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State Economic Development Bulletin
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How States Can Address Capital Access with SSBCI 2.0 (SSTI). The American Rescue Plan Act authorizes a $10 billion State Small Business Credit Initiative (SSBCI). This funding is unlike other small business assistance programs authorized during the pandemic emergency as it specifically provides funds to states—at least $56 million per state—to use for their own capital access initiatives. Some states will use SSBCI funds to support new companies driven by technology and innovation, as accelerating new technology-focused companies can lead to economic diversification and growth. Well-run investment funds can recycle returns back into the program, becoming an evergreen source of early-stage risk capital to draw economic opportunity and private investment into a state. However, the private venture capital market contains several structural biases that negatively affect many companies’ access to investment financing, including geographic concentration, investment preference, and demographic homogeneity. These are all challenges that states’ SSBCI programs could be designed to help address.
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* American Rescue Plan Act *
States Prioritize Recovery Fund Spending
The American Rescue Plan Act of 2021 (ARPA) created the $195 billion Coronavirus State Fiscal Recovery Fund (CSFRF) to mitigate the continued effects of the COVID-19 pandemic. States are on the second round of direct federal aid, and as state legislative sessions wind down, state decisions on spending their one-time federal allocations vary. Compared with the Coronavirus Relief Fund (CRF), under the Coronavirus Aid, Relief and Economic Security (CARES) Act, the CSFRF affords states additional time and flexibility for fund use. The National Conference of State Legislatures (NCSL) is tracking new CSFRF state spending trends for backfilling budget shortfalls, environmental protection, premium pay, and transportation, water, and sewer infrastructure. Recovery fund spending also continues for public health needs, broadband, hazard pay, housing, human services, state administration and operations, small-business assistance, unemployment, and workforce development.
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State Economic Performance
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Many Metro Areas Posted Low Unemployment Rates (Bureau of Labor Statistics). In March 2021, a total of 245 metropolitan areas had unemployment rates below the U.S. rate of 6.2 percent, 138 areas had rates above it, and 6 areas had rates equal to that of the nation. In total, 16 metro areas had jobless rates of at least 10.0 percent. El Centro, California, had the highest unemployment rate (15.7 percent), followed by Ocean City, New Jersey (12.5 percent), and Kahului, Hawaii (12.2 percent). Among metropolitan areas with a population of 1 million or more, Los Angeles, California, had the highest unemployment rate in March (9.8 percent), followed by Las Vegas, Nevada, and New York, NY (8.8 percent each). Ten areas had unemployment rates lower than 3.0 percent. Logan, Utah, had the lowest rate (2.1 percent), followed by Decatur, Alabama; Huntsville, Alabama; and Provo, Utah (2.5 percent each). Among the large metro areas, the lowest jobless rates were in Salt Lake City, Utah (3.0 percent) and Birmingham, Alabama (3.2 percent).
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* Economic Outlook *
Forward Policy Thinking on Unemployment and Future of Work
As the pandemic subsides, a big question remains: what jobs will survive? Many workers might need to change jobs or even entire sectors of employment. On this McKinsey Global Institute podcast, Nobel Prize economist, Sir Christopher Pissarides, discusses job loss and creation after the pandemic, plus what government policymakers should be addressing today. From his perspective, the best approach governments can follow is to provide dual support. On the one hand, make sure workers do not sink into poverty, as many are already low-income workers. On the other hand, provide both incentives and financial support for the retraining of these workers into new types of in-demand employment. However, as Pissarides points out, “What jobs are going to come after the pandemic?” is the difficult question because there is so much uncertainty. A key long-term concern for him is addressing inequality, as with every new technology or disaster the poorest sections of society tend to get hit worst.
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Multinational Corporations Remain Major Players in U.S. Economy (Brookings). U.S. and foreign-headquartered multinational corporations employ about a third of all private sector workers in the U.S. and more than three quarters of all workers in manufacturing. Because multinationals pay more on average than other employers, they account for almost 40% of all private-sector employee compensation and 90% in manufacturing. Multinationals also account for the bulk of U.S. industrial R&D and well over half of all capital spending and exports. Suspicions persist that multinationals will take over the U.S. and the world economies. Yet, the data shows multinationals’ share of private-sector employment and of capital spending in the United States has not changed much over the past four decades. A major change, however, is U.S. multinationals used to conduct nearly all their research and development in the United States. What little they did abroad was in Canada, Europe, and Japan. Over the past two decades, the amount of R&D conducted overseas by U.S. multinationals has grown nearly four-fold—with more R&D being done in “non-traditional hubs” such as China, India, and Israel.
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U.S. Manufacturers Seek End to Section 232 Steel & Aluminum Tariffs (Business Wire). Over 300 manufacturers in the U.S.—from family-owned metal forming shops to nationally branded companies—sent a letter to the Biden administration explaining the challenges created by Section 232 steel and aluminum tariffs and requesting the immediate termination of the tariffs that were initiated three years ago under the Trump administration. The 2018 measure added tariffs of 25 percent and 10 percent on steel and aluminum imports from almost all countries. The companies signing the letter are currently struggling to meet demand and stay competitive due to supply shortages, long lead times, and artificially high prices for their key inputs. On some products, according to the letter, American businesses pay 40 percent more for similar steel compared to their European competitors. The situation could worsen with passage of an infrastructure bill, as these projects will create more strain on domestic steel and aluminum supplies. The letter was organized by the Coalition of American Metal Manufacturers and Users, the National Foreign Trade Council, and other groups representing steel and aluminum-using companies.
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From Homeless to Opportunity Zone Developer (OpportunityDb). Terrica Lynn Smith grew up broke and homeless on the streets of New Orleans. But now, she is developing new affordable housing in an Opportunity Zone on the north side of Lafayette, Louisiana. Terrica is managing partner of SALT Capital Equity Group, real estate developer of Madeline Cove, a mixed-use “micro-community” development located along Madeline Avenue within the city’s “University Corridor.” Madeline Cove will offer a wide variety of affordable housing for both sale and rent, including single family dwellings, townhomes, senior and student housing, as well as commercial and green space. The podcast covers Terrica Lynn Smith’s inspiring story plus important insights on why her initial skepticism of Opportunity Zones changed, the challenge of talking to investors about investing in downtrodden neighborhoods, the need for better marketing of the OZ initiative, and how OZs can be a powerful tool for community revitalization.
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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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The Case for Inclusive Grow (McKinsey & Company). Economies grow faster and for longer periods when prosperity is more equally distributed across segments of the population. However, despite the longest economic expansion in U.S. history through much of the 2010s, the Gini index (a wealth inequality measure) reached 0.485—the most inequitable level of income distribution recorded in the U.S. since the Census Bureau began tracking the metric. Moreover, the perceived tension between inclusion and growth has hampered efforts to pursue and achieve inclusive growth. But in fact, lack of economic inclusion is a threat to prosperity. Research suggests that up to 40 percent of GDP growth in the U.S. economy since 1960 can be attributed to greater participation of women and people of color in the labor force through improved talent allocation. This McKinsey report suggests a three-phased approach leaders can take to realize a more inclusive economy.
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Linking Net Zero and Supply Chain Innovation (GreenBiz). Food giant Nestle, wireless behemoth Ericsson, IKEA, Unilever, Tech Mahindra, BT, Telia, and Ragn-Sells are all signers of the 1.5 Degrees Supply Chain Leaders pledge. They are working with their suppliers to halve emissions by 2030 and reach net zero before 2050. Unilever’s net-zero supply chain commitment, for example, will require weaning itself off fossil fuels as a source of ingredients for the formulations and packaging of its cleaning and laundry products. That means embracing new partners, such as Evonik Industries, which provides the renewable and biodegradable surfactant for its Sunlight dishwashing soap in Chile and Vietnam. The company set aside $1.2 billion in research and development funds for biotechnology and low-carbon chemistry technologies that support that goal. Most “climate-leading” companies are embracing strategies to include: 1. Calculating an emissions baseline and sharing data with suppliers; 2. Setting targets that “cascade” net-zero emissions ambitions down to suppliers; 3. Redesigning products; 4. Reconsidering sourcing; 5. Tying emissions requirements to procurement contracts; 6. Teaming up with suppliers on emissions reductions; 7. Engaging on sector-focused initiatives that create momentum; 8. Bringing other buyers along; and 9. Introducing “low-carbon governance.”
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Cybersecurity Executive Order is Game Changer (The Hill). As every aspect of our lives has become more dependent on software, the importance of transparency and visibility into our nation’s software supply chain has increased. The average software application depends on more than 500 open-source libraries and components. More than 90 percent of commercial software applications contain outdated or abandoned open-source components. Malicious actors seek to exploit these vulnerabilities. The latest ransomware attack on the Colonial Pipeline only adds to the urgency to drastically rethink and retool outdated software procurement processes. Of course, the red light has been flashing for years that our nation’s infrastructure is vulnerable to cyber exploits. Even our cars have more than 100 million lines of software code, requiring trusted security. The Biden administration’s recent Executive Order on Improving the Nation’s Cybersecurity is a game changer, requiring a Software Bill of Materials (SBOM) directly or via public website for federal procurement. By requiring an SBOM, clearly listing the software components, the executive order ensures federal agencies and critical infrastructure owners and operators can make informed procurement decisions – including replacing software with a history of security, performance, or reliability issues.
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Apple Announces $1 Billion Investment in North Carolina (CBS 17 Raleigh-Durham NC News). Apple plans to build a new campus and engineering hub in Research Triangle Park, bringing 3,000 jobs to Wake County to work in a variety of roles including machine learning, artificial intelligence, and software engineering, among others. Hiring is expected to begin right away, as the company anticipates leasing space in the area while it designs and builds the new facilities. The campus will be more than 1,000,000 square feet and run entirely on renewable energy, according to Apple. The minimum average wage for the positions will be $187,001, according to the NC Department of Commerce. The company will receive more than $845 million in tax incentives from the state over 39 years and $20 million from Wake County. This includes reimbursements up to 90% of the new personal income tax withholding for 30 years for meeting the state’s “transformative project” definition. Apple’s RTP campus is expected to have a $1.5 billion impact on the state’s economy annually by 2029. Company leaders said the North Carolina announcement is part of a larger $430 billion plan to add more than 20,000 jobs across the country in the next five years.
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Oracle Brings 8,500 Jobs, Invests $1.2 Billion in Tennessee (News 4 Nashville TN). An agreement negotiated by local and state officials would bring Oracle Corporation to Nashville’s East Bank in a development that will transform the area and connect the tech giant to the HBCU corridor on Jefferson Street. Oracle’s proposal adds 8,500 jobs at an average salary of $110,000 and $1.2 billion investment to the city by the end of 2031. The company’s capital investment includes $175 million in public infrastructure, adding a pedestrian bridge over the Cumberland River, brownfield remediation, a sewer pump station, and riverfront park. Oracle is interested in Nashville because it provides access to world class higher education institutions and a talented workforce, boasts a diverse population with a vibrant culture, has a high quality of life while maintaining affordability, and is a top destination for new employees. Oracle will receive more than $100 million of state-level incentives and related spending to include two highway underpasses connecting to the new waterfront campus. The city will reimburse Oracle half of the property tax revenue they generate over the next 25 years.
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West Virginia Launches Remote Worker Program (Ascend West Virginia). West Virginia has launched an initiative that offers remote workers $12,000 to relocate to parts of the state and remain for at least two years. Governor Jim Justice introduced the Ascend WV program alongside Intuit CEO Brad D. Smith and his wife, Alys, who are funding the program with a $25 million gift to West Virginia University for an Outdoor Economic Development Collaborative. Approved remote workers also receive access to co-working space and a free outdoor recreation package. Payments will be provided monthly, with the first $10,000 being paid over 12 months. The final $2,000 will be paid at the end of the remote workers’ second year in West Virginia. Ascend WV members will pick up their scheduled checks in person at the coworking space. The first wave of applicants will be for residency in Morgantown, with future slots being planned for relocation to Lewisburg and Shepherdstown.
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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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States Make Use of Revenue Surpluses (AUBER). There is debate surrounding federal stimulus funding and the retrenching of the economy in response to the COVID-19 pandemic. This roundtable, hosted by the Association for University Business and Economic Research (AUBER), provides expert insights on the current state of state budgets, lessons learned from the recession, and how fiscal stimulus policies are playing out at the state level. Featured speakers include Kathryn Vesey White, Director of Budget Process Studies at the National Association of State Budget Officers; Jason Saving, Senior Economist at the Federal Reserve Bank of Dallas; and Kate Watkins, Chief Economist at the Colorado State Legislature. Juliette Tennert, Director of Economic and Public Policy Research at the Kem C. Gardner Policy Institute at the University of Utah, moderated the roundtable.
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Talent Development/Attraction
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Apprenticeships Rise Significantly Since 2010 (Forbes). The number of apprentices registered with the U.S. Department of Labor surpassed 636,000 in 2020, a 64 percent increase from the level a decade ago. Apprenticeships are a workforce training model which allow apprentices to earn a wage while they learn a trade on the job. Despite a brief plateau during the COVID-19 pandemic, the ranks of registered apprentices have increased every year since 2011. Government can have a beneficial role in supporting apprenticeships, but the private sector must take the lead. For policymakers, the suggested best place to start is leveling the playing field between apprenticeships and traditional higher education. The typical community college receives over $11,000 per student in government funding, while apprentices only get between $100 and $400. The American Jobs Plan proposes $48 billion for workforce training, including the creation of one to two million new registered apprenticeships slots.
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States Take Lead in Minimum Wage Increases (National Conference of State Legislatures). Proponents of raising the minimum wage argue that the current federal rate of $7.25 an hour is too low and not commensurate with the rising cost of living. Opponents, however, worry that an increase will place an undue burden on business owners, prompting layoffs and greater unemployment. Efforts to raise the minimum wage remain popular, with states taking the lead in making such changes. Nineteen states began 2021 with higher minimum wages than in previous years. Nine states—Alaska, Arizona, Colorado, Maine Minnesota, Montana, Ohio, South Dakota, and Washington—automatically increased their rates based on the cost of living, while 10 states—Arkansas, California, Illinois, Maryland, Massachusetts, Missouri, New Jersey, New Mexico, New York, and Vermont—increased their rates due to previously approved legislation or ballot initiatives. At least 34 states are considering legislation to increase the minimum wage, with 29 states proposing an incremental increase to $15 an hour or more. To date, nine states and the District of Columbia have enacted legislation or passed ballot measures incrementally increasing the state minimum to $15.
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SEDE Network Updates
* SEDE Members and Partners Hold SSBCI 2.0 State Input Sessions *
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The State Small Business Credit Initiative (SSBCI) was signed into law as part of the American Rescue Plan Act of 2021. The SEDE Network partnered with U.S. Treasury, Center for Regional Economic Competitiveness, and Council of Development Finance Agencies to host a series of five state input sessions to discuss SSBCI 2.0. The April 2021 sessions covered state strategy and policy considerations along with program implementation discussions, including:
- What process are states putting in place to determine market demand for capital and the need for different types of programs (e.g., debt or equity)?
- How are states identifying and addressing capital needs for business enterprises owned and controlled by economically disadvantaged individuals in the planning process?
- How are states selecting partners to engage with planning efforts?
- How has information provided by Treasury to date influenced state SSBCI planning processes? What additional information do states need to inform that process?
- What are the most critical issues emerging in states that need more Treasury guidance to move forward in planning?
- Is there any guidance from SSBCI 1.0 that states struggled to meet? How can Treasury be supportive of those needs with SSBCI 2.0?
- What guidance do states need on how best to distinguish between the recent allocation and the allocation expected for capital to business enterprises owned and controlled by economically disadvantaged individuals?
- How will the Technical Assistance resources be integrated into state strategies?
The listening sessions helped keep states and stakeholders informed, but also prepared states and territories to submit their Notices of Intent to apply for SSBCI funding. All states and territories have since submitted NOIs for SSBCI.
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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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