Economic report card gives state near-failing grades

Posted on February 10, 2006 | Type: In the News | Author: Mike Sunnucks
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A new national report card skewers Arizona's economy despite the state's high employment growth and population gains in recent years.

Arizona earned D grades on the economic report card published by the Corporation for Enterprise Development in all three key areas: economic performance, business vitality and development capacity for the future. Those are the same grades Arizona earned from the group last year.

The Washington, D.C.-based nonprofit"which encourages economic and community development"ranks U.S. states on various business, socioeconomic and quality-of-life factors.

Minnesota and Massachusetts earned straight As from CFED. Colorado, Wisconsin, Virginia, Connecticut and New Jersey got A's and B's from the group in the three main study areas.

Arizona ranked last in terms of high school graduation and crime rates. The state also fared poorly in terms of small-business loans (47th), teen pregnancies (44th) and manufacturing investments (46th).

Arizona was one of only five states to get D or F grades in the report's three major areas: It joins Mississippi, West Virginia, New Mexico and Alaska.

All that dire news comes despite the fact that Arizona"and the Phoenix metropolitan area in particular"have been top employment gainers in recent years.

As a result, Arizona earned an A in long-term employment growth and trailed only Nevada in that category as well as in net population gain.

The Grand Canyon State also scored in the top 10 in categories such as per capita energy consumption, reducing the number of uninsured low-income children, renewable energy, federal research and development, licenses and royalties.

Still, the state's overall poor showing pours some cold water on the economic cheerleading by business leaders and elected officials who have been touting Arizona's job gains, housing market and recent attraction of new Google and Intel Corp. facilities.

Some leading regional business and economic leaders dispute the findings.

"My reaction is simple"disbelief," said Mary Ann Miller, president of the Tempe Chamber of Commerce.

"While I'm admittedly focused on just a small corner of this state, you can't sit in my office in Tempe and believe that businesses are not competitive, there's no entrepreneurial energy, we're not ready for the future and our citizens are being shortchanged. Quite the contrary," Miller said.

She and others point to the fact that Arizona and the Phoenix metro area have gained jobs in recent years and are seeing growth in sectors such as construction, biomedical, defense and financial services.

Noah Clarke, an economist for the Goldwater Institute think tank, said a number of the factors considered in the grades were not directly related to economic growth"such as voter turnout, recycling and charitable giving.

"These are not telling measurements of economic development," said Clarke.

Instead, Clarke argues Arizona's economic performance is displayed by its strong employment gains and population growth.

"People, not indexes, are the real judges of economic opportunity, and they think Arizona is a great place to come to live and work," he said.

Barry Broome, president of the Greater Phoenix Economic Council, said Arizona should have received a better overall grade, but he said the report shows the state has progress to make in areas such as personal income, wages and educational attainment.

Broome also said the state and Phoenix region need to better focus economic development tools and resources and deal with demographic issues such as the large immigrant population.

David Drennon, spokesman for the Arizona Department of Commerce, said the report card shows Arizona performing well in economic indicators, such as jobs, but trailing in social arenas not handled by his economic development agency.

However, the low scores do create concerns that the state lags behind in education and other areas.

Steve Prokopek, Peoria economic development director, said the state needs to revamp its tax structure to help spur manufacturing and high-tech investments.

"Arizona has a property tax environment that is extremely prohibitive to manufacturing," said Prokopek pointing to state taxes on business property and equipment. "We have one of the highest real and personal business property tax structures," he said.

The state did approve a reduction to business property taxes last year as well as a break for manufacturers and semiconductor producers. The latter helped land a $3 billion Intel computer chip plant in Chandler. There are proposals this year to trim or eliminate business equipment levies.

"If I am a small to medium-sized manufacturer that started in Arizona, I am an easy target to be relocated to a state with a more favorable environment," Prokopek said.

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