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LEGAL ISSUES

Report on the States
 

Governor's innovations on economic development may be adopted nationally (rankings and statistics included).
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The nation's governors have had to innovate to keep their states from economic turmoil. Now, some of their ideas may be headed for Washington

* * *

Even if you're not from the state of Massachusetts, your governor is probably running for President this year.

At least that's how it may sound. Each time the candidates talk about investing in education or transferring technology, they are borrowing language heard first from governors. Call it trickle-up economics; this year, both candidates are adopting concepts that have been tested on the state level. "The governors have been on the firing line," says Douglas Henton, program manager at the Center for Economic Competitiveness at SRI International. "They've had to innovate.'

This isn't the first time economic policy has been tried on a regional basis before being rolled out nationally. In his recent book Laboratories of Democracy, author David Osborne argues that the states also led the way at the turn of the century, coping with the country's shift from a rural to an industrial economy.

This time around, a declining industrial sector has forced many states to develop innovative programs. Pennsylvania (#28), for one, is beginning to crawl out from the rubble of the collapsed steel industry. It created a program using public money as a lure to coax more start-ups out of its technologically fertile universities (see "The New Role Models," October 1987). Likewise Michigan (#23) used small amounts of public money to create incentives for much larger amounts of private investment and tapped public pension money to fund new businesses.

Keep an eye on other states that are leveraging public money. Ohio (#25) offers matching grants for promising new companies and provides early support through incubators and research centers, hoping to attract corporate and venture capital. The state's public pension funds have invested about $140 million in new ventures since 1983. Indiana (#24) is offering tax credits to its citizens who invest in a venture capital fund that intends to support the state's businesses.

For some governors, the challenge has been finding new ways to shape economic growth. Arizona, #1 for three consecutive years, took off largely due to spillover from southern California and an ideal climate for testing electronics. But the state has sought ways to extend that growth. It financed a survey to determine which products and services big companies were buying outside the state, then launched a program to match these companies with local businesses.

Some of the broad concepts of state economic development could be adopted at the national level. First-rate universities, for instance, have played a role in boosting the economies of many states, such as California (#9), Texas (#20), and Massachusetts (#12). Now, Presidential candidate George Bush talks of becoming the "education President." And both Michael S. Dukakis and Bush have pushed the idea of creating public-private partnerships to transfer technology from universities to the private sector.

It appears that the states are leading the way.

-- Joshua Hyatt

* * *

RATING THE STATES 1988:

New jobs, new companies, and the climate for growth

No. New No. No. Fast- % Fast-

Jobs (in Growth New Business Growth Growth Total

Rank/State (1987 rank) thousands) In Jobs Score Cos. Birthrate Score Cos. Cos. Score Score

1 2 3 4 5 6 7 8 9 10
1. ARIZONA (1) 267.9 23.30% 31.77 1,769 2.87% 33.17 451 4.00% 29.08 94.03

2. NEW HAMPSHIRE (2) 95.6 22.72 31.26 499 2.32 24.63 131 4.46 33.33 89.21

3. MARYLAND (3) 273.1 15.71 24.95 1,965 2.55 28.20 558 4.30 31.85 85.00

4. FLORIDA (6) 936.4 22.70 31.23 6,540 2.88 33.33 1,606 3.06 20.40 84.96

5. VIRGINIA (5) 463.3 20.65 29.39 2,292 2.53 27.89 602 3.83 27.51 84.79

6. GEORGIA (4) 420.9 17.86 26.88 2,983 2.79 31.93 665 3.43 23.82 82.63

7. DELAWARE (7) 56.2 21.06 29.76 246 2.25 23.54 64 3.95 28.62 81.92

8. NEVADA (10) 102.3 25.03 33.33 498 2.57 28.51 104 2.87 18.64 80.49

9. CALIFORNIA (8) 1,573.4 15.27 24.55 12,352 2.37 25.40 3,459 3.59 25.29 75.25

10.TENNESSEE (11) 273.7 15.60 24.85 1,872 2.41 26.02 417 3.06 20.40 71.27

11. NORTH CAROLINA (13) 400.1 15.99 25.20 2,137 2.17 22.29 504 3.37 23.26 70.75

12. MASSACHUSETTS (9) 282.8 10.26 20.04 2,335 1.95 18.87 619 3.91 28.25 67.17

13. VERMONT (18) 39.4 18.67 27.61 205 1.69 14.83 53 3.48 24.28 66.72

14. NEW JERSEY (17) 365.6 11.39 21.06 3,237 2.09 21.05 794 3.33 22.89 65.00

15. MAINE (26) 82.0 19.29 28.16 359 1.64 14.06 92 3.26 22.25 64.47

16. SOUTH CAROLINA (14) 183.2 14.95 24.26 1,141 2.23 23.23 214 2.54 15.59 63.08

17. HAWAII (20) 55.8 13.60 23.04 414 2.0 19.65 106 3.00 19.84 62.54

18. CONNECTICUT (16) 168.5 11.43 21.09 1,241 1.88 17.79 338 3.40 23.54 62.42

19. ALABAMA (21) 156.2 11.53 21.18 1,235 2.17 22.29 231 2.54 15.59 59.07

20. TEXAS (12) 185.5 2.93 13.44 8,289 2.58 28.67 1,732 2.60 16.15 58.26

21. WASHINGTON (24) 251.8 15.69 24.92 1,624 1.73 15.46 427 2.59 16.06 56.43

22. UTAH (15) 56.9 9.81 19.64 642 2.08 20.90 144 2.56 15.78 56.31

23. MICHIGAN (19) 395.8 12.04 21.65 2,752 1.67 14.52 743 2.98 19.66 55.83

24. INDIANA (25) 254.0 12.34 21.91 1,636 1.75 15.77 361 2.77 17.72 55.39

25. OHIO (23) 444.0 10.76 20.49 3,240 1.66 14.37 889 2.96 19.47 54.33

26. RHODE ISLAND (27) 4.4 11.07 20.77 316 1.44 10.95 95 3.30 22.61 54.33

27. NEW YORK (28) 673.6 9.13 19.02 6,734 1.77 16.08 1,741 2.93 19.20 54.30

28. PENNSYLVANIA (32) 378.5 8.36 18.33 3,469 1.64 14.06 864 3.20 21.69 54.08

29. MINNESOTA (29) 210.2 12.05 21.65 1,396 1.54 12.50 411 2.88 18.74 52.88

30. KENTUCKY (34) 160.6 13.71 23.15 1,194 1.86 17.48 210 2.13 11.81 52.43

31. COLORADO (22) 38.5 2.84 13.37 1,670 2.26 23.69 365 2.34 13.75 50.81

32. OREGON (33) 131.2 13.47 22.93 958 1.53 12.35 274 2.46 14.86 50.13

33. WISCONSIN (35) 207.7 11.09 20.79 1,408 1.48 11.57 349 2.55 15.69 48.05

34. ILLINOIS (36) 350.1 7.67 17.71 3,788 1.61 13.59 938 2.65 16.61 47.91

35. MISSOURI (31) 205.2 10.43 20.19 1,677 1.59 13.28 376 2.37 14.02 47.49

36. NEW MEXICO (30) 41.7 8.53 18.48 482 1.86 17.48 94 1.96 10.24 46.19

37. KANSAS (38) 64.7 6.89 17.01 948 1.63 13.90 202 2.34 13.75 44.66

38. MISSISSIPPI (40) 71.3 8.85 18.77 664 1.73 15.46 103 1.69 7.74 41.97

39. ARKANSAS (37) 82.9 10.89 20.60 657 1.52 12.19 129 1.83 9.04 41.83

40. WEST VIRGINIA (41) 13.8 2.39 12.96 479 1.74 15.61 68 1.94 10.05 38.62

41. NEBRASKA (43) 52.6 8.68 18.61 461 1.19 7.06 124 2.05 11.07 36.74

42. LOUISIANA (44) -77.7 -4.95 6.35 1,430 1.8 16.54 289 1.90 9.68 32.58

43. IDAHO (42) 15.2 4.79 15.12 291 1.38 10.02 52 1.47 5.71 30.84

44. IOWA (46) 72.4 6.93 17.04 657 1.05 4.89 141 1.65 7.37 29.30

45. OKLAHOMA (47) -83.0 -7.08 4.43 1,211 1.64 14.06 227 1.53 6.27 24.75

46. ALASKA (39) -9.6 -4.62 6.65 187 1.53 12.35 32 1.33 4.42 23.42

47. SOUTH DAKOTA (45) 13.9 5.88 16.10 149 0.9 2.55 34 1.33 4.42 23.07

48. MONTANA (48) -1.8 -0.67 10.21 257 1.12 5.97 49 1.15 2.76 18.94

49. NORTH DAKOTA (49) 3.2 1.30 11.98 159 1.02 4.42 22 0.96 1.00 17.40

50. WYOMING (50) -21.2 -10.90 1.00 105 0.8 1.00 25 0.97 1.09 3.09

Chart compiled by special projects editor Sara Baer-Sinnott.


WHAT THE RANKINGS MEAN

This year's rankings measure how a state is actually doing in stimulating entrepreneurial activity and economic expansion. A state's position on the list reflects its economy's relative success, over a four-year period, in three areas: job generation, new-business creation, and young-company growth.

Job Generation. The figures in columns 1 and 2, from the federal government's Bureau of Labor Statistics, indicate a state's gain (or loss) in private-sector and civilian public-sector employment between February 1984 and February 1988.

New Businesses. The figures in column 4, compiled for the Report on the States by Cognetics Inc., in Cambridge, Mass., include all companies founded in 1984 or later that had at least 10 employees by January 1988. The "birthrate" in column 5 is this number divided by the total number of business establishments in the state.

Young-Company Growth. Column 7, also compiled by Cognetics, lists all the companies founded in 1980 or later that registered a growth index of at least 20 between the beginning of 1984 and the beginning of 1988. What's a growth index? Simply the company's absolute growth in employment multiplied by its percentage growth in employment (expressed as a decimal). Say you employed 50 people in January 1984 and 75 people in January 1988. Your growth index would be 25 x .50, or 12.5 -- not enough to make the list. Figuring growth in this way eliminates any bias in favor of large companies (which might have high absolute numbers) or small (which might have high percentage numbers).

Column 8 is the number of these young, fast-growing companies divided by all of a state's business establishments founded in 1980 or later.

Scores. A state's scores (columns 3, 6, and 9) are computer-generated rankings that reflect how it stands in relation to all the other states. The top state in any one category gets a score of 33.33, the bottom state a score of one. Every other state is assigned a number reflecting its relative position on an imaginary scale between the top and the bottom. The top possible score is 100.

All scoring is based on a state's ranking in the percentage columns, not in the absolute-numbers columns. Column 10 -- the bottom line, so to speak -- is the sum of the other three "score" columns.

Last updated: Oct 1, 1988




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