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Category: Incentives

  • Incentives Update: General Trends

    As we wrap up the C2ER State Business Incentives update, we’re looking at nationwide trends. What kinds of programs are states launching? What challenges are they trying to solve? Where do we see the most activity? This blog explores how new and evolving incentives are shaping state economic development strategies.

    Program Numbers and Focus

    Although the number of incentive programs continues to increase, new incentive program creation has steadily declined over time. As shown in Figure 1, the number of new programs peaked in 2011 and has followed a downward trend since then. While 2025 shows a spike in new programs, the broader trend suggests that states have generally reduced their rollout of new incentive programs. Generally, in response to recessions, states appear to introduce more new incentive programs, For example, in 2020, several states introduced programs to reduce business disruption risks. Such as Maryland’s Manufacturing Disruption Mitigation Assistance Program (MDMAP) and Montana’s Agriculture Adaptability Program.

    Several new programs in 2024 and 2025 are focused on boosting childcare resources. For example, in 2024, Nebraska introduced the School Readiness Tax Credit and Child Care Nonrefundable Tax Credit. This offers relief to operators and providers of early childcare and education programs. Utah and Alabama followed suit in 2025, rolling out the Child Care Business Tax Credit and Childcare Facility Tax Credit, respectively. Both are designed to encourage employer-provided childcare and improve childcare availability.

    Moving forward, trends suggest that we may see states increase the number of incentives added annually. Specifically, states may respond to reshoring efforts by encouraging increases in domestic manufacturing.  In doing so, states may also launch export support and workforce training, upskilling, and recruitment incentives to supplement manufacturing growth, production expansion, and increased demand for labor.

    Figure 1.

    Program Types

    Over half of the active incentive programs in the database are categorized as either tax credit or exemption programs, grant programs, or loan programs. Grants, tax credits/exemptions, and loans are common state business incentives because they’re relatively easy to implement and administer through existing systems. Ensuring high performance from recipient companies, these types of programs also offer more straightforward ways to measure economic impact. Other potential incentives, like equity investment or insurance, are much less popular options (Figure 2).

    Figure 2.

    Incentive programs continued to be multifaceted and often address multiple business needs. However, as expected, many focus on enhancing the return on investment (ROI) for business expansion, improving access to capital, and reducing tax or regulatory burdens. Other notable business needs include infrastructure or facility development, product development, and workforce development (Figure 3).

    Figure 3.

    States continue to typically use statewide programs for impacting local and regional economies. The small number of regionally focused incentives are usually in designated development zones, underdeveloped, or rural areas. This trend is consistent with previous updates, showing most programs offer geographically broad economic support.

    Figure 4.

    Macroeconomic fiscal and monetary tightening typically slows business expansion and economic activity, which may prompt states to introduce more incentive programs to boost demand. If previous periods of economic hardship are an indication, the number of new programs may spike to mitigate business belt-tightening.

    The push to bolster domestic manufacturing may also encourage incentive program growth to retain and grow existing businesses, attract new businesses, encourage exports, and prepare the workforce to meet changing labor needs. In addition to manufacturing, we may also expect states to prioritize workforce initiatives and programs like childcare or housing to support a robust workforce. These efforts will be essential in fostering long-term economic resilience, helping states adapt to evolving challenges and secure sustainable growth. To learn more about business incentives, please check out C2ER’s State Business Incentive Database.

  • Incentivizing Innovation

    American manufacturing employment has been on the decline since the late 1970s. Offshoring—moving production overseas to lower costs—together with productivity and technological improvements like artificial intelligence and automation, have contributed to a significant downturn in manufacturing employment in the US.[1] As such, more states have shifted their focus from traditional industries, like manufacturing, to innovation-driven sectors.

    While innovative technologies in advanced manufacturing are helping increase the number of US-produced goods, manufacturing jobs are not being replaced at the rate in which they were lost. In 1970, 18 million workers had jobs in the manufacturing sector, accounting for 31% of private employment. The market share was as little as 9.7% in 2023.[2] To replace employment and strengthen their economies, states find themselves competing with one another to draw entrepreneurs and develop the next technology hub. Almost every state is taking a multifaceted approach to attract innovation and tech dollars, employing a different combination of research and development (R&D) incentives and venture capital (VC) funding.

    Of the existing VC and R&D state-offered business incentives, shown broken down by program type in Figure 1, 58% are targeted toward organizations involved in research and development. Tax incentives comprise 66% of all research and development incentives and are the primary vehicle for states promoting R&D. Grants are the second most popular, accounting for 27% of the available incentives.

    Figure 1: R&D State Business Incentives by Program Type

    Naturally, the most common way for states to incentivize venture capital is through encouraging equity investment, which constitutes over 45% of VC incentives in the US. Figure 2 shows that the remaining VC incentives are distributed somewhat evenly among the other program types: tax, grants, and loans. Equity investments are usually offered to startups themselves while other program types are available for venture capitalists to encourage investment into new companies of all stages.

    Figure 2: VC State Business Incentives by Program Type

    States incentivize R&D and VC with different program types because of each business’s distinct needs. R&D tax credits are known to be effective at drawing innovation: a National Bureau of Economic Research working paper found that R&D tax credits are linked to a 20% increase in the rate of new startups in an area over 10 years.[3] Tax credits spur that steady, long-term growth, while equity investments are intended to create more immediate results. Helping startups efficiently access direct funding can increase their chances of commercializing, especially when a business is in the “valley of death” phase, where startups face high operating expenses but have not yet generated revenue.

    Alaska, Missouri, and South Dakota are the only states that do not currently offer business incentives designed specifically for startups or research and development. Conversely, Puerto Rico is the only US territory that offers incentives, providing one R&D tax program and two R&D grant programs. On average, a US state offers three VC or R&D incentives. Five states—Oklahoma, Arkansas, Massachusetts, Connecticut, and North Dakota—provide at least double the country’s average number of programs.

    Table 1: Number of VC and R&D Incentives Offered by State

    Table 2: Number of Incentives of each Program Type Offered by State

    By avoiding a one-size-fits-all approach, each state can tailor its incentives to target specific types of businesses and startups. States, then, do not need to directly compete with one another because they are pursuing different kinds of research and venture capital. Consequently, businesses with high levels of research and development can shop around to find the best sites for innovation, while startups can choose the state with the best ecosystem in which to begin operations and consolidate financial support.

    Are you an entrepreneur or researcher? Are you interested in moving to a new location or establishing your business at an innovation hub? If so, C2ER’s State Business Incentives Database can help you find a state whose incentives best align with your organization’s goals and funding needs.

  • Regional Trends in State Business Incentives Programs

    To maintain a competitive edge in attracting businesses, states develop their incentive programs to build on current strengths or fill gaps in economic development. Since incentive programs are catered to the needs of each state, regions’ programs differ in structure, type, and size. The specifics of a program may ultimately be the deciding factor for a business looking to locate or relocate.

    Industry specific incentive programs across the country by and large address NAICS codes 11 (agriculture, forestry, fishing, and hunting), 31-33 (manufacturing), and 54 (professional, scientific, and technical services). However, the regions where each of these three industries is most dominant varies. Table 1 below indicates the ranking of most popular industries by region.

    *Equal number of programs for each of these industries

    With prominent research institutions, like MIT and Harvard, in the northeast, it is no surprise that professional, scientific, and technical services far outnumber other industry-related programs. Interestingly, while the South’s most popular industry is manufacturing, each of its top 3 industries for incentives programs are roughly the same in number. In fact, its total professional, scientific, and technical services-related programs outnumber that of the Northeast. Recently, North Carolina’s Research Triangle and Atlanta’s innovation centers have attracted tech giants like Meta, Apple, Alphabet, and Microsoft.[1] Additionally, Tesla moved its headquarters to Austin, Texas just a few years ago. It is not clear if incentive programs play a part in tech’s migration to the South, but a correlation exists, nonetheless.

    While technology and manufacturing incentive programs appear most prevalent in the Northeast and South, agriculture seems to play a bigger part in the West and Midwest. In the Midwest, agricultural programs are nearly double that of manufacturing, the region’s second most popular industry for incentives. Nebraska and Iowa distribute the greatest amounts of federal Farm Service Agency loans.[2] Additionally, California, Illinois, and Iowa, are the top agriculture exporting states in the country, helping to explain the popularity of agricultural incentives in the region.[3]

    The next most popular industry for incentive programs is NAICS code 71 (arts, entertainment, and culture), which trails nearly 200 programs behind professional, scientific, and technical services. Incentive programs in this industry mostly cover film and theater production, sports, and tourism. The South maintains the most programs in this industry. However, the art industry is the second most prevalent for incentive programs in territories. Puerto Rico makes up half of those in tax credits and loans for film and tourism ventures.

    Program type is another notable area for regional analysis. Overall, the most popular types of programs in order are tax credits, grants, and then following very closely, loans. The table below breaks down the most popular program types by region.

    Every region, including territories, favors direct business financing programs, like grants or loans. However, the South is the only region where tax-related programs are more common. Nonetheless, tax programs are greatest in number across the whole country indicating that tax burden reduction is a common goal. The bar chart below shows the distribution of program categories by region.

    The South outnumbers all other regions across every program category, besides indirect business financing. As expected, direct community financing and indirect business financing pale in comparison to tax programs and direct business financing.

    The data makes it clear there is a diversity in strategy and approach for implementing business incentive programs between regions. Regions can be broken down and defined in many ways. The different ways we define a region will likely tell a unique story about regional business development priorities. Find out your region’s story by checking out C2ER’s State Business Incentives Database.

    [1] Eanes, Zachary. “Meta, Other Tech Giants Flock to Raleigh and Durham.” Axios. Accessed August 9, 2023. https://www.axios.com/local/raleigh/2022/06/08/meta-possible-expansion-raleigh-north-carolina.

    [2] Program data. Accessed August 9, 2023. https://www.fsa.usda.gov/programs-and-services/farm-loan-programs/program-data/index.

    [3] “Annual State Agricultural Exports Interactive Chart.” USDA ERS – Annual State Agricultural Exports. Accessed August 9, 2023. https://www.ers.usda.gov/data-products/state-agricultural-trade-data/annual-state-agricultural-exports/#:~:text=The%20top%20three%20exporters%20of,soybeans%2C%20corn%2C%20and%20feeds.

     

  • Incentives Update: General Trends

    As the C2ER State Incentives update comes to a close, we will begin publishing a series of blogs detailing new insights and findings. This first entry will focus on general trends in the Incentives data. Of particular interest this year, is the status of COVID -19 recovery programs which states are winding down.

    As one can see in Figure 1 below, the number of active incentive programs has been steadily decreasing since 2014, with a slight bump between 2019-2020. Presumably, the spike after 2008 can be attributed to recovery efforts after the Global Financial Crisis (GFC). Likewise, the 2019-2020 bump is likely a response to the COVID-19 pandemic and the following decrease may be a consequence of those programs ending.

    Figure 1

    While the number of new incentive programs is decreasing overall, the decrease is not proportional. Indeed, some categories and types of programs are increasing, although the net effect is still negative. When looking at two three-year spans in the figure below, one can see that new loan and equity programs have increased in prominence while new tax and grant programs are less common (Figure 2).

    Figure 2

    This uneven decrease may be the result of the second iteration of the State Small Business Credit Initiative, launched in 2021. Originally created in 2010, SSBCI is a federal program administered by the Department of Treasury, which injects capital into small businesses through intermediaries like local Community Development Finance Institutions (CDFIs). The capital is funneled into a handful of financial instruments, notably loans and equity support programs. When COVID-19 struck, the Biden administration re-launched the 2010 SSBCI program calling it “SSBCI 2.0”. The funds were deployed through The American Rescue Plan (ARPA, 2021), thus helping to explain the increase in loan and equity programs between 2020 and 2023.

    When looking at the needs that incentive programs are designed to address, the same emphasis on debt and equity programs obtains.

    Figure 3

    As one can see from looking at Figure 3 above, new capital access programs and capital access-related programs have increased, while there are fewer new programs for workforce and taxes. This shift in program share can also be fairly attributed to the SSBCI 2.0 program.

    As program topic foci have changed, so too have regional foci- although not as drastically. One can see in figure 4 (below) that most incentive programs throughout time have been statewide and did not have a particular regional focus. This has been true as far back as incentives data are available. However, one can see a slight uptick in rural and “development zone” specific programs beginning in the 1980s and continuing until 2010-2023. In the period beginning in 2010, non-statewide programs began to compress once again, while statewide programs regained lost ground and urban programs marginally increased. It would be reasonable to assume that this pattern arises from the nature of the economic crises in each of these decades. Where the 2008 GFC impacted specific sectors before tipping the U.S. into recession, the COVID-19 shock was broad-based, mangling goods markets and financial markets alike. Thus, in the 2010-2023 period, programs would begin to shift from specific markets and districts, into broad-based economic support.

     

    Figure 4

    As it stands, one can see incentives programs trending downward in the wake of COVID-19. This could mean a lower level of overall economic assistance as markets return to normal and economic hardships ease. However, as interest rates rise to quell inflation, a recession may be on the horizon. If a recession does emerge, programs may once more adjust to stimulate demand and lend assistance to businesses. Although, the chances of another major stimulus package so soon after the torrent of pandemic recovery spending seems particularly unlikely.

  • Getting to Work[force]: State Business Incentive Database Summer 2022 Update

    Workforce development has become a hallmark of community economic development, and the term encompasses the activities, policies, and programs that work to connect occupational skills and vocational training services with the economy’s actual need for workers. There are many strategies that states and regions employ to develop and maintain a skilled workforce, but the State Business Incentive Database that is maintained by the Center for Community and Economic Research (C2ER) specifically tracks programs that focus on the education, training, and recruitment of workers, especially those that concentrate on improving the skill base and job placement of the state’s labor base. Research suggests that aligning economic development programs and policies with community priorities will create initiatives that are more “people-centric and place conscious.[1]” Evaluating the specific focus on workforce development programs across the nation allows for a better understanding of whom these programs serve and how they may best-serve their communities.

    Figure 1 shows where workforce development incentives are most and least prevalent, with states that are more darkly shaded indicating a greater number of programs and states that are more lightly shaded indicating only a couple of programs. The map shows that most programs regarding workforce development are found east of the Mississippi river, especially in the northeast region of the United States. However, the states that have the greatest number of workforce development incentives are not necessarily those that are among the most populated states.

    Note: Alaska and the District of Columbia have 1 workforce development program, Puerto Rico has 3, and Hawaii has none.

    For example, South Carolina has the greatest number of workforce development programs but does not rank among the most populated states. Maine is also among the top five states regarding the number of workforce development programs and is one of the least-populated states.

    In addition to tracking incentives based on geographic area, C2ER further refines incentives by program type. There are several program types that range from grants to loans to different tax benefit, such as abatements, exemptions, refunds, and credits. The graph below illustrates that programs pertaining to workforce development are overwhelmingly grants and tax credits, meaning that most states are either providing cash to a beneficiary without the expectation of being repaid or allowing qualifying taxpayers to subtract a certain amount from the total they owe the state.

    Note: Two programs that had a mixture of types (either a grant and/or tax credit and a tax credit and/or exemption) have been removed for clarity.

    States utilize many different strategies for building and maintaining a skilled workforce, and, one approach is a problem-focused approach that works to address issues such as low-skilled workers or the need for more employees in a particular industry. Some states offer incentives for employers that create and/or retain jobs. West Virginia’s High-Wage Job Credit provides a payroll incentive for businesses to create new high-wage jobs, those in which the salary is 2.25 times that of the state median salary. Other states have programs incentivizing hiring specific groups, such as veterans. There are also workforce development programs that focus either on skills training or retraining or work-based learning, which would be apprenticeships, internships, and other “on-the-job” training programs. Figure 3 shows that most state workforce development incentives take a more problem-focused approach, as most programs can either be classified as focusing on job creation or the training of workers.

    The way each state incentivizes these outcomes is also varied, as the table below demonstrates. Programs that involve worker training or work-based training are primarily grants, while programs that regard job creation or the hiring of workers are predominantly tax credits.

    There is a more holistic approach to workforce development that considers the participants’ many barriers to the workforce and the overall needs of the region, and this solution is part of the framework that Dr. Harpel and Dr. Hackler promote in their 2020 report for more responsive economic development efforts. The graph below shows that, of the nearly 300 programs regarding workforce development, only 31 seek to address individual barriers to employment, such as having a disability, criminal history, history of substance abuse.

    Of these programs that address individual barriers, most are hiring incentives that provide tax credits for employers that employ a person for a targeted group. Utah has two such incentives. One is the Veteran Employment Tax Credit, and the other is the Homeless Hiring Tax Credit. New York also has two hiring incentives for businesses that hire individuals with disabilities or an individual in recovery from a substance abuse disorder.

    There is also a New Jersey program that maybe best highlights this type of holistic approach that is necessary for responsive economic development programs that help communities grow and thrive. The state’s Opioid Recovery Grant Program seeks to deepen the network of employment support available for those affected by the opioid epidemic by working to improve opportunities and incentives for opioid-impacted individuals. This New Jersey workforce development initiative aims to accomplish this by providing basic skills instruction and work experience to emphasize re-entry into the workplace as well as offering support services such as transportation, childcare, clothing, and driver’s license restoration to help facilitate the effective transition by this targeted population into employment.

    Looking forward, it will be interesting to see if more states move toward this more holistic approach to workforce development programs instead of just focusing on tax credits for more jobs. Analyzing the needs of residents can help the states create more meaningful incentives for businesses to participate in the development of the workforce and improvement of communities.

    [1] Hackler, Darren and Ellen Harpel. (2020). Reflecting on community priorities in economic development practices. Smart Incentives. https://smartincentives.org/wp-content/uploads/33591_SmartIncentives_Report.pdf.

  • 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.

  • State Incentives: SSBCI Program Recap and Overview

    State Incentives: SSBCI Program Recap and Overview

    In 2010, President Obama signed into law the Small Business Jobs Act, which created the State Small Business Credit Initiative (SSBCI). Functioning as a recovery response to the Great Recession, it delivered $1.5 billion in capital to small businesses. Federally, SSBCI phased out in 2017.

    Nevertheless, after more than a decade, many of the same original SSBCI programs still exist, suggesting that states value them. In the wake of the COVID-19 pandemic, similar economic challenges to the Great Recession emerged. President Biden signed the American Rescue Plan Act in March 2021 to deliver immediate and direct relief to families, businesses, and workers impacted by the COVID-19 crisis, part of which reauthorized SSBCI.

    A Continuation of the Trends

    The 2021 bill allocated $10 billion to SSBCI, which is a sizeable $8.5 billion more than the amount authorized in 2010. Based on a 2016 SSBCI program evaluation[1] conducted by Center for Regional Economic Competitiveness (CREC), this could mean significant economic benefits for states. The CREC report highlighted that SSBCI programs expended $1.04 billion, supporting “nearly $8.4 billion in new capital in small business loans and investments by the end of 2015.” The very next year the Congressional Research Service calculated SSBCI participants leveraged $8.95 in new financing for every $1 in SSBCI funds[2] a significant return on investment.

    Moreover, the Great Recession and COVID-19 both substantially impacted very small businesses. SSBCI aims to fund all small businesses, but 80 percent of transactions involved very small businesses of 10 or fewer employees in the original authorization. The American Rescue Plan now codifies this trend by requiring $500 million to specifically fund very small businesses.

    What’s new?

    Given the good return from SSBCI 1.0, if states are well-coordinated with their strategic plans, then they should have an even better outcome for SSBCI 2.0. Through its first action, the U.S. Treasury Department distributed $6.5 billion of the preliminary allocation by formula to states. Other funding is set aside for designated purposes: $500 million for technical assistance, $500 million for tribal governments, $1.5 billion to socially and economically disadvantaged businesses, and $1 billion will be kept to award states that perform well using SSBCI.

    As with many new federal funding initiatives, SSBCI 1.0 experienced bumps along the road. Capital access programs experienced difficulties getting significant quantities of funds out the door because small loan sizes meant that it took many more loans to lend the same amount as other programs. Collateral support programs encountered issues in generating sustainable revenues because they tended to take longer to recycle. However, in tandem with the experience gained by the states, technical assistance funds may be an important mechanism for helping to smooth the path going forward. Funding for socially and economic disadvantaged businesses as well as tribal communities helps address the traditional disparity in capital access for these groups.

    The Current State of SSBCI

    CREC has been following the SSBCI 1.0 programs since it was phased out in 2017. At that time, some states reallocated their SSBCI funding to other activities. States continue to operate slightly less than half of those programs some four years later. Of the five major program types, states were more likely to keep loan participation programs. Close to half of those programs are still active. It is likely that the newly authorized funding will be built from this foundation based on preliminary planning reports from the states.

    Through these existing programs, states already have a solid foundation for the next round of SSBCI. Several states have maintained all SSBCI programs including Idaho, Illinois, Kentucky, Maine, Delaware, Maryland, Massachusetts, Mississippi, New York, Ohio, Oklahoma, Oregon, South Carolina, and Vermont. All original programs are inactive in Arizona, Connecticut, Hawaii, Michigan, Montana, New Hampshire, North Dakota, Wisconsin, and Wyoming. We expect to see an influx of new financing programs from SSBCI 2.0, especially in the states where either all or some programs are inactive.

    The map below indicates the number of still active SSBCI programs and the preliminary allocations states have received by formula. Access the C2ER State Incentives Database to stay up to date on what SSBCI programs are available. To get a preview of notable programs from SSBCI 1.0 by program type, read the case studies under the graphic.

    Click here to access the interactive SSBCI 2.0 map

    Case Studies

    California Capital Access Program

    California SSBCI 1.0 Allocation: $168 million

    CalCap Allocation: $19.5 million

    California SSBCI 2.0 Allocation: $892 million

    California received an allocation of $168 million from 2011 to 2017. The state split the funds between its collateral support (CalCSP) and capital access program (CalCap). CalCap emerged as the state’s shining star during SSBCI 1.0. While only $19.5 million of the $168 million (11 percent) went to CalCap, the program generated over $337 million in new financing. That translated into $22.19 in private lending for every $1 of SSBCI leveraged.[3] Capital access programs rely on enrolling many loans continuously and pooling contributions to create a reserve fund to recycle funds and protect against default by borrowers. The Opportunity Fund, a CDFI and frequent user of CalCap, dispersed 8,754 loans to small businesses by 2018, aiding in the program’s immense success.[4] These loans, 91 percent of which were granted to minorities, assisted small businesses of all types, ranging from street vendors to family-run restaurants.[5] Going into SSBCI 2.0, CalCap still operates and will probably be an important contributor to SSBCI 2.0.

    Florida Venture Capital Program

    Florida SSBCI 1.0 Allocation: $98 million

    FVCP Allocation: $26.5 million

    Florida SSBCI 2.0 Allocation: $324 million

    Florida’s venture capital program, managed by the Florida Opportunity Fund, offers equity investments and convertible debt instruments to emerging Florida companies, particularly those with long-term growth potential. The programs website indicates that “through June 30, 2019, the FLVCP completed 19 investment commitments, and there are active investments in 15 companies.”[6] According to the National Bureau of Economic Research, businesses in their adolescence with potential for high growth have significantly positive effects to job growth and regional economies.[7] In 2013, the earlier years of SSBCI, Florida invested all venture capital SSBCI funds into companies in their seed/early stages.[8] Over the past few decades, venture capital funds have slowly transitioned to disproportionately concentrating in specific metro areas. In 2015, close to 80 percent of all venture capital went to businesses in San Francisco, Los Angeles, New York City, and Boston.[9] SSBCI 2.0 will hopefully break geographic concentrations down and distribute business expansion evenly. As programs like these grow, they have the potential to break through equity capital barriers in so-called flyover states.

    Michigan Collateral Support Program

    Michigan SSBCI 1.0 Allocation: $79 million

    MCSP Allocation: $44 million

    Michigan SSBCI 2.0 Preliminary Allocation: $176 million

    Among all program types, collateral support programs struggled the most to generate sustainable income streams. Michigan stood out at the front of the pack, however, by making this model work and recycling funds at an exceptional rate. The program rests on the rationale that the financial sector woefully undervalues equipment and other assets as collateral. This is especially true with hard-to-liquidate fixed assets such as specialty equipment or unique real estate properties. Collateral support helps to “boost the value” of the collateral by providing a cash asset to guarantee the fixed asset’s collateral value. Michigan’s program provided a model that 16 other states followed[10] and is still active today, playing an important part in financing companies during the pandemic. In 2020, the program helped 100 companies, opened 300 new jobs, and helped maintain 1,500 other jobs.[11] Michigan clearly values this program, since it continued well after the sunset of SSBCI 1.0 in 2017. New funding will permit Michigan to further showcase why its collateral support program is a model for other states to follow coming out of COVID-19.

    Alabama Loan Guarantee Program

    Alabama SSBCI 1.0 Allocation: $31 million

    ALGP Allocation: $27 million

    Alabama SSBCI 2.0 Preliminary Allocation: $56 million

    The Alabama Loan Guarantee Program helped form partnerships between the state and community banks. Community banks have a pulse on the needs of the business community, so consulting with them optimized the use of funds. Prior to SSBCI, Alabama had no credit-support programs for small business.[12] Marketed as an easier, cheaper, and more inclusive alternative to SBA, lenders and borrowers alike benefitted from the program, resulting in 568 transactions.[13] Alabama expended all the program’s funds by 2016 but continues to operate it with recycled funds. The state’s SSBCI 2.0 allocation provides resources that could help reinvigorate the program.

    Advantage Illinois Loan Participation Program

    Illinois SSBCI 1.0 Allocation: $78 million

    AILPP Allocation: $70.5 million

    Illinois SSBCI 2.0 Preliminary Allocation: $282 million

    Advantage Illinois Loan Participation Program assists many business types, with a focus on minority-, women-, disability-, and veteran-owned businesses by purchasing subordinated loan participation at below market interest rates.[14] Furthermore, the program allows funding to be used for a wide range of purposes. The flexibility, inclusivity, and favorable characteristics of the loan made it a highly popular program. The program made up 87 percent of total SSBCI funds the state expended, totaling in 200 transactions that leveraged $8.65 for every dollar.[15] The program continued operating throughout the pandemic and could be an important part of Illinois’ future plans.

    [1] Program Evaluation of The US Department of Treasury State Small Business Credit Initiative, Arlington, VA: Center for Regional Economic Competitiveness, 2016), https://www.treasury.gov/resource-center/sb-programs/documents/ssbci%20program%20evaluation%202016%20-%20full%20report.pdf.

    [2] State Small Business Credit Initiative: A Summary of States 2016 Annual Reports, Washington D.C.: Department of the Treasury, 2017, https://home.treasury.gov/system/files/256/SSBCI-Summary-of-States-Annual-Report-2016_508-Compliant.pdf.

    [3] State Small Business Credit Initiative: A Summary of States 2016 Annual Reports, Washington D.C.: Department of the Treasury, 2017, https://home.treasury.gov/system/files/256/SSBCI-Summary-of-States-Annual-Report-2016_508-Compliant.pdf.

    [4]  Seidman, Ellen, “Capital Access Programs: CDFI Case Study on the California Capital Access Program,” Urban Institute, April 2018, https://www.urban.org/sites/default/files/publication/98051/capital_access_programs_cdfi_case_study_on_the_california_capital_access_programs_0.pdf.

    [5] Program Evaluation of The US Department of Treasury State Small Business Credit Initiative, Arlington, VA: Center for Regional Economic Competitiveness, 2016), https://www.treasury.gov/resource-center/sb-programs/documents/ssbci%20program%20evaluation%202016%20-%20full%20report.pdf.

    [6] Florida Opportunity Fund, “Florida Venture Capital Program,” https://www.floridaopportunityfund.com/florida-venture-capital-program/.

    [7] Haltiwanger, John C.,Jarmin, Ron S., & Miranda, Javier. Who Creates Jobs? Small Versus Large Versus Young. National Bureau of Economic Research. Working paper 16300. August 2010, revised November 2012. Web accessed. (http://www.nber.org/papers/ w16300.pdf).

    [8] Information and Observations on State Venture Capital Programs, Washington, D.C.: Cromwell Schmisseur LLC, 2013), https://www.treasury.gov/resource-center/sb-programs/Documents/VC%20Report.pdf

    [9] State Small Business Credit Initiative: A Summary of States 2016 Annual Reports, Washington D.C.: Department of the Treasury, 2017, https://home.treasury.gov/system/files/256/SSBCI-Summary-of-States-Annual-Report-2016_508-Compliant.pdf.

    [10] Program Evaluation of The US Department of Treasury State Small Business Credit Initiative, Arlington, VA: Center for Regional Economic Competitiveness, 2016), https://www.treasury.gov/resource-center/sb-programs/documents/ssbci%20program%20evaluation%202016%20-%20full%20report.pdf.

    [11] Overbey, Courtney, “MEDC Helps Small, Medium-Sized Businesses Access Capital in Michigan,” Michigan Economic Development Corporation, June 16, 2021, https://www.michiganbusiness.org/news/2021/06/medc-helps-small-medium-sized-businesses-access-capital-in-michigan/.

    [12] Program Evaluation of The US Department of Treasury State Small Business Credit Initiative, Arlington, VA: Center for Regional Economic Competitiveness, 2016), https://www.treasury.gov/resource-center/sb-programs/documents/ssbci%20program%20evaluation%202016%20-%20full%20report.pdf.

    [13] State Small Business Credit Initiative: A Summary of States 2016 Annual Reports, Washington D.C.: Department of the Treasury, 2017, https://home.treasury.gov/system/files/256/SSBCI-Summary-of-States-Annual-Report-2016_508-Compliant.pdf.

    [14] Program Evaluation of The US Department of Treasury State Small Business Credit Initiative, Arlington, VA: Center for Regional Economic Competitiveness, 2016), https://www.treasury.gov/resource-center/sb-programs/documents/ssbci%20program%20evaluation%202016%20-%20full%20report.pdf.

    [15] State Small Business Credit Initiative: A Summary of States 2016 Annual Reports, Washington D.C.: Department of the Treasury, 2017, https://home.treasury.gov/system/files/256/SSBCI-Summary-of-States-Annual-Report-2016_508-Compliant.pdf.

  • State Incentive Program Trends: Broadband Expansion

    To ensure equitable access to broadband internet and spur economic development in underserved communities, many states offer incentive programs to for-profit businesses, local governments, and/or non-profit organizations to expand broadband internet access throughout the state.

    The incentives can take a variety of forms. Some states offer specific tax credits relating to broadband infrastructure development, like the Mississippi Broadband Technology Tax Credit. In many states, infrastructure and investment programs that are not explicitly advertised as “broadband expansion programs” can be used to expand internet access and promote prosperity in all communities. States can also leverage federal programs, such as the Community Development Block Grant and New Markets Tax Credit, to assist underserved populations and ensure equitable internet access.

    Users of the C2ER State Business Incentives Database can find state programs offering tax credits to fund broadband infrastructure expansion, such as as rural economic development tax credits, opportunity zone investment tax credits, and other tax credits for job creation, broadband technology purchases, brownfield cleanup activities, and infrastructure development.

    Beyond tax credits, many states offer grant programs that can be used to spur broadband internet expansion, such as grants for enterprise zone property investment, infrastructure development, job investment activities, economic development, site development, and industrial development. Loan and loan guarantee programs are also utilized, including state programs offering industrial revenue bonds, capital revolving loan options, and/or enterprise bonds for broadband expansion.

    One innovative state approach includes the use of Community Development Block Grants (CDBG) to drive internet expansion in underserved communities. For example, in 2014, Nelson County, Virginia was awarded $200,000 in CDBG funds with a $100,000 Local Match Fund requirement. With the CDBG grant funding, Nelson County was able to construct approximately 8.1 miles of fiber optic cable in underserved areas of the locality. The beneficiaries of the fiber optic cable expansion included 88 businesses, 80 residential structures, and 20 newly created jobs resulting from the project.

    Another inventive state incentive program is the use of New Market Tax Credits (NMTC) to spur broadband internet expansion. Congress authorized the NMTC in 2000 to mitigate the cost of capital expansion in low-income communities. The program’s flexibility provides options to finance projects to expand broadband, according to the New Markets Tax Credit Coalition. For example, in Conneaut, Ohio, the Ohio Community Development Finance Fund partnered with the Development Fund of the Western Reserve and US Bancorp Community Development Corporation to provide NMTC financing in the town for broadband internet expansion. Conneaut, Ohio has been categorized by the Appalachian Regional Commission as a “severely distressed” and underserved community. But through the collaborative effort made possible by NMTC financing, the private business GreatWage Communications—a company providing high-quality telecommunications services in rural areas—was able to expand into Conneaut, Ohio, leading to 54 new jobs and expanded broadband internet access to an additional 50 businesses and 600 residential customers.

    There are many avenues for non-profit organizations, for-profit companies, and/or local governments to strategically use state incentive programs toward broadband internet expansion in their respective communities. The Council for Community and Economic Research (C2ER) maintains the State Business Incentives Database, where users can search and compare state incentive programs from all U.S. states and territories.

  • New Workforce Development Programs Reflect Importance and Need for Training and Talent Development

    By Chelsea Thomson

    Even before the COVID-19 pandemic and social unrest, states incentivized employers to support those out of work and provide opportunities for occupational advancement, especially for marginalized communities and ones characterized by historic divestment.  These programs are crucial for getting people back into the labor market and providing the opportunities for reskilling and upskilling necessary to secure a living wage. A talented pool of labor, aligned with employer needs, encourages businesses to relocate to certain areas or expand their operations. States and cities are also encouraging workers to move to their locations through creative place-making initiatives. The workforce development programs that states primarily develop and fund include skill upgrading, talent retention, pipeline development, and cluster and sector strategies. States accomplish these goals through internships, apprenticeships, youth training programs, partnerships with secondary schools, and collaboration across industry stakeholders, community-based organizations, educational institutions, and businesses.

    C2ER’s State Business Incentives Database tracks these initiatives and provides insight into the mechanisms states use to support employers and workers in developing the workforce necessary for economic success and mobility. Nearly all states and some territories have workforce development programs, with an average of four (4) programs per state. Several states recently added programs focused on workforce development, on top of the more than 250 programs states already implement. Massachusetts, Minnesota, North Carolina, Virginia, and Arizona all brought on new programs in the past year.

    The most common focus of these workforce development programs is offering an incentive for employers to provide training by reimbursing or allowing a tax credit against the training costs. Both the Minnesota Automation Training Incentive Pilot Program and Arizona’s Rapid Employment Job Training Grant offer reimbursement for training costs. Minnesota reimburses training costs for small businesses to train existing workers in new automation technology. Employers can apply for grants up to $25,000 to cover the cost of training workers who work full time and earn at least 120% of the federal poverty wage. As a direct response to COVID, Arizona’s program reimburses the cost of training for hires made after March 1, 2020. Virginia created the Worker Training Tax Credit to incentivize businesses to not only provide training but also collaborate with middle and high schools to provide manufacturing training or instruction. Companies can receive a 35% tax credit for training costs, up to $500 per worker and $1,000 if the worker’s income is below the state median wage. For employers that provide training to middle and high school students, they are eligible for the 35% tax credit on direct training costs.

    The remaining two programs focus on aspects of workforce and talent development beyond training. In Massachusetts, the Advanced Analytics-Data Science Internship Program reimburses the cost of intern stipends for students with post-secondary degrees, Bachelor’s and above, who intern with a research institution or small business. The reimbursement ranges from $20-$40/hour depending on the education level of the intern.

    North Carolina’s Golden LEAF Opportunities for Work program provides grants up to $500,000 to help the state prepare for job growth, especially jobs that require post-secondary degrees. The program accomplishes this goal through re-engaging individuals in the workforce, providing skills training and post-secondary opportunities, and addressing barriers to employment in rural and economically distressed communities. The program targets “disconnected” youth, people who are underemployed, and those experiencing long term unemployment.

    These five innovative programs are a small slice of the workforce development picture in the U.S., but they provide insight into the mechanisms states use to stimulate talent development and training. As states respond to the impacts of the COVID-19 pandemic and grapple with calls to address the systemic barriers marginalized communities face, the type, focus, and benefit of workforce development programs will become all the more important.