KEPC UPDATE: Troubled economy, incentives, DegreeStats, tuition increases…and everything you wanted to know about Kansas.

 

In this issue… 

  • Kansas’ economy is still troubling
  • Survey says incentives growing in importance
  • New DegreeStats available
  • Tuition increases for public higher education
  • Everything you wanted to know about Kansas

 

Kansas economy is still troubling

The downward slope of the Kansas economy over the past several years continues to be disturbing.  As the 2018 Legislature approaches, many lawmakers are trying to decide what they can do to reverse the trend.  The many candidates for governor are also expressing concern.

There are two major indicators we look at: employment growth and GDP growth (gross domestic product), which is also essentially economic growth.

The latest employment growth figures for Kansas continue to be bleak.  The latest Kansas Labor Department Report, which looks at employment from August, 2016 to August, 2017, shows an overall decline.  Total non-farm employment is down (-0.6%) over the period.  That’s about a 9,000 job decline.

If you just look at private sector jobs, the decline is -0.5%.

Back in the first quarter of 2012, Kansas job growth was over 1.5%.  The charts have zigged and zagged but the trend has been declining growth.

Kansas economic growth (GDP) has been showing a similar trend.  In the fourth quarter of 2016, Kansas tied with Mississippi for the lowest economic growth among the states at 0.1%.

What can government do to grow the economy?

I try to start every presentation and testimony with a list of five things that mainstream economists have concluded government can do.  Not on this list is currency and interest rate manipulation because we can’t do that at the state and local level.

  1. The investment rate in plant and equipment, including efficient physical infrastructure, has a strong positive impact on growth. Studies show the higher an economy’s capital intensity, the more prosperous the economy. This means government infrastructure like highways, bridges, water and sewer systems, as well as encouraging businesses to invest in machinery and equipment that makes them more productive.

Kansas has hurt infrastructure investment over the past several years through transportation cuts.  The latest state budget borrows $200 million to be used for essentially basic maintenance over the next two years.

  1. Human capital and the efficiency of labor have also been shown to be significant to growth. Measures of human capital include the literacy rate, school enrollment ratios, and labor demographics.  Higher education levels contribute to higher wages and higher productivity.  Higher productivity increases GDP, the major economic measure of wealth.

Kansas has hurt this area by not keeping up with K-12 education spending and reduced spending over the years on higher education.   That’s resulted in higher tuition costs, making it more difficult for students to obtain an education.

  1. Linked to investment and human capital, there is substantial support for the contribution of continuing technological innovation and improvement in sustaining economic growth. This suggests that support for research and development and education is important. We do this through the research conducted by our universities that help agriculture, aviation, and other areas of the economy become more productive.

Kansas has pretty much eliminated the Bioscience Authority, a public-private agency that’s been given tremendous credit for attracting the $1.25 billion National Bio and Agri-Defense Facility (NBAF) at Kansas State University.  About 1,500 construction jobs are being created and 350 permanent jobs.

  1. Public policy which supports economic freedom through open economies supports higher growth rates. We would include tax structure and business regulation in this category.

Okay, Kansas went overboard on this with the 2012 income tax cuts, which resulted in problems for the other areas we are talking about here.  However, this is still important.  We need to continue to look at tax structure on some businesses that weren’t necessarily helped by the income tax cuts, but were damaged by the sales tax increases passed to pay for the cuts.

  1. Reliable legal systems are a significant basis for economic growth. These systems provide dependable enforcement of private contracts, protection of private property rights, effective law enforcement, and an absence of corruption. The budget cuts over the years are having an impact on this area that we’ve been reading about often in the news:  problems at our prisons.  Also, the Kansas Highway Patrol doesn’t have enough troopers to cover all of our counties.

Obviously, it will take many years to correct the problems caused by the income tax cuts that then resulted in damaging budget cuts.  Perhaps our economy is declining because we’ve cut in so many areas (like those above) that are important to economic growth.

 

Survey says incentives growing in importance

The annual survey of corporate decision-makers by Area Development Magazine shows a big jump in the importance of state and local incentives to the location of new and/or expanding businesses.

Area Development Magazine is considered the primary publication for businesses that are expanding, local and state economic development officials, and professional site consultants.

The 31st annual survey, released earlier this year, indicated incentives have become more important.  According to the narrative of the survey, “The lack of available buildings in certain markets, as well as rising rental and labor costs, has made expansions more expensive than ever and heightened the need for economic incentives in order to make projects a reality.”

State and local incentives moved up from number nine on the list to the number 5 ranking factor over the past year.  The survey narrative says, “In fact, 74 percent of the respondents separately note that incentives are very or somewhat important to a project moving forward in a particular location. More than 70 percent consider tax incentives the most important type, and 39 percent cite the importance of worker training incentives.”

Here’s the list.  The percentage on the right represents respondents who answered the factor was “very important” or “important.

  1. Highway accessibility (94.4%)
  2. Availability of skilled labor (89.8%)
  3. Labor costs (89.6%)
  4. Occupancy and construction costs (86%)
  5. State and local incentives (84%)
  6. Corporate tax rate (82.3%)
  7. Tax exemptions (79.7%)
  8. Energy availability and costs (78.5%)
  9. Proximity to major markets (78.1%)
  10. Quality of life (76.4%)

Local economic development professionals I’ve talked with agree.  Here’s what they usually say:

“A business that’s expanding normally has two or three locations in mind.  They need highway accessibility, an educated labor pool, and taxes that aren’t high.  Taxes don’t have to be low, but they can’t be too high.  If everything else works, they ask about what else is available.

“Some states like Arkansas have a big ‘closing fund’ that can be tapped.  Oklahoma offers free workforce training.  Some individual communities in Kansas have set aside dedicated funds for economic development incentives.  Most would depend on the state for help.”

Most of the local economic developers I know say the State of Kansas doesn’t offer enough.

Note that number 10 on the list is quality of life.  Here’s what the survey narrative says about it:

“Despite the fact that quality of life is not the primary consideration when a company is choosing a location, experts say it cannot be overlooked.  It’s not only important to attracting young, tech-savvy workers but also mature workers who require good schools for their children and access to quality healthcare, as well as cultural and recreational amenities.”

 

New DegreeStats now available

How much does it cost to get a degree in a specific area?  How much can I expect to earn if I get the degree?

The answers to these and other questions are available online through a service offered by the Kansas Board of Regents.  The latest updates are available here.

The service is the result of 2016 legislation that requires the information be collected and presented online.  It’s an interactive online tool that reviews cost and earnings data from real graduates for each undergraduate degree program offered at a public university or college in Kansas.

It’s now been updated and expanded.

The Kansas Board of Regents says no other state provides data on the actual costs experienced by graduates, and no other resource is available which combines detailed degree-level cost and earnings data in one place.  You can even compare the same degree and different institutions.

 

Tuition increase for public higher education

The Kansas Board of Regents announced in June their approval of new tuition rates for each of the six state universities for the new academic year.  The majority range from 2.5% to 2.9% for undergraduate resident and non-resident students.  An exception is the University of Kansas Compact Rate (5.5%) and students attending the KU Medical Center (5.0%).

Here’s a link to the news release from the Regents.

 

Everything you wanted to know about Kansas

What do you want to know about Kansas?  There are sixteen categories of information available in the 51st Edition of the Kansas Statistical Abstract, collected through August of 2017.

They are Agriculture; Banking and finance; Business, Industry, and Exports; Climate; Communications and Information; Courts, Crime, and Public Safety; Education; Employment and Earnings; Energy and Natural Resources; Government: Housing and Construction; Income; Parks and Recreation; Population; Transportation; and Vital Statistics and Health.

Here’s a link to the information, which was put together by the University of Kansas Institute for Policy and Social Research.