Building a Skilled Workforce Is More Critical Than Any Tax Credit or Abatement Program

No business in any industry can succeed without the availability of a quality workforce. The availability of a reliable, high quality workforce used to be a given for many companies when deciding whether to grow and where to expand. Those days are gone.

Just take a look at some staggering numbers, and consider how these shortages may affect the growth of a company or the region:

• 600,000-that is the total number of jobs in the manufacturing sector waiting for skilled workers. Manufacturing jobs are coming back to the United States, but many are concerned the world’s global manufacturing leader is not ready to fill all the positions.
• 50%- that is the number of the energy industry’s pool of 5 million skilled workers that will retire within a decade. At the same time, a shale energy jobs explosion is expanding well beyond the Texas-Oklahoma-Louisiana triangle into North Dakota, Ohio, Pennsylvania, and West Virginia. This boom will create thousands of energy jobs over the next decade exactly when half the current workers are retiring.
• 56%- that is the percentage of IT executives who said there largest barrier to success is a lack of staff to implement the mission of the company. Much like energy, information technology is a major aspect of the American economy and provides the basis for global success in many U.S. markets. Regions without a strong base of skilled information technology workers simply won’t be able to compete with global tech regions.
• 500,000 and 125,000- that is the shortage of nurses and doctors, respectively, expected by 2020 in what is the largest sector of most regional economies, health care. Five of Ohio’s largest employers are now hospitals and only three in the top 20 are manufacturers. Regions without a skilled workforce for the healthcare industry will struggle to grow this important sector of their economy and retain other employers whose employees need quality healthcare.

The retirement of the Baby Boom generation, low performance of America’s schools, a welfare system not creating workers and a lack of alignment between industry and higher education is creating widespread qualified workforce shortages even in times of high-unemployment.

Companies looking to grow and expand have no choice but to create a workforce strategy centered on locating in markets with a strong base of workers, an industry cluster aligned with the company’s focus, strong connections between regional educational institutions, a friendliness to immigrant workers and industry and local and state programs geared toward creating a strong workforce. First, demographic data need to be identified that will indicate which regions have a base of workers available for specific industries. Second, companies are more likely to find the long term pool of workers they need by locating in a region with their industry cluster. Another long term workforce approach is the alignment of higher education, community colleges and universities, with industry to produce the workers needed. In addition, for many companies in the tech sector, regions and states friendly to immigrant workers are more likely to have a strong base of highly educated, global workers available. Finally, even if a region is “worker-rich,” these companies need to negotiate tax incentives that include grants for workforce training.

A workforce development strategy is just as important as identifying a supply chain, links to customers, highway access and tax friendly policies when determine where to grow a company.

Turnpike Proceeds to Launch New Era of Ohio Highway Funding Opportunities

The Transportation Review Advisory Council (TRAC) is back. Actually, created in 1997, TRAC never went anywhere but the panel charged with setting Ohio Department of Transportation (ODOT) funding priorities made all sorts of decisions but lacked the funding to build much. The passage of Governor’s Kasich’s plan to use the proceeds of the Ohio Turnpike for transportation projects north of State Route 30 creates nearly a billion dollar’s worth of new funding opportunities in Northern Ohio as well as frees up additional ODOT dollars for projects south of State Route 30.

Understanding the TRAC process is critical to gaining state transportation funding in this new brave world. TRAC has nine members and only ranks transportation projects costing $12M or more which add transportation capacity, reduce congestion and are critical to the mobility, economic development, and quality of life for the state highway or Interstate highway system. TRAC is a mix of traditional highway building strategies focusing on roadway and system preservation and addressing traffic flow but it was designed to also look at the economic development impact of a state highway request.

The first order of business when going for TRAC funding is to line up the support of local elected and Metropolitan Planning Organizations. TRAC like all state agencies is not a fan of choosing between competing local priorities. TRAC has set a clear criteria and scoring system that matters.

Criteria and Scoring Methodology for TRAC Projects

TRAC will review and rank all the projects submitted to it for potential ODOT funding. The ranking process creates four categories: Tier I, Tier II, Tier III and Tier IV. Tier I are projects that will be funded within the next four years and cannot constitute more than 25% of the funding available. Tier II is the group of projects funded for additional environmental, design or right of way development activities necessary before the projects would be available for construction under Tier I and are ready to jump into Tier I at any moment. Tier III are the group of projects with previous phases funded for construction in Tier I and are part of a long range funding plan to advance multiphase projects within the state. Tier IV is of course where transportation projects go to die.

TRAC is a political process. Political in all senses- it clearly requires a strong team of engineering consultants who know how to design a transportation project but they need to know the ODOT team as well. It is also political from a lobbying sense as the competition is fierce and the TRAC membership has as many local government and non-transportation officials as it does local transportation staff. No doubt many more developers, economic development leaders and local government leaders will once again become acquainted with TRAC.

Tax, Medicaid and Education Debate Critical to State’s Economic Success

The state operating budget is working its way through the Ohio General Assembly. The media and many Statehouse pundits are focused on how many changes the Ohio House of Representatives made in Governor John Kasich’s aggressive reform oriented budget. The story is not about an inter-party, Republican fight. The true story of the current budget debate is how as the budget gets amended it keeps moving further away from helping the Ohio economy.

States impact economic development through the adoption of pro-business policies around tax, workforce, land use and quality of life issues matched with a strategic focus on growing industries a region has a strategic advantage and a world class implementation of the business of economic development. Ohio has the 8^th largest economy in the nation and its nearly $500B economy is not always directly influenced by the state’s $50B in government spending. However, Governor Kasich’s proposed budget attempted to not only reform state government but made efforts to address the state’s long-term economic struggles.

The Kasich Budget was not perfect from an economic development standpoint. Many have questioned the economic impact of the proposed tax changes. However, it recognized the important role of health care in the Ohio economy and acknowledged the importance of education in the state’s effort to produce a skilled workforce.

First healthcare. Site Selectors who guide most major economic development projects believe the quality of a region’s health care is a major factor to most companies when deciding where to locate jobs. Governor Kasich’s budget illustrated an understanding that 5 out of 10 of Ohio’s largest employers, which are hospitals, would benefit along with the patients they serve from the billions of federal dollars in additional Medicaid spending. The Ohio House chose to ignore this fact and the Senate has taken the Medicaid expansion out of the budget process in the hopes of passing some form of Medicaid alternative later in the year. Many see Medicaid as an ideological chance to attack Obama Care or a moral issue about serving the poor with healthcare. However, using additional federal funding to help the state’s largest employers treat customers they serve today at the cost of every other customer with insurance is an economic necessity. Hospitals in regions big and small are the largest employers paying above average wages with benefits. Passing up billions in government spending will harm these employers ability to serve residents and weaken region’s ability to attract employers demanding high quality healthcare.

Next tax policy. What taxes and how much is charged is a top five issue for companies looking to grow. Governor Kasich proposed a substantial expansion of the sales tax and severance tax to pay for a large state income tax. The House rejected the Governor’s tax plan in favor of a lower income tax cut. The Senate is rumored to be considering raising the Commercial Activity Tax to increase the House income tax cut. Many question whether any of these tax policy proposals is really going to improve the Ohio economy. Instead, a major play that would impact the ability of the state to compete with Texas and Florida would be for Ohio to not reduce the state income tax but to eliminate it. Ohio’s income tax creates about $9 B in state revenue. To eliminate this tax would mean an increase in the current sales tax which creates $7.5B and likely the Commercial Activity Tax which currently creates in $1.6B in state revenues. Incremental income tax cuts have done nothing in the last decade to change our economic fortunes. However, eliminating the income tax in Ohio would create a strategic competitive advantage of all other Midwest states that all have substantial state income taxes.

Third is education. With 600,000 manufacturing jobs looking for a skilled workers, developing a quality skilled workforce has never been more important. State government impacts the availability of a skilled workforce more than they do any other issues. Governor Kasich’s budget recognized the important role state government plays in developing future workers by increasing spending in both K-12 and higher education. So far, the General Assembly seems to agree with the Governor on the importance of education spending. The House made changes to how the Governor’s school funding formula distributed money but continued to increase spending for K-12 schools. Higher education’s new formula that will tie funding to graduation rates has been universally accepted. The Senate may examine if Ohio’s charter schools are underfunded but again most members of the General Assembly see education funding as a priority.

State policy makers over the next several months have an opportunity to change course and support healthcare, adopt a pro-business tax policy and expand the support for the further development of Ohio’s workforce.