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State Economic Development Bulletin
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State Funding Breakdown for American Rescue Plan Act (Rockefeller Institute). After a year of fiscal uncertainty, state and local governments are receiving resources through the American Rescue Plan Act that will allow them to close budget gaps and restore services that were lost during the COVID-19 pandemic. The funding helps roll out public health measures to diagnose, treat, vaccinate citizens, and prevent COVID-19. The ARP Act funding also allow leaders to develop initiatives to stimulate economic recovery by targeting the individuals, businesses, and organizations most in need. The Rockefeller Institute visualization below shows ARP Act funding to each of the states in the form of payments to the state, county, city, and municipal governments. California, Texas, New York, and Florida are expected to receive the largest total amounts of state and local funding. Data is also presented on a per capita basis to adjust for population. Wyoming, Vermont, and Alaska are projected to receive the most per resident. States in the Northeast and upper Midwest are receiving higher than average per capita funding, while those in the southeast and lower Midwest appear to be getting lower than average.
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The American Rescue Plan Act of 2021 provides $1.9 trillion in mandatory funding, program changes, and tax policies aimed at mitigating the effects of the pandemic. The Act builds upon previously enacted aid measures in 2020, including the year-end spending and aid package, Coronavirus Aid, Relief, and Economic Security (CARES) Act, and Families First Coronavirus Response Act (FFCRA). For the National Conference of State Legislatures summary of American Rescue Plan provisions and additional resources, click here.
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* American Rescue Plan Act *
SSBCI 2.0 State Allocations Released
The U.S. Treasury Department released a preliminary allocation table for State Small Business Credit Initiative (SSBCI) funds set aside for states, territories, and the District of Columbia pursuant to the American Rescue Plan Act of 2021. The ARP allocates $10 billion for state governments to leverage private capital to support recovering and emerging businesses after the pandemic with the relaunch of SSBCI. All states and territories have a preliminary allocation of at least $56 million with some states having significantly higher allocations. Approximately $6.25 billion of the $10 billion is being distributed in this preliminary allocation by Treasury with the Notice of Intent to Apply (NOI) due from states, territories, and Washington, DC by May 10, 2021. SSBCI was originally passed through the Small Business Jobs Act of 2010; numerous resources and CREC evaluation report are available here.
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State Economic Performance
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State Job Openings Rate Measures Unmet Labor Demand (Bureau of Labor Statistics). West Virginia had the highest job openings rate at 5.8 percent at the end of 2020. Other states with a job openings rate greater than 5.0 percent were Georgia, Arizona, New Jersey, Oregon, and South Carolina, according to the Bureau of Labor Statistics Job Openings and Labor Turnover Survey (JOLTS) program. These data serve as demand-side indicators of labor shortages. Prior to JOLTS, there was no economic indicator of the unmet demand for labor with which to assess the presence or extent of labor shortages in the United States. The availability of unfilled jobs—the job openings rate—is an important measure of the tightness of job markets, parallel to existing measures of unemployment, a measure of the excess supply of labor. Hawaii and New York had the lowest job openings rates in December 2020, at 3.5 percent each. Eight states and the District of Columbia had job openings rates of less than 4.0 percent.
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* Economic Outlook *
U.S. Entering Faster Growth, Though Virus Spike Remains a Risk
The Federal Reserve has pledged to be patient and maintain aggressive monetary policy support, even as the economic recovery from the pandemic picks up speed. Fed policymakers substantially lifted their growth and employment forecasts at the central bank’s recent meeting. Their median estimate sees the U.S. economy expanding 6.5% this year and the unemployment rate declining to 4.5% by the end of 2021. Fed Chair Powell said the main risk is another spike in Covid-19 cases due to virus strains that may be more difficult to treat. While the economy appears to have turned a corner, the Fed will wait until inflation has reached 2% sustainably and the labor-market recovery is complete before considering lifting interest rates, and the combination is unlikely to happen before 2022. In fact, recent Fed forecasts signaled rates being held near zero through 2023.
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U.S. Automakers Face Lithium-Ion Battery Shortage (CNBC). While automakers continue to grapple with a semiconductor shortage, some experts say the next supply chain crisis for the U.S. could involve lithium-ion batteries. Lithium-ion is a type of rechargeable battery commonly used for portable electronics like cell phones, electric vehicles, and with growing military and aerospace applications. As companies like GM, Ford, and a slew of start-ups ramp up their electric vehicle (EV) ambitions, current battery production in the U.S. will not be able to keep up with demand. Though the U.S. has a handful of large-scale battery manufacturing facilities, including Tesla’s Gigafactory that operates in partnership with Panasonic, a trade dispute between two Korean battery makers, LG Chem and SK Innovation, threatens the future of a new battery factory in Georgia. Given the demand, there are more calls to build-up a strong domestic supply chain for lithium-ion batteries, including more mining of lithium deposits here and securing other important minerals needed in production. The article has a 15-minute video on why the U.S. has fallen behind China and Europe, and what needs to happen to avoid a bottleneck in EV production.
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U.S. Remains Top Foreign Direct Investment Destination Amid Investor Caution (Kearney Global). Kearney, a global consulting firm, released its 2021 Foreign Direct Investment (FDI) Confidence Index ranking the United States as the top destination for foreign investors for the ninth year in a row. Canada remains second and Germany third. The United Kingdom rejoins the top five after ranking sixth last year. The top 10 countries on the Index remain unchanged from 2020, apart from Spain joining the list and China falling out. The new findings show a clear predisposition for larger, more advanced markets. However, the results also show that fewer investors intend to invest across all types of markets. The strong showing of advanced economies likely stems from FDI-related considerations for taxation & regulatory environments, skilled workforces, advanced technology infrastructure, R&D capabilities, and economic stability—areas of strong competitive advantage for most developed economies. The top performing emerging markets are China, the UAE, and Brazil. While China remains the highest-ranked emerging market on the Index, the country dropped from eighth to 12th, which may reflect concern over persistent US–China trade tensions and a more general corporate rethink of international supply chains.
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Indiana Rural Opportunity Zone Initiative Selects Communities (Greensburg IN Daily News). The Indiana Office of Community and Rural Affairs, in partnership with the Purdue Center for Regional Development (PCRD), Purdue Extension Community Development, and Indiana Housing and Community Development Authority (IHCDA), announced the selection of a second round of pilot communities to be part of the Rural Opportunity Zone Initiative (ROZI), an effort that provides technical assistance and capacity-building support to rural areas. The purpose ROZI is to build the capacity of Opportunity Zones located in rural Indiana to attract private, public, and philanthropic sector investments that support locally driven priorities. The selected communities included Connersville, Delphi, Princeton, Putnam County, Rush County, and Starke County. Each applied through a competitive process and will receive focused technical assistance resulting in the completion of an investment prospectus which may be marketed to attract investment. This program is funded by a USDA Rural Business Development Grant.
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The Opportunity Zones program provides a tax incentive for investors to re-invest their unrealized capital gains into Opportunity Funds that are dedicated to investing into Opportunity Zones designated by the chief executives of every U.S. state and territory. Treasury has certified more than 8,700 census tracts as Qualified Opportunity Zones (QOZs) across all states, territories, and the District of Columbia. For a map of all designated QOZs, click here.
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Wisconsin is Building an Economy for All (Wisconsin Economic Development Corporation). “Everyone deserves an opportunity to prosper” is the key theme of Wisconsin Tomorrow: Building an Economy for All, the economic development and investment strategy for the Wisconsin Economic Development Corporation. Central to this strategy is a comprehensive approach that promotes economic well-being for every person in the state. It is a strategy that focuses on removing obstacles and providing the necessary support to all individuals and understanding their needs and their dreams. Looking forward, WEDC will use the experience and knowledge gained from the COVID-19 pandemic to reinforce the elements of individual economic well-being – financial stability, education and health, the infrastructure of the community and immediate environment – to find gaps and opportunities for investments.
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An Investment Reality Check in Mobility’s Future (McKinsey & Company). Automation, connectivity, electrification, and smart mobility (ACES) technologies will continue to evolve and disrupt the business landscape. Since 2010, investors have poured nearly $330 billion into more than 2,000 mobility companies focused on ACES, with over $80 billion of this amount invested since 2019. McKinsey reviewed the landscape for mobility start-up and investment, identifying 17 critical categories of ACES technologies that attracted the most funding. ACES technology investments are mostly related to autonomous driving, connectivity, and electrification. For AVs, the main investments focus on radar and camera technologies (about $23 billion), with about $1.4 billion going to light detection and ranging (Lidar). In connectivity, vehicle-to-infrastructure and vehicle-to-everything (V2I/V2X) communication solutions attracted approximately $18 billion in spending. In electrification, $21 billion went to lithium-ion battery technology. Companies investing in the smart-mobility cluster make limited investments in technology, instead channeling funds to build the future customer base.
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State-by-State Fact Sheets on American Jobs Plan Need (The White House). President Biden has unveiled the American Jobs Plan, a $2.3 trillion investment in America’s infrastructure that funds sectors from transportation to drinking water to public schools. Alongside the plan, Biden also released his Made in America Tax Plan, outlining the revenue sources intended to fully offset the investment levels made in the plan over 15 years. The White House has since released state-by-state fact sheets that highlight the need in every state across the country for the investments proposed by President Biden in the American Jobs Plan. The fact sheets highlight the number of bridges and miles of road in each state that are in poor condition, the percentage of households without access to broadband, the billions of dollars required for water infrastructure, among other infrastructure needs. Individual fact sheets are available for each of the 50 states, the District of Columbia and Puerto Rico. To view a National Association of Counties summary of the American Jobs Plan, click here.
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How States Can Avoid Costly Pitfalls While Rebuilding Their Economies (Pew Charitable Trusts). An unexpected decrease in revenue is one of the most challenging budget situations that state governments can face, as recent experiences grappling with the impact of the pandemic show. Policymakers are also feeling pressure to get their economies back on track. If economic development incentives are part of a state’s recovery strategy, leaders should take three steps to increase predictability and effectiveness: 1. Design incentives in ways that reduce fiscal risk; 2. Inform incentive policy decisions with evaluation findings; and 3. Revisit programs used to respond to the recession for continued relevancy. For example, Pennsylvania’s Independent Fiscal Office reviewed the Commonwealth’s Mobile Telecommunications Broadband Investment Tax Credit in 2020 and found the program to be falling short of expectations. In response, the state ended the credit and created a new broadband infrastructure grant intended to expand high-speed broadband in unserved and underserved areas.
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* SEDE Incentives Report Series *
CREC and Smart Incentives have produced a series of report for the SEDE network over the past year providing guidance on critical issues and trade-offs to help state leaders make sound decisions on incentive policies. These reports cover:
- Guide to Help States Adjust Incentive Performance Agreements in Response to the Current Economic Crisis
- Guidance on Adjusting Discretionary Incentive Programs to Support Small Business Recovery
- Incentive Adjustments – Implications for Reporting and Evaluation: Guidance on Documenting Program Changes
- Estimating the Influence of Incentives on Investment Decisions: A New Approach to the But-For Question
- Addressing Remote Work in State Business Incentive Programs
- Repositioning Economic Development Incentives Post-Pandemic
The SEDE Incentive Report Series is available on the Resource tab of the SEDE website, click here.
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Rhode Island Announces New Small Business Relief Grant Program (RI Commerce Corporation). Rhode Island announced a new grant program for the state’s small businesses impacted by the COVID-19 pandemic. The program, administered by the Rhode Island Commerce Corporation, will use $20 million from CARES Act funds to give $5,000 grants to qualifying businesses. The first round of applications will be accepted on a first-come, first-served basis through April 30, 2021. To be eligible, businesses must be based in Rhode Island, have less than $1 million in gross receipts in the 2020 tax year, and have received less than $25,000 in state COVID-related financial assistance. Applicants must also have a net financial need which exceeds the $5,000 grant amount. The grant program is designed to help cover costs such as wages and salaries and operational expenses for a business to remain open or for reopening due to the pandemic. Future expansions of this program are possible depending upon demand and the availability of funds.
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JobsOhio Investing Millions in Start-Up Companies (Cleveland.com). JobsOhio will invest $50 million this year in taking ownership stakes in start-up companies through its new Growth Capital program. The organization made its first foray into owning shares of companies last year, when it gave $47 million to six companies suffering financial difficulties due to the COVID-19 pandemic including Standard Bariatrics, a medical-device manufacturer in Cincinnati; Centerline Biomedical in Cleveland, which designs medical diagnostic tools; and Stirling Ultracold in Athens, which designs cold-storage technologies. Standard Bariatrics, for example, said the funding “rescued” the company by helping it pay for research it needed to complete a crucial regulatory study. Without the money, the company would have had to lay off staff and possibly would have folded. Under the new Growth Capital program, JobsOhio will invest in Ohio companies that previously have attracted private investment that fall within industries, like health care or technology, that are strategic priorities for the organization. In any particular deal, JobsOhio will not contribute more than 20% of funding.
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The State Business Incentives Database is a national database maintained by the Council for Community and Economic Research (C2ER) with almost 2,000 programs listed and described from all U.S. states and territories. The Database gives economic developers, business development finance professionals, and economic researchers a one-stop resource for searching and comparing state incentive programs. To view the information available in the database, click here.
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How the Pandemic is Reversing Maine’s Rural Trends (The Hill). Newspaper headlines in rural communities told a similar story of college-educated young people packing their diplomas and moving to bigger cities with dreams of “making it big” in their careers and social lives. The opportunistic pull of the cities was so strong that it earned its own nickname, the “brain drain,” and smaller communities were left struggling to compete with the growth of urban centers around the country. Traffic on this seemingly one-way street, however, is beginning to turn. Nearly eight in ten Maine workers currently working from home intend to continue working remotely at least part time when pandemic restrictions are fully lifted. Nearly half have been working from home for less than a year and two-thirds said that they are not originally from Maine. These stories included new Mainers like a Bostonian who was able to move to Maine after his job went fully remote and a family of four who left the nation’s capital behind for the natural capital of Maine’s forests, clean water, and ocean breezes. Many of these remote workers had been thinking about a possible move, but the pandemic fast-tracked their decision.
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Talent Development/Attraction
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Apprenticeship Impacts on Laid-Off Workers (North Carolina Department of Commerce). The COVID-19 pandemic has led to record-high job losses. The task of identifying programs and services that advance the career prospects of laid-off workers is more important than ever. In a recent study, North Carolina used data from the North Carolina Common Follow-up System to evaluate the impact of registered apprenticeship on individuals who lost their job during the Great Recession, finding that apprenticeship can be an effective strategy for improving the long-term outcomes of workers displaced during an economic downturn. A key feature of apprenticeship programs is paid work at a sponsoring employer. The employment rate of these program enrollees remained 17 percentage points higher than the comparison group nine years later, demonstrating that the benefits of apprenticeship persist long past the period of participation. Apprenticeship not only increased the likelihood of finding work and remaining employed; it also led to finding and maintaining higher-paying employment. Individuals who enrolled in an apprenticeship program earned higher wages at their jobs than non-enrollees in subsequent years, earning $7,201 more on average nine years after their initial layoff date.
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Proposed White House Infrastructure Program Supports 15 Million Jobs (Georgetown University). President Biden’s trillion-dollar infrastructure proposal would create or save 15 million jobs over 10 years, according to a report from the Georgetown University Center on Education and the Workforce, and workforce training programs – especially short-term ones – would be crucial to help workers prepare for the bulk of those jobs. The reports estimates that the infrastructure program would create 8 million jobs for workers with a high school diploma or less, 4.8 million jobs for workers with more than a high school diploma but less than a bachelor’s degree, and 2.25 million jobs for workers with bachelor’s degrees and above. Of the jobs created, 60% would require six months of training or less, and 40% would require more than six months of training. Most infrastructure jobs will consist of added need for trades workers, construction workers, and material moving and transportation workers. Infrastructure jobs for workers with an associate degree or higher would be concentrated in engineering and protective services, managerial, and business and financial operations occupations.
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SEDE Network Updates
* Check out the SEDE Website *
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StateEconomicDevelopment.org
The SEDE Network engages in regular activities and events throughout the year. You can stay up to date on all these activities via the SEDE Network website.
Click the link above and check it out!
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The SEDE Network Steering Committee includes: Stefan Pryor (RI), Chair; Sandra Watson (AZ), Vice Chair; Julie Anderson (AK); Mike Preston (AR); Kurt Foreman (DE); Don Pierson (LA); Kelly Schulz (MD); Kevin McKinnon (MN); Chris Chung (NC); Alicia Keyes (NM); Michael Brown (NV); Andrew Deye (OH); Dennis Davin (PA); Adriana Cruz (TX); Joan Goldstein (VT); Mike Graney (WV).
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For further questions on the content in this Bulletin or for information on the SEDE Network contact Marty Romitti, CREC Senior Vice President, at mromitti@crec.net.
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