SSTI Digest

New data analyzing the first cohort of Tennessee Promise students reveals a higher graduation rate and increased number of students earning a college credential when compared to the previous year’s non-Promise cohort. The inaugural class of Tennessee Promise students graduated from high school in 2015 and completed their five semesters of eligibility in December. The program is showing impressive early results including:

While the increasing gaps between the coasts and the heartland continues to capture the media’s attention, a collection of recent research suggests that inequality within regions may be the greatest factor hampering economic growth. Five recent articles tell a nuanced story of how economic and racial inequities may impede regional economic development efforts. The research presented here from a variety of outlets examines the role of inequality in the overall economy of regions.

For example, research in the Journal of Regional Studies examines how the Great Recession challenged the economic resilience of metropolitan areas and how income inequality worsened these impacts. A separate analysis by the Urban Institute finds that economically healthy cities are more likely to be inclusive.  In particular, older industrial cities struggle with issues stemming from inequality. Additionally, to complicate matters further, research from the Center for Economic and Policy Research finds inequality is likely worse than actually reported.

Economically healthy cities are more likely to be inclusive.

Both the House and Senate are beginning the appropriations process for FY 2019 this month, and early indicators suggest that EDA’s Regional Innovation Strategies program could see an increase over its $21 million for FY 2018.

In the House, the relevant subcommittee under Chairman John Culberson (R-TX) and Ranking Member Jose Serrano (D-NY), advanced a bill to fund the program at $21 million — the highest level ever approved by the committee. The new Senate appropriations chair, Senator Richard Shelby (R-AL), was over the subcommittee as it moved the program from $10 million to $21 million. The new subcommittee chair, Senator Jerry Moran (R-KS), has been a champion of the program and noted its importance to Kansas in his opening remarks to Commerce Secretary Wilbur Ross in a budget hearing this morning.

Earlier this month, the Bureau of Economic Analysis (BEA) published its 2017 estimates on state-level real gross domestic product (GDP). Per-capita gross product is a useful metric because it can show a state’s relative performance against its peers and over time. SSTI has prepared a spreadsheet showing 10 years of real per capita gross product by state, as well as an interactive map showing changes over the 1-year, 5-year, and 10-year periods. As more data becomes available, a future Digest issue will cover this topic at the metropolitan level. 

At nearly $160,000 per person, real per capita gross product was highest, by far, in Washington D.C. in 2017. Coastal states like Massachusetts ($66,500 per person), New York ($65,220), Delaware ($63,955), and Connecticut ($62,633), as well as energy-intensive states like North Dakota ($64,911), Alaska ($63,610), and Wyoming ($61,091), ranked highly for real per capita gross product in 2017.

Declining enrollments, higher costs and limited state funding continue to challenge higher education institutions, and possible mergers continue to surface as an option to meeting those challenges. In Pennsylvania, a new study sponsored by the Pennsylvania Legislative Budget and Finance Committee identifies options to help ensure the sustainability of the State System of Higher Education, and mergers factor into those considerations. However, in Connecticut a plan to merge the state’s 12 community colleges into one was rejected last month by its regional accrediting authority, the New England Association of Schools and Colleges (NEASC).

A change in policy at the Mayo Clinic has “single-handedly sprouted a startup ecosystem in Rochester, as med-tech startups, accelerators, co-working spaces and a venture capital ecosystem have flourished in the area over the last half decade” according to new research by Maddy Kennedy of the The Minneapolis/St. Paul Business Journal.

A Securities Exchange Commission (SEC) report contains over 20 recommendations for the SEC to consider that would improve small business capital formation. The report, released in April, stems from the 36th annual Government-Business Forum on Small Business Capital Formation – a daylong event held late last year. Its recommendations include issues related to the definition of accredited investors; rules changes that would increase the number of Regulation A+ and Regulation Crowdfunding offerings; and, a revised regulatory regime (based upon the European regulatory regime) to improve peer-to-peer lending.

Money the federal government invests in the Manufacturing Extension Partnership (MEP) program is generating a substantial economic and financial return and powering an additional 219,000 jobs, according to a new study by the W.E. Upjohn Institute. The study of FY 2017 data showed a 14.5:1 financial return for the $128 million invested by the federal government.

Each year, an independent firm surveys manufacturers regarding the impact they have achieved from MEP Center services. In 2017, MEP clients reported $12.6 billion new and retained sales of which $3.5 billion is new sales providing an economic stimulus of 27 to 1 (based on the $128 million federal investment). The study looked solely at personal income tax and not business taxes, and provides a conservative estimate of the return.

In 2017, 122 companies filed Regulation A+ (Reg A+) offerings and raised over $236.5 million collectively, building upon the early promise shown when the rules went into effect two years ago. Reg A+ is a less complicated and shorter process for a company going public than the traditional initial public offering (IPO) process. The 2017 Reg A+ offerings averaged $18.2 million each, according to a recent report by Amit Singh from the Stradling law firm, and include both Reg A+ Tier 1 and Tier 2 offerings. However, as the SSTI Digest recently reported about  equity crowdfunding, startups and other small businesses have been slow to adopt this new source of capital.

The majority (75 percent) of all high school students were enrolled in a STEM course during the 2015-16 school year, according to the newest Civil Rights Data Collection (CRDC). For the first time, the CRDC includes new categories of data on STEM course taking, showing that some higher level math and science courses are offered at fewer high schools. That figure is even more pronounced at the approximately 5,000 high schools with high black and Latino enrollment (i.e. schools with more than 75 percent black and Latino student enrollment), where higher level mathematics and science courses are offered at a lower rate than the overall population of all high schools.

One of our partner organizations, the National Association for Community College Entrepreneurship (NACCE), recently opened their registration for their annual conference, NACCE 2018 The Entrepreneurial Ecosystem Revolution. The conference features keynotes from engaging entrepreneurs that have innovated in areas ranging from 1980’s rock and roll memorabilia to one of the co-developers of Amazon’s Alexa. Panels and breakout sessions featuring NACCE members from across the U.S. will share best practices for entrepreneurial leadership and experiential teaching across academic disciplines.

One of this year’s most important books on economic development tells a story that those involved in the field need to know and might not necessarily want to hear. In Coping with Adversity: Regional Economic Resilience and Public Policy, authors Harold Wolman, Howard Wial, Travis St. Clair, and Ned Hill seek to understand why some metropolitan areas are resilient in the face of economic hardship, while others are not. This commentary will summarize the authors’ findings and provide insight into what their findings might mean for the broader economic development community.