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Area Development - Site Selection, Facility Planning and Workforce Development

2017 Top States for Doing Business: Georgia Ranks #1 Fourth Year in a Row

The top-ranked states have committed to adding value as economic development leaders and problem-solvers, characteristics that are recognized by consultants to industry.

Q3 2017
Bringing in business is a top priority for every state. New corporate locations and expansions create jobs and expand and diversify the tax base. Even though most would agree we have largely recovered from the Great Recession, the memories of that brutal downturn are still painfully sharp and linger — and still impact decision-making by corporate leadership. Today companies pay more attention to how states held on to and supported business during the Great Recession; in turn, states are more motivated to do all they can to attract, diversify, and support new business and stand out from competing states.

The economic development playing field is more competitive than ever. Standard incentives just don’t cut it anymore — it is a buyer’s market, and companies aren’t shy about telling states what they want, and how they expect to be treated. They are also fully prepared to shop around, even if it lengthens the decision-making process.

States are offering more than they used to — incentive packages rich with discounts and credits and tax breaks, free land and infrastructure, faster permitting, energy discounts, shovel-ready sites, creative funding options, workforce training, etc. And although the incentives package still matters, what companies really want (and what might even tip the balance) is a state that is a willing and proactive partner. A state that will take the time to understand each company’s unique set of needs, and go above and beyond to deliver solutions (and even innovate). Many companies aren’t thinking short-term, either — they want a long-term partner that will help them negotiate the future, whatever it might bring.

This is what top-ranked states do. They commit to adding value as an economic development leader and problem-solver — even during lean economic times. Any manufacturer will tell you that a big indicator of quality — and sound management — is consistent, repeatable results. This is also true for state government — especially the first six states in our “Top States for Doing Business” survey for 2017. Georgia, South Carolina, Texas, Tennessee, Louisiana, and Alabama (ranked first through sixth, respectively) retained their exact rankings from 2016. Florida, which placed seventh last year, dropped to 12th this year. This opening allowed Indiana, North Carolina, Mississippi, and Ohio to all move up one position from last year, to round out the top 10 — an impressive indicator of consistent and repeatable economic leadership.

TOP STATES FOR DOING BUSINESS 2017

  1. 1.Georgia
  2. 2.South Carolina
  3. 3.Texas
  4. 4.Tennessee
  5. 5.Louisiana
  6. 6.Alabama
  7. 7.Indiana
  8. 8.North Carolina
  9. 9.Mississippi
  10. 10.Ohio
  11. 11.Virginia
  12. 12.Florida
  13. 13.New York
  14. 14.Oklahoma
  15. 15.Michigan
  16. 16.Arkansas
  17. 17.Kentucky
  18. 18.Utah
  19. 19.Idaho
  20. 20.Wisconsin

Individual Categories

Overall Cost of Doing Business

  1. 1.Texas
  2. 2.South Carolina
  3. 3.Georgia
  4. 4.Mississippi
  5. 5.North Carolina
  6. 6.Indiana
  7. 7.Tennessee
  8. 7.tAlabama
  9. 9.Louisiana
  10. 10.Utah

Corporate Tax Environment

  1. 1.Texas
  2. 2.Florida
  3. 3.Georgia
  4. 4.Nevada
  5. 5.South Dakota
  6. 6.North Carolina
  7. 7.Tennessee
  8. 8.South Carolina
  9. 8.tIndiana
  10. 8.tNorth Dakota

Business Incentives Programs

  1. 1.South Carolina
  2. 2.Georgia
  3. 3.Mississippi
  4. 4.Louisiana
  5. 5.Texas
  6. 6.Indiana
  7. 6.tOhio
  8. 8.Arkansas
  9. 8.tNew Jersey
  10. 10.Alabama
  11. 10.tNew York

Access to Capital & Project Funding

  1. 1.New York
  2. 1.tCalifornia
  3. 3.Texas
  4. 4.Georgia
  5. 5.Tennessee
  6. 6.North Carolina
  7. 6.tMichigan
  8. 6.tIllinois
  9. 9.New Jersey
  10. 10.Massachusetts

Cooperative & Responsive State Government

  1. 1.Georgia
  2. 2.South Carolina
  3. 3.Tennessee
  4. 4.Louisiana
  5. 5.Virginia
  6. 6.Texas
  7. 7.Alabama
  8. 7.tIndiana
  9. 9.Mississippi
  10. 10.Ohio
  11. 10.tOklahoma

Favorable Regulatory Environment

  1. 1.Texas
  2. 2.South Carolina
  3. 3.Georgia
  4. 4.Louisiana
  5. 5.Mississippi
  6. 6.Alabama
  7. 6.tIndiana
  8. 8.Tennessee
  9. 9.Virginia
  10. 9.tOklahoma

Speed of Permitting

  1. 1.Louisiana
  2. 2.Georgia
  3. 3.South Carolina
  4. 4.Texas
  5. 5.Alabama
  6. 6.Mississippi
  7. 6.tIndiana
  8. 8.Tennessee
  9. 9.Virginia
  10. 10.North Carolina

Shovel-Ready Sites Program

  1. 1.Tennessee
  2. 2.Georgia
  3. 3.South Carolina
  4. 3.tAlabama
  5. 3.tIndiana
  6. 6.North Carolina
  7. 7.Louisiana
  8. 8.Texas
  9. 9.Kentucky
  10. 10.Mississippi
  11. 11.Ohio
  12. 11.tWisconsin
  13. 13.Iowa

Favorable Utility Rates

  1. 1.
  2. 2.Tennessee
  3. 3.Georgia
  4. 4.South Carolina
  5. 5.Oregon
  6. 6.Louisiana
  7. 7.Alabama
  8. 7.tNorth Carolina
  9. 7.tIdaho
  10. 10.Texas
  11. 10.tKentucky

Competitive Labor Environment

  1. 1.Texas
  2. 2.Georgia
  3. 3.South Carolina
  4. 4.North Carolina
  5. 5.Indiana
  6. 6.Tennessee
  7. 6.tMississippi
  8. 8.Virginia
  9. 8.tOhio
  10. 8.tAlabama

Leading Workforce Development Programs

  1. 1.Georgia
  2. 2.Louisiana
  3. 3.Alabama
  4. 4.South Carolina
  5. 5.Tennessee
  6. 6.North Carolina
  7. 7.Virginia
  8. 8.Texas
  9. 8.tIndiana
  10. 8.tOhio

Most Improved Economic Development Policies

  1. 1.Ohio
  2. 2.Michigan
  3. 3.Alabama
  4. 3.tNorth Carolina
  5. 5.Indiana
  6. 6.Wisconsin
  7. 6.tArkansas
  8. 8.Georgia
  9. 8.tKentucky
  10. 10.Tennessee
  11. 10.tArizona
  12. 10.tMissouri
Let’s take a look at the 12 factors on which the states were ranked.

Overall Cost of Doing Business
Key categories that contribute to the overall cost of doing business in a state are corporate income tax, business incentives, and access to capital and project funding. A cooperative and responsive state government, regulatory environment, utility rates, speed of permitting, and shovel-ready sites as well as the labor cost environment also make an impact. If a state excels in many or most of these categories, chances are it will have some of the lowest costs of doing business in the country.

Therefore, it’s no surprise that Texas ranks first for the overall cost of doing business. The Lone Star State placed in the top five in six other categories. With its long history of tax reform and cutting red tape, Texas is always tough to beat. In 2015, the state passed an across-the-board 25 percent reduction in the franchise tax; Governor Abbot has pledged to further cut the franchise tax by $250 million, freeing up more capital for companies to invest in their operations. Texas is also home to one of the most competitive, deal-closing incentive programs in the nation — the Texas Enterprise Fund.

Companies also want to see sound fiscal management in their states. Georgia, for example, mandates that it must maintain a balanced state budget. The state consistently maintains one of the nation’s lowest debt-per-capita levels. Georgia is one of a handful of states to have the highest bond rating (AAA) from all three major municipal bond rating agencies — Moody’s, Fitch, and Standard & Poor’s. The ratings, combined with stable outlooks, mean Georgia can continue to borrow money for major projects at lower interest rates. Indiana, which ranked 14th in CNBC’s 2017 “America’s Top States for Business,” also has an AAA bond rating. North Carolina is another state with a long history of prudent fiscal management that carries an AAA bond rating. North Carolina continues to reduce and streamline its business taxes.

Methodology for 2017 Top States for Doing Business

Our 2017 Top States for Doing Business rankings reflect the results of our recent survey asking the consultants to give us their top state picks in 12 categories that impact companies’ location and facility plans. The responses were weighted with their #1 choice in each category receiving three points, #2 choice receiving two points, and runners-up in each category receiving one point. States were ranked in order based on the total of weighted scores across all 12 categories.

Corporate Tax Environment
Evaluating the effective corporate tax rate can be a bit of a challenge — each state has a different corporate tax rate (flat, adjusted, or none). But other factors often come into play to determine the overall adjusted tax rate, such as type of business structure, and taxes on payroll, property, inventory, goods in transit, and sales, as well as any credits or adjustments to those taxes.

According to the Tax Foundation’s “State Corporate Income Tax Rates and Brackets for 2017,” 44 states levy a corporate income tax. Tax rates range from 3 percent in North Carolina to 12 percent in Iowa. Nevada, Ohio, Texas, and Washington impose gross receipts taxes instead of corporate income taxes (gross receipts taxes can be more economically harmful than corporate income taxes). South Dakota and Wyoming are the only states that do not levy a corporate income or gross receipts taxes.

Texas, which placed first in this category, has no corporate or personal income tax. Other significant tax advantages are sales tax exemptions on selected equipment and machinery, R&D-related exemptions, and property tax abatements.

Florida, ranking second in this category, has a flat corporate income tax rate of 5.5 percent of gross income. The federal corporate income tax, by contrast, is a marginal bracketed corporate income tax. Florida’s maximum marginal corporate income tax rate is the fifth lowest in the country.

Fifth-ranked South Dakota also has no corporate income tax or personal income tax, which helps give it a top reputation for business friendliness and entrepreneurial activity. The Small Business and Entrepreneurship Council ranked South Dakota the best state in the country for tax systems for entrepreneurship and small business in its “Small Business Tax Index 2016” survey. Other tax benefits in South Dakota are no personal property, business inventory, or inheritance taxes.

Several states have passed corporate income tax rate reductions and other reforms in 2016 and 2017. Perhaps most notable, according to the Tax Foundation, is North Carolina’s corporate income tax changes for 2017, which “include a cut of its corporate income tax from 4 percent to 3 percent, as the final component of the multiyear phase-in of its comprehensive 2013 tax reform package.” North Carolina now has the lowest rate of any state levying a corporate income tax, down from 6.9 percent in 2013.

Business Incentive Programs
Business incentives are becoming more integrated, multi-purpose, and higher value (for example, Wisconsin recently announced it would provide $3 billion in incentives to secure Foxconn’s $10 billion proposed manufacturing campus).

Incentives are typically linked to economic and job-creation performance. They are increasingly tailored to specific company needs, such as land acquisition, infrastructure improvements, low-interest financing, tax credits, and expedited permitting. Companies are especially attracted to incentive programs that help offset operating costs, such as income tax exemptions (sometimes payment is waived for up to a decade), job creation tax credits, and property tax abatements. For example, the Mississippi Aerospace Initiative Incentives Program includes a 10-year exemption from state income and franchise taxes, as well as a sales and use tax exemption for the purchase of component building materials and equipment related to the start up or expansion of an aerospace-related facility. And eighth-ranked Arkansas provides up to a 5 percent payroll rebate (annual cash payments based on a company’s annual payroll) for new, full-time, permanent employees.

Another cash-equivalent incentive that lowers project costs is a deal-closing fund. Texas is well known for its Texas Enterprise Fund (TEF), which awards cash grants as a financial incentive tool to close out deals that bring significant job creation and capital investment to the state. Since its inception in 2004, TEF has invested nearly $600 million across a number of industries, creating more than 80,000 jobs.

Other states have similar closing funds that target specific sectors. Ranked first in this category, South Carolina’s incentive packages target services and manufacturing. Three discretionary grant funds (one of which is the Governor’s closing fund) are administered by the South Carolina Coordinating Council for Economic Development to secure high-value projects on a case-by-case basis.

States also provide specialized incentives that target certain industries. Fourth-ranked Louisiana recently announced it would create and manage a $7 million economic development fund for the 23-parish service territory for Cleco, an energy services company in central Louisiana. The purpose of the fund is to provide infrastructure improvements and other investments that will attract new capital investment and job-creating projects to the area, by both existing firms and new employers coming into the region.

Access to Capital and Project Funding
An acute memory that many companies have from the Great Recession is the frustration (and even panic) in not being able to acquire funding for their operations — especially for improvements that would make them more efficient, productive, and competitive, or allow them to take advantage of market openings.

Access to capital is essential for business growth, in good economic times and bad. With companies in the driver’s seat as “buyers” when it comes to site selection, they expect funding help — even if it is just to “retain” current jobs in existing operations. States realize if they are too slow or reluctant with funding, these companies will go somewhere else. This is where knowing a company’s needs is essential for designing the best funding package, ranging from a variety of loans and grants and payback periods to private activity bonds, closing funds, and connections with venture capitalists.

Tied for first place in this category in the 2017 Top States for Doing Business survey are New York and California, both of which offer a variety of creative funding options. For example, New York provides its Linked Deposit Program, which helps companies obtain reduced-rate financing to improve productivity, market access, and competitiveness. Other programs include the $47.3 million Innovate NY Fund that invests in seed-stage businesses and the Women and Minority Micro-Enterprise Loan Fund Program, which provides loans for real property, equipment, and working capital. In California, the Capital Infusion Program has provided $4 million in grant funding to small businesses. In addition, the state’s Opportunity Fund plans to issue approximately a total of $75 million in loans for California’s small businesses.

Sixth-placed Michigan also has some innovative funding programs in place. Its Collateral Support Program helps companies acquire financing that might otherwise be unavailable due to collateral shortfalls. The program supplies pledged cash collateral accounts to lenders for approved projects. Grow Michigan, a public-private partnership between government agencies and a number of banks, is structured to operate below the traditional mezzanine markets and offer loans (up to $3 million) in a secondary collateral position at attractive rates. This capital, delivered in conjunction with a senior bank lender, helps businesses grow into new contracts or finance succession/acquisition events.

Cooperative and Responsive State Government
When a state has a reputation for being business-friendly and responsive, word gets around. All states provide significant incentives — but what sets top states apart is that they know prospective companies are on a short timeline and want to make decisions quickly. In response, the states provide solutions quickly in a proactive way, so they can close the deal. These economic development teams are also empowered to make their own decisions quickly too, such as zoning modifications, streamlined permitting, variances and exemptions, providing infrastructure and services, etc. — all of which minimize red tape. This also reassures prospective companies that the state will be a long-term partner.

Georgia, which has a longstanding reputation as a cooperative and responsive state government, placed first in this category. Its reputation starts with its business-friendly climate, including reasonable statutes, sound economic development policy, and strong business development support. The Georgia Department of Economic Development collaborates with the Georgia Chamber of Commerce, Georgia Economic Developers Association, and other state and local agencies to help businesses quickly find the perfect fit for their operations. State economic development representatives (who are typically experts in the industries they represent) can customize incentives and tax credits to meet a company’s needs.

This is also the case in Louisiana, which ranked fourth in this category. Industry experts at Louisiana Economic Development are highly knowledgeable in their fields and can respond quickly to prospective companies interested in relocation or expansion.

Ninth-place Mississippi takes a “holistic approach” to foster industry growth and considers all the factors up front that contribute to a company’s relocation or expansion. Such collaborative, cross-communication between Mississippi Development Authority (MDA) representatives and the prospective business leads to quick decision-making. MDA works with local economic developers and state and local leaders to find the ideal site, apply for necessary permits, and start the screening and hiring process.

MDA also opens new markets for its businesses by funding trade missions overseas. Businesses are invited to participate at a low, subsidized cost to explore the potential of these new markets and make contacts. Additional services include scheduled meetings with qualified buyers, free pre-mission market research and business-potential assessment, and a customized itinerary and logistical support. After the trip, MDA works with Mississippi companies to capitalize on opportunities resulting from the development mission.

Favorable Regulatory Environment
A reasonable regulatory climate is also essential for healthy business growth. Top concerns are environmental, legal, workers’ compensation, labor/HR, and administrative-related regulations. Changes don’t have be complicated — they can be as simple as eliminating duplicate steps and changing the way documents are received and handled. Also, regulatory reform is not just about reducing the number of regulations or easing their limits, but getting rid of red tape and making processes easier and faster.

Companies expect regulatory improvements; in response, many states have launched red-tape initiatives to identify outdated laws and regulations that can be removed or revised. These initiatives also often include a sunset provision of regulations with periodic review. For example, in 2016 Kentucky launched the Red Tape Reduction Initiative to review each of its nearly 5,000 regulations with the goal of eliminating those deemed unnecessary or duplicative, and simplifying others that seem too complex. As of July 2017, 160 administrative regulations had been repealed and 181 had been amended. In February 2017 the Kentucky legislature approved House Bill 50, which calls for ordinary regulations to automatically expire seven years after their last effective date. This law will force agencies to regularly review their regulations and take action to keep them in effect.

In South Carolina, ranked second in this category, the Governor signed an executive order in April to establish a framework to “promote responsible regulation.” The framework includes establishing a four-part test in promoting new regulations, looking at reducing regulations, and promoting transparency in the rule-making process.

States that have undergone tort reforms show prospective companies that they are looking out for business interests. A tort is either an omission or an occurrence that harms or injures another person. Tort systems, which used to call for maximum compensation for the injured person, are now being revised across the country to limit damages to a set amount. Because payouts are capped, employers have more money to invest in business growth, rather than high insurance premiums. It is no surprise that Texas, which ranked first in regulatory environment in our survey, has undertaken tort reform over the last 10 years.

A sound regulatory climate also helps secure better bond ratings for a state. For example, Tennessee has successfully overhauled its tort and workers’ compensation laws and has a triple AAA rating (in fact, its most recent bond sale was at the lowest-ever interest rate). Other AAA-rated states with favorable regulatory environments are Indiana and Georgia.

Speed of Permitting
Companies are in a hurry — they want to set up and get to work on the shortest possible timeline. Permitting delays hurt their productivity, return on investment, delivery schedules, and ultimately their bottom line. A firm start-up date is also essential for construction scheduling and hiring employees.

Therefore, businesses fervently hope for predictability and efficiency in government regulations. This especially means speed for permitting — without the necessary permits in place, projects stall and time and money are wasted. The permitting process can be especially hard on small businesses or startups with limited funds, where a slow permitting process limits what they can afford to do and impacts their profits.

“Dealing with local government permitting has become a nightmare for our small business members who have no in-house compliance department,” says Will Newton, executive director for the National Federation of Independent Business in Texas. “Time is money, and small business owners are strained in both areas.”

There are two main ways to achieve faster permitting for businesses: fewer permits and/or faster approval and delivery of permits. About 75 percent of states use a small business flexibility analysis to adjust regulatory burdens (including permitting) on small businesses. In Virginia, for example, the agency that proposes the regulation must prepare a regulatory flexibility analysis that considers using alternative methods that will accomplish the same objectives, while minimizing the adverse impact. These alternative methods could include less stringent compliance with permitting requirements, such as relaxed schedules or deadlines, easier threshold limits, or sometimes even full exemptions.

The Alabama Department of Environmental Management (ADEM) fast tracks permitting by working with state and local economic development officials on the front end of a project to evaluate permitting requirements and ensure communication is at the forefront. If there are no serious permitting obstacles, complex air and water permits are usually issued by ADEM within 60 days and storm water permits within two or three days. Prevention of significant deterioration (PSD) analyses for major air permits can be completed in 120 days or less, in most cases. This collaborative approach with economic development teams is essential for a fast permitting start on new projects.

Shovel-Ready Sites Program
State-sanctioned “shovel-ready” or “certified” sites are all about speed and risk. Because the due diligence has already been completed and approved by the state, companies can build quickly with no risk of having to mitigate any problems that might surface and otherwise delay the project.

Most certified sites target industrial, office, or mixed-use projects of 10 to 25 acres in size. Due diligence includes zoning restrictions, title work, environmental studies, soil analysis, and other surveys. Sometimes states will invest significant resources to clean up and certify contaminated sites, especially if they are in areas where the city or state would like to see development (for example, infill brownfield sites within city limits).

Certified sites are important economic development tools that attract major projects. Ranked first in this category, Tennessee’s program — Select Tennessee Certified Sites — gives communities, especially those in the state’s rural areas, an advantage when competing with other states for economic development projects. The sites must include at least 20 developable acres with proper zoning, existing utilities on site (or a formal plan to extend to site), and truck-quality access roads. To date, 48 sites have been certified.

In neighboring Alabama, the AdvantageSites program has brought in more than 20 projects since the program’s inception in 2008, representing nearly $1 billion in capital investment and 4,000 jobs. Alabama currently has 56 active sites.

Sometimes a state offers multiple levels of “readiness,” depending on a company’s needs. Indiana’s Site Certified program provides three tiers of readiness: silver, gold, and prime. The silver tier defines property boundaries, establishes a price, demonstrates local government support, defines utility capacity, and provides some initial surveys. The gold tier calls for a minimum of 20 contiguous acres, a location no more than five miles from a state highway, and additional surveys, including geo tech, seismic hazard, and environmental. The prime tier requires 30 contiguous acres, a location no more than 2.5 miles from a state highway, and an archaeological investigation.

Certified sites can also be a good way to attract employers to areas of underemployment. In Kentucky, on a Build-Ready site, construction can begin immediately. All Build-Ready sites include a 50,000-square-foot concrete pad and utilities that extend to the site’s edge. The state just announced its fourteenth site near Ashland, which will hopefully attract an employer to the area, which needs jobs.

Favorable Utility Rates
Energy availability and cost are top site selection considerations for any company, especially those that consume large amounts of energy, such as data centers, manufacturing operations, and 24/7 facilities. Energy costs vary significantly, according to the type of energy source and its proximity to the business operation. Companies prefer a consistent and reliable energy source, with minimal risks for disruption (usually brought about by shortages or increasing regulations).

State and local governments often collaborate with utility companies to provide innovative, low-cost energy plans for companies looking to locate or expand. Utility incentives include rate discounts, tax exemptions, and grants for utility infrastructure improvements. Delivering a customized energy plan that meets a prospect’s energy needs is a key part of closing any deal. In general, states with large amounts of hydro-generated power have lower energy rates. For example, according to the U.S. Energy Information Administration, industrial energy rates in the state of Washington (ranked first in this category) are 38.1 percent lower than the U.S. average. Washington’s hydroelectric system is one of the largest in the world — nearly 75 percent of its power needs are generated by its fast-moving rivers. This vast renewable resource, combined with expanding capacity from wind and solar power, keeps rates as low as 4.13 cents per kWh for industrial customers. Washington also provides competitively priced natural gas delivered via pipeline from Canada.

Many states in the South and Midwest still depend on coal. Although the Trump administration wants to cut back environmental regulations and revitalize coal mining, many states continue with efforts to bring solar and wind power into their grids. These sustainable-energy technologies are becoming more efficient, lower-cost, and can be easily connected. They are also in high demand by consumers.

Kentucky, which tied for number 10 with Texas in this category, has plentiful coal and natural gas supplies, which keep the state’s industrial sector’s electric power costs low. Demand, however, is starting to drop. For example, at one point, more than 90 percent of the electric power provided by East Kentucky Power Cooperative (EKPC) was coal-fired. That number has fallen to about 70 percent; in response, the cooperative is installing a 33,000-panel solar field on one of its properties.

“What we’re doing is recognizing customer demand,” said Nick Comer, manager of External Affairs for EKPC. “And not just residential customers, but also businesses. When companies are considering areas to locate a plant or facility, they’re looking for energy options that are cost-effective and sustainable.”

Texas is another energy powerhouse. Unconventional oil shale deposits in West Texas (and New Mexico) contain an estimated 75 billion barrels of oil, making the region one the world’s largest oil reserves. Texas has also become the national leader in wind power. With an installed wind power capacity of nearly 18,000 MW, Texas produces more wind energy than the next three states combined. Texas also led the nation in wind farm expansions in 2016, with plans to add more than 5,000 MW of capacity.

Competitive Labor Environment
For most companies, the number-one site selection concern is labor — availability and cost, skill level, training resources, and state support. Companies seek regional labor pools that meet their needs for qualified workers. The labor pool must also be large enough to fulfill additional staff-ups resulting from future expansions, even if competing companies move in and deplete the labor pool. This is where free or low-cost workforce development programs can reassure CEOs that states will step up and provide trained employees when needed. Another attribute companies like to see is right-to-work status, which tends to reduce overall labor costs.

A common denominator for states with top-ranked workforces is a strong network of universities and colleges. For example, the Texan workforce (which ranked first in our competitive labor environment category) is supported by nearly 40 public universities and 50 community college districts. Graduates from these schools enter the labor pool with skill sets that are in high demand among employers.

Availability of skilled labor is another major concern, especially for manufacturers dealing with the “skills gap.” A report by Deloitte and the Manufacturing Institute predicts that nearly 3.5 million manufacturing jobs will be created by 2025; however, two million will be unfilled because workers don’t have the required skills, especially STEM (science, technology, engineering, and math). Some states are working proactively with their educational systems to build a future workforce interested in careers that require STEM skills.

For example, in Tennessee, the “Drive to 55” program aims to bring the percentage of Tennesseans with college degrees or certifications to 55 percent by the year 2025. About 41,000 students graduated with STEM-related qualifications at Tennessee institutions in 2015 — an increase of 20 percent in just five years. Graduates in engineering, engineering technologies, and engineering-related fields grew by 25.2 percent over the same time period.

Leading Workforce Development Programs
When making a site selection decision, companies ask if the location’s workforce will have the training needed to perform the job, especially when it comes to STEM skills. To alleviate these concerns, many states provide comprehensive workforce development programs. With the help of local postsecondary educational institutions, these programs screen, select, and train the workforce a company needs for a new location or expansion.

In fact, some companies have cut back on internal training resources because they know states will design and implement customized training programs. The training is typically free for employers that meet state requirements for job creation. This can save companies millions of dollars and close a deal. The best-known programs are in the South. For example, Georgia, Louisiana, Alabama, and South Carolina have top-rated programs that serve as models for other states.

The number-one ranked workforce development program is Georgia’s Quick Start, which has trained more than one million employees in 6,500 projects, many of them for large-scale manufacturing projects. Quick Start is a highly versatile program, whose industry experts can design and implement cutting-edge training programs for workers in aerospace, biotechnology, pharma, advanced manufacturing, food and beverage, and other industries. Training is conducted in classrooms, mobile labs, or on site using the company’s own equipment and processes. Quick Start will even build state-of-the-art training facilities using identical equipment off site at a nearby technical college to assure company workers will be fully trained and ready to go once their new facility has been constructed.

For example, Quick Start is helping NIFCO KTW, a leading global supplier of automotive injection-molded parts, expand in Stephens County, Ga., adding 200 jobs. Quick Start will provide job-specific training in injection-molding, assembly, and paint operations. Development of employees’ “soft skills” — leadership, quality and productivity enhancement, etc. — is also being provided.

Louisiana Economic Development’s FastStart program provides comprehensive employee recruiting, screening, training, and orientation to assure smooth start-up for new operations. FastStart is also engaged in creating new employment opportunities in regions hurt by the oil and gas slump, as well as educating high school students about career opportunities in manufacturing and other industries.

Since 1971, AIDT has been providing workforce development programs in Alabama in order to attract new industries and expand existing ones. Training is provided by AIDT staff or contracted instructors and delivered through classrooms or 38 mobile training units on site to meet specific company needs. These include project-based training centers for Honda, Hyundai, Mercedes Benz, Navistar, and Airbus among others.

In 1961 South Carolina launched a statewide, comprehensive technical and industrial training program for the state’s workforce. Called readySC™ today, it continues to design and implement customized training for new employees and also works with existing employees to meet or maintain their certifications and credentials. Training resources are provided through South Carolina’s 16 technical colleges. The program has trained about 289,000 employees for more than 2,000 companies since its inception.

Most Improved Economic Development Policies
As stated, tax incentives — including credits, exemptions, and deductions — are an important economic development tool that states use to attract new businesses, create jobs, and diversify their economies. The more a state can improve its incentives, the greater the business investment that will result. That said, incentives are a significant chunk of the state budget, totaling billions of dollars every year. And, because of fierce competition between states, these packages continually get more expensive. Therefore, legislators are demanding more in-depth information about the effectiveness of tax incentives, and how they can be improved. According to the Pew Charitable Trusts, over the last five years, 27 states and the District of Columbia have made progress in gathering this data on their economic development tax incentives. For example, Ohio, which ranked first in improved economic development policies, has implemented a plan for regular evaluation of tax incentives and also established a legislative committee to study tax incentives. Third-ranked Alabama is following a similar plan and also hired a contractor to develop a set of best practices for evaluating incentives.

When lawmakers gain this information, they usually act on it. “Policymakers in numerous states have made changes to incentives that were consistent with the findings or recommendations of evaluations,” writes Pew Charitable Trusts. “Changes both large and small — from ending ineffective programs to subtly modifying the design or administration of incentives — can greatly improve the effectiveness of state economic development efforts.”

The number-two ranked state in this category, Michigan, also was ranked the most improved in CNBC’s 2017 “America’s Top States for Business.” Among the changes implemented in Michigan were a comprehensive overhaul and simplification of the state’s corporate income tax and passage of a right-to-work law.

Sometimes all lawmakers have to do is listen to business. In response to calls from the Arizona business community for streamlined regulation, the Arizona legislature approved fundamental changes in the administration of Arizona’s transaction privilege tax system, streamlining the process and eliminating the need for multiple (state and local) tax licenses, tax returns, and tax audits.

Economic development is also bolstered by supporting entrepreneurs and startups. Wisconsin provides business startups and early-stage companies with funding sources and a network of industry accelerators, usually associated with post-secondary schools throughout the state. To strengthen this effort, the Wisconsin Economic Development Corporation recently launched its Entrepreneurship Support pilot program, which provides grants between $10,000 and $100,000 to eligible Wisconsin nonprofit organizations or communities for projects that promote entrepreneurship.
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