Economic Development: Ranking the States

Thursday, January 25, 2007

Growing Economy

by Nathan Newman

Ranking the States on Economic Development

Too often, we hear the simplistic rhetoric that all states have to do to promote jobs and improve the "business environment" is cut taxes and gut business regulations. Luckily, we have an alternative: CFED's annual Development Report Card for the States, which actually highlights the whole variety of tools used by states to invest in the long-term economic strength of their states: skilled workforces, entrepreneurs, high standards of living, technology development, existing businesses, world class infrastructure, and excellent public services.

And instead of a simplistic single measure of the "business environment," CFED's report card ranks states on three main categories: their Performance in delivering decent income and living conditions to their residents, the Business Vitality of their firms in adjusting to changes in the global economy, and the Development Capacity of their state's investments in the future through education, physical infrastructure, and financial, natural and technological resources.

And which states ranked highest? Leading the pack were the two states earning As in all three indicators, Connecticut and Delaware, followed by Colorado, Massachusetts, Minnesota, Utah and Wisconsin, which earned either As or Bs in all areas. What this "Honor Roll" of states share are a broad-based commitment to economic development and the fundamentals of good government.

What the CFED rankings pound home is how impoverished many state debates are around economic development. Too often they focus on trying to lure big businesses with expensive tax breaks instead of focusing on the fundamentals of building an economy where home-grown companies can thrive and innovate. As CFED notes, "Quick-fix solutions are easy to grasp but do not address the fundamental needs of most communities."

To help state leaders, CFED is highlighting "promising practices" that promote healthy economies, including policies to promote Affordable Housing, Business Finance, Education, Entrepreneurship, and Innovation that move beyond quick-fix solutions to concentrate on the building blocks of long-term economic growth and progress for state economies.

More Resources

Valuing Families

by Adam Thompson

Bush's Fake Federalism: Health Care

In President Bush's speech on Tuesday, he made a grand pledge to "help the states that are coming up with innovative ways to cover the uninsured." Yet even as he was hailing the innovative role of states in health care, Bush was proposing new federal laws -- the promotion of so-called Association Health Plans (AHPs) -- that would further limit state powers to regulate the health insurance industry. As the bipartisan leadership of the National Governors Association made in a 2005 letter to the US Senate:

AHPs are health insurance companies sponsored by business and professional associations that would be granted a special exemption from state regulation, and would instead operate under limited federal rules and virtually no oversight. Under current AHP proposals, these types of insurers would be exempt from important regulations that our states have designed to ensure a healthy small insurance group market that can deliver affordable care to all participants...[T]his legislation raises important questions about the future ability of our states to regulate health insurance at all.

But this undermining of states ability to regulate the health care industry is par for the course for the Bush Administration. Bush-appointed judges struck down Maryland's groundbreaking law requiring large employers to contribute a fair share of their employee health costs and the Administration has not hesitated to get in the way of state initiatives to reimport cheaper prescription drugs from countries like Canada. While reimportation may be off the table because of Bush Administration stonewalling, another threat in the form of international treaties negotiated by the Bush Administration is emerging that "may constrain state efforts to manage prescription drug and public insurance costs."

Even Bush's pledge of funds to states to help on health care costs is a bait-and-switch. The grants would be funded by redirecting $30 billion worth of Medicare and Medicaid payments that currently go to hospitals that treat large numbers of uninsured and under-insured patients. Hospital groups immediately came out against the proposal, which is nothing more than a classic "rob Peter to pay Paul" scenario.

Looking at these proposals in combination, they are part of the Bush Administrations effort to promote an unregulated private insurance market, while using the rhetoric of federalism and states rights. In his speech on Tuesday, he specifically stated he wanted to support state programs that increase access to "private health insurance," even as his proposal would drain funds from existing Medicaid patients. And even as he's promoting more money for private sector health plans at the expense of Medicaid, he wants to strip state governments of the power to regulate those plans-- a recipe for unregulated abuse and profiteering by those insurance companies. This proposal is nothing more than another kick-back to the private sector at the expense of seniors and low-income children and families.

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Strengthening Communities

by J. Mijin Cha

Unlocking the Prison Puzzle

An innovative correction reform program is currently underway in Alabama to decrease the number of long prison sentences. The Pew Charitable Trusts' Public Safety Performance Project and the Vera Institute of Justice teamed together to implement a four year project that supports in-depth research and education for policymakers and the public to help states increase public safety, manage corrections spending, and hold offenders accountable. Alabama is the first of eight states to implement the pilot program.

The Pew pilot program has three main objectives. First, it aims to collect and analyze data about who is admitted to the state's prison, how long they stay, who returns, and the implications of those practices for public safety and state budgets. Second, the initiative aids states in understanding how their existing sentencing, release and community-supervision policies compare to those of other states. Finally, the initiative encourages states to use all the information gathered and best available research to explore policy changes that will increase public safety and deliver a solid return on taxpayers' investment.

The Alabama project aims to expand community corrections programs for non violent offenders, such as work-release centers, as a viable alternative to long prison sentences. Alabama prisons are currently grossly overpopulated, partly because too many nonviolent criminals have been put in prison for long terms. Instead of serving long prison terms, people convicted of non-violent property crimes and drug crimes can be placed in community programs. This would shrink the already too-large prison population and lead to less recidivism, or tendency to repeat crime, among inmates released into society. It also allows them to work during the day and then go back to a confined center at night. Through this, non violent prisoners can work to earn money to pay restitution or fines and also begin to acclimate to life without crime.

Through the pilot program, Alabama has a chance to lead the nation in correction reform and provide a viable alternative to the current overpopulated, non-reforming corrections programs.

More Resources

Research Roundup

Tax Breaks and Economic Development, Prisoner Release, Medical Debt, Minimum Wage, and EITC

Reinforcing CFED's message that tax breaks are a poor road to state economic growth, a report commissioned by Kentucky's state government finds that tax breaks hadn't produced the number of new jobs state officials had previously claimed, while workforce training programs were far more cost-effective in creating new jobs.

To help communities deal with the increased number of people being released from prison and returning home in recent years, the Urban Institute has a new brief explaining how to use Reentry Mapping to better inform and improve community efforts to address reentry for returning prisoners, from the policy decisions of local governments to outreach from neighborhood churches.

One cost of our health care crisis is rising debt due to medical expenses, highlighted by a new Access Project report, that finds that 29% of households with credit card debt reported that medical expenses contributed to their debt and that their credit card debt was 46% higher than for families without those medical expenses.

Adding to the evidence that raising the minimum wage has no ill effects on the economy, the Fiscal Policy Institute reports that in the two years since New York state increased its minimum wage, 750,000 workers should have received a wage increase even as low-wage industries have grown faster in the state than for other industries and faster than comparable industries in surrounding states.

When low-income families earn just a little more money, they often see their tax bills explode as they lose state benefits. New Jersey Policy Perspectives highlights an example, a quirk of the state Earned Income Tax Credit where abrupt "phase-out" rules mean a married couple making $19,000 per year can see a $1414 increase in their state taxes if they make just $2000 more in income.

Ranking the States on Economic Development

CFED, "Development Report Card for the States"

Progressive States Network, "Reforming Failed Tax Subsidies"

Progressive States Network, "Economic Growth: New State Solutions for Job Creation"

Bush's Fake Federalism: Health Care

National Governors Association, "Letter to Senate on AHPs"

Families USA, "AHPs: Bad Medicine for Small Employers"

National Legislative Association on Prescription Drug Prices, Drug Importation and Trade Policy

Unlocking the Prison Puzzle

Vera Institute of Justice, Sentencing and Corrections

The Pew Charitable Trusts, "State Sentencing and Corrections

Mobile Register, Alabama Prisons Earn Well-Deserved Attention"

Eye on the Right

When Massachusetts approved its far-reaching health care plan last year, Progressive States was among those that warned that its individual mandate would impose too high of a cost on individuals. Now, it appears, reality has caught up with the state, where approved plans could lead Bay Staters to spend as much as one-third of their annual income on health care. Unsurprisingly, it is back to the drawing board to clean up the mess.

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The Stateside Dispatch is written and edited by:

Nathan Newman, Policy Director
Mijin Cha, Policy Specialist
Adam Thompson, Policy Specialist
Matt Singer, Communications Director


Please shoot me an email at if you have feedback, tips, suggestions, criticisms, or nominations for any of our sidebar features.

Matt Singer
Editor, Stateside Dispatch


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