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Enhancing Competitiveness: A Review of Recent State Economic Development Initiatives

States launched a variety of economic development initiatives over the last year, despite limited
resources available for new programs. Most initiatives aimed to improve job growth and job
quality.

With no new money to spend on development grants, tax incentives, or infrastructure
improvements that might spur short-term employment, governors turned to strategies to build the
skills of the workforce, improve the innovative capacity of their regions, and enhance their states’
ability to compete in the world marketplace over the long term.
Although the average monthly unemployment rate hovered around 5.7 percent over the period
from September 2003 through September 2004, job growth was weak. By the end of September
2004, there were 1.3 million fewer jobs than in 2001, the peak year of the recent economic
expansion. At the same time, states faced an exceptionally tight fiscal situation, hampering their
ability to respond to the weak job market.

State revenue growth averaged just 1.4 percent in fiscal
year 2004, causing many states to enact negative growth budgets.

Most of the major new economic development initiatives enacted by states from September 2003
through September 2004 focused on enhancing state and regional “clusters of innovation” — fastgrowing
groups of businesses that share markets, labor, new ideas, and products.

To enhance
these clusters and exploit the unique advantages of the region’s labor pool, educational resources,
and research capacity, most development initiatives emphasized one or more of the following
strategies.

• Building a skilled workforce, by providing training and education to meet industry needs.

• Promoting research and development at local universities and in the private sector, by
leveraging public funds and encouraging partnerships.

• Supporting local entrepreneurs by providing venture capital funds and incentives for job
creation.

• Developing rural areas, by supporting innovations in agriculture and supporting small
business development.

• Supporting tourism and cultural activities, through state funding and programs.

• Improving business attraction through revitalization activities and quality of life
initiatives.

• Marketing the state through outreach campaigns and international missions and offices.

Full Report: http://www.nga.org/cda/files/0501COMPETITIVENESS.pdf

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