Before we get too far into the new fiscal year, we thought we’d go back and look at how the innovation-based economic development (IBED) world fared in the last round of state budgets. Tax credits continue to be a favored tool to spur growth and investment in the IBED world. Even though budgets are tight, many states have maintained or increased funding for IBED-related tax credits, and a few, such as Nebraska and Virginia have introduced new ones. Supporting commercialization efforts was also high on the list this legislative season. Ohio’s Third Frontier, for instance, has a new Commercial Acceleration Loan Fund worth $25 million. With waning investment from traditional venture capital firms, several states are stepping in to fill the gap. Maryland’s new InvestMaryland program allocates $70 million for venture capital in the innovation economy sector. And though it was developed back in 1989, Economic Gardening has only recently started to catch hold on the regional and state level. Nebraska, Virginia, Pennsylvania, and Michigan have all introduced new initiatives this year. The trend of the year, though, seems to be the restructuring of state-level economic development efforts, with a particular emphasis on engaging the private sector. Many of these efforts are currently facing some controversy, but we wouldn’t be surprised if once the wrinkles get ironed out, this is a trend that’s here to stay.
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Perspecitves – Innovation-Based Economic Development vs. State Budgets
And…don’t forget about our poll this month…
Think we missed something? We’d love to hear from you. Share your thoughts in the comments below…
The Glass is Half . . .?
We recently conducted a survey of our e-newsletter readers and LinkedIn group friends. We were looking to see what people are thinking about in terms of economic development. The responses tell us a good deal about what’s on folks minds as we all work to escape the lingering impacts of the Great Recession.
First, to understand the audience – 48% of respondents own their own, or are employed by, a private sector business. 31% work for a nonprofit and 19% are government employees. A decent representation of sectors.
We asked “what will the biggest economic drivers in your community be over the next 1-3 years.” Educated Workforce was the number one driver with 73% of people saying that it’s the high impact driver for their community. While we are certainly hearing this from our site selection and economic development clients, the level of focus on this is impressive. This data means that communities lacking an educated workforce or lacking training resources will be further impacted as the economy recovers. Our upcoming Fourth Economy Index tracks this trend as a key community rating factor.
Workforce Availability and Maintenance Infrastructure were ranked by respondents as high impact by 52% and 50%. Until recently these factors were much higher on our clients minds. One surprising statistic was that Access to Affordable Energy came in 15% higher than Tax Climate (49 and 34 respectively). In the past, a lot of people sited tax climate as being a critical economic driver, however we are finding less of a concern in this area due to the different tax/fee strategies that are neutralizing this as an issue for business growth.
Economic Development Concepts
We asked people “what economic development concept is the most critical in their community.” Innovation Based Economic Development came in with 93% of the respondents citing it as high to medium impact. Economic Gardening or Grow Your Own Strategies pulled a 79% ranking and ‘Onshoring’ a 70.5% ranking. In many communities all three of these concepts are new – less than 5 years with specific strategies. This provides an opening for a great deal of experimentation for strategy development and lesson sharing between communities. We will continue to share what we are thinking and reading about on these concepts.
Here to Serve?
As many in state capitals around the country ‘debate’ the role of government in the economy, one thing is clear. Our respondents believe the bickering is holding us back. Almost 41% of them site Political Stalemate as being our greatest economic risk. We are hearing this concern from many professionals in the communities in which we are working. The act of setting an agenda and executing on it is an incredible challenge for many due to the uncertainty caused by the rhetoric and infighting coming from many of our elected officials.
In the past we have written about public private partnerships but the environment for engaging the government side of the public sector is becoming increasingly challenging.
We will follow up on this survey sometime next year. We’d like to hear from you in the meantime. Let us know what you are thinking in the comments below.