While the Tennessee Legislature was slashing programs and laying off 700 state employees to close a budget gap last week, Gov. Phil Bredesen was touring a manufacturing company in the Swiss village of Birr.
From Switzerland, it was on to Germany and Poland for Bredesen, a two-term Democrat. The coincidence of the state's top elected official bouncing around Europe as state lawmakers were struggling with agonizing budget choices back home may appear irresponsible at first. But Bredesen actually was on a calculated mission to attract jobs that he says could help Tennessee get through the economic downturn.
"Now is not the time to pull back or retrench," Bredesen said.
Bredesen's job-recruiting trip points up a little known aspect of the recession: States may be losing thousands of jobs, but many states are spending millions of dollars and approving new incentives to create jobs, with some success. Economic development efforts don't come to a halt during a downturn; they're needed more than ever.
"Certainly there are very current and pressing budget difficulties and it makes sense to consider priorities," said Ian Pulsipher, an economic development specialist with the National Conference of State Legislatures . "At the same time, economic development is much more long-term than fixing this year's state budget. It's not something you spend money on one year and neglect the next."
The latest unemployment figures confirm the worst is not over for states; the federal Bureau of Labor Statistics reported Friday (June 19) that all but two states reported increases in the number of jobless from April to May. Still, state officials have been claiming large and small victories in their attempts to generate jobs.
North Carolina officials say a new building in Raleigh housing the state National Guard and three other agencies will create 4,200 jobs, while Indiana officials say 50 workers will be hired for the expansion of a corndog and fritter manufacturer in Muncie. The Air Force's newest major command, the Global Strike Command, will produce 1,000 jobs in northwest Louisiana, while U.S. Ordnance Inc. will hire seven people at its Nevada plant that makes M60 machine guns for the U.S. government.
Some of the job activity involves America's best-known brands. The upstate New York plant where Lunchables meals are produced for the East Coast will expand and add 50 jobs. Coca-Cola just opened a new bottling plant for Powerade and VitaminWater in Baton Rouge, La., with 113 new jobs in three years. Greenies dog and cat treat manufacturer Mars Inc. is creating 157 jobs with a research and development unit in North Kansas City, Mo.
Hilton Hotels Corp. is moving its headquarters from Beverly Hills to Fairfax County, Va., outside Washington D.C., creating 300 jobs over three years. Furniture maker Ethan Allen is expanding its 60-year-old operation in Maiden, N.C., generating 302 jobs in the next three years. Fashion retailer Chico's is adding 189 jobs over three years by expanding its distribution center near Atlanta. Home Depot is putting in a distribution center near Topeka, Kan., initiating hundreds of jobs by 2010.
Even states with severe unemployment and budget troubles are reporting small triumphs. South Carolina, which has the nation's third-highest unemployment rate, recently announced that a Florida-based business outsourcing company would add 900 jobs in three counties. You'd never know Michigan has the nation's highest unemployment by visiting the Michigan Economic Development Corporation's W eb site , which trumpets a string of successes in recent months that have resulted in thousands of jobs in a state battered by the decline of auto manufacturing.
"We'll continue to do everything we can to attract and retain businesses because our future is dependent upon their investment and success," said Bridget Beckman, a spokeswoman for the economic development corporation.
The recession hasn't stopped states from competing against each other for jobs, sometimes aggressively. "New Study Shows Minnesota Companies Can Save Millions By Expanding to West Central Wisconsin," read the title of a news release put out by the Wisconsin department of economic development aimed at Minneapolis-St. Paul area companies.
Wisconsin, Michigan and Tennessee currently are battling over which state General Motors Corp. will choose for its small car production plant by the end of June. Texas recently beat out Kansas for a 1,400-job Medtronic Inc. diabetes support unit, but a month later, Kansas overcame Texas for a 550-job Apria Healthcare facility.
Virginia recently outdid North Carolina to keep a Vaughan-Bassett furniture company plant and 600 jobs in southwest Virginia. Now Utah is challenging Virginia for the corporate headquarters of Verisys, Inc., a health care technology company currently in the Virginia suburbs of Washington, D.C.
In their competition, many states are trying to position themselves for the recovery by emphasizing a niche. Wisconsin wants to be thought of as a center for stem-cell research. Michigan is determined to be "the advanced battery capital of the world" for electric cars, says Gov. Jennifer Granholm (D). Sunny Colorado and windy Kansas are going after solar and wind energy jobs, among other states. The clean energy economy is an "emerging sector poised to expand significantly," according to a recent report by the Pew Center on the States, of which Stateline.org is a part.
Andrew Gledhill, an economist at Moody's Economy.com , said in an interview that states with a high concentration of high tech industries could recover faster from the downturn than other states because that sector is more likely to see job growth. Colorado, Idaho, Oregon, Texas and Washington should recover first, Gledhill said, followed by Alabama, Georgia, Nebraska, New Mexico, North Carolina and South Dakota. Moody's analysis can be found here .
The current recession isn't the first time that state economic development officials have had to defend foreign trips and recruitment of companies as they slash other programs and services. But this downturn is different from the past because it could be the worst for states since World War II.
Georgia set a record last month in the number of people out of work, but spent $96 million on incentives to entice technology company NCR to locate its corporate headquarters to the Atlanta area and build a new plant in Columbus. The 2,120 jobs created could generate an additional 1,700 jobs, officials say. The projected increase in tax revenue will more than offset the state's costs, officials say.
Connecticut will end the current fiscal year June 30 nearly $1 million in the red, and $8.7 billion over the next two fiscal years. Yet Gov. M. Jodi Rell (R) has offered various loans and tax credits to companies to create jobs, including $5.25 million in loans to three businesses to save 700 jobs through expansions.
"A recession is exactly the right time to make these wise investments in our business community," Rell said in a statement. "Every job we can save and create in Connecticut is another step forward toward economic recovery."
North Carolina Gov. Beverly Perdue (D) is pushing for tax increases of more than $1 billion to avoid cuts to public schools. At the same time, she recently signed legislation giving corporate income tax breaks to companies willing to locate in economically distressed areas.
"During these tough economic times, it's important to make the investments that create jobs in areas that need them the most," Perdue said in a statement.
Some states, such as Michigan, structure their incentives so a company can collect its tax credit only by creating a certain number of jobs or spending a certain amount of money on its operations. "It's not upfront money nor coming at the expense of some other program or service or business," said Beckman of the Michigan Economic Development Corporation. Many governors' trips are financed by private dollars.
Governors and state legislatures were busy in this year's sessions enacting new economic development inducements. Colorado, Florida, Missouri and Alabama were among the states enacting job-creation legislation. Kentucky lawmakers currently are meeting in a special session to consider, among other bills, Democratic Gov. Steve Beshear's proposal to spend $75 million in incentives to expand existing businesses and attract a NASCAR Sprint Cup to the state.
Tennessee's session ended Thursday (June 18), which was good timing for House Speaker Kent Williams (R). He now can duplicate Bredesen's efforts on his own trip to Taiwan. Williams is on a trade mission to see whether the Taiwan government, which is paying for the trip, wants to buy more Tennessee-made products.