Corporation for Enterprise Development’s State Report Card Links Innovation and Investment to Economic Success

States making strong investments in people, education and research are creating high quality jobs and faring the best economically

States with significant research development funding, high-tech employment and training, and strong investments in education enjoy the most competitive, diverse and entrepreneurial business climates, according to the 2000 Development Report Card for the States. This 14^th annual report, released by the Corporation for Enterprise Development (CFED), provides a broad-based rating of economies of the 50 states.

“A state’s economic prospects cannot be judged by simply counting the number of factories, the availability of low-paying jobs, or how low taxes may be,” said CFED president Brian Dabson. “The quality of jobs, standards of living, investments in innovation, education, sustainable growth, and infrastructure, and many other factors must be taken into account in determining a state’s long-term economic health.”

In analyzing this year’s data, CFED researchers find that states rich in innovation assets generally have thestrongest business climates. Innovation assets include students and employees in high tech fields, ample public and private research and development funding, and success in marketing new products through universities and small businesses. States such as California, Colorado, Connecticut, Massachusetts, New York, Rhode Island, Utah and Washington stand out in this area.

Additionally, CFED finds that states making key investments in the education and health care of children tend to have higher quality jobs and more competitive businesses. Massachusetts, New Jersey, Connecticut, Indiana, and Minnesota are among the top states in terms of their investments in children’s education and health, and each earned an A in the report’s assessment of state Earnings, Job Quality and Competitiveness of Existing Businesses.

The report also finds that, despite a robust national economy, the gap between the rich and poor grew by 15% during the decade of the 1990s, and few states have made strides in closing the gap. “These findings show that states must make critical investments in innovation and in people in order to sustain and improve their competitiveness and business vitality,” said William Schweke, Senior Program Director for CFED. “Economic success increasingly relies on human capital, sustainability, and entrepreneurship. States making strong investments in education and research are creating high quality jobs and these states are faring the best economically.”

Highlights from the 2000 Development Report Card for the States

Innovation. States seem to have more vital economies overall when they make higher investments in innovation – including, for example, public and private research and development activities. – California, Colorado, Massachusetts, Utah and Washington have, over time, invested more heavily in technical knowledge and resources . including science and engineering . than most other states. Each earned an A in Business Vitality in 2000. Competitiveness. States seem to enjoy higher quality jobs and more competitive businesses when they invest in their children’s health and education.  – Massachusetts, New Jersey, Minnesota, and Connecticut are among the top states leading investment in children’s education and health. Each earned an A in Earnings and Job Quality as well as Competitiveness of Existing Businesses. – North Carolina has begun to lay a foundation for enhanced investment in children’s education and health by aggressively increasing its teacher’s salaries (more than any other state, by percentage) since it passed its Excellence in Education Act in 1997. – Since implementing its Rite Care program, which provides easily accessible health coverage for low-income children, Rhode Island has surged ahead of 41 states in this category. Income Gap. In all but ten states, income disparity between the wealthiest 20% and the poorest 20% has increased over the past decade, despite the booming economy and a higher federal minimum wage. – Fourteen states have implemented state Earned Income Tax credits. (Refer to CPA’s information on EITCs for more information.) – Ten states have raised the minimum wage higher than the federally mandated $5.15/hour. – Twenty-seven states have structured specific tax policies – such as taxes on food – so as to not disproportionately burden low-income families.

CFED is a private, nonprofit economic development organization founded in 1979 with offices in Washington, D.C., San Francisco, CA, and Durham, NC. CFED promotes asset-building and economic opportunity strategies, primarily in low-income and distressed communities, bringing together community practice, public policy, and private markets in new and effective ways. For more information, contact CFED at (202) 408-9788 or www.cfed.org.

The web-based 2000 Development Report Card for the States, with state-by-state ratings, downloadable spreadsheets and interactive features is linked to CPA’s “State of the States” web page at www.stateaction.org/states. This provocative index rates the 50 states’ economic progress in three main areas: Performance includes employment, earnings, job quality, equity, quality of life and resource efficiency. Business Vitality includes competitiveness of existing businesses, structural diversity, and entrepreneurial energy. Development Capacity looks at human resources, financial resources, infrastructure, amenities, natural capital, and innovation assets.