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States invest in economic development to encourage job growth, increase wages, and raise the standard of living for their residents. State economic development efforts, however, typically encompass many programs administered by several agencies at different levels of government, making it difficult to coordinate investments across the state. States can better leverage scarce resources by coordinating investments across agencies and incorporating executive or legislative mechanisms for interagency communication, data sharing, program evaluation, and long-term planning.
State investment in economic development falls into three categories: investment in the marketplace, in the workforce, and in the community. Marketplace investment includes general business support and finance assistance, small-business procurement programs, and tax incentives. Most evidence shows, however, that government actions are not the primary driver of firm siting and operation decisions. Thus, governments should target their resources toward gaps in support that businesses cannot fill through the private marketplace.
The alchemy of economic development requires coordination that no state has been able to achieve. The moving parts are the purview of different agencies with different agendas and different mandates. This is not by accident; the missions are different for different agencies, and too often, programs that are critical to economic development are not established, administered, and evaluated from an economic development perspective. Consequently, there is an element of mystery about what works and what doesn’t.
Although there appears to be broad consensus on coordinating the disparate strands of economic development policy, there are few cogent examples. Encouraging this kind of coordination should be a priority for evaluating programs and ensuring public money is spent most effectively. Federal intervention or coordination of aid could encourage state agencies to work together and foster coordination. Or a coordinated federal program could incentivize or require evaluations of program effectiveness as a condition of funding.
Other than clarity around desired goals, one way to start is by coordinating long-term planning among the key agencies of economic development, workforce development, and transportation. Such coordination would not be collaboration or joint administration, both of which would be infeasible given their different missions and requirements; rather, their coordination would entail priorities being set and administered by a broader authority in either the executive or legislative offices. Then agencies would be mandated to communicate and ensure programs understand what strategies and proposals are underway in sister agencies.
Underlying all investments must be an ability to collect and connect data about investments from different agencies and outcomes. This means establishing procedures to share administrative data to produce reports.