Commentary: States need growth-friendly policies to restore employment
The Washington Post
By Margaret Spellings
July 3, 2011
More than a year and a half into the economic recovery, the conditions across America are far from satisfactory. Unemployment remains high, job creation meager, and American workforce participation has dropped to the lowest rate in a quarter of a century.
In the past, states could look to Washington to help turn this around. But with future increases in federal spending unlikely, governors are facing a new, and perhaps unprecedented, challenge.
Most will have to meet this challenge without significantly increasing their own spending as well, as many states face a dire prognosis in the short-term. Altogether, 44 states, including Maryland and the District of Columbia, are projecting budget shortfalls for 2012 amounting to $112 billion.
Facing these constraints, state governments have responded by taking innovative steps to grow their economies, create jobs and compete globally.
The U.S. Chamber of Commerce’s 2011 Enterprising States study analyzed these steps, and provides governors with a guide through this economic morass, allowing them to learn from each other’s successes. The report highlights specific strategies that all 50 states are employing to remain competitive, restore jobs and drive economic growth. The foundation of these state-driven initiatives is efforts to redesign government, including measures to deal with excessive debt levels that inhibit economic growth and job creation, and implementing forward-looking, enterprise-friendly initiatives with a primary goal of creating the conditions for job creation and future prosperity.
One of the best examples of this success is in Delaware. While confronted with more than a $300 million deficit early in 2011, the state now finds itself with a surplus of about $320 million and is deciding how to balance the allocation of these surplus funds between tax reductions and targeted investments.
To the south, Virginia entered 2010 facing a daunting budget deficit approaching nearly $2 billion for 2012. Forced into action, Gov. Robert F. McDonnell (R) and the Virginia General Assembly were able to close the gap with a budget package centered on steep cuts to government programs and services, accessing rainy day funds, new fee structures and changes to contribution rates and pension structures for Virginia state employees. As a result of these diverse changes the assembly’s 2011 session was able to convene in Richmond with a surplus estimated at up to $400 million.
These actions in Richmond happened in concert with a variety of statewide programs to advance research and development. For example, the Virginia Innovation Partnership is a grant for “translational research,” that leads to potential technology commercialization and job creation. The funding is intended to spur public-private collaboration, support small tech start-ups and attract companies from outside the commonwealth to relocate, bringing new high-tech jobs to the area.
The diversity of these examples — which make the two states top performers in this year’s study — illustrate that there’s not one silver bullet to attracting businesses to a state. But there is only one route to sustainable state economies, and that is through broad-based growth. The road to that objective can vary by state, but the fundamental goal needs to be kept in mind if we wish to see a restoration of hope and American optimism about the future.
Margaret Spellings is the president of the U.S. Forum for Policy Innovation at the Chamber of Commerce.