is the reduction of programs managed by the agency from 127 to 56. This reduction will come from program elimination and consolidation.

Of course such action is not without its critics who would prefer the status quo over the unknown. In the end though the action is necessary, as the agency has had to deal with the creation and implementation of new programs with each subsequent Governor and new Legislature for decades. The maze of funding opportunities, guideline and legal requirements has created a nightmare of doors to go through for any community or business seeking government funding support.

The Governor began the process by making his recommendations. It is now critical that we as tax payers and stakeholders in the economic development infrastructure of this state weigh in on those recommendations and offer our own suggestions.

The Team PA Foundation has developed a feedback tool for you to share you ideas and comment on others. I strongly encourage you to take advantage of this opportunity and if you can attend a future regional session do that as well.

New initiatives that have been recommended include:

  • The Liberty Loan Fund
  • PA First Fund
  • Discovered in PA, Developed in PA
  • PA Regional Economic Partnership

Each program significantly changes the current way the state conducts business and it’s relationship with partners throughout the state. As a result there is significant room for recommendations and adjustment while the budget is debated. The time is now for you to add your voice to the discussion.