Redesigning State Economic
Development Agencies
Erin Sparks
CSG-West Annual Meeting
July 31, 2013
States Experimenting with New Models
• At least 12 states have reorganized their
approach to economic development over past
two years – others are currently in the process of
doing so.
• Responding to three pressing challenges:
– Rise of intense global competition;
– Structural inefficiencies in economic development
agencies;
– State fiscal crunch.
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Structural Inefficiencies in Economic
Development Agencies
Cumbersome Agency Design
• Having a cohesive, coordinated state economic development
strategy depends on creative a more nimble and effective entity.
Limited Professional Experience
• Institutional knowledge is key to supporting business
development and to aiding the growth of new business clusters.
Lack of a Quantitative Evaluation System
• Absence of qualitative evaluation system limits credibility and
transparency.
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Strategies for Successful Agencies
Engage and Sustain Private Sector Involvement
• Public-Private Partnerships
• Semi-State Agency
• Independent Business Association
Create Mechanisms to Encourage Collaboration
• Across State Agencies, Industries, and Universities
• Between States and Regions
Institute a Quantitative Evaluation System
• Web-based Monitoring System
• Benchmark Indicators
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Engage and Sustain Private Sector
Involvement
• Public-Private Partnerships
– Michigan Economic Development Corporation
– Iowa Economic Development Partnership
• Semi-State Agency
– Arizona Commerce Authority
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Public-Private Partnerships
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Michigan Economic Development
Corporation (MEDC)
• Michigan’s lead economic development agency; created
in 1999.
• Under Governor Rick Snyder’s direction, focused on four
statewide goals:
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Unemployment rate ranked with the ten lowest states
GDP growth ranked with the top ten states
Real personal income per capita ranked with the top ten states
Population increase of people aged 25 to 34
• Most of funding comes from public sources, through a
combination of state general fund appropriations and
dedicated funding sources, such as tobacco settlement funds
and casino revenue.
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Michigan Economic Development
Corporation (MEDC)
• Private sector involvement includes:
– Participation in 20-member executive committee
appointed and chaired by governor.
– An additional oversight and performance board, that
consists of nearly 90 private sector leaders.
– Regional mechanisms for interacting with businesses.
• Corporate employee category allows MEDC to
attract and retain highly-qualified employees who
have extensive experience in the private sector.
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Iowa Economic Development
Partnership
• Created in 2011 to replace Iowa Department of Economic
Development.
• Chaired by Governor with 11 member board (appointed
by governor) composed of private sector and economic
development experts.
• Charged with developing comprehensive economic
development strategy.
• Consists of a partnership between the Iowa Economic
Development Authority and the Iowa Economic
Development Corporation.
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Iowa Innovation Corporation
• Operating arm of Iowa Innovation Council.
– Created in 2010 as advisory body. Absorbed three
innovation councils: Bioscience Alliance, Advanced
Manufacturing Council, and Information Technology
Council.
• Goal to provide the infrastructure for an innovation
ecosystem.
– Developing an innovation roadmap, including an Iowa
Innovation Index.
– Legislative priorities include seed fund tax credits, SBIR/STTR
funding, DEMO fund.
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Semi-State Agency
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Arizona Commerce Authority (ACA)
• Eight-month transition from Arizona Commerce Department
to ACA started in June 2010.
• ACA’s operations are publicly funded with one exception–
marketing operations, which will be financed by the private
sector.
• Unlike traditional commerce departments, ACA is devoted
exclusively to economic development; any unrelated
programs were shifted to other agencies.
• Private sector involvement through board of directors
chaired by governor and comprised of chief executive officerlevel business, education, and community leaders.
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Create Mechanisms for Collaboration
• Across State Agencies, Industry, and
Universities
• Between States and Regions
– New York Regional Councils
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Collaboration between States and
Regions
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New York’s Regional Councils
• In 2011, New York established 10 regional public-private
partnerships (regional development councils).
– Composed of stakeholders from business, academia, local government, and
nongovernmental organizations.
– Tasked with developing strategic plans that emphasize each region’s
strengths and unique assets.
• Regional Councils access state funding through the new
Consolidated Funding Application.
– Regional councils complete one application, based on their economic
development strategy, to access grant funding and tax credits from multiple
state funding sources.
– All regions receive some support, but winning regions receive additional
support.
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Institute a Qualitative Evaluation
System
• Web-based Monitoring System
– Virginia Performs
– MI Dashboard
• Benchmark Indicators
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Web-based Monitoring Systems
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• System for monitoring effectiveness of state
agencies.
• Includes information about agency mission, strategic
plan, and performance against a set of evaluation
measures.
• Designed to align specific outcomes achieved with
larger statewide goals for the economy identified
through consensus process led by the Council on
Virginia’s Future.
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• Dashboard: Provides a quick assessment of the
state’s performance in key areas including: economic
strength; health and education; value for money
government; quality of life; and public safety.
• Agency scorecards: Provide transparency and
accountability to Michigan taxpayers, serve as an
internal management tool for decision-makers and a
compass for all State of Michigan employees.
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Lessons Learned
• Moving to public private partnership may better leverage
private sector expertise, but probably won’t leverage large
amounts of private sector funding.
• Keep accountability mechanisms in place, even when
shifting to public private partnerships.
• What matters more than organizational structure:
– Nimble agency that leverages private sector’s experience and
perspective.
– Core mission of economic development agency informed by
new understanding of economic growth.
– Governor has an active role in economic development process
– from designing strategy to promoting agency collaboration
to being the deal closer.
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