From the Dispatch

Reducing Military Spending to Spur Economic Growth at Home

Altaf Rahamatulla — Thu, 11 Mar 2010 13:02:00 -0500

The Senate struggled to approve a $15 billion jobs bill and has yet to enact additional fiscal relief for the states, but lawmakers continue to approve trillions of dollars for wars and defense appropriations. In fact, ignoring the almost $1 trillion spent on the Iraq and Afghanistan wars, military spending has grown 41 percent since 1998. If progressive leaders intend to reduce long-term deficits and ensure a robust economic recovery, cutting inefficient and costly areas of the defense budget should be a top priority.

For this reason, state legislators from across the country have signed on to the Women Legislators' Lobby's (WiLL) letter encouraging the federal government to trim the unnecessary spending in the Pentagon budget and redirect that money to areas in the economy that generate more jobs and address significant issues, such as climate change, education, and infrastructure maintenance.

If you are a female state legislator and interested in supporting the effort, please sign on by clicking here, calling (202) 544-5055, ext. 2602, or emailing will@wand.org.

FY2010 Budget Request: In February, President Obama remarked that one of his priorities would be reforming the defense budget so that the country is not spending scarce revenue on obsolete weapons. Nevertheless, the President's FY2010 budget request for the Department of Defense and the nuclear weapons portion of the Department of Energy is approximately $557 billion, which amounts to half of the entire federal discretionary budget. The Congressional Budget Office (CBO) finds that this level of spending will only increase in the future. "In CBO’s estimation, carrying out the Department of Defense's 2009 plans for 2010 and beyond—excluding overseas contingency operations—would require defense resources averaging at least $573 billion annually (in 2010 dollars) from 2011 to 2028." These astronomical figures do not include the costs of the wars in Iraq and Afghanistan, as they are funded through an emergency supplemental budgeting process. Since 2001, the country has allocated approximately $915 billion to the military operations in Iraq and Afghanistan.

In the State of the Union, President Obama proposed to freeze all non-security discretionary spending for three years, creating $250 billion in savings, yet exempted the defense budget from scrutiny. However, as Lawrence Korb, a senior fellow at the Center for American Progress and former Assistant Secretary of Defense under President Reagan indicates, "[i]f President Obama is serious about controlling spending, he can’t exempt the Pentagon... Because the budgets of [Defense] agencies, particularly that of the Pentagon, are responsible for a large and increasing share of the discretionary portion of the federal budget, the president’s spending freeze will have a marginal effect."

Source: Women's Action for New Directions - Making the military budget smarter, not bigger

US Military Spending: Even as the US is failing to invest in the basic infrastructure needed for global economic competitiveness, the nation's military budget dwarfs the amount other countries allocate for defense and accounts for almost half of all military spending in the world.

Additionally, 83 percent of US national security spending is specifically allocated to the military, while 11 percent is directed toward homeland security, and 6 percent to international affairs. As a result, US security spending is overwhelmingly skewed towards weaponry rather than basic protection and diplomatic efforts. As Women's Action for New Directions (WAND) notes, portions of the military's budget go to "weapons systems that were intended to fight the military might of the Soviet Union during the Cold War. They are now obsolete, unnecessary, and eating up federal dollars that could be better spent elsewhere." WAND and the Center for American Progress identify several defense spending cuts that would not threaten US efforts overseas or security within the nation's borders.

Jobs and Economic Recovery: According to a report by economists at the University of Massachusetts, reducing spending on obsolete weaponry and inefficient defense spending and shifting funding towards other critical sectors will create jobs and foster economic recovery. For example, investing in mass transit creates twice as many jobs as spending on the military. Specifically, investing $1 billion in the military only creates 8,500 jobs, while the same investment in:

home weatherization and infrastructure create 12,800 jobs;
health care, 12,900 jobs;
education, 17,700 jobs;
and mass transit, 19,800 jobs.

Other countries have recognized that these investments translate into economic growth. For instance, China's $585 economic stimulus program is predominantly focused on infrastructure spending on highways, railroads, and power grids.

Speaking in Florida in January, President Obama acknowledged that Asian and European countries are vastly ahead the United States in developing high-speed rail: “Other countries aren’t waiting. They want those jobs. China wants those jobs. Germany wants those jobs. They are going after them hard, making the investments required.”

Take Action: Sign on to WiLL's letter calling on the President to cut non-essential spending in the Pentagon budget and redirect that money to areas in the economy that generate more, and better, jobs for long-term security by clicking here, calling (202) 544-5055, ext. 2602, or emailing will@wand.org.

Resources:
Center for American Progress - Paying for the Troop Escalation in Afghanistan
Congressional Budget Office - Long-Term Implications of the Fiscal Year 2010 Defense Budget
Progressive States Network - Reforming Defense Spending and National Guard Overseas Deployment
Women's Action for New Directions - Finding New Ways to Create Jobs
Women's Action for New Directions - Making the military budget smarter, not bigger
Women Legislators' Lobby - Balanced Security Spending

State Job Creation Strategies Part II: Supporting Innovation, Industrial Clusters and Green Job Creation

Nathan Newman — Mon, 25 Jan 2010 14:22:36 -0500

As we described last week in State Job Creation Strategies Part I: Finding the Money and Investing in Human Capital and Physical Infrastructure, competing globally for jobs starts with policy makers instituting fundamental investments in education, human capital and physical infrastructure that make their state a productive environment for economic innovation.

The next step, as this Dispatch will describe, is helping the private sector leverage opportunities for job creation and technological innovation. Too often, some state leaders treat economic development as merely a bidding war between states to give away the most tax breaks or economic subsidies to big corporate bidders. Not only do most studies show such tax-giveaway approaches to be ineffective -- fundamentals like labor productivity and physical infrastructure are more critical in site selection for most global businesses -- but they end up devoting most state resources to a few large businesses while ignoring investments in start-ups and smaller homegrown firms that are the heart of long-term local prosperity.

Instead, state policymakers should move away from a tax giveaway mentality towards an approach that step-by-step supports an ecology of local investment, technological innovation and mutually-interdependent industries that together encourage ongoing entrepreneurship and firm growth. Elements of such a strategy include:

State-backed venture capital institutions that can not only supply needed capital for start-up firms, but help leverage additional private investments to expand the capital available for innovative start-ups in a region.
Leverage technology transfer from universities and government labs to translate basic research into commercial products and the technical assistance that can launch firms builds on that innovation.
Nurture regional industry partnerships and industrial clusters where firms thrive together based on shared investments in the skills of the regional workforce and strategic support for specialized local firms.
Encourage green innovation that will yield a range of new jobs in the emerging green sector.

Each of these steps emphasizes building partnerships between government, business, community and labor institutions to make continual learning and innovation an integral part of regional economies.

Table of Contents:

- Job Creation Opportunities During a Recession

- State Venture Capital Funds

- Encourage Technology Transfer and Commercialization

- Strengthen Industry Partnerships & Clusters

- Clean Energy Industry Support

- Conclusion

Job Creation Opportunities During a Recession

While policymakers might despair of encouraging new job creation during a recession, the seeds of future innovation and growth are often sown during recessions, as entrepreneurs analyze the failures of the previous boom and launch new ventures.

In fact, well-over half of the Fortune 500 list of top companies and just under half of Inc. magazine's list of top small firms were founded during recessions or bear markets on the stock market, according to a 2009 Kauffman Foundation study. Unemployment often encourages people to found their own firms during recessions, so making sure they have the support to thrive is critical. New immigrants are an especially strong source of such job creation-- thirty-one percent of the engineering and technology companies founded from 1995 to 2005 had an immigrant as a key founder.

Innovation Economics versus Neoliberal Economics: Notably, innovation and entrepreneurship in states seems to have little to do with low taxes or weak regulatory protections for workers and consumers. While the same right-wing economic pundits who supported the bubble economy continue to promote the low tax, weak regulation line for state economic development, the reality is that innovation in states actually requires high state investments and engagement for success.

The Information Technology and Innovation Foundation compiles a State New Economy Index to measure how much states have moved towards generating high-value "knowledge jobs" likely to survive in global competition, built export-oriented manufacturing and services, sustained fast-growing "gazelle" firms and moved their people and firms into the digital economy with a high percentage of jobs in high-innovation technology sectors. States ranking high on the index included high revenue, high state-investment models such as Maryland, Washington, and Massachusetts, which generally had higher growth in state per-capita incomes between 2002 and 2006 than many supposed "low tax" states that often fail to create long-term high-value jobs.

Instead of chasing after "low road" employers looking for weak labor standards -- which such firms can find even more easily overseas -- long-term job creation in the United States is dependent on investing seriously in high-innovation environments.

Resources:
Kauffman Foundation - The Economic Future Just Happened
Information Technology and Innovation Foundation - 2008 State New Economy Index
Kauffman Foundation - Better, Faster, Cheaper: The New Bootstrap Job Creator"

State Venture Capital Funds

There is a critical role for states to take as funders of innovation, especially at the early stage of firm development when private sources of capital are especially reluctant to step up these days. The National Venture Capital Association reports that venture investing in early-stage businesses is down 71 percent over the last 12 months. This has created a funding “gap” that is preventing the growth of small businesses, and subsequently hurting job creation.

Fortuitously, states for the last decade or so have been creating a wide array of innovative state-backed venture capital funds and supporting early-stage "angel" investments to get firms off the ground, so states increasingly have the tools in place to promote investments in innovation from the earliest stages.

State Venture Funds: Instead of merely handing out tax credits or subsidies with no direct return to the taxpayers, states are increasingly making direct equity investments in local firms-- a tool that not only promises payback to taxpayers if firms become profitable, but also creates greater accountability for the public funds invested.

As of 2008, states had over $2.3 billion invested in state-supported venture capital funds -- see this state-by-state chart of various kinds of state funds, courtesy of the National Association of Seed and Venture Funds (NASVF) . A few examples:

Indiana Future Fund: The Indianapolis Star has described the Indiana Future Fund as "the life blood of 14 Indiana life sciences companies, and it continues to provide the foundation for Indiana's venture capital growth." The IFF helped bring in more than $160 million to Indiana start-ups from private venture capital firms across the country.
Start-Up Kentucky uses public funding to provide seed capital investments for high-tech start-ups in the state.

In Illinois, the Governor this year has proposed tools to help small businesses thrive, such as bolstering start-up and micro-businesses by creating Angel Investment Tax Credits and expanding venture capital funding for seed and early-stage firms.
Florida has set aside $250 million of its $110 billion pension fund for awards of between $5 million and $20 million to growing later-stage life-science and other tech companies. That money will come from the state-created Florida Growth Fund, a venture capital fund managed by Philadelphia private equity firm Hamilton Lane.

Supporting Angel Investments: Since many traditional venture capital firms now only invest in more established firms, start-up companies at the earliest steps of formation often have few options for finding capital. States increasingly are stepping up to support so-called "Angel capital" - the capital invested by (usually) wealthy individuals in a region’s businesses--as a key part of supporting entrepreneurship. States can help encourage networks for local investors to work together and jointly support start-ups in their states through "Angel Networks":

The Wisconsin Angel Network, part of the Wisconsin Technology Council, is funded for two years with $300,000 from the Wisconsin Departments of Commerce and Financial Institution and the Wisconsin Technology Council.
Washington: The WTC Angel Network was formed with a $250,000 grant from the United States Economic Development Administration that was matched by the Washington Technology Center (WTC).
Pennsylvania: The Pennsylvania Angel Network, a nonprofit organization, was begun with $350,000 from the Pennsylvania Department of Commerce and Economic Development to fund its first two years of operations.

Resources:
National Governors Association - State Strategies to Promote Angel Investment for Economic Growth
NASVF - U.S. State-Supported Venture Capital Funds

Encourage Technology Transfer and Commercialization

Government funding of basic research has been the wellspring for innovation for years, from the government's creation of the Internet, funding for life sciences at universities, to green technology in recent years.

Federal, state, university, and nonprofit investments in R&D play a crucial role in promoting innovation: for example, in 2006, 77 of the 88 U.S. companies that produced award-winning innovations were beneficiaries of federal funding.

While quite a bit of funding for innovation comes from the federal government, the Information Technology and Innovation Foundation report notes that "The challenge for...states is to continue to find ways to translate these inputs into commercial outputs in their states." They are making progress. Between 1991 and 2004, the number of patent applications filed by United States universities increased from 13.7 applications per institution to 57.8, licensing income increased from $1.96 million per university to $7.06 million, and new university-based start-ups increased from 212 in 1994 to 462 in 2004.

And state governments are increasingly seen as key partners for start-up firms looking to commercialize technology. With venture and angel investors becoming scarcer in the recession, Entrepreneur Magazine has spotlighted universities and government-backed business incubators as a key tool for start-up businesses to find help in getting investments.

Overcoming the "Valley of Death": In a recent report, Excell Partners, a seed-stage venture capital fund with ties to the University of Rochester, noted New York state fares well in attracting billions of federal research dollars for its universities. But the state can do more to capitalize on business opportunities that emerge from the research, by helping firms at the earliest level of development before they are generating revenue, filing patents and assembling management teams. States can help firms at this early development point, what analysts call the “Valley of Death,” as firms move from university spinoff to early-stage revenue-generating company, since venture capitalists only tend to take an interest once revenue starts to be generated.

Dedicated Technology Transfer Investments: By concentrating investment funding on commercialization of university and other basic research technology, states can help turn research into viable business models.

Pennsylvania’s Ben Franklin Technology Partners, established by the Pennsylvania General Assembly 25 years ago, has served as a statewide resource for technology commercialization for entrepreneurs. Since its inception, it has invested in 3,000 companies in the state, often at their earliest stages of development, where state investments helped them secure additional private angel and venture capital investments. A recent report estimated the institution boosted the state economy by $9.3 billion between 2002 and 2006 and helped create 32,382 "job years" that would not have existed without it.
Since its creation by the state, the Maryland Technology Development Corporation (TEDCO) has provided direct capital funding of $7.9 million to 132 companies to assist tech transfer from state universities. That initial investment has helped leverage additional funding from angel and venture investors, federal awards and other resources exceeding $298 million for those Maryland companies. For five years, TEDCO was recognized by Entrepreneur magazine as the most active early-stage investor in the nation, beating out all private sector and other institutional funds as the most active early stage funder of entrepreneurs.
Similarly, by distributing $33 million in economic development funding over the last five years, the Kansas Bioscience Authority (KBA) has helped the state become a national leader in biosciences, creating 1,164 jobs, encouraging $110 million in capital improvements, supporting research worth $44 million and attracted an outside equity investment of $29 million. More than five years ago, the state Legislature enacted the Economic Growth Act, giving the KBA $580 million over 15 years which helped the state attract a $650 million federal lab and helped launch a massive campaign to garner the prestigious National Cancer Institute designation for the Kansas University Cancer Center.

Technical Support for Tech Transfer: Beyond direct financial investments, states can make a difference just by providing technical assistance to entrepreneurs looking for help in launching technology start-ups. For example, the University of Oklahoma Office of Technology Development is working with the private non-profit entrepreneurial consulting and services firm i2e to speed tech transfer and create start-up companies around OU technologies. Florida's Institute for the Commercialization of Public Research received $600,000 this fiscal year to link entrepreneurs with investors and companies to commercialize technologies based on publicly-funded research. However, Florida's refusal to raise new revenues means that lawmakers may fail to revive a $250 million economic development fund that helped the Sunshine State to attract six research institutes before it was eliminated last year through budget cuts.

Business Incubators and Science Parks: Other key support states offer are physical and institutional spaces for entrepreneurs to setup shop until they are ready to be independent. 300,000 workers in North America are employed at a university research park and generate an additional 2.57 jobs in the broader economy, according to a report by the Association of University Research Parks. These research parks encourage businesses to take advantage of university research assets and employ university graduates, thus helping to nurture start-up firms and ideally integrate them into the broader local economy.

A recent study for the U.S. Department of Commerce: Economic Development Administration found that business incubators create up to 20 times more jobs than traditional infrastructure projects, and they do so at a fraction of the cost: $144 to $216 for each incubator-related job, compared with $2,920 to $6,872 for construction-related jobs.

Resources:
Pennsylvania Economy League - A Continuing Record of Achievement: The Economic Impact of Ben Franklin Technology Partners 2002-2006
U.S. Department of Commerce, Economic Development Administration - Construction Grants Program Impact Assessment Report
Information Technology and Innovation Foundation - 2008 State New Economy Index
Batelle and the Association of University Research Parks - Characteristics and Trends in North American Research Parks

Strengthen Industry Partnerships & Clusters

Beyond supporting individual technology firm start-ups, states are increasingly looking to support interrelated "clusters" of firms that reinforce innovation in a region around specialized industries, much as the car industry grew up in Detroit, the film industry in Los Angeles, finance in New York City, and as a paradigm of the high-tech economy, Silicon Valley became a source of ongoing computer-related innovation.

States can play a critical role in promoting such clusters beyond supporting university research and funding new start-ups by identifying key local assets, facilitating relationships among firms, deepening the talent pool, and encouraging investments that reinforce those cluster needs—a point emphasized by the National Governors Association in their report, Cluster-Based Strategies for Growing State Economies. States need to avoid endorsing the latest technology fad and handing out tax credits without real returns or accountability provisions. Instead, they need to carefully assess their own local strengths and support the specialized industries that can give their regional businesses a unique advantage in the global economy.

Pennsylvania-- an Innovation of Industry Partnerships: As Good Jobs First notes in a recent report, “ Pennsylvania, by virtue of its longstanding programs to foster early-stage companies, its new efforts to integrate its workforce strategy... through training consortia—'Industry Partnerships'—linked with key regional clusters...and to broadly diffuse the adoption of process technologies in manufacturing production" appears to have one of the most balanced approaches in promoting its high-tech economy.

In Pennsylvania, the Strategic Early Warning Network (SEWN), created by the non-profit Steel Vally Authority under a mandate from the State of Pennsylvania back in 1993, created a system that saves firms through early intervention.

The key is not to wait for a mass layoff notice, but to establish programs that monitor key sources of business information for economic danger signs that can predict plant closures -- and proactively allow states to reach out to firms in trouble and implement response and prevention strategies.
SEWN works with firms on everything from financial restructuring to dealing with owner succession issues to cost management to promoting new labor-management cooperation to improve productivity.
Back in early 2008, SWEN targeted a large number of small auto suppliers in the state, employing 23,000 workers in Pennsylvania, who SEWN knew would be facing a crisis with the large scale cutbacks by the Big Three automakers.

Beyond short-term interventions, Pennsylvania has built 90 Industry Partnerships (IPs) to promote longer-term strategic cooperation among regional firms. The IP program has engaged more than 6000 businesses. Main goals have been to connect training and education to the needs of industry sectors, help companies adopt high-performance organizational approaches, and expand opportunities for workers in those industries. The industry partnership program has been supported by $5 million in state funds to identify industry clusters and build the IPs in the first place, plus an additional $15 million for training through the IPs.

Other Efforts in Building Industry Partnerships: The National Fund for Workforce Solutions is a a new collaboration to encourage more public support for industry partnerships across the nation.

SkillWorks in Boston is a collaborative of local philanthropies, the City of Boston and the Commonwealth of Massachusetts that is working with employers in the regional economy to upgrade the workforce in the region.
Baltimore Alliance for Careers in Healthcare is designed to map careers for seven area hospitals, provide career coaching to reduce employee turnover and provide entry-level and bridge programs to expand the pipeline of underrepresented populations into the industry.
Washington State Industry Skill Panels are public/private partnerships of business, labor and education, funded by the state Workforce Board and convened by regional Workforce Development Councils in order to provide workers with better skills, employers with more efficiency and less turnover, and address the educational needs of key industry clusters in the states. Washington has seven active ISPs, including Building Manufacturing and Regional Advanced Manufacturing.

Resources:
Keystone Research Center - Pennsylvania's Industry Partnership Strategy
Steel Valley Authority (SVA) - Early Warning and Layoff Aversio
Seattle Foundation and SkillUp Washington - Creating Stronger Workforce Partnerships In Manufacturing
National Fund for Workforce Solutions - The Principles of the National Fund for Workforce Solutions and Their Implications for Public Policy
National Governors Association - Cluster-Based Strategies for Growing State Economies

Clean Energy Industry Support

Building a green economy is one of the largest areas of entrepreneurial energy these days and states are designing a wide range of programs to encourage firms in their states to become leaders. Since energy savings are an inherent source of potential revenue, the opportunities are large, but the need for technical, regulatory and financial assistance are also clear. The following are a few of the programs states are promoting in this area, although the Apollo Alliance extensively tracks clean energy programs in the manufacturing sector:

New York: Green Jobs/Green Homes NY: The passage of Green Jobs/Green Homes NY produced a job creation program that will foster energy savings and revitalization of distressed areas. The program will create an estimated 14,000 jobs and reduce energy costs for about 1 million homes and businesses across the state. Using an innovative revolving loan fund, the program will “provide up to $13,000 for residential homes and $26,000 for businesses to retrofit for increased energy efficiency.”
Pennsylvania: Building on the state's industry partnerships discussed above, this program will concentrate on upgrading workforce skills by developing industry-recognized credentials, participating in curriculum development at all levels, and helping workers respond to changing industry needs. This will involve multiple partnerships, including a 3 Rivers Clean Energy Partnership, which helps train workers for jobs in the clean energy industry and the Electronics Manufacturing Partnership, which helps firms become more environmentally conscious.
Washington: Lean and Green Assistance Program: Last year, the Washington Department of Ecology proposed a Lean and Green Assistance Program aimed at improving the environmental performance and provide technical assistance to companies across the state. From 2007 to 2008, three Lean and Environmental pilot project were undertaken, effectively saving businesses over $1.5 million and reducing pollution by more than 800,000 pounds according to the EPA.
Kansas SB 108 provides for $150 million in bonds to be issued by the state’s development finance authority to fund manufacturing projects through long-term loans to eligible wind and solar energy businesses in amounts not exceeding $5 million per project. Companies’ tax withholdings will be placed in a specially-created state economic revitalization fund during the period of the loan to pay off the principal and interest of the loans.
Michigan Manufacturing Diversification Program is a loan program backed by the state to help parts of the auto supply chain retool to join the clean energy supply chain, from helping companies eliminate chemicals from processes that clean steel for manufacturing to funding re-purposed factory conveyor belts for solar panel manufacturers.
Wisconsin: The Clean Energy Business Loan Program uses $55 million in ARRA State Energy Program to fund low-interest loans to businesses that promote major renewable energy production projects, the manufacture of clean energy products, advanced manufacturing of clean energy components, retooled supply chains, and energy efficiency programs at firms.

Conclusion

Job creation is not a single program for state policymakers, but a nexus of commitments, from fundamental investments in education and infrastructure to creating an environment where innovation is supported every step of the way from university research funding to investing in first-stage commercialization to building industry partnerships that can sustain networks of interdependent firms in a sector. The good news is that recessions have often been the birth point for some of the most important current firms in our economy, so the right decisions today could mean decades of economic growth in the future.

State Job Creation Strategies Part I: Finding the Money and Investing in Human Capital and Physical Infrastructure

Nathan Newman — Tue, 19 Jan 2010 12:59:28 -0500

The fundamental challenge in this recession is that the growth that preceded it was a mirage. Bubble era borrowing created a network of financial jobs, real estate jobs and construction jobs that collapsed with the end of the bubble. Many of those jobs will never return.

An extremely high proportion (75%) of job losses in this recession are permanent rather than temporary. States will need to nurture completely new industry sectors and the infrastructure to support those jobs, while the jobless will need retraining in new skills to participate in those sectors.

The Private Sector Can't Do it Alone: As the Economic Policy Institute wrote recently, "it is likely that unemployment will remain above 8% even two years from now in the absence of bold and decisive action to create jobs." With the credit crunch and the reduction in consumer demand, small businesses are experiencing tough times. In 2008, for example, 43,500 businesses filed for bankruptcy, up from 28,300 businesses in 2007 and more than double the 19,700 filings in 2006.

What's needed: As this Dispatch will highlight, the first step is to fund jobs that support long-term economic competitiveness, notably by investing in people and physical infrastructure. While the economic climate for profit-making business opportunities is more limited, investments in education, health care, transit and energy efficiency can create immediate jobs while strengthening building blocks for long-term growth.

Next week's Dispatch will be a second part of this series on how states can nurture startups, strengthen existing industry sectors, and promote green jobs in their states.

Mobilizing for a Federal Support for Jobs and State Fiscal Relief: As we highlighted two weeks ago, a critical part of job creation will be a new round of federal job creation and state fiscal relief. We are asking state legislators to sign onto a letter to promote this job creation plan at www.progressivestates.org/jobcreation or by emailing jobcreation@progressivestates.org. Advocates can sign onto a similar letter for organizations or use our handy online tool to contact their state legislators to let them know about the job creation letter and to encourage them to sign.

Resources:
Progressive States Network - Take Action: Additional Federal Job Creation and State Fiscal Relief Needed
Economic Policy Institute - American Jobs Plan: A Five Point Plan to Stem the U.S. Jobs Crisis
Center for Labor Market Studies (Northeastern Univ.) - The Great Recession of 2007-2009: Its Post-World War II Record Impacts on Rising Unemployment and Underutilization Problems Among U.S. Workers

Direct Public Money to Investments in Economic Growth

In the current economic and fiscal crisis, finding the funds for long-term investments is a challenge, but those investments will deliver both short-term jobs and long-term economic growth to turn state economies around. States need a balanced approach of revenue increases, bonds for long-term investments and tapping existing sources of state capital like state pension funds to marshal the capital needed for economic recovery.

Raise Revenues, Don't Cut Public Investments: The recession has made clear the hollowness of the bubble economy in many states, especially in some of the low-tax, low-investment Sunbelt states touted by anti-tax forces as exemplars of economic growth.

When measuring long-term economic competitiveness, states with some of the highest marginal tax rates on individuals -- from New York to Maryland -- were supporting some of the most innovative "new economy" industries in the country, according to a 2008 analysis by the Information Technology & Innovation Foundation. As we detailed last year, progressive tax increases to fund economic recovery are the better alternative to budget cuts. Many needed investments are in the fundamentals of education and infrastructure as well as in the nurturing of new sectors where private capital is unlikely to effectively step in. Increased tax revenue to fill in government and private sector gaps in investment is clearly needed.

Use State Bonding Authority: One obvious source for funding long-term growth projects are new bonds that can be paid back with the tax revenue yielded by greater economic growth. Especially where tolls or energy savings will directly return revenue to the state from bonded investments, legislative leaders are aggressively pursuing new bond investments.

The federal ARRA recovery plan provides a two-year 35% tax credit for state Build America Bonds, which is yielding record low interest rates for states that are issuing bonds. For example, Washington state received an interest rate equivalent to 3.52 percent on $500 million in bonds issued in October. To help municipal governments take advantage of lower interest rates and lower issuance costs, nearly a dozen states have created "state bond banks" to pool the loans of local governments.

A few examples of recent state bond discussions around the country include:

The Ohio House of Representatives has approved placing a $950 million bond issue on the May 4th ballot to renew for another five years the state’s largest economic development project, the Third Frontier, which invests in research and commercialization of technology in five industries sectors and created 41,300 jobs from 2003-2008.
Last week, the Washington State House Capital Budget Committee approved sending $861 million Jobs Act Bonds to voters in November to fund schools and colleges to fund energy upgrades. The sponsor, Rep. Hans Dunshee, estimates it would create 38,000 jobs and generate energy savings that will cover much of the interest costs.
Minnesota legislative leaders are proposing $1 billion in bonds to build and repair facilities around the state.

Use Pensions Funds for In-State Investments: Unwilling to rely on uncertain global investment markets to fuel economic growth, states are increasingly choosing to directly invest in local state businesses. Instead of giving away corporate welfare and subsidies, states can offer needed capital to create a financial stake in firms. If these businesses are successful, they return equity to taxpayers that can be reinvested in other projects.

One study found that the California Public Employees' Retirement System's in-state investments fed an estimated $15.1 billion into in-state economic activity in 2006 and created 124,000 jobs-- more jobs than the construction or motion picture industries. Other examples of in-state pension investments include:

Florida Governor Charlie Crist recently signed an economic stimulus plan for the state that redirects $1.95 billion of the state's pension fund into direct investments in Florida's economy.
Washington state held $1.4 billion in Washington-based investments at the end of 2008, using the money to leverage additional capital from other sources to invest in the state.
New York held $403.6 million as of March 2009 through its Common Retirement Fund with another $500 million available to invest in New York-based businesses.
The Invest Michigan! Fund features The Michigan Opportunities Fund and the Growth Capital Fund and is capitalized with $300 million from the state's pension fund.
In Indiana, the public pension funds collaborated with state universities and various health-based companies to launch the Indiana Future Fund, an investment fund designed to benefit Indiana companies, especially in the life sciences and high technology arena.

Avoid Privatization as a Funding Source: Given budget deficits, some states are being lured by the supposed "free lunch" offered by selling or leasing public assets to private firms with the promise of upfront private investment. Unfortunately, as we have detailed repeatedly (see here and here and here), privatization of public assets are inherently likely to ripoff the public to the benefit of private interests.

As detailed in a U.S. PIRG report last year, since governments can issue tax-free bonds at lower rates than private investors, "deals based on private capital are inherently more expensive than public financing." In 2008, Missouri was planning to use some form of privatization with investors to fund an ambitious plan to repair or replace 802 bridges. Now, the Missouri DOT is funding the entire project through the sale of government bonds.

Don't Waste Money on Direct Subsidies to Businesses: One general caution for states is to limit grants, tax credits and other giveaways to business. Instead use either direct equity investments or loans that are repaid in order to replenish the supply of public capital over the long-term.

States waste money competing for firms to cross the border from another state, rather than on fostering entrepreneurship and new jobs. A recent Good Jobs First report on high-tech deals by states notes that many are extremely costly. The poster children for bad deals are North Carolina's large subsidies to Dell Corporation, who took the money, but then sent the 900 jobs off-shore four years later and New York giving microchip maker AMD (later Global Foundries) $1 million in taxpayer funds for each job being created by the firm upstate. As the report states:

Tax reductions, exemption or credits “exert a very small marginal influence on corporate investment decisions because other cost factors such as labor, occupancy and other key inputs are far larger than taxes (or tax breaks)… For the vast majority of companies, tax breaks are windfalls, not determinants, and are therefore wasted.

Redeploy Wasted Corporate Giveaways to Real Public Investments: If states do a thorough review of ineffectual subsidies, costly contracting out, and tax credits, they can generate additional revenue that can be used for more effective job creation efforts. Progressive States Network has worked with allies to outline model Corporate Transparency in the State Budget legislation and set up a supporting campaign webpage to help achieve that goal.

As the rest of this Dispatch emphasizes, states can better invest scarce public dollars in upgrading the quality of the workforce and infrastructure, rather than engaging in costly bidding wars with other states for jobs.

Resources:
Information Technology & Innovation Foundation - The 2008 State New Economy Index: Benchmarking Economic Transformation in the States
U.S. PIRG - Private Roads, Public Costs: The Facts About Toll Road Privatization and How to Protect the Public
Council of Development Finance Agencies - State Bond Banks: Municipal Borrowing Made Easy
CALPERS - CalPERS - An Economic Engine
Good Jobs First - Growing Pennsylvania's High-Tech Economy: Choosing Effective Investments
Progressive States Network - Corporate Transparency in State Budgets

Invest in People- the Key Engine of Growth

In a global economy where the quality of the workforce increasingly determines the standard of living, investing in an educated and healthy population is key to promoting state economic growth.

Invest in Education: One of the largest successes of the recovery plan has been preventing massive teacher layoffs and creating or preserving 250,000 education positions. Additional federal help will be needed to stave off reductions in the coming years, but it is a marked success that despite the largest downturn in post-war history, the core educational infrastructure of our nation has been preserved.

Why this is so important is highlighted by a number of recent studies that emphasize that investments in education have clear dollar returns to state governments.

Each new high school graduate yields a net public benefit of $127,000 or 2.5 times the cost of needed public investments, according to a Columbia Teachers College report. In fact, cutting in half the number of high school dropouts would yield $45 billion in extra tax revenues. High school graduates themselves will earn $117,000-$322,000 more in their lifetimes than dropouts, with female college graduates, for example, earning $800,000 more than dropouts.
As we detailed last spring, early education investments in particular show long-term economic payoffs. A recent Cornell University study found that funds spent in the early education sector have more stimulative effect on the economy than most other spending. Early education programs help parents take advantage of opportunities in the workforce and child care improves parents' productivity at work. One study by the business-backed Committee for Economic Development, estimated that for every dollar invested in preschool, there was an expected return of $2 to $4 in future societal benefits.

Part of youth education is giving them entry-level job training. The federal recovery plan helped revive summer youth job programs across the country, offsetting massive youth unemployment in the private sector. The Idaho Labor Department sponsored its first youth employment program in over a decade.

Support Worker Retraining: While training can't create jobs, it can ensure that workers who are unlikely to be reemployed in their old industry sectors have a chance to be reemployed somewhere else -- and that vibrant industries have the skilled workforce needed to expand in a state.

A Michigan Council for Labor and Economic Growth study found that a five percent increase in college-educated adults would boost economic growth by 2.5% over ten years and real wages by 5.5%. Similarly, studies show that just helping workers get their GED significantly boosts their employment in the long-term. Notably, a study by the National Skills Coalition (formerly the Workforce Alliance) found that even as unemployment mounted in summer 2009, 60% of employers still had trouble finding qualified applicants for the vacancies they did have -- emphasizing the lack of fit in skills between those laid off and the sectors where growth is likely to occur.

In our Dispatch Averting Layoffs and Revitalizing the Manufacturing Economy, we highlighted a range of best practices through which states can both work to avert impending layoffs and use rapid-response to help employees get new jobs or enter retraining programs as quickly as possible. These include Rapid Response programs used by some states to on-site contact with employees before layoffs, accessing training programs like Trade Adjustment Aid, working with communities to tailor training and placement programs, as well as promoting Peer Networks to train groups of workers during layoffs to collect information from fellow workers, help connect them with community services, promote job referrals, and work with community leaders.

Fund Health Care and Support the Safety Net: Health care and other safety net spending is not just a public expense; it is also itself an investment in economic growth. A healthier workforce means greater economic productivity and more years of productive labor. And the health care industry is itself a source of good quality jobs.

A few years ago, a Commonwealth Fund study estimated that labor time lost due to health reasons totalled $260 billion per year. And unhealthy workers often have lower productivity at work. In fact, because people are living and working longer, long-term economic growth is likely to be far higher than many current government projections, according to a recent study by North Carolina State University. "Spending on health care productivity, biomedical research and universal health care should be considered an investment that will eventually lead to increased economic growth," argues co-author Dr. Al Headen. The payoffs are likely to be more taxes paid, more consumer spending and far lower public expenditures on programs like Medicare than currently assumed.

Another remarkable accomplishment of the federal-state partnership in the last year has been not only preservation of basic health care spending for low-income families, but the expansion of SCHIP programs for children and COBRA subsidies for the unemployed. This is in sharp contrast to the recession in the early part of this decade when literally millions of people lost publicly funded health coverage. Maintaining health programs will continue to be a challenge for states -- and new federal funds are a key part of that solution -- but it should be considered a key part of long-term investments in a healthy workforce.

Integrate New Immigrants into the Economy: As we emphasized last week, keeping an estimated 12 million people in the shadows of the economy is bad for them, bad for native workers and bad for the U.S. economy. A recent report estimated that immigration reform that integrates new immigrants into the U.S. economy would create $1.5 trillion in added GDP over ten years and newly legalized workers would increase tax revenues by up to $5.4 billion in the first three years. Another study by the CATO Institute found that legalization would boost the incomes of U.S. households by $180 billion annually by 2019.

Across the board, the goal should be to maximize the productivity of all workers in our economy and produce the most economically competitive workforce in the world.

Resources:
Progressive States Network - Early Education Investments: Economic Importance and Policy Implementation
Columbia Teachers College Center for Benefit-Cost Studies of Education - An Excellent Education for All of America's Children
Workforce Alliance - Job Training is Key to Success of Jobs Bill: Analysis and Recommendations
Progressive States Network - State Action for the Unemployed
National Employment Law Project - Rapid Response Training Overview
Michigan's Human Resource Development Institute - Peer Networks
Commonwealth Fund - Health and Productivity Among U.S. Workers
Council for Labor and Economic Growth - Transforming Michigan’s Adult Learning Infrastructure
Center for American Progress and the Immigration Policy Center - Raising the Floor for American Workers: The Economic Benefits of Comprehensive Immigration Reform
Cato Institute - Restriction or Legalization? Measuring the Economic Benefits of Immigration Reform
North Carolina State University - Study shows health care spending spurs economic growth

Creating a 21st Century Infrastructure in the States

“As a country, we’re deluding ourselves if we think we have put enough into infrastructure," notes the Urban Land Institute. "We’ve been under-investing for 30 years.” As a percentage of gross domestic product, infrastructure spending actually has been declining since 1959. A 2009 American Society of Civil Engineers (ASCE) assessment calculates that $2.2 trillion is needed for infrastructure repairs and upgrades just in the next five years. In contrast, China has committed $259 billion to its plans for building the world's largest high-speed rail system -- with trains going up to 218mph -- and plans to add another half trillion dollars in the next few years for a total investment to $730 billion by 2012. That's more than the entire 2009 federal recovery plan.

The federal recovery plan had $132 billion for infrastructure of all kinds, from roads to transit to smart energy grids, but that's a tiny part of what is needed for the U.S. to retain global competitiveness.

More and Better State Transit: Focus on repairing existing infrastructure, strengthen gateway infrastructure in ports and cities which are the focus of global shipping and travel, and reconfigure suburbs to better integrate regional economies.

Public Transit Investments are a Key Job Creator: One clear lesson from the recovery plan, according to a recent report, is that money spent on public transit yields nearly twice the jobs compared to similar amounts spent on highway projects. This result is due to the fact that public transit spends less money on real land costs and supports vehicle manufacturing and maintenance jobs. It also especially helps low-income workers save money in getting access to jobs where transit integrates communities. One innovative, lower-cost transit approach is bus rapid transit (BRT), which builds separated lanes for larger buses that can move at speeds approaching subway lines. Pioneered in Ottawa, Canada and Adelaide, Australia, similar systems are spreading to Latin America, China, India and Mexico. In the U.S., Los Angeles and Boston have adopted BRT principles and Chicago will be inaugurating BRT service in 2010.
Integrate transit with land use planning: Building transit in the middle of sprawl does little to ease congestion; instead transit funding needs to be linked to development planning that integrates transit with access to jobs and retail. The Denver region is a notable success story in using transit and land use zoning to reclaim its urban downtown, adding a 122-mile light rail system, instituting a Bus Rapid Transit system to link to nearby Boulder, and linking the urban core to multiple town centers in the surrounding suburbs.
Strategically Apply User Fees to Fund Infrastructure: The Urban Land Institute emphasizes that more of the costs of transit infrastructure will inevitably need to be borne by consumers in the form of higher gas taxes, tolls and congestion pricing in urban areas. This needs to be combined with targeted tax relief to ease the burden on low-income families. The reality is that gas taxes in the U.S. are far smaller than European economic competitors, who use those revenues to fund far more robust transit upgrades across their continent.

Broadband and Smart Grid Investments: Despite the U.S. playing a key role in creation of the Internet, a study by the International Telecommunications Union found that the United States now ranks 17th in global broadband penetration. Lack of affordable broadband access undermines the international competitiveness of our communities and workforce. The $7.2 billion of direct broadband funding in the federal recovery plan and pockets of other funding for digital infrastructure throughout the ARRA also emphasized broadband as a catalyst for spurring job creation and economic growth.

A number of state legislators have created Broadband Strategy Councils to focus on using those and internal state funds to increase access to and adoption of affordable broadband. Beyond investing in physical infrastructure, increasing digital literacy is a key investment as well. During the 2008 legislative session Washington state passed SB 6438, which created a statewide high-speed Internet development process and established the Community Technology Opportunity Program (CTOP) that will provide resources for capacity-building and grant-giving to Community Technology programs that provide hands-on technology access and training to residents.

Water Systems: Many cities and regions are using old water systems desperately in need of repairs and upgrading. Nationwide, the U.S. Environmental Protection Agency (EPA) projects a $224 billion funding gap between 2000 and 2019 between what states are spending and federal requirements for water quality. Part of the solution are new policies to reduce wasteful water use, since per capita domestic water consumption in the U.S. is more than twice as much as most global competitors-- and more than four times the use by citizens of Great Britain and China.

In California, where some water bills can approach $500 a month, jurisdictions began to require retrofitting homes on resale. Development needs to be restricted in areas lacking water systems, since such growth just dumps costs on government and leads to underfunding water systems in established areas.

Infrastructure Projects already approved: Some notable examples of integrated infrastructure investment programs around the country include:

Illinois Department of Transportation has $3.1 billion in committed projects in 2009. In addition, Illinois is creating a major “inland port” with the development of Union Pacific's new intermodal facility in Joliet that will create an estimated 7,000 jobs.
Iowa's I-Jobs program approved last year has created a three-year, $830 million investment in Iowa’s infrastructure using existing gaming revenue including public improvements, community colleges, veterans homes ($285 million), disaster recovery and prevention ($165 million), improving transportation infrastructure ($115 million), rebuilding universities ($115 million), improving environment and water quality ($80 million), and enhancing telecommunications and renewable energy ($35 million).
Oregon's Job and Transportation Act invests more than $1 billion to address all sectors of Oregon's transportation system, including roads, bridges, bike and pedestrian facilities, mass transit, railroads, ports and airports. Green aspects of the bill included multi-modal transportation, increased transit funding, planning for greenhouse gas reduction scenarios, a congestion pricing pilot project, and an urban trail fund for non-motorized vehicles and pedestrians.

The key to long-term growth is moving infrastructure investments from one-off projects towards integrated investments that connect them into a holistic plan for growth. As Robert Puentes of the Brookings Institution said this past year at a Congressional hearing, "the problem is that there is too little integrated decision making that crosses disciplines and joins-up solutions in infrastructure investments." To achieve maximum effectiveness, transit and other infrastructure investments need to be coordinated not only with each other, but also with land use and housing decisions.

Next Week: State Job Creation Strategies Part II: Supporting Innovation, Industrial Clusters & Green Job Creation

Resources:
Urban Land Institute - Infrastructure 2009: Pivot Point
American Society of Civil Engineers - Report Card for America's Infrastructure with State and Local Report Cards
U.S. PIRG, Smart Growth America, CNT - What We Learned from the Stimulus: And how to use what we learned to speed job creation in the 2010 jobs bill
Progressive States Network - Making Broadband a Key Part of States' Economic Recovery

Making Broadband a Key Part of States' Economic Recovery

PSN — Mon, 16 Mar 2009 15:06:57 -0400

Making Broadband a Key Part of States' Economic Recovery

Over 2,600,000 jobs were lost in 2008. Many of these jobs are in traditional sectors that are unlikely to return, so investing in both the infrastructure and job skills needed for a digital economy are critical to reviving long-term economic growth. Unfortunately, as acting FCC Chairman Michael Copps said last week, "[t]oo few consumers and small businesses in this country have the high-speed broadband they need.... We pay too much for service that is too slow.” To emphasize his point he highlighted a study by the International Telecommunications Union that found the United States now ranked 17th in global broadband penetration. Lack of affordable broadband access undermines the international competitiveness of our communities and workforce.

America has always realized the importance of investing in traditional infrastructure, such as roads, bridges, railways and waterways. These infrastructure systems have enabled the United States's remarkable economic growth of last century, and we have willingly financed their construction, maintenance and upgrades. With the recently passed American Recovery and Reinvestment Act of 2009, our nation has committed an unprecedented amount of money to initiatives aimed at improving our digital infrastructure. These initiatives focus on increasing access to and adoption of affordable broadband technology. Rick Wade, Commerce Department senior advisor and acting chief of staff, stated that "both Commerce and USDA’s broadband programs represent a critical component of the administration’s broader economic recovery program.”

As the $7.2 billion of direct broadband funding and pockets of other funding for digital infrastructure throughout the ARRA demonstrate, the Obama Administration sees broadband as a catalyst for spurring job creation and economic growth. Further, it is an integral tool to improve health care access, energy management, public safety and transparency; and a mechanism to increase educational, civic participation and social opportunities.

The Current Digital Divide: Unfortunately, as we become increasingly dependent upon advanced communication and information technologies, people with less access to broadband or with fewer digital skills become increasingly disadvantaged financially and have fewer opportunities. Currently, nearly 20 million Americans do not have access to a single high-speed Internet provider, and only an approximate 60 percent of American households subscribe to broadband service. Many of those who do not subscribe to broadband do so because they lack a comprehensive understanding of the benefits of broadband and how it can improve their lives. Others lack the necessary digital skills or the ability to afford broadband or related technology.

The 21st century has transformed our economy and broadband access and digital skills are now critical for the job search and application process, as well as a substantial number of employment opportunities. Additionally, access to and the ability to utilize high-speed Internet services is key to making telehealth opportunities a reality, using online government services and taking advantage of remote educational opportunities. Without that access, living standards in the U.S. will fall and inequality will rise.

States Taking Action: With new help from the federal government, states are increasingly taking action to bridge the digital divide -- creating policies to promote access to and adoption of broadband to ensure that a greater equality is created between the technological haves and have-nots. To increase access to and adoption of broadband while creating a more inclusive network, states should pursue two courses of action: (1) establish Broadband Strategy Councils and (2) support digital inclusion programs. Broadband Strategy Councils should be used to devise a strategic approach to broadband initiatives and ensure that broadband investments correlate with other state goals. Digital inclusion initiatives will help ensure all residents have access to broadband and the necessary skills and hardware to utilize the technology.

This Dispatch will outline how funds allocated in the ARRA aim to support broadband initiatives and how states can leverage broadband to create efficiencies, increase opportunities and begin to bridge a major resource divide in our country by implementing progressive broadband initiatives.

Table of contents
- Broadband and the Federal Recovery Plan
- State Broadband Strategy Councils
- State Digital Inclusion Campaigns
- Conclusion

Broadband and the Federal Recovery Plan

Under the legislation the NTIA was directed to:
• Award at least one NTIA grant to each state; • Dispense grants by September 30, 2010, but funds will continue to be disbursed up until two years after the grant is made. • Make awards on a “technologically neutral” basis. • Fund only projects that adhere to the Federal Communications Commission's Internet nondiscrimination and openness principles; • Promote projects that will "provide the greatest broadband speed possible;” • Consult with state governments to determine which areas are "unserved" and “underserved;” • Consult with states when determining how to allocate grants within that state; • Consider whether an application to deploy infrastructure in an area will increase the affordability of and subscribership to broadband, preferably to the greatest population of users in the area; • Consider if the initiative will provide the greatest broadband speed possible to the most users in the area; • Consider if the initiative will enhance service for health care delivery, education, or children to the greatest population of users in the area; and will not result in unjust enrichment as a result of support for non-recurring costs through another Federal program for service in the area; • Consider whether or not the applicant is a socially and economically disadvantaged small business; • Eligible services are not limited to end-user broadband services. It appears that backhaul, middle-mile, wholesale transit, tower services, are eligible projects. Grant applications must include, among other things, the following information: • A demonstration that projects receiving money will be substantially completed in two years; • A demonstration that an entity can meet the grant’s 20% matching requirement (the federal government will pay up to 80% of the cost) or is eligible for an economic hardship waiver; • An explanation of how any amount received under the program will carry out the objectives of the legislation and be used to an efficient and expeditious manner. Additionally, the law requires that, the project would not have been implemented, within the proposed timeframe, but for the federal grant; • Demonstrate, to the satisfaction of the grantors, that it is capable of carrying out the project or function to which the application relates in a competent manner in compliance with all applicable federal, state, and local laws.

Under the legislation the NTIA was directed to:

• Award at least one NTIA grant to each state;

• Dispense grants by September 30, 2010, but funds will continue to be disbursed up until two years after the grant is made.

• Make awards on a “technologically neutral” basis.

• Fund only projects that adhere to the Federal Communications Commission's Internet nondiscrimination and openness principles;

• Promote projects that will "provide the greatest broadband speed possible;”

• Consult with state governments to determine which areas are "unserved" and “underserved;”

• Consult with states when determining how to allocate grants within that state;

• Consider whether an application to deploy infrastructure in an area will increase the affordability of and subscribership to broadband, preferably to the greatest population of users in the area;

• Consider if the initiative will provide the greatest broadband speed possible to the most users in the area;

• Consider if the initiative will enhance service for health care delivery, education, or children to the greatest population of users in the area; and will not result in unjust enrichment as a result of support for non-recurring costs through another Federal program for service in the area;

• Consider whether or not the applicant is a socially and economically disadvantaged small business;

• Eligible services are not limited to end-user broadband services. It appears that backhaul, middle-mile, wholesale transit, tower services, are eligible projects.

Grant applications must include, among other things, the following information:

• A demonstration that projects receiving money will be substantially completed in two years;

• A demonstration that an entity can meet the grant’s 20% matching requirement (the federal government will pay up to 80% of the cost) or is eligible for an economic hardship waiver;

• An explanation of how any amount received under the program will carry out the objectives of the legislation and be used to an efficient and expeditious manner. Additionally, the law requires that, the project would not have been implemented, within the proposed timeframe, but for the federal grant;

• Demonstrate, to the satisfaction of the grantors, that it is capable of carrying out the project or function to which the application relates in a competent manner in compliance with all applicable federal, state, and local laws.

The American Recovery and Reinvestment Act allocates $7.2 billion to promote broadband programs. The majority of the funding will be used to increase broadband access in rural, unserved, and underserved areas. Additionally, funding is provided to support community programs that encourage broadband adoption in low-income communities, for initiatives that expand public community centers' capacity and to fund the development of a national broadband map.

The National Telecommunication and Information Administration (NTIA) and the Rural Utility Service (RUS) will be charged with distributing the grants and loans. Eligible grant applicants may apply for either or both the RUS and the NTIA grants, but if they are awarded funds by both agencies, only money from one agency can be used for a specific project. The NTIA will issue its first “notice of funds availability” in April to June of 2009, the second round would be between October and December 2009, and the third round between April and June 2010.

According to the Baller Herbst Law Group, in addition to funds appropriated directly for broadband, other funding streams in the ARRA may present substantial opportunities to use stimulus money to further broadband initiatives, if efforts are effectively coordinated ahead of time. For example, ARRA funds allocated for health information technology projects and smart grid initiatives could be leveraged to support broadband deployment.

National Telecommunications and Information Administration: The NTIA was allocated $4.7 billion in total. The majority of the NTIA funds, $4.35 billion, will be distributed to states, political subdivisions of states, municipalities, non-profits or private companies through the Broadband Technology Opportunities Program. In addition to grants aimed at increasing access to broadband, at least $250 million of the NTIA funds are set aside for competitive grants for programs that encourage sustainable broadband adoption, while at least an additional $200 million in grants are set aside for expanding public computer center capacity. It is important to note that the bill sets a floor, not a ceiling, for programs that focus on broadband demand. Another $350 million will fund the Broadband Data Improvement Act to support broadband inventory mapping and community initiatives. For more specific information regarding initiatives covered under the Broadband Technology Opportunities Program click here.

State role: States will likely play an advisory role to the NTIA in the distribution of grants since they have specific and unique knowledge on residents needs, existing programs, and how broadband can be integrated into long-term state goals. Grass-roots groups and any applicant applying for ARRA broadband funding should contact their state legislator and make them aware of the application they are filing.

Another role that will be imperative for states to play, although not laid out specifically in the ARRA language, is that of watchdog. Since many of the federal grants may be going to private companies, non-profits, or other non-government entities, it is important that the state ensures that selected projects reach the intended populations and are implemented in the public interest.

Rural Utility Service Grants and Loans: The Rural Utility Service (RUS) will appropriate $2.5 billion in grants and loans. In order to receive a grant from the RUS, 75% of the area being served must be rural and without sufficient access to high-speed broadband to facilitate rural economic development. Priority will be given to applications for broadband systems that will allow end users to have a choice of more than one service provider, to projects servicing the highest proportion of rural residents, and to previous borrowers or current borrowers under Title II of the Rural Electrification Act of 1936. For more specific information regarding what programs are eligible to receive RUS grants and loans click here.

States Taking Action Will Further Reform: The ARRA's commitment to use broadband to create efficiencies throughout many different sectors of society underscores the importance of state broadband legislation. State legislators across the country are taking action to spur strategic implementation of broadband initiatives and increase broadband adoption. Moving these policies across multiple states helps reinforce the message that we need to eliminate the digital divide. With broad and decisive enough action, states can help lead the way to even bolder federal reform. A key goal is to use these initiatives as a means to generate support for increased investment in broadband and and as motivation to leverage new broadband technologies to improve our economy, implement environmentally friendly and energy-efficient policies, and increase health care, education and social opportunities.

Baller-Herbst Law Group,The American Recovery and Reinvestment Act of 2009, Opportunities for Federal Grants, Loans and Other Support for Broadband Projects

Free Press - Accessing the Current Digital Divide Brochure

Leadership Conference on Civil Rights – Solving the Persistent Problem of the Digital Divide
OECD - OECD High-speed Internet Portal Household Census Information 2007
Educause White Paper - A Blueprint for Big Broadband
National Governors Association - States Take Action to Expand Access to High-speed Internet Communication
Progressive States Network, Guide to Broadband Provisions in the American Recovery and Reinvestment Act

Free Press, A Roadmap for Stimulus Success

U.S. Census

State Broadband Strategy Councils

Despite the clear and well documented benefits of broadband, many regions are still unserved or underserved by broadband providers. In order to ensure that states remain competitive in the 21st century, state legislators are creating Broadband Strategy Councils that focus on increasing access to and adoption of affordable broadband. Such entities can help leverage broadband technology across various sectors, such as government, health care, energy management and education to create efficiencies, save money, increase transparency and provide better services and increased opportunities.

Thus far in 2009, numerous states have introduced or considered implementing some form of a Broadband Strategy Council. A few examples of initiatives taking place across the country are:

MD: H.B. 1121, authored by Delegate Hucker, establishes a broadband strategy council to focus on increasing access to and adoption of affordable broadband and outlines specific broadband data to be collected and mapped. It includes accountability metrics if a third-party contractor is hired to collect and map the broadband data.
RI: H.B. 5396, authored by Rep. Rice, creates a broadband strategy council to study and recommend the adoption of high-speed Internet services and technology throughout Rhode Island for the benefit of the state's citizens and employers. This bill emphasizes that digital inclusion initiatives should be established as long term components of a community's offerings to its citizens and an ever-present vehicle to help Rhode Island meet a variety of economic, health care, environmental and educational goals.
OR: H.B. 3158, authored by Rep. Smith, establishes an Oregon Broadband Advisory Council focused on encouraging and supporting the deployment of broadband telecommunications services and reducing barriers to broadband adoption, especially within unserved and underserved populations. The council is tasked with encouraging coordination between different organizations and sectors that can leverage broadband to their advantage, such as, state agencies, workforce development training programs, healthcare providers and educational institutions.
IN: H.B. 1621, sponsored by Rep. Pierce, creates an Indiana Broadband Deployment Council to develop a strategy for expanding the deployment and adoption of broadband services in Indiana. Among other things, the council was tasked with increasing access to broadband in underserved areas, promoting affordable broadband service throughout Indiana, initiating and supporting the development of broadband services and resources, including establishing technology literacy and digital inclusion programs and establishing low cost hardware and software purchasing programs.
TX: S.B. 640, sponsored by Senator Ellis, establishes an Authority and Cooperation regarding technology infrastructure.
AK: H.B. 107, sponsored by Rep. Guttenberg, establishes the state Internet Access Authority and the state Broadband Task Force.
CT: H.B. 6426 aims to improve broadband access and enlists a public-private partnership to implement a high-speed Internet deployment plan that will ensure all Connecticut residents and businesses access to affordable broadband service and will increase technological literacy.

Any legislation establishing a broadband strategy council should require the council to:

Engage in long-term planning and establish clear deployment goals and accountability metrics: Councils should develop a statewide strategic approach to broadband deployment, including integrating broadband build-out with long-term state goals and creating metrics for succcess.
Promote cooperation across diverse stakeholders: Councils should consist of diverse members representing various stakeholders, experts, government and agency leaders who are able to develop a "big picture" build-out strategy that provides increased access to affordable broadband and protects the public interest. Additionally, councils should provide a forum for public/private collaboration that allows states to work with privately owned providers to expand services in underserved and unserved areas.
Help spur demand: Councils should create increased affordable access to broadband and encourage private corporations to act in the public interest. Under the terms of Minneapolis, Minnesota wireless project, which many consider the most successful municipal high-speed Internet program to date, the city is functioning as an "anchor tenant", paying $1.25 million a year for the city's own use of the network. Since the city agreed to be the “anchor tenant,” U.S. Internet built the high-speed network with no public financing. Additionally, U.S. Internet is providing a comprehensive set of community benefits that surpass negotiations by other cities in the country, including a $500,000 initial payment and a commitment to dedicate at least 5% of its profits to create and maintain a “digital inclusion fund” that will be geared at promoting affordable Internet and hardware access and digital skills training.
Meet federal requirements for matching grant and other funding opportunities to expand funding for these projects.
Protect innovation by municipalities: For example, Illinois Senate Bill 2244, introduced in 2008, included a specific statement making it clear that "nothing in the deployment council enacting legislation should be construed to limit the ability of any municipality, county, or other unit of local government to undertake local high-speed Internet projects and related functions." As the Illinois legislation set out, councils should protect municipalities ability to undertake local broadband projects.

Across the board, states should be studying not only how to extend physical connections to broadband Internet but also how to assure that it is affordable, especially for working families suffering the most during the current economic downturn.

Final Report of the California High-speed Internet Task Force - State of Connectivity: Building Innovation Through High-speed Internet
Progressive States Network - Guiding Principles for Broadband Strategy Councils

State Digital Inclusion Campaigns

State broadband initiatives that focus on increasing affordable access to broadband only help address the supply side of the digital divide equation. To ensure that all citizens can take part in the digital age, especially as more government programs, jobs, education and health care institutions expand their use of advanced technology, states should implement Digital Inclusion Campaigns.

The Washington Model: During the 2008 legislative session Washington State, in large part thanks to the Communities Connect Network, took an aggressive step to increase digital literacy. The Washington State legislature allocated $500,000 to support Washington's Community Technology programs. Senate Bill 6438 created a statewide high-speed Internet development process and established the Community Technology Opportunity Program (CTOP) that will provide resources for capacity-building and grant-giving to Community Technology programs that provide hands-on technology access and training to residents. Additionally, the legislation called for the development a statewide web directory of Community Technology programs.

This legislative session Senator Kohl-Welles introduced Senate Bill 5916 to continue the community technology opportunity program. In addition, the bill aims to assist Washington’s broadband efforts by positioning the state to receive Federal stimulus dollars that will allow Washington to expand broadband access infrastructure. “This is about bettering our citizens’ lives. By eliminating the digital divide and promoting digital inclusion in underserved areas, particularly in rural parts of the state, we help to enhance education opportunities, increase access to high-paying jobs, health care, government and community economic development,” said Sen. Jeanne Kohl-Welles. Senate Bill 5916 was passed unanimously by the Washington State Senate and now moves to the House.

Investing Beyond Infrastructure: Digital inclusion programs look beyond physical infrastructure, and instead address adoption issues that are at the heart of the digital divide. Under the broad umbrella of digital inclusion falls educating the public on what broadband can do to improve their lives, providing digital skills training, increasing relevant content on the Internet, and providing access to hardware and software. State initiatives to increase digital inclusion and the everyday use of technology must address all three major causes for lack of broadband adoption.

Digital Empowerment: States need to educate the public on the benefits and opportunities provided by 21st century technologies. Many individuals without broadband access do not understand the benefits and practical applications of broadband and new technology. States need to facilitate discussions about, and publicize how, technology is tied to economic development, better health care, implementing environmentally friendly policies, better access to information and increased opportunity.
Affordable Access to Technology and Digital Training Programs: Individuals must be provided access to technology and digital skills training which will teach them how to utilize and reap the benefits of 21st century infrastructure. Any digital inclusion program should target underserved populations and must address both sides of the digital divide equation, access and adoption. The elements that help increase access to technology and digital skills are community technology centers, technology recycling programs, leveraging of state buying power and public/private partnerships.
Long-Term Sustainability: Any digital inclusion initiative must be tied to the overall goals of a state to ensure long term sustainability. Digital inclusion initiatives should be seen a means to help state meet a variety of economic, health care, environmental and educational goals.

Maria E. Wynne and Lane F. Cooper, A Road Map Toward Digital Inclusion: Digital Inclusion Imperatives Offer Municipalities New Social and Economic Opportunities
Progressive States Network- Guiding Principles for Digital Inclusion Policies
Progressive States Network- Increase Technology Literacy and Inclusion
San Francisco Digital Inclusion Strategy
Digital Inclusion Forum
Communities Connect Network

Conclusion

The ARRA marks a departure from previous policies that facilitated the U.S. decline in numerous global broadband rankings, and can be, if managed and supported correctly, the beginning of a new vision for the 21st century. This vision includes a commitment to expanding access to and increased utilization of broadband, by individuals, businesses, health care providers, government entities, education institutions and even the energy sector. In order to remain a global competitor and to stay true to the basic concepts of equality and opportunity upon which our country was founded, the federal government and states must commit to investing in digital infrastructure and ensuring that every individual can afford and utilize broadband.

State Action for the Unemployed

PSN — Mon, 09 Mar 2009 12:45:45 -0400

State Action for the Unemployed

On Thursday, the official unemployment rate climbed to 8.1% nationwide as employers shed an additional 651,00 workers last month. Add in sharp rises in the number of involuntary part-time and long-time discouraged workers, and the unemployment rate rose to 14.8%.

While long-term job growth is the goal of the recovery package, states need to, and some are already stepping up to, address the immediate needs of the unemployed. There are a range of additional resources outlined in PSN's Implementing the Recovery Plan: A Resource Guide for State Legislators and Advocates, but this Dispatch emphasizes key programs states can take advantage of to help their unemployed workers.

- Modernizing Unemployment Insurance
- Health Care for the Unemployed
- Layoff Prevention and Retraining
- Expanding Safety Net Programs
- Conclusion

Modernizing Unemployment Insurance

The most obvious action states can take for the unemployed is to ensure that their unemployment insurance systems cover as many people who have lost their jobs as possible, tapping all available federal funding resources. Along with the additional funds automatically going to unemployed workers under the recovery plan, there are several steps states can take to modernize their programs, allowing them to qualify for additional federal funds. The National Employment Law Project (NELP) has just released a Concise Guide to Assistance for Jobless Workers, which helps states identify and implement modernization initiatives to qualify for additional funds:

States can qualify for some of the $7 billion in additional federal funds being made available nationally, as long as they have extended coverage to additional workers specified by the recovery bill.
Five states (ME, NJ, NM, NY and WA) already meet these standards and will receive their full portion of the $7 billion. Other states will receive some or all of their share depending on what provisions they adopt.
Fourteen other states have adopted what's called an "alternative base period" which entitles them to one-third of their portion of the federal incentive payments.
To qualify for their full portion of unemployment insurance (UI) incentive funds, states must adopt the alternative base period plus two of the four following modernizations: (1) eligibility for part time workers; (2) covering individuals forced to leave work for compelling family reasons; (3) providing 26 weeks of additional UI benefits for individuals in approved training programs; and (4) paying dependents' allowances of $15 a week for each dependent.

Helping the Long-Term Unemployed: States have a new option to help workers who have exhausted Emergency Unemployment Compensation (EUC). States that adopt what's known as a Total Unemployment Rate (TUR) trigger at a rate of 6.0 percent can provide their workers with an additional 13 weeks of Extended Benefits (EB), which are now 100% federally financed. And for states where unemployment exceeds 8 percent, workers will get 7 additional weeks of EB, or a total of 20 additional weeks of benefits.

From the Dispatch

Reducing Military Spending to Spur Economic Growth at Home

State Job Creation Strategies Part II: Supporting Innovation, Industrial Clusters and Green Job Creation

Job Creation Opportunities During a Recession

State Venture Capital Funds

Encourage Technology Transfer and Commercialization

Strengthen Industry Partnerships & Clusters

Clean Energy Industry Support

Conclusion

State Job Creation Strategies Part I: Finding the Money and Investing in Human Capital and Physical Infrastructure

Direct Public Money to Investments in Economic Growth

Invest in People- the Key Engine of Growth

Creating a 21st Century Infrastructure in the States

Next Week: State Job Creation Strategies Part II: Supporting Innovation, Industrial Clusters & Green Job Creation

Making Broadband a Key Part of States' Economic Recovery

Making Broadband a Key Part of States' Economic Recovery

Broadband and the Federal Recovery Plan

Under the legislation the NTIA was directed to:

State Broadband Strategy Councils

State Digital Inclusion Campaigns

Conclusion

State Action for the Unemployed

State Action for the Unemployed

Table of Contents

Modernizing Unemployment Insurance

Health Care for the Unemployed

Layoff Prevention and Retraining

Expanding Safety Net Programs

Conclusion

Resources

Modernizing Unemployment Insurance

Health Care for the Unemployed

Layoff Prevention and Retraining

Expanding Safety Net Programs

Taking Action on Job Creation: Invest Michigan! Fund

Resources

State Pension Funds to be Invested in State Job Creation in Florida

Averting Layoffs and Revitalizing the Manufacturing Economy: Lessons from the Great Lakes States

Developing a Rapid Response Program for Layoffs

Layoff Aversion: Early Warning and Industry Partnerships to Avert Plant Shutdowns

Revitalizing Manufacturing in the United States

Greening the Economy to Revitalize Manufacturing

Conclusion: Lessons from the Cleveland Summit

Economic Strategies for Nurturing Innovation and Job Growth

How States Invest in Technology Startups

Encouraging Technology Transfer from Universities

Strengthening Industrial Clusters

Investing in Community and People

Conclusion