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Author: John Ponder White

  • State Incentive Program General Trends

    With the conclusion of the State Business Incentives Database summer update, the Council for Community and Economic Research (C2ER) will be publishing a series of blog posts. These blog posts will explore new and topical trends and provide analysis concerning how state incentive programs have changed. This inaugural post focuses on general trends and how programs have shifted over the past year. Of particular interest are the lingering effects of the COVID-19 pandemic and how it continues to shape program type and focus. The analysis of current general trends will be useful to compare to the coming years to see how the Infrastructure Investment and Jobs Act and the Inflation Reduction Act affect state programs.

    The first major trend concerns the recent decline in total quantity of state incentives programs. As COVID-19 relief programs are beginning to sunset, many states are taking the opportunity to rework their program portfolio. Many programs are being left in limbo until the next cash infusion from the federal government. Additionally, states are not replacing these programs either. Graph 1 shows the number of new programs added each year that are still currently active in the state incentive database. This year, 11 new programs were found, which is considerably fewer than any previous year. The lack of program replacement has resulted in a decrease in total active program, from 2,367 in the summer of 2021 to 2,354 as of today. Graph 2 shows that this is a very minor decrease, with far more programs still on the books than there were in 2015. As this is the first year that shows a decline, it is too soon to say if this is going to be indicative of future trends, or if new programs stemming from federal legislation will result in this being a one-year aberration.

    Graph 1: Number of new programs created each year since 1990

    Graph 2: Number of programs by year

    The second recognized major trend is the pivot away from tax-based programs since 2020. Programs can fall into multiple types and categories and address multiple needs. A program that has both a tax credit and grant component will be counted as both for the following analysis. Tax credits are the most common form of incentive in our database, making up roughly 25% of all the programs. Grant programs are the second most popular, making up roughly 22% of the programs. However, recent years have shown this trend changing. While Graph 3 shows that fewer grant programs have been created since 2020 than in the three years prior, the number of new tax credit programs has fallen by much more. Grant programs make up a total of 22 new programs created since the pandemic began, roughly 40% of the overall. In contrast, only 13 new tax credit programs were added, making up a much smaller share of new programs (24%).

    Graph 3: Program Types

    When looking at the broader program categories, the change in new program focus is even stronger. Since the pandemic there has been a dramatic shift from tax programs to direct business financing. Graph 4 shows that only 13 new programs that utilize taxes had been created in the last three years, while 44 were created in the three years prior. Comparatively, 29 programs pointing to direct business financing were created in the past three years. While this is a decrease from the 33 programs created between 2017 and 2019, the program type experienced a proportional increase. Grant programs and direct business programs are increasing at a higher rate than tax-based programs, resulting in the direction of state incentives shifting during the past three years.

    Graph 4: Program Categories

    This shift in program types and categories is not just regulatory, but indicative in what needs are being addressed by new state incentives. Graph 5 shows that states have shifted from tax and regulatory burden reduction to capital access funds. While fewer total programs addressing capital access needs were added since the start of the pandemic, they make up roughly 36% of the new programs. In contrast, only 13 new programs addressing tax and regulatory burdens were added, making up a much smaller share of 19% of new programs. This shows a shift in both desired outcome of state incentive programs as well as a shift in strategy.

    Graph 5: Program Needs

    Looking to the future, we will see if these trends continue after the passage Infrastructure Investment and Jobs Act and the Inflation Reduction Act, or if this was an outlier deviation caused by waning of the COVID-19 pandemic and sunsetting of programs created to specifically address the outbreak. If we continue to see a rise in grant programs, direct business financing programs, and programs addressing capital access we will know that a longer-term shift has been made, and not just emergency adjustments.

  • The Future of Work Keynote

    It is undeniable that work, and the needs of work are changing. The middle class has been in decline as manufacturing jobs were offshored. And, as more and more people are working remotely, they are leaving major metropolitan areas for new places to live. For these reasons, the Future of Work keynote address by Dr. Ross DeVol and discussion with Dr. DeVol and Kathryn Kelley was a vital addition and appropriate end to the C2ER and LMI Institute conference in Columbus, Ohio. Dr. Ross DeVol is President and CEO of Heartland Forward. Kathryn Kelley is the Executive Director of the Ohio Manufacturing Institute at The Ohio State University.  

    Dr. DeVol’s presentation highlighted the significance of workforce development, talent creation and retention, and the growing importance of entrepreneurship, all with a special focus on America’s heartland. The ongoing pandemic has highlighted the need for reshoring manufacturing. The vulnerability of long supply chains has revealed not only an economic threat, but a national security threat as well. Dr. DeVol stressed the need for incentives to encourage manufacturing firms to relocate back to the United States. One incentive emphasized was the United States’ capacity for workforce development, which he said contributed to Intel’s recent decision to build a $20 billion chip plant in Ohio. In the discussion panel, Kelley spoke about how this plant would create a whole network of jobs around the it, both with the plant itself and the supply chain needed to support it. 

    Increased development and nurturing of firms in the U.S. is another critical aspect necessary to drive the future of work forward. The percentage of people employed by firms less than five years old has been declining. Encouraging entrepreneurs can pay dividends in the long run as small local firms are unlikely to offshore, in comparison to larger firms invited in. Another metric to follow is what universities are being cited most in new patents filed by firms. Schools allowing access to their intellectual property can have a huge effect on the local economy and the businesses in the surrounding area. 

    The middle class is in decline, and, beyond reshoring, a way to help bring it back is focusing on ‘opportunity occupations,’ which Dr. DeVol defines as growing fields that pay at least three times poverty wage and do not require a four-year degree. This issue was brought back up in the discussion panel after the presentation. Dr. DeVol reemphasized that a cultural reevaluation of these opportunities and trades must be conducted. This process can start as easily as swapping out the term ‘vocational education’ for ‘career pathways.’  

    The final topic addressed was how remote work will be impactful across various sectors going forward. Before the pandemic, about 5% of the workforce was remote. However, as the economy settles out, about 20-25% of the workforce is full time remote, with another 15% hybrid. This shift indicates that people in the workforce have enormous freedom over where they live and putting an increased motivation on providing high-speed internet for towns and encouraging the growth of their social capital. Quality of life and local amenities continue to play a bigger role in attracting new residents.   

    Both speakers agreed that the future of work, and thus the economy, is uncertain. But, with proper focus and development, communities can achieve their growth goals and improve the economic prospects of the heartland.