Governor Mike Beebe’s Strategic Plan for Economic Development

Arkansas Economic Development Commission 2009 Arkansas StRategic Plan Arkansas Economic Development Commission

Address: One Capitol Mall Little Rock, AR 72201

Phone: 1.800.ARKANSAS 501.682.1121

Fax: 501.682.7394

Web site: www.arkansasedc.com

E-mail address: [email protected]

AEDC Strategic Planning Team: Morris Jenkins, Director of Strategic Planning and Legislative Affairs Kurt Naumann, Deputy Director of Strategic Planning and Legislative Affairs Brad Henry, Senior Policy Analyst Tom Chilton, Director of Technology Development Betty Anderson, Director of Human Resources

Please Note: This document was developed by Arkansans, for Arkansas with the intent that it be used by any Arkansan desiring a more prosperous Arkansas.

Arkansas StRategic Plan On behalf of the state of Arkansas, the Arkansas Economic Development Commission would like to thank the contributors to this plan

Economic Development Leaders • Office of the Governor • Arkansas Congressional Delegation • AEDC Commissioners

Economic Development and Workforce Cabinet • Arkansas Department of Higher Education • Arkansas Department of Education • Arkansas Science and Technology Authority • Arkansas Development Finance Authority • Arkansas Highway and Transportation Department • Arkansas Department of Workforce Services • Arkansas Department of Parks and Tourism • Arkansas Department of Finance and Administration • Arkansas Department of Rural Services • Arkansas Natural Resources Commission • Arkansas Department of Environmental Quality • Arkansas Agriculture Department • Department of Arkansas Heritage • Arkansas Game and Fish Commission • Arkansas Department of Workforce Education • Arkansas Forestry Commission

Economic Development Partners • Arkansas Capital Corporation • Arkansas State Chamber of Commerce • Arkansas Municipal League • Association of Arkansas Counties • Arkansas Economic Developers • Arkansas Association of Two-Year Colleges • Presidents and Chancellors of Arkansas Colleges and Universities • Entergy Arkansas • Arkansas Electric Cooperatives • Arkansas Planning and Development District Directors • Accelerate Arkansas Arkansas StRategic Plan Executive Summary The following statewide economic development plan is Governor Beebe’s Five Goals the result of answering the question “Why does the State for Economic Development of Arkansas need a long-term strategic plan for economic development?” Arkansas is at a critical disadvantage in 1. Increase the incomes of Arkansans at a growth pace competing for opportunities in the 21st century economy. greater than the national average. A review undertaken by the Milken Institute to evaluate Arkansas and its position in the knowledge-based economy 2. Expand entrepreneurship, focusing on knowledge-based was not very complimentary of the state’s efforts and enterprises. definitively stated, “Arkansas has been operating at the periphery of the knowledge-based economy.” Milken 3. Compete more effectively in the global marketplace for continued by pointing out while other states have been new business and jobs, and create a business retention investing heavily and nurturing key institutions to improve strategy to reduce closures. their position in the knowledge-based economy, Arkansas has not kept pace with the requirements of the New Economy. 4. Economic development will meet the special needs and In a report to the National Governors Association, the Pew take advantage of the extraordinary assets of various Center on the States insisted “today states must accelerate areas of the state. It will not be a one size fits all. efforts or risk becoming economic backwaters. Specifically, they must become places where new ideas are discovered, 5. Increase the number of workers with post-secondary invented or given their first break.”  training so they are prepared when they enter the workforce and equipped for new jobs in the future. Governor Mike Beebe authorized the Arkansas Economic Development Commission to develop a long-range, statewide economic development plan. This strategic plan establishes Beginning in June 2007, AEDC Executive Director Maria a disciplined approach that will change the focus of current Haley established a five-person committee to create this economic development efforts and lead Arkansas in a long-range economic development strategy for the State of successful transition into the 21st century global economy. Arkansas. A statewide effort was initiated to solicit input from a large cross section of economic development stakeholders. Comprehensive interviews were conducted with Governor’s Staff, all state agencies and commissions directly tied to economic development, the entire federal delegation, and many private businesses and foundations across the state. The attached plan was developed by Arkansans for Arkansas.

The research and background leading to the specific recommendations for the strategic plan came from an amalgamation of prior consultant reports, review of other successful state strategies, and the collective works of Accelerate Arkansas, the Governor’s Workforce Cabinet, and the Task Force for the 21st Century. The plan emphasizes  The Milken Institute. Arkansas’ Position in a Knowledge-Based Economy, 2004. http://www.acceleratearkansas.com/AA_KBE.pdf Governor Beebe’s belief that education and economic  Pew Center on the States. “Investing in Innovation,” 2007. www.nga. org/center/innovation Arkansas StRategic Plan development are inseparable in establishing an Arkansas in the state and coordinate, within the parameters of the economy supported by knowledge-based jobs. plan, the statewide economic development efforts. The overwhelming feedback from the various interviews was this Upon the completion of the survey and interview process, leader should be and must be the AEDC. combined with the work emanating from the available research material, three consistent obstacles were identified To eliminate the third obstacle, a recurring and predictable which prevent Arkansas from moving its economy forward. funding source must be indentified for economic development or Arkansas will continue to be relegated to the back waters OBSTACLES of the 21st century economy. It is understood that revenues collected by Arkansas cannot support the large infusion 1. Arkansas needs a transitional, systematic approach to an of money into the process in the same way as some of our economy supported by knowledge-based jobs. competitor states. This plan articulates a funding model which promotes a fiscally responsible approach to funding the 2. The economic development efforts throughout the state needs of economic development in the state. are diffused and inefficient. To meet the objectives of this plan, the AEDC will require 3. Arkansas lacks a recurring and predictable funding a near term incremental increase in funding. The funding formula for economic development. will need to be predictable and funding formulas will need to be more flexible to meet the new requirements of the 21st century economy. The plan calls for more empowerment at This plan identifies a strategy to overcome these formidable the local community level to raise funds to incent economic obstacles. The plan recognizes that the state cannot migrate development in Arkansas. Local communities must be overnight to a knowledge-based economy. A starting point encouraged to form strong regional coalitions to more for statewide improvement is to focus current strategies effectively promote their locations within Arkansas. on creating high-wage, high-skilled jobs while moving toward an economy dominated by knowledge-based job This plan also calls on the private sectors of the state to join development. Knowledge-based growth and development with the public agencies to create an environment for the reflect a highly skilled/educated workforce capable of systematic transition to a knowledge-based economy. The responding to economic and technological change in the Arkansas Economic Development Foundation must take a medium and long term. The market recognizes and rewards more active role in driving the private sector into the public this with improved earning potential. economic development strategy. This role should include funding and leadership in a joint effort with the AEDC. The AEDC will embrace the inputs identified by the Taskforce for the 21st Century Economy while maintaining Incorporating the new mission statement into AEDC business an emphasis on creating jobs which raise the incomes of practices will require that certain economic development Arkansans. The plan requires a measured, yet progressive, tenets be reformulated. These new tenets, or guiding transition to a knowledge-based economy without recklessly principles, form the base of the strategic plan and must be abandoning the more traditional strategies of the past. implemented in their entirety if the plan is to succeed.

The second obstacle is eliminated by a simple understanding that a single organization must be established as the leader

 Task Force for the 21st Century Economy. “Building a 21st Century Economy in Arkansas,” page 10. October 2008. Arkansas StRategic Plan

Guiding principles plan raises the bar for economic development in both vision and execution by calling for stringent performance metrics 1. To generate wealth for Arkansans, the AEDC requires designed to re-evaluate the plan annually so quick intervention a systematic plan causing a transition to an economy can be made to keep the plan on course. The new Mission of supported by knowledge-based jobs. the Arkansas Economic Development Commission is now the charge: 2. All internal and external AEDC business practices and processes must be evaluated to guarantee efficiencies AEDC MISSION STATEMENT of operation and mission focus. Inefficient processes should be corrected immediately, while others must be To lead statewide economic development, create targeted evaluated over a period of time to determine if they are strategies that produce better-paying jobs, promote properly focused. communities, and support the training and growth of a 21st century skilled workforce. 3. Scarce and diffused economic resources mandate a coordination of efforts led by the AEDC to transition the Arkansas economy to an economy supported by knowledge-based jobs.

4. The AEDC must help provide the needed tools to allow regions to control their own economic development.

5. A new approach to state and regional economic development funding must be employed to ensure resources are predictable and flexible. This approach will allow funds to be committed efficiently and equitably.

Implementation of these guiding principles will lead to accomplishments in the five key sectors of Workforce Development, Infrastructure, Business Development, Competitive Business Climate, and Collaborative Partnerships. Successfully meeting milestones in these sectors will ultimately lead to achieving Governor Beebe’s Five Goals for Economic Development and transitioning to an Arkansas economy supported by knowledge-based jobs.

In summary, this plan is a long-range strategy with the single purpose of overcoming the status quo. The bold steps established by this plan will succeed in moving Arkansas forward into the 21st century economy. The transitional steps called for in the following pages have been carefully considered as the best way to move Arkansas forward. The Arkansas StRategic Plan Contents

I. Economic Development Visioning 1 iii. Transportation and Logistics 56 1. Knowledge-Based Economic Development 1 iv. Bio Resources 58 2. Traditional Economic Development Strategies 2 v. Information Services 60 a. The Post War Strategy 2 vi. Tourism 61 b. The 1960s 3 3. Economic Development Infrastructure 62 c. The 1970 4 a. Transportation Assets 62 d. The 1980s 5 i. Highways 63 e. The 1990s 7 ii. Waterways 66 3. Arkansas’s Position in the iii. Railroads 67 Knowledge-Based Economy 8 iv. Intermodal Facilities 68 4. Formulating a New Vision v. Air 68 of Economic Development 12 b. Utilities 69 5. Sharing the Vision: Leadership, Implementation c. Real Estate (Buildings and Sites) 70 and Accountability 14 4. Competitive Business Climate 72 II. The Strategic Planning Process 15 a. The Nature of Competitiveness 72 1. Review of Other States’ Economic i. Factors of Competitiveness 73 Development Plans 15 ii. Strategic Recruitment 73 2. AEDC Internal and External Interviews 16 iii. Statewide Competitiveness Policies 74 3. Action Items 17 b. Capital Infrastructure (Financing) 75 III. Guiding Principles 18 i. The New AEDC Funding Model 76 IV. Five Strategic Economic Development Components 24 ii. Regional Funding Model 79 1. Workforce Development 25 iii. Federal Funding 80 a. Education 26 iv. Private Sector Partnerships 80 i. Secondary Education 27 c. Economic Development Incentives 81 ii. Post-Secondary Education 28 i. Existing Incentives 82 b. Workforce Training 32 ii. Proposed Legislation 83 c. Labor Force 35 d. Taxation and Regulatory Policies 83 2. Business Development 37 i. State Taxes 83 a. A Diversified Economy 37 ii. Local Taxes 84 b. Business Development and Labor Growth 39 5. Collaborative Partnerships 86 c. Creating a Targeted Development Strategy 40 a. Federal 87 i. Promote Innovation, Entrepreneurship b. State 87 and Commercialization 41 c. Regional 87 ii. Target Business Recruitment 46 i. Regional Planning 87 iii. Enhance Business Retention ii. Regional Recruitment 88 and Expansion 49 d. Non-Governmental 89 iv. Attract Global Investment 50 V. Conclusion 90 d. Sector-Based Business Development 52 VI. Appendices 96 i. Corporate/Non-Profit Headquarters 52 ii. Manufacturing 54 Arkansas StRategic Plan page  I. Economic Development Visioning

You cannot escape the responsibility of tomorrow by evading it today.

– Abraham Lincoln

1. Knowledge-Based Economic capable of responding to economic and technological change Development in the medium and long term. The market recognizes and rewards this with improved earning potential. Arkansas is at an economic crossroads. The ubiquitous impact of globalization, summarized by Pulitzer Prize-winning author The Arkansas Economic Development Commission’s strategic Thomas L. Friedman in his groundbreaking books The Lexus initiative is to foster knowledge-based development while and the Olive Tree and The World is Flat, has “flattened the maintaining the current strategy to assist in accomplishing economic playing field” and in doing so, has changed the Governor Beebe’s goal of raising the per capita personal entire raison d’être of economic development. income through the creation of high wage, high skilled jobs.

According to Friedman, the recent era of globalization, The implementation of this initiative is to embrace the shaped by the convergence of ten forces, has created a new challenges brought forth by the 21st Century Taskforce while economic platform. Paramount among these forces is maintaining an emphasis on creating jobs which raise the affordable and universally-accessible computer technologies, incomes of Arkansans. global supply chains, and the instantaneous dissemination of communications. Friedman states: * Editor’s note: At various times, the Arkansas Economic “This platform now operates without regard to geography, Development Commission (AEDC) has been named the distance, time, and, in the near future, even language… Arkansas Industrial Development Commission (AIDC) and Wealth and power will increasingly accrue to those countries, the Arkansas Department of Economic Development (ADED). companies, individuals, universities, and groups who get the Reference is made throughout the strategic plan to the name three basic things right: the infrastructure to connect with this currently in effect at the time of reference. flat-world platform, the education to get more of their people innovating on, working off of, and tapping into this platform, and finally, the governance to get the best out of this platform and cushion its worst side effects.” 

Economic success will accrue to those entities that can successfully implement this new platform. The purpose of the Arkansas Economic Development Commission (AEDC)* strategic plan is to design an integrated framework to systematically transition Arkansas to an economy supported by knowledge-based jobs. Knowledge-based growth and development reflect a highly skilled/educated workforce

 Thomas L. Friedman, The World is Flat: A Brief History of the Twenty- First Century, 1st updated and expanded ed. (New York: Farrar, Straus and Giroux, 2006), 205. Arkansas StRategic Plan page 

2. Traditional Economic end of encouraging both the establishment of new industrial Development Strategies enterprises and the expansion of industries already existing; and, a. The Post War Strategy • Prepare and publicize through the various available Few state policies guided Arkansas’s economic development medium, including paid advertisements in instances before 1955. Prior to World War II, Arkansas’s economy where appropriations have been made available for the was predominantly rural and agrarian. In 1940, 51 percent purpose, information for the purpose of budgeting into and of Arkansas’s workforce was agriculturally employed, 8.5 establishing new industry in the State. percent was employed in manufacturing, and the balance was employed in trade and service industries. During World War Act 404 of 1955 also permitted incorporation of local II, manufacturing peaked, increasing to 18 percent, while industrial corporations and issuance of local industrial farm employment declined to 20 percent.  development bonds. 

As mechanization displaced agricultural workers and wartime Under the leadership of AIDC Chairman Winthrop job opportunities in the North and West proliferated, Rockefeller and the efforts of the Committee of 100 (a Arkansas’s population declined significantly. Between 1940 volunteer assemblage of Arkansas’s leading businessmen at the and 1956, Arkansas experienced a net population loss of time), the AIDC began to aggressively recruit manufacturing 251,000 persons — nearly 13 percent of residents.  During plants and bolster existing industry. Touting cost-effective the 1950s, the number of Arkansas farms declined from labor, low taxes, abundant resources and plentiful land, 182,000 to 95,000.  Arkansas dramatically succeeded in locating branch- manufacturing plants from the North and Midwest. In To stem the tide of out-migration and enhance the transition the first year of operation, the AIDC helped create 10,000 of Arkansas’s economy from agriculture to industry, Act 404 new jobs. Additionally, 79 local industrial development of 1955 established the Arkansas Industrial Development corporations were created.  Commission (AIDC). The AIDC’s major responsibilities, as defined by the Act, were to: The creation of two other entities during the 1950s further enhanced Arkansas’s economic development capabilities. The • Bring labor, industry and agriculture into the closest and University of Arkansas Industrial Research and Extension fullest possible accord for the development of the state’s Center — now the University of Arkansas at Little Rock resources and the furtherance of its industry; Institute for Economic Advancement (IEA) — was created • Assemble and publicize all available information pertinent in 1955 to provide research support to AIDC. In subsequent to the industrial opportunities afforded by this State, decades, the IEA expanded its economic development capacity both in respect to particular sections of the State as by adding an Economic Development Administration a whole, including the raw material and the products University Center, a Census State Data Center, a Labor producible there from, the water and the power resources, Education Program, a Trade Adjustment and Assistance transportation facilities, available markets, labor supply, Center, and the Arkansas Small Business Development Center. industrial sites, and banking and credit facilities all to the

 Arkansas Industrial Development Commission, An Industrial History of Arkansas (Little Rock, 1962).  Joseph L. Marks and Alicia A. Diaz, eds., SREB Fact Book on Higher Education, [book online] (Atlanta: SREB, 2007, accessed 15 Feb. 2008);  1955 Ark. Acts 404. available from www.sreb.org/DataLibrary/tables/FB01.xls.  Arkansas Industrial Development Commission, Services Division, Annual  Calvin Smith, “Some Pertinent Facts about Arkansas History: Past and Reports and List of New and Expanding Industry 1955 through June 1960, Present,” MS, Arkansas Industrial Development Commission, 1982, 3. vol. 1 (Little Rock, 1960). Arkansas StRategic Plan page 

The First Arkansas Development Finance Corporation covered employment (See Figure 2) accelerated. The initial (FADFC) — now the Arkansas Capital Corporation economic development investments of the 1950s would — was established by Act 567 of 1957 to provide industrial produce unprecedented dividends throughout the 1960s. development funding “to promote the industrial, business, Figure 113Figure 214 agricultural and general economic welfare of the state Figure 113 through the creation of employment opportunity Arkansas PCPI as a Percent of US: 1930-1960  of Arkansas citizens.” Although the FADFC was 70% not limited to industrial development financing, 60% its stimulus was the lack of credit and capital funds 61.6% 61.7% 59.5% available in Arkansas to finance industrial projects. 50% 56%

40% 43% 43% Additional financing initiatives also enhanced 30% 36.3% economic development during these years. Amendment 49, approved in 1958, permitted cities 20% and counties to issue tax-exempt general obligation 10% bonds dedicated to ad valorem tax revenues to 0% finance land, buildings, improvements, machinery 1930 1935 1940 1945 1950 1955 1960 and equipment. Act 9 of 1960 expanded economic development bonding authority by permitting cities and Figure 214 counties to issue tax-exempt special obligation revenue bonds Arkansas Covered Employment 1951-1960 to finance industrial construction.  280,000

270,000 Between June 1955 and June 1960, Arkansas intensified 260,000 industrial production and reversed population outflows. 250,000 Within five years, the AIDC helped new and expanding 240,000 industries create 51,141 jobs. 10 Despite a net population 230,000 decline during the 1950s, the 1960 population of 1,789,000 220,000 was significantly higher than the post-war low of 1,704,000 in 1956. 11 Arkansas’s manufacturing base was still natural 210,000 200,000 resource-dependent — food and lumber accounted for 42 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 percent of manufacturing jobs. 12 However, per capita personal income (See Figure 1) began to exceed peak wartime levels as

b. The 1960s

 Herbert L. Thomas Sr., “A Concept in Cooperation First Arkansas Arkansas legislators were not complacent with economic Development Finance Corporation,” Arkansas Economist, n.d., accessed 15 success and sought strategies to accelerate momentum as Dec. 2007; available from http://assets.arcapital.com/pdf/fadfc_history.pdf. the national economy rapidly expanded. One of the earliest  Ark. Const. Amend. 49 (1958, repealed by Amendment 62 § 11, 1982).  1960 Ark. Acts 9. strategic planning efforts was a 1964 report, Accelerating 10 Annual Reports and List of New and Expanding Industry 1955 through June 1960, 31. 11 SREB Fact Book on Higher Education, Table 1. 13 Department of Commerce, Bureau of Economic Analysis, Per Capita 12 Arkansas Economic Expansion Study Commission, Accelerating Personal Income, Mar. 2008, online, available from http://www.bea.gov/ Economic Growth in Arkansas: A Report to the Governor, the Legislative regional/reis/drill.cfm Council, and the General Assembly of Arkansas Pursuant to Act 244 of 1963 14 Arkansas Employment Security Department, Covered Employment and (Little Rock, 1964), 22. Earnings Arkansas 1996 (Little Rock, 1997) 54-55. Arkansas StRategic Plan page 

Economic Growth in Arkansas, prepared by the Arkansas Buoyed by early success, the AIDC continued to recruit Economic Expansion Study Commission. Authorized by Act industries by touting low business and labor costs. Marketing 244 of 1963, this report identified 30 strategies specific to materials proudly stated that “Average hourly earnings in education, financing, government and taxation, research, and Arkansas manufacturing are about 30 percent below the transportation. A passage from the report shows that many of national average.” 17 As a result, the 1960s ushered the greatest today’s economic concerns are not far removed from those of manufacturing growth in Arkansas’s history. The number the 1960s: of Arkansans employed in manufacturing grew by 65,000, or almost 64 percent, while covered employment grew by We can seek to accelerate economic growth…Yet, if Arkansas 120,000. Manufacturing accounted for 55 percent of all is to continue its progressive trends, we must recognize: employment growth during the 1960s. 18 Per capita personal income, only 61.7 percent of the national average in 1960, had 1. That we live in an age of rapid change, and therefore, we grown to 69.2 percent of the national average by 1970. 19 must prepare the economy of Arkansas to more easily adjust to the structure most compatible with rapid growth within c. The 1970s the guidelines of the changing national economy. The 1970s started much like the previous decade ended. 2. That we live in an age of science and technology, and However, economic uncertainty in the mid-1970s due to rising therefore, we must invest in education, research, and energy costs, economic recession, inflation, and the initial graduate training of professional brain power. movement of United States manufacturers to Mexico slowed 3. That we live in an age of the skilled worker, and therefore, progress temporarily. Arkansas’s unemployment rate, once 5.0 we must expand our vocational technical training to provide percent in 1970 had nearly doubled to 9.5 percent in 1975. 20 needed skills for the future. 4. That we live in an age of changing industrial mix, and, In an effort to jump-start the strained economy, the Arkansas therefore, we must make the changes necessary to acquire General Assembly created the Economic Development Study more employment and to guide our industrial growth. 15 Commission in 1975. The Commission’s sole purpose was to prepare a program for increasing economic development and The AIDC was successful in championing several laws improving the quality of life in Arkansas over the next decade. recommended by the report that continue to influence The Commission accomplished its objective by issuing its economic development today. These laws included: Report and Recommendations in 1976. This report, partially funded by the Winthrop Rockefeller Foundation, specified 90 • Act 173 of 1967, the Revenue Bond Guaranty Law, which recommendations for legislative action in the following areas: authorized the AIDC to guarantee both interest and agriculture, capital formation, energy, environment, forestry, principal payments on Act 9 bonds. government service, human resources, industrial development, • Act 118 of 1969, which established eight statewide planning tourism and transportation. 21 and development districts to prepare comprehensive regional plans for economic development. • Act 269 of 1969, which clarified the Freeport Law. • Act 479 of 1969, which created the Arkansas Industry 17 Arkansas Industrial Development Commission, A Preliminary Report Training Program to provide pre-employment and on-the- from Arkansas (Little Rock, 1969), n.p. job training to manufacturing workers. 16 18 Barbara I. Pardue, “Arkansas’ Economic Development: Past, Present, Future,” Arkansas Business & Economic Review 31, no. 3 (1998): 11. 19 Per Capita Personal Income, Table SA1-3. 20 Belinda Hodges, E-mail to AEDC, 6 Dec. 2007. 15 Accelerating Economic Growth in Arkansas, 2. 21 Arkansas Economic Development Study Commission, Arkansas 16 Arkansas Department of Economic Development, Basics of Plant Economic Development: A Design for Future Growth, Report and Location in Arkansas, 8th ed. (Little Rock, n.d.), 4-5. Recommendations (Little Rock, 1976), 35-203. Arkansas StRategic Plan page 

Like 1964’s Accelerating Economic Growth in Arkansas, the Figure 326 recommendations of the 1976 Report and Recommendations of Population Rebound in Arkansas 1950-1980 the Economic Development Study Commission are still relevant 2,500,000 today (See Appendix A for a listing of recommendations). 2,000,000 2,286,435 1,909,511 1,923,295 1,500,000 1,786,272 By mid-decade, AIDC directors lamented the lack of progress and recognized the need to expand industrial recruitment by 1,000,000 adopting targeted industrial recruitment, attracting foreign 500,000 investment, and recruiting companies that required semi- 0 skilled workers in non-manufacturing occupations. Foreign 1950 1960 1970 1980 investment, initiated in 1974, later led to the creation of Arkansas’s first global office in Belgium in 1976. 22 Figure 427 Covered Employment Growth The 1970s ended with yet another report, Arkansas Climbs in Arkansas: 1960-1980 the Ladder: A View of Economic Factors Relating to Growth of 800,000 Jobs and Purchasing Power. This 1979 report, commissioned 700,000 by the Arkansas Economic Development Commission, noted 600,000 significant gains in population, (see Figure 3) median number 500,000 of school years completed, covered employment (see Figure 4) 400,000 and per capita personal income. 23 Per capita personal income as a percentage of the national average reached its zenith at 300,000 78.3 percent in 1978. 24 200,000 100,000

The future, according to the report, was not as bright 0 1960 1965 1970 1975 1980 because Arkansas’s recruitment efforts relied exclusively on d. The 1980s labor-intensive, low-wage, low- skilled branch plants. The The 1980s was a decade of economic uncertainty for many authors proclaimed Arkansas at a crossroads — continue Arkansans. Unemployment, which started increasing in the recruiting labor intensive, low-skilled, minimum wage jobs or mid 1970s, would peak at 9.7 percent in 1983 and would immediately begin implementation of a program to develop remain above 7 percent until 1990. 28 Farm prices, which skills required by modern industry, both manufacturing and fueled income growth in the late 1970s, would tumble. non-manufacturing. 25 Finally, a national recession in the early 1980s, coupled with Figure 3 26 Figure 4 27 the savings and loan debacle and bank closures of the mid 1980s stifled much of the growth that AIDC helped fuel in its first 20 years.

22 “A Word from Our Directors,” This is Arkansas, Special Issue, May-June 1975, 34. Economic recovery, albeit slow, was hastened by proactive 23 Arkansas Department of Economic Development, Arkansas Climbs legislation. Arkansas became one of the first states to enact the Ladder: A View of Economic Factors Relating to Growth of Jobs and Purchasing Power, (Little Rock, 1979) b. tax incentives to attract industries. The Enterprise Zone 24 Per Capita Personal Income, Table SA1-3. Act of 1983 provided tax credits for the creation of new jobs 25 Arkansas Climbs the Ladder, 33-34. 26 Department of Commerce, Bureau of the Census, State Population 28 Arkansas Department of Workforce Services, Unemployment Estimates, online; accessed 15 Nov. 2007; available from www.census.gov/ Rates and Labor Force Statistics, accessed 2 Dec. 2007; available from popest/archives/ http://www.discoverarkansas.net/cgi/dataanalysis/PeriodSelection. 27 Covered Employment and Earnings Arkansas 1996, 54-55. asp?menuchoice=labforce Arkansas StRategic Plan page  and sales and use tax exemptions for building materials used Jobs for Arkansas’ Future, released in 1986, by the Jobs to construct manufacturing facilities. 29 To ensure existing for Arkansas’ Future Commission, focused on five key manufacturers would remain in Arkansas, the Manufacturers’ recommendations: Investment Tax Credit (MITC) Act (currently InvestArk) was passed in 1985 to provide manufacturers with sales and use • Invest in Arkansas’s people tax credits equal to 7 percent of the cost to modernize or • Target economic development resources more strategically expand facilities. 30 • Increase the availability of financial resources • Enhance state government capacity to develop policy and Additional legislation created two new state agencies whose coordinate programs missions have become closely ingrained with economic • Develop private sector and local leadership capacity 33 development. The Arkansas Science & Technology Authority (ASTA) was created in 1983 to bring the benefits (Specific recommendations are listed in Appendix B.) of science and advanced technology to the people and State of Arkansas. This mission is addressed through strategies to Breaking Down Old Walls, Laying a New Foundation, written promote scientific research, technology development, business by the University of Arkansas at Little Rock’s Center for innovation, and math, science and engineering education. 31 Research and Public Policy in 1987, suggested that changing market pressures and advanced technology required Arkansas The Arkansas Development Finance Authority (ADFA), manufacturers to develop innovative products and implement created in 1985, was empowered to issue tax-exempt modern production processes. Three major problems facing bonds and other debt instruments to finance housing, manufacturers were noted: manufacturing, health care, exporting, infrastructure, small business, agricultural business enterprises, and education. 32 • Under-education of Arkansas workers • Lack of adequate infrastructure • Barriers that limited communication with the public sector

Because of globalization, the report noted, Arkansas could no longer attract industries in need of low-skilled, low-cost labor. Arkansas’s workforce had to enhance job skills to keep up with technological innovations. To prosper, Arkansas had to increase Gross Domestic Product by state by increasing export income, enhancing value-added manufacturing and As global competition forced closures of many low-tech encouraging growth of the service sector. 34 manufacturers, two economic reports prodded officials to develop a more diversified economy, led by high-tech and Unfortunately, many of the recommendations contained knowledge-based industries that could compete globally. within these early reports were never fully implemented. As a result, numerous problems identified as early as 1964 still remain today. Therefore, it is imperative that the strategic

29 1983 Ark. Acts 740. plan mandate an annual quantifiable implementation 30 1985 Ark. Acts 529. 31 Arkansas Science and Technology Authority, “About the Authority,” 33 Arkansas Office of Governor, Jobs for Arkansas’ Future (Little Rock, online, accessed 15 Dec. 2007; available from http://www.asta.arkansas. 1986), 33-45. gov/authority_info.html 34 University of Arkansas at Little Rock Center for Research and Public 32 Arkansas Development Finance Authority, “General Information and Policy, Breaking Down Old Walls Laying a New Foundation: Findings and Special Interest,” online, accessed 15 Dec. 2007; available at http://arkansas. Recommendations of the Economic Expansion Study Commission (Little gov/adfa/about.html Rock, 1987), 37-43. Arkansas StRategic Plan page  and measurement strategy to ensure that all policy Creation of Arkansas Manufacturing Solutions (AMS) in recommendations are accomplished. 1995 helped to accomplish some of these recommendations. AMS, a program of ASTA and an affiliate of the National e. The 1990s Institute of Standards and Technology Manufacturing Legislators eager to rekindle economic growth passed Act Extension Partnership, provides manufacturing extension 1227 of 1991. This Act required AIDC to develop specific services to Arkansas manufacturers. The mission of AMS is actions to meet seven statistical goals by the year 2000. to positively impact the State of Arkansas by improving the These goals were to: global competitiveness of Arkansas’s industry. AMS continues to improve manufacturers’ performance, productivity, and 1. Increase per capita personal income to reach 85 percent of profitability through training and projects that are consistent the U.S. average with each company’s strategy and that achieve tangible and 2. Increase annual pay to 85 percent of the U.S. average measurable results. 37 3. Reduce the duration of unemployment to less than 10 weeks Despite failure to achieve several of Act 1227’s goals 4. Reduce the unemployment rate to the national average pertaining to income and poverty, population and labor force 5. Increase health insurance coverage to 75 percent of growth were profound during the 1990s. Arkansas gained the workforce 322,675 residents between 1990 and 2000 — considerably 6. Decrease the poverty rate to less than 14 percent of the more than the 64,290 gain between 1980 and 1990. 38 families in the State Despite rapid labor force growth, unemployment remained 7. Increase the rate of new business formation to that low, returning to rates not seen since the early 1970s. By 1995, of the U.S. 35 Arkansas’s covered employment exceeded one million while unemployment dropped to 4.8 percent. 39 In formulating recommendations to accomplish these goals, the AIDC reviewed previous reports including the recently- Much of Arkansas’s economic growth occurred as several released Designing Arkansas: The State of the Future, written by “home-grown” companies rose to national prominence. the Commission for Arkansas’ Future in 1992. Although companies such as Tyson Foods, Wal-Mart, Alltel, Acxiom, J.B. Hunt, Dillard’s, Riceland, Stephens Inc. and Similar to The World is Flat; Designing Arkansas identified six Murphy Oil were established long before 1990, the 1980s and forces that were shaping economic development. These forces 1990s were unprecedented times of growth. For instance, were technology, a global economy, business decentralization, Tyson became the nation’s largest poultry processer in 1986, a shortage of skilled workers, unbalanced environmental and Wal-Mart became the nation’s largest retailer in 1991, and economic concerns, and the need for increased emphasis J.B. Hunt became the nation’s top trucking company in the on family values. The report’s vision was increased and early 1990s. Companies such as Alltel and Acxiom became coordinated planning, better management of scarce resources, Arkansas’s knowledge-based leaders. a higher quality of life, education, and fulfilling basic human needs. 36

37 Arkansas Manufacturing Solutions, “About Us,” online, accessed 17 Dec. 2007; available from http://www.mfgsolutions.org/section.asp?secID=11 38 State Population Estimates. 35 1991 Ark. Acts 1227. 39 Arkansas Department of Workforce Services, Covered Employment 36 The Commission for Arkansas’ Future, Designing Arkansas: The State of and Earnings, online, accessed 2 Dec. 2007; available from http://www. the Future, the Report of the Commission for Arkansas’ Future (Little Rock, discoverarkansas.net/cgi/dataanalysis/AreaSelection.asp?tableName=Industry 1992). And Unemployment Rates and Labor Force Statistics. Arkansas StRategic Plan page 

3. Arkansas’s Position in the 7. Arkansas state government must become more efficient as Knowledge-Based Economy an important part of the process of promoting economic development. 41 By the mid-1990s, it was apparent most of Arkansas was not well-positioned to capitalize on knowledge-based The Summit’s Executive Summary concluded that continued job opportunities. State strategies were too focused on growth of the manufacturing sector, as well as a new traditional economic development practices, which hindered focus on securing jobs for the future in knowledge-based, transition to an economy supported by knowledge-based biotechnology, and telecommunications companies, will jobs. Manufacturing closures intensified, college graduates ensure employment opportunities. out-migrated and rural populations declined. It became imperative that Arkansas formulate a plan to accelerate In 1999, the Arkansas General Assembly implemented some the transition from traditional manufacturing jobs to a of these recommendations. Notable achievements during this knowledge-based economy. session included:

One of the first knowledge-based planning efforts began in • Creation of a two-year Small Business Loan pilot program, June 1998 when then-Governor Mike Huckabee convened through which the AEDC’s Small and Minority Business the Governor’s Summit on Economic Development to Division would award up to 50 percent matching loans to “thoughtfully consider the progressive, state-level policy small business owners through community lenders. 42 needed to promote economic growth, development, and job • The Arkansas Economic Development Act (now ArkPlus), creation in Arkansas.” 40 Create Rebate, Enterprise Zone (now Advantage Arkansas) and Manufacturers’ Investment Tax Credit (now InvestArk) Seven critical recommendations emerged from this summit: incentive programs and the Existing Workforce Training Program were amended to expand eligibility to include more 1. A strategic plan for economic development should be knowledge-based, high-technology industries. 43 prepared by the State of Arkansas to maximize • Creation of the Arkansas Research Matching Fund coordinated efforts. administered by ASTA. 44 2. A statewide transportation plan should be developed to • Reduction of Capital Gains taxes by 30 percent. 45 integrate the economic development potential of highways, • The Technical Careers Student Loan Forgiveness Program waterways, rail and air. was established to assist and encourage people to enter and 3. Arkansas needs to expand the availability of venture complete technical programs in demand fields. 46 capital within the State and to develop an entrepreneurial • Creation of the Tuition Reimbursement Tax Credit Program atmosphere. which authorizes a 30 percent tax credit to targeted 4. The Arkansas capital gains tax should be eliminated. companies for the costs paid to further employees’ post- 5. The Arkansas personal income tax system should secondary education expenditures. 47 be reformed. 6. Education is an economic development issue of major At the request of the Director of the ADED, the Task Force proportions, and the current system of public education for the Creation of Knowledge-Based Jobs (Task Force) was must be strengthened. The Arkansas educational system should be more closely connected to the business world, and 41 Teamwork for the Twenty-First Century, 4-5. 42 1999 Ark. Acts 448. educators must address educational performance. 43 1999 Ark. Acts 264, 575, 584, 995 and 1130. 44 1999 Ark. Acts 1545. 45 1999 Ark. Acts 1005. 40 Arkansas Office of Governor, Governor’s Summit on Economic 46 1999 Ark. Acts 652. Development, Teamwork for the Twenty-First Century (Little Rock 1998), 4. 47 1999 Ark. Acts 1036. Arkansas StRategic Plan page  formed in June 2001. The mission of the Task Force was The Task Force believed Arkansas had the basic tools to achieve to enhance statewide economic development by increasing success but lacked a game plan. Additionally, the process for knowledge-based employment in existing businesses; creating knowledge-based jobs is a continuum that requires increasing the number of knowledge-based start up businesses; commitment by both the public and the private sectors. and, by attracting new knowledge-based businesses from outside of Arkansas. In 2001, the Arkansas General Assembly implemented some of these recommendations. Notable achievements during this The Task Force identified education, research, and session included: entrepreneurship/risk capital as the three areas most critical to their success. From their extensive research, the Task Force • Extending the Small Business Loan program. 49 issued 12 recommendations which included: • Extending the carry forward for earned tax credits for biotechnology and emerging technologies. 50 1. Elevating math and science education to the number 1 • Raising bond guaranty limits from $4 million to $5 million. 51 public education issue. • Permitting Tax Increment Financing (Approved by voters in 2. Recommending ways to better allocate state education and 2000 general election). 52 support infrastructure budgets. 3. Shifting resources to degree programs that best address In 2003, Accelerate Arkansas, a statewide group dedicated Arkansas’s economic needs. to growing Arkansas’s knowledge-based economy, formed 4. Supporting research and focusing research matching funds as a result of recommendations by the Task Force and from on Centers of Excellence. leadership of the Arkansas Venture Forum. Accelerate 5. Instituting a voucher program to provide grants to Arkansas Arkansas is a diverse group of 60 business and education business start-ups. leaders committed to building a competitive, knowledge-based 6. Expanding ASTA’s Capital Seed Program. economy in Arkansas with the goal of achieving parity in per 7. Requiring State pension funds to invest from one to three capita income with the U.S. average by the year 2020. percent in the Fund of Funds (also known as the Arkansas Institutional Fund) for early-stage Arkansas technology The mission of Accelerate Arkansas is to foster economic companies or in Arkansas venture capital funds investing at growth in Arkansas by using the essential building blocks of least 60 percent of their investments in Arkansas companies. the knowledge-based economy: 8. Pledging AEDC bond guarantee funds to support ADFA’s venture capital fund. 1. Creating jobs from research and development knowledge. 9. Providing tax incentives for investors in technology start-up 2. Making risk capital available at all stages of the business cycle. and early-stage businesses in Arkansas. 3. Encouraging entrepreneurship and accelerating new 10. Modifying economic development incentives to value enterprise development. people and intangible assets. 4. Increasing achievement in Science, Technology, Engineering 11. Creating a Knowledge-Based Industries Partnership of and Math (STEM) education. Arkansas to recommend and champion the creation of 5. Sustaining existing industries through advanced technology. 53 knowledge-based businesses and jobs. 12. Proposing a constitutional amendment to allow equity investment by qualified state agencies. 48 49 2001 Ark. Acts 913. 50 2001 Ark. Acts 1284. 51 2001 Ark. Acts 1032. 52 2001 Ark. Acts 1197 and Ark. Const. Amend. 82. 53 Accelerate Arkansas webpage, “Building a Knowledge-Based Economy 48 Arkansas Department of Economic Development, Report of the Task in Arkansas,” online, accessed 4 Jan. 2008; available from http://www. Force for the Creation of Knowledge-Based Jobs (Little Rock, 2002), 10-19. acceleratearkansas.org/index.html. Arkansas StRategic Plan page 10

One of Accelerate Arkansas’s first initiatives was to secure Recently, Accelerate Arkansas unveiled a statewide strategic funding for a study by the Milken Institute, entitled Arkansas’ economic development plan defining how Arkansas can Position in the Knowledge-Based Economy. 54 This study built accelerate its competitiveness and preparedness to compete the foundation for eight of Accelerate Arkansas’s legislative in today’s rapidly changing and highly competitive global proposals passed into law in 2007. economy. The cornerstones of the plan emphasize technology, knowledge and entrepreneurship. 56 Specific recommendations These eight laws included: of this plan will be discussed within the various components of 1. Authorizing ASTA to help with the creation of the the AEDC strategic plan. Arkansas Research Alliance (modeled after Georgia’s Research Alliance). 2. Providing additional funds to existing ASTA and Arkansas Biotechnology Institute knowledge-based research programs. 3. Establishing a risk capital matching fund to provide financial assistance to early stage Arkansas companies unable to attract traditional capital. 4. Providing additional funding for the Seed Capital Investment Program. 5. Creating Innovate Arkansas, contracted by state government, to provide business support to fast-growing or knowledge-based start up companies. (Modeled after Oklahoma’s i2E Inc. (Innovation to Enterprise). During the last three legislative sessions, several other 6. Establishing STEM grants to help hire and retain economic development initiatives merit discussion. STEM teachers. These included: 7. Enhancing the Consolidated Incentives Act by expanding and strengthening research and development/knowledge- 2003 based business incentives. • Creating the Consolidated Incentive Act of 2003 that 8. Requesting a task force to study a new governmental combined six existing economic development laws into one structure with a broad focus on 21st century economic act and expanded incentives to address new technology- development. 55 oriented businesses, many of which have research and development activities. 57 Governor Mike Beebe pledged state matching funds if • Reinstating the Capital Development Corporation Act, additional funding could be raised privately. To date, which allows 33 percent income tax credits for investments approximately $14 million of state funding has been in Arkansas business through capital development committed to these and other technology initiatives supported companies. 58 by Accelerate Arkansas. As part of its commitment to Innovate Arkansas, Winrock International will develop a $1 million technology business finance program. This fund will be used to launch and grow promising Arkansas companies 56 Teresa A. McLendon, ed., Building a Knowledge-based Economy in that emerge from Innovate Arkansas. Arkansas: Strategic Recommendations by Accelerate Arkansas, report prepared for The Accelerate Arkansas Strategic Planning Committee (Little 54 Milken Institute, Arkansas’ Position in the Knowledge-based Economy Rock: UALR Institute for Economic Advancement, 2007) 36-43. (Santa Monica, CA, 2004). 57 2003 Ark. Acts 182. 55 Accelerate Arkansas webpage, “Building a Knowledge-based Economy.” 58 2003 Ark. Acts 860. Arkansas StRategic Plan page 11

• Creating the Biodiesel Incentive Act, which authorized a 5 2007 (In addition to Accelerate Arkansas legislation percent income tax credit for equipment used to store and discussed on the previous page) distribute biodiesel. 59 • Reducing the sales and use tax on energy consumed in • Creating a mechanism by which the Governor can authorize manufacturing. 66 the call of a special election for voters to approve the • Establishing the Governor’s Quick Action Closing Fund. 67 issuance of general obligation bonds for super projects. 60 • Establishing an income tax exemption for windmill blade manufacturers. 68 2005 • Establishing the Equity Investment Incentive Act. 69 • Creating the Non-Profit Incentive Act, which allows jobs tax • Allowing the issuance of $575 million in general credits based on payroll for eligible non-profit corporations. 61 obligation bonds for the construction and repair of • Creating Accelerate Arkansas’s Act to Foster the Growth Interstate Highways. 70 of High-Paying Jobs. This legislation outlined several • Creating Connect Arkansas to promote broadband actions aimed at promoting job growth to raise the level of education and deployment in Arkansas. 71 Arkansas’s per capita personal income to the national level. Additionally, changes were made to existing laws to lower the thresholds for targeted businesses, to provide flexibility on the tuition reimbursement tax credit program, to allow graduate students to participate in the Technical Careers Student Loan Forgiveness Program, to promote research in the state by existing companies, to allow both ADED and ADFA to guarantee bonds for technology based enterprises and to increase the amount of money ASTA may provide in support of technology development. 62 • Creating an Arkansas Agriculture Department that includes the State Plant Board, the Arkansas Livestock and Poultry Commission, the Arkansas Forestry Commission and the Abandoned Pesticide Advisory Board. 63 • Allowing the Arkansas Higher Education Coordinating Board to create acknowledged Centers of Excellence following the approval of applications submitted by state colleges and universities. 64 • Creating enabling legislation for Amendment 82. 65

59 2003 Ark. Acts 1287. 60 2003 Ark. Acts 1751. 66 2007 Ark. Acts 185. 61 2005 Ark. Acts 1277. 67 2007 Ark. Acts 510. 62 2005 Ark. Acts 1232. 68 2007 Ark. Acts 990. 63 2005 Ark. Acts 1978. 69 2007 Ark. Acts 566. 64 2005 Ark. Acts 265. 70 2007 Ark. Acts 511. 65 2005 Ark. Acts 1941. 71 2007 Ark. Acts 604. Arkansas StRategic Plan page 12

4. Formulating a New Vision of Economic Development

Global competition, technological change and competition for scarce resources cannot elicit a myopic view of economic development. The diversity and complexity of economic development is acknowledged by the International Economic Development Council who laments:

No single definition incorporates all of the different strands of economic development. Typically economic development can be described in terms of objectives. These are most commonly described as the creation of jobs and wealth, and the improvement of quality of life. Economic development can also be described as a process that influences growth and restructuring of an economy to enhance the economic well being of a community. In the broadest sense, economic development encompasses three major areas:

• Policies that government undertakes to meet broad economic objectives including inflation control, high employment, and sustainable growth. • Policies and programs to provide services including building highways, managing parks, and providing medical access to the disadvantaged. As Governor Beebe has stated, the complexities of • Policies and programs explicitly directed at improving the community and economic development preclude a one-size- business climate through specific efforts, business finance, fits-all approach. Governor Beebe’s vision is both pragmatic marketing, neighborhood development, business retention and passionate: and expansion, technology transfer, real estate development and others. We need a renewed emphasis on industry retention while helping to expand the businesses already here and

The main goal of economic development is improving the attracting new ones. The mission of the Arkansas Economic economic well being of a community through efforts that Development Commission, first and foremost, should be entail job creation, job retention, tax base enhancements and aggressively seeking to provide better-paying jobs that offer quality of life. As there is no single definition for economic a greater quality of life to our people. As we look forward to development, there is no single strategy, policy, or program for the future, we must put a special focus on the industries of achieving successful economic development. 72 the 21st century that will ensure our long-term success. It will require a change in philosophy, and that must begin at the very core of our efforts. We can not see tomorrow with yesterday’s eyes. 73

72 International Economic Development Council webpage, “Economic 73 Arkansas, Office of Governor webpage, “Economic Development Issues,” Development Reference Guide,” online, accessed 8 Jan. 2008, available from online, assessed 20 Nov. 2007, available from http://www.governor.arkansas. http://www.iedconline.org/?p=Guide_Overview gov/initiatives_economic_development.html Arkansas StRategic Plan page 13

Specifically, Governor Beebe identified five goals for AEDC Executive Director Maria Luisa M. Haley concurs in economic development: Governor Beebe’s vision and adds that economic development strategies must be formulated within the context of the 1. We will increase the incomes of Arkansans at a growth pace following three principles: greater than the national average. 2. We will expand entrepreneurship focusing on knowledge- • Education and economic development are inseparable based enterprises. • Economic development is global 3. We will compete more effectively in the global marketplace • Communities are the lifeblood of economic development 75 for new businesses, jobs, and create a business retention strategy to reduce closures. The goals and principles of Governor Beebe and AEDC 4. Our economic development policy will meet the special Executive Director Maria Haley form the foundation of the needs and take advantage of the extraordinary assets of strategic plan. various areas of the state. It will not be one size fits all. 5. We will increase the number of workers with post secondary training so they are prepared when they enter the workforce and equipped for new jobs in the future. 74

74 Mike Beebe for Governor webpage, “Mike Beebe on Jobs and Economic 75 Samantha Friedman, “Back in Arkansas after years in Washington, Development,” online, assessed 9 Feb. 2007, available from http://www. Philippine native Maria Haley is working to boost the state’s economy,” mikebeebe.com/issues_details.asp?id=32. Arkansas Democrat Gazette, 25 Nov. 2007, D1. Arkansas StRategic Plan page 14

5. Sharing the Vision: Leadership, Implementation and Accountability

“Vision without action is a daydream. Action without vision is a nightmare”

– Japanese Proverb

As the above overview documents, Arkansas has embarked on numerous planning initiatives during the past 40 years often with only a modicum of success. Most plans, however well-written, fail for three reasons: dispirited or imperceptible leadership, deficient implementation and the absence of accountability. Too often, vague goals and objectives hamper implementation. All action items presented in this strategic plan support the AEDC mission, will be quantified, and can be assigned to specific entities for execution.

Leadership is central to this plan’s success. The state’s new economic vision requires the AEDC to lead the charge. Leadership is so important that it has become the central focus of AEDC’s new mission:

To lead statewide economic development, create

targeted strategies that produce better-paying

jobs, promote communities, and support the

training and growth of a 21st century skilled

workforce. (December 2007)

Though concise, the new AEDC mission statement is more than a précis of current economic development conjecture. The mission statement supports the economic development goals of Governor Beebe and Executive Director Maria Haley and synthesizes the collective vision of hundreds of Arkansans who desire a better economic future for Arkansas. Arkansas StRategic Plan page 15 II. The Strategic Planning Process

1. Review of Other States’ Economic Development Plans

The AEDC strategic planning process began in July 2007 with a review of statewide economic development plans from 18 peer states. Selection criteria included economic and geographic similarities, innovative visions of economic development and efforts to maximize partnerships.

Most plans were stimulated either by legislative mandate or gubernatorial initiative. Although a few plans had indeterminable implementation timeframes, most planning periods were from five to 10 years, with annual or biannual updates. Collectively, reports were authored by consultants, state economic development personnel, university faculty, and private statewide economic development corporations. A majority of plans identified a manageable number of goals, issues, or themes and clearly-defined objectives. Generally, statewide economic development plans were “high-level” without specific actions, quantitative measures and financing strategies.

The best plans were future-oriented, focusing on sustainable development, building a knowledge-based workforce, and diversifying economic opportunities through targeted, regional efforts. These plans were driven by a guiding vision or mission statement and solicited input from a wide variety of economic development stakeholders. The weakest plans professed an incremental approach to economic development and were narrowly confined to existing programs, partnerships and philosophies. Arkansas StRategic Plan page 16

2. AEDC Internal and External Interviews

Between August 2007 and May 2008, input was gathered from AEDC directors and external economic development stakeholders through a series of interviews and facilitate.com computerized questionnaires concerning economic development issues facing the state.

To envision a comprehensive perspective of economic development issues facing the state, the AEDC interviewed a broad spectrum of private and public individuals involved with economic development, education and workforce development including Arkansas cabinet-level agencies, post-secondary educational institutions, Accelerate Arkansas members, Arkansas’s Federal delegation, AEDC’s Commissioners and members of Arkansas’s statewide economic development organizations. Specific state agencies interviewed included:

• Arkansas Department of Higher Education • Arkansas Department of Education • Arkansas Science and Technology Authority • Arkansas Development Finance Authority • Arkansas Highway and Transportation Department • Arkansas Department of Workforce Services • Arkansas Department of Parks and Tourism • Arkansas Department of Finance and Administration • Arkansas Department of Rural Services • Arkansas Natural Resources Commission • Arkansas Department of Environmental Quality • Arkansas Agricultural Department • Arkansas Department of Workforce Education • Arkansas Game and Fish Commission • Department of Arkansas Heritage • Arkansas Forestry Commission Arkansas StRategic Plan page 17

3. Action Items

Strategic recommendations gleaned from interviews were aggregated and formulated into action items that are identified in the guiding principles and five strategic categories: workforce development, business development, economic development infrastructure, competitive business climate and collaborative partnerships. Action items were chosen based upon the Strategic Planning Division’s belief that each would help bring about a systematic transition to a knowledge-based economy. Responsibility for implementing each item will be delineated in annual strategic plan documents.

All action items are signified by the graphic below.

Action Items:

• This is an example of an action item list.

• This is an example of an action item list. Arkansas StRategic Plan page 18 III. guiding Principles

The mission of the AEDC is to lead statewide economic development, create targeted strategies that produce better-paying jobs, promote communities, and support the training and growth of a 21st century skilled workforce. (December 2007)

Incorporating the new mission statement into AEDC business The Arkansas Economic Development Commission’s strategic practices will require reformulation of certain economic initiative is to foster knowledge-based development while development tenets. These new tenets, or guiding principles, maintaining the current strategy to assist in accomplishing form the base of the strategic plan and must be implemented Governor Beebe’s goal of raising the per capita personal in their entirety if the plan is to succeed. The guiding income through the creation of high-wage, high-skilled jobs. principles are reflective of three consistent obstacles identified by interviewees during the strategic planning process: The implementation of this initiative is to embrace the challenges brought forth by the 21st Century Taskforce while 1. Arkansas needs a transitional, systematic approach to maintaining an emphasis on creating jobs which raise the building an economy supported by knowledge-based jobs. incomes of Arkansans. 2. Economic development efforts throughout Arkansas are diffused and inefficient. Currently, a majority of Arkansas workers are not employed 3. Arkansas lacks a recurring and predictable funding formula by knowledge-based enterprises, which is reflected by the for economic development. state’s per capita personal income and average hourly wage. Arkansas’s per capita personal income is $30,100, ranking The guiding principles are as follows: 47th among states. 76 If the AEDC is to drastically improve this ranking, and achieve Governor Beebe’s and Accelerate 1. To generate wealth for Arkansans, the Arkansas’s challenging goals, transition to an economy state requires A systematic plan causing a supported by knowledge-based jobs must occur rapidly. transition to an economy supported by knowledge-based jobs. As previously mentioned, the Arkansas General Assembly has fostered this transition by enacting copious economic • Raising Arkansas’s per capita personal income can only be development legislation. The Consolidated Incentive Act accomplished if economic developers prioritize creation, (CIA), passed in 2003, provides tax incentives based on recruitment and retention of knowledge-based jobs through payroll, rather than job creation. This has enabled many comprehensive strategic planning. Regional plans must knowledge-based employers with few employees but expansive effectuate a transition from recruitment of low-skilled payrolls to qualify for incentives. These incentives were employers to targeted development of knowledge-based amended during the 2005 and 2007 Legislative Sessions to businesses. Although this transition has begun, it has expand eligibility of knowledge-based employers. Also during occurred slowly, and only in certain regions. the 2007 Legislative Session, Accelerate Arkansas worked to enact eight bills to further stimulate the transition to an As previously stated, knowledge-based growth and economy supported by knowledge-based jobs. The growth development reflect a highly skilled/educated workforce of the state’s major corporations, investment by the state into capable of responding to economic and technological change university research and Arkansans’ entrepreneurial spirit has in the medium and long term. The market recognizes and also helped initiate this transition. rewards this with improved earning potential. 76 Per Capita Personal Income, Table SA1-3. Arkansas StRategic Plan page 19

The focus of the AEDC and all other economic development legislative initiatives will focus on achieving the objectives stakeholders must now solely be on systematically transitioning of the strategic plan and will be submitted to the Governor’s to an economy supported by knowledge-based jobs. Office for review in June of even-numbered years to allow the Arkansas Department of Finance and Administration (DFA) • Development of a five-year strategic plan will ensure that appropriate time to review any items with possible revenue a systematic transition occurs. Milestones will be set and impacts. This cycle is illustrated below in Figure 5. measurement processes established to track implementation of the strategic plan. Figure 5 Strategic planning is a logical approach to addressing the AEDC Budget Operational Submitted long-term economic development issues and opportunities Cycle Biannually facing the state. It also enables the AEDC to allocate limited in March resources effectively, establish clear priorities, and build a consensus with respect to the direction of the economy of Arkansas. The objectives and strategies identified within this plan will provide the AEDC with a more efficient way FIVE-YEAR of conducting business to meet the challenges of economic STRATEGIC transitioning. It will also serve as a guide to local/regional Legislative PLAN AEDC Plan economic development organizations that want to align their Initiatives Submitted Submitted economic development plans with the state’s plan. Biannually Annually in June in June Unlike traditional plans, the strategic plan will be updated annually to maintain focus. These annual plans will measure accomplishments of the preceding year, identify future legislative and budgetary priorities, and propose strategic actions to accomplish the agency’s mission. The foundation Completing the Operational Cycle will require several critical of the annual plan will be a compilation of annual AEDC steps discussed in Figure 6 (page 20). All process components division director plans approved by the AEDC Executive will be driven by both the AEDC mission statement and the Director. This “living document” will allow the AEDC to guiding principles defined above. Based on the division- stay flexible with the ever-changing global economy. specific action items set forth in the strategic plan, each division director will create a division-level strategic plan. At • The operational cycle of the plan must coincide with the end of every fiscal year, each division director will provide biennial legislative sessions and budgeting cycles to ensure an annual report to the AEDC Executive Director. These applicable legislation is enacted and sufficient funding is division-level annual reports will be used to produce an secured to implement strategic initiatives. agency-level annual report. The agency-level annual report will also include the annual update of the strategic plan. The operational cycle (See Figure 5) represents the process by which certain vital functions will occur. The AEDC budget will continue to be submitted annually in March, as currently required by the Governor’s Office. Proposed AEDC Arkansas StRategic Plan page 20

Figure 6 Currently, the Executive Director’s Office, division directors, Operational and human resources staff “measure” the success of an Cycle AEDC individual or division through the current performance Strategic Plan Process evaluation process. Unfortunately, this process is insufficient for quantifying strategic plan accomplishments. Division Plan Budget Updated Resources Annual Procedures Strategic Plan It is recommended that a designated person or persons assist Job Definition Training Plan the division directors and the human resources staff to create proper measurements that will allow each division director MISSION STATEMENT to quantify success of the objectives set forth by the strategic plan. The person(s) responsible for measurement will lead Division and AEDC Annual Individual Report to conceptualization and implementation of valid and reliable Performance Governor and Review Legislature measures for each division and employee.

Annual Division • Through the newly-developed internal measures, the AEDC Report to Director’s Office must look to gain efficiencies throughout the organization.

Because the global economy requires a new focus for the 2. All internal and external AEDC business AEDC to be successful in its overall mission, the AEDC must practices and processes must be evaluated evaluate all current business practices to guarantee efficiencies to guarantee efficiencies of operation of operation and mission focus. The AEDC currently has and mission focus. Inefficient processes fifteen divisions providing important functions to state should be corrected immediately, while government. However, each division must be evaluated to others must be evaluated over a period determine if it can achieve its individual division objectives of time to determine if they are properly and the overall agency objectives set forth by the strategic focused. plan. Also, the evaluation must determine if divisions should be created, recreated, or transferred elsewhere to achieve the • Initially, the AEDC operational budget must be reorganized, objectives of the strategic plan. as it is too diffused, compartmentalized, and inflexible.

• The strategic planning division cannot recommend AEDC Currently, the AEDC operational budget is composed of organizational changes until proper measurements are multiple appropriations dedicated to narrowly-defined developed and a thorough organizational study is completed. expenditure accounts. This “program-based” process is not conducive to funding many of the objectives defined in the The AEDC, ADFA, and ASTA constantly work together on strategic plan. Consolidating these appropriations into one a number of different economic development projects. The or a few appropriations will improve efficiency and flexibility co-location of these agencies will allow this partnership to by allowing the budget to synchronize with strategic become even stronger and more efficient. Further, co-location plan objectives. should allow the agencies to determine if efficiencies could be gained by combining certain functions or transferring • A comprehensive matrix of qualitative and quantitative certain functions to other state agencies. The three agencies measures must be established and continuously evaluated may also conclude certain actions being performed by other to ensure AEDC operations are achieving the objectives set state agencies would operate more efficiently if housed within forth in the strategic plan. AEDC, ADFA, or ASTA. Arkansas StRategic Plan page 21

• To enhance existing partnerships, the AEDC strongly who has the authority, responsibility and ultimately the recommends that AEDC, ADFA, and ASTA be co- accountability to implement recommendations. To assist in located. Following co-location, the three agencies should this determination, an influence tree for action items was analyze processes to determine where efficiencies can be developed. (See Appendix C) accomplished through consolidation of efforts. Operationalizing each action item will require not only a 3. Scarce and diffused economic resources determination of responsibility but also a time period for mandate a coordination of efforts led implementation and metrics for measuring success. The by the AEDC to transition the Arkansas action items identified in annual plans will therefore provide a economy to an economy supported by greater level of detail than contained in the strategic plan. knowledge-based jobs. Traditionally, the success of the AEDC has been measured • The AEDC must partner with stakeholders if all objectives by two metrics: jobs and capital investment. While these are of the strategic plan are to be accomplished. Partnerships two very important variables, additional measurements must will affect policies controlled and influenced by the AEDC. be defined to measure accomplishments. Further, external measures should be created for programs that are cooperatively The strategic planning process determined most economic addressed by others. development activities are not directly controlled by the AEDC, but are the products of joint control and multiple • The AEDC must work with partner agencies to develop influences from numerous entities. For example, most qualitative and quantitative measurements of partners’ economic development tax incentives are administered by economic development efforts specific to strategic the AEDC but require enabling legislation, funding and plan action items to ensure that objectives are being oversight controlled by others. Therefore, policies affecting accomplished. tax incentives require strong partnerships led and greatly influenced by the AEDC. Conversely, transportation 4. The AEDC must help provide needed initiatives such as access road construction are vital to economic tools to allow regions to control their development, but are the responsibility of the Arkansas own economic development. Highway and Transportation Department (AHTD). The AEDC cannot control, but can influence, AHTD decisions by Due to a number of factors, including population loss and providing input into planning and funding processes. the need to prioritize the allocation of scarce infrastructure resources, areas of the state must view economic development Development of a comprehensive statewide strategic plan from a regional approach. Most communities do not have requires that all relevant economic policy recommendations, the infrastructure and critical mass required to prosper in the not just those controlled by the AEDC, be explored. As global marketplace. However, all communities can prosper if the statewide leader of economic development activities, they partner with their neighbors. the AEDC must forge multiple partnerships with other state agencies, the regions of the state, the Congressional The transition to regionally-based economic development Delegation, and the private sector to achieve strategic will take time. Fortunately, the movement has already plan objectives. begun. Most counties currently belonging to a regional economic development consortium are seeing benefits from Strategic plan action items will be thoroughly analyzed to this membership. (See Appendix D for a map of regional determine who controls and/or influences policy development partnerships.) and implementation. Such analysis will determine Arkansas StRategic Plan page 22

• The AEDC will intensify transitional efforts to working 5. A new approach to state and regional with communities on a regional basis. A priority of this economic development funding must effort is to provide the tools needed for regions to control be employed to ensure resources are more of their own economic development and be less predictable and flexible. This approach dependent on the state. The development of regional will allow funds to be committed economic development plans consistent with the AEDC efficiently and equitably. strategic plan should enhance the ability of regions to meet specific goals. Currently, most discretionary state funding for economic development is appropriated from general improvement The AEDC will encourage further development of funds. Competition for these funds is historically intense regionally-funded economic development organizations. and funding is uncertain. Consequently, funding, if received, These organizations will allow the AEDC to better define is often insufficient, causing many worthy projects to go statewide economic policies and assist regional organizations unfunded. More importantly, the uncertain funding stream in developing strategic plans that align with and implement prevents the AEDC from adequately planning for the future. the statewide strategy. Further, as regions become more proficient in recruitment, the AEDC will be able to target • Dedicating specific revenues to economic development will proactive recruitment and develop initiatives that further the remove budgeting uncertainty and allow long-term revenue development of knowledge-based employment. streams to fund long-term objectives.

Regional organizations should also strive to generate The AEDC alone will never be able to provide adequate significant funding for local infrastructure, freeing up scarce funding for all viable projects across the state. Diffused and state funding for broad-based initiatives. This will create a inflexible resources among state agencies and a lack of focus on more balanced distribution of resources between regions and generating funding from other sources have led to unfunded the state. (See Figure 7) Therefore, the concept of regionalism or underfunded projects. To remedy this situation, the AEDC is one of the most critical long-range goals of the strategic plan. will work with stakeholders to develop strong partnerships which will provide a coordinated effort toward accomplishing

Figure 7 strategic plan objectives. A Mutual Partnership • Funding at the regional level must be developed to implement regional strategic planning objectives. As regional resources are created, state funding will be available to target statewide FUTURE strategic plan objectives that precipitate the transition to an

State ECONOMIC Regional economy supported by knowledge-based jobs. DEVELOPMENT PARTNERSHIP Local infrastructure projects have historically depended upon significant state funding. However, scarce resources will preclude the state from continuing such contributions and will require regions to provide considerable funding for economic development. To assist with this transition, the AEDC will work with regions to develop dedicated, predictable funding

sources. A predictable funding source at the regional level

will help produce the adequate resources required to succeed

Arkansas StRategic Plan page 23 in economic development. As the regions begin to build Conclusion funding capacity, the AEDC will be able to focus its dollars on The transition to an economy supported by knowledge-based achieving the recommendations of the strategic plan. Regions jobs will only occur if the five guiding principles are adopted. will then be able to finance regional strategic planning To lead this transition, the AEDC must create quantifiable priorities and provide matching dollars for projects co-funded measures around both the internal and external goals of the by the AEDC. Just as there is a timeline associated with the strategic plan, promote regionalism as the most successful transition to an economy supported by knowledge-based jobs, route to economic prosperity and wealth, and implement a there must also be a timeline associated with the transition to new approach to economic funding. the new funding approach.

Today, state incentives and funding are available on a project- by-project basis with local funding only occasionally available. Further, there is almost no coordinated effort between state and local funds. Within five years, the funding formula will become more integrated, allowing the state to distribute most economic development funding to action items identified in the strategic plan while regions can fund local projects. The new funding strategy will increase statewide funding for economic development initiatives and cause the transition to an economy supported by knowledge-based jobs.

Figure 8 Long-term Economic Development Funding: 3-5 Years

State investments to build an economy supported by knowledge-based jobs

State incentives Region funding for targeted for investments recruitment and recruitment Arkansas StRategic Plan page 24 IV. Five Strategic Economic Development Components

Economic development is a system comprised of five interdependent components: workforce development, business development, economic development infrastructure, competitive business climate and collaborative partnerships. Each component is augmented by a vast array of resources — people, capital, entities and policies — that collectively delineate the blueprint for this strategic plan.

Figure 9

Economic WORKFORCE DEVELOPMENT Development Recruitment Components Workforce Training Education Labor Force

COLLABORATIVE BUSINESS PARTNERSHIPS DEVELOPMENT New Business Startups Creative Infrastructure Targeted Recruitment Planning Global Marketplace Funding Existing Business People ECONOMIC DEVELOPMENT

COMPETITIVE BUSINESS INFRASTRUCTURE CLIMATE Communications Taxes/Regulation Transportation Incentives Building/Sites Financing Utilities Marketing Arkansas StRategic Plan page 25

Component 1 All who have meditated on the art of governing Workforce Development mankind have been convinced that the fate of

A. Education empires depends on the education of youth. B. Workforce Training – Aristotle C. Labor Force

Workforce development is the process by which knowledge and skills are attained by the labor force. Contributing to this process are state agencies, educational institutions, training providers, employers and employees. The success of the strategic plan is predicated on advancing a streamlined workforce development system that focuses resources on increasing educational attainment at all levels and enhancing the technical skills required by knowledge-based employers.

As policy discussions broadened, representatives from the Arkansas’s potential to retain and expand existing businesses Arkansas Department of Education (ADE) and the Arkansas and to recruit targeted companies is constrained by skilled Department of Workforce Education (ADWE) were added labor shortages. Thousands of manufacturing jobs in to the group. Partnership efforts have been instrumental in drafting, welding, industrial maintenance, aerospace formulating many workforce development initiatives proposed technology, and machining remain vacant. in the strategic plan.

Additionally, the AEDC’s targeted recruitment strategy (See Realizing that a systematic approach to improve the state’s Component 2 – Business Development) prioritizes knowledge- workforce development delivery system was needed, Governor intensive businesses. Successful business recruitment will Beebe convened the Governor’s Workforce Cabinet in May require substantive changes to educational and training 2007. Governor Beebe’s initial assessment of Arkansas’s systems in regard to curriculum development and delivery, workforce system during his gubernatorial campaign provides flexibility and funding of existing programs, and insight into the importance of the Governor’s Workforce construction of new programs which reflect economic goals. Cabinet:

Prompted by Act 502 of 2005, 77which required the AEDC to Let’s be honest: our current workforce training programs are not share economic planning data with the ADHE for inclusion achieving the results and meeting the needs of our employers. in post-secondary institution role and scope designations, the But they can if they are streamlined, given the right mandate AEDC and the ADHE initiated quarterly meetings to discuss and organization, and funded to the necessary levels…Right issues germane to education and economic development. now there are too many state agencies and divisions trying to These meetings have helped to strengthen the connection play some role in workforce training. I will streamline the between education and economic development and have current multi-agency and multi-funded workforce training helped to formulate many of the strategic plan’s action items. programs and make the focus life-long learning. 78

77 2005 Ark. Acts 502. 78 “Mike Beebe on Jobs and Economic Development.” Arkansas StRategic Plan page 26

Initial research conducted by the AEDC pursuant to the a. Education activities of the Governor’s Workforce Cabinet found that site Figure 10 consultants’ ratings of state workforce development programs were highest for those states (such as Georgia, Alabama, Florida, and South Carolina) whose programs possessed the following characteristics:

• The primary role of two-year post secondary institutions was to provide technical and vocational training to prepare people for work. • A customer-supplier relationship existed between industry and workforce development providers. Workforce training – Governor Mike Beebe was connected to business and industry to insure relevance and usefulness in the workplace. Economic development strategies are ineffective without an • Workforce development programs were well-funded from educated workforce. Education entities at all levels must be dedicated revenue sources. attuned to the workforce needs of businesses and align their missions with those of the AEDC. No levels, from Pre-K The AEDC carefully studied the organizational structures, through college, are immune. Economic benefits of an service delivery methods and funding mechanisms of a dozen educated workforce are substantial as illustrated in Figure 11. 79 peer states to identify best practices. Many of these practices have been incorporated into AEDC’s Governor’s Workforce Cabinet policy recommendations pending final approval by Governor Beebe.

Figure 11 Education Pays

UNEMPLOYMENT MEDIAN WEEKLY RATE IN 2007 EARNINGS IN 2007 1.4% Doctoral degree $1,497

1.3% Professional degree $1,427

1.8% Master’s degree $1,165

2.2% Bachelor’s degree $987

3% Associate degree $740

3.8% Some college, no degree $683

4.4% High-school graduate $604

7.1% Less than high $428 school diploma

Source: Bureau of Labor Statistics, Current Population Survey

79 Department of Commerce, Bureau of the Census, “Education Pays,” online. accessed 22 May 2008, available from http://www.bls.gov/emp/ emptab7.htm. Arkansas StRategic Plan page 27 i. Secondary Education Engaging students in innovative programs also helps Recent sessions of the Arkansas General Assembly have increase educational attainment and technical skills. The illustrated Arkansas’s pronounced commitment to education. Environmental and Spatial Technology (EAST) Initiative, Increased funding and enhanced standards have significantly launched in 1997, encourages students to utilize teamwork, improved student accessibility and performance. Education applied knowledge and technology to creatively solve real- Week’s Quality Counts 2008 report ranked Arkansas eighth world community problems. Today, approximately 200 among all states based upon the following criteria: students’ schools in eight states implement EAST programs. 82 The chance for success; K-12 achievement; standards, assessments AEDC will support EAST activities and work with the ADE and accountability; transition and alignment policies; school to expand EAST’s entrepreneurial and technological vision in finance; and, teaching professionalism. 80 all secondary schools throughout Arkansas.

Arkansas high-school attainment rates are vastly improving. Career technical training within 16 educational pathways Since 1960, the percentage of Arkansans over 25 years of helps prepare students for many jobs that require specific age with a high-school diploma has nearly tripled. Arkansas occupational skill sets. More than 150,000 Arkansans — 76 currently ranks 41st among states and could reach the percent of all 7th – 12th grade students — are enrolled in career national average within the next decade if trends continue. 81 and technical education classes. Approximately 39 percent Innovative programs such as Youth Opportunities Unlimited of these students complete all classes within their chosen are reducing high-school dropout rates by helping at-risk youth educational pathway. understand the importance of remaining in school. Other programs such as the Arkansas Scholars Program, which helps A five-year study of these students found that: prepare students for post-secondary education and workforce opportunities, should be implemented by more schools. • Pathway graduates entering college increased by 47 percent. • College remediation rates of pathway graduates decreased Figure 12 14 percent. Percentage of Persons 25 Years and Older with a High School • In 2005, 72 percent of pathway graduates remained in Diploma: AR vs US 1940-2006 college for their sophomore year (this was 4.7 percent above the overall collegiate average). 100% Arkansas United States 90% • The number of students receiving concurrent college credit 80% for pathways coursework tripled from 1,124 to 3,607, 70% resulting in transcriptable college credits of 10,336 hours. 83 60% 50% 40% Increasingly, college-bound students are taking advanced 30% placement examinations. Since 2004, the number of advanced 20% placement students increased by 164 percent. 84 10% 0% 1940 1960 1980 2000 2006

80 “Quality Counts 2008: Tapping into Teaching,” [report online], Education Week, accessed 5 Feb. 2008, available from http://www.bls.gov/ 82 EAST Initiative webpage, “EAST Schools,” accessed 14 Oct. 2008, emp/emptab7.htm. available from http://www.eastproject.org/SchoolsPartners/. 81 Department of Commerce, Bureau of the Census, Educational 83 John Davidson, Arkansas Department of Workforce Education, data to Attainment in the United States, online, accessed 2 Feb. 2008, available from AEDC, n.d. http://www.census.gov/population/www/socdemo/education/cps2006.html. 84 Arkansas Department of Education, Office of Gifted and Talented, 2004- and historical data provided by Ron Harrell from the Arkansas Department 2008 College Board Data, e-mail from Ann Biggers, data to AEDC 13 Oct. of Higher Education. 2008. Arkansas StRategic Plan page 28 ii. Post-Secondary Education Figure 13 Several of Arkansas’s post-secondary educational Advanced Placement Accomplishments institutions have been recognized for academic in AR: 2004-2008 achievement by U.S. News and World Report in their 35,000 AP Students AP Exams Taken AP Exams with 3+ Scores 85 annual America’s Best Colleges issue. New programs 30,000 in business, engineering, technology and sciences have 25,000 proliferated at most institutions and are too numerous to mention here. The phenomenal capital and academic 20,000 growth, coupled with the advent of financial assistance 15,000 programs such as the Arkansas Academic Challenge 10,000 Scholarship Program, has increased the demand for post-secondary education. 5,000

0 Local scholarship programs can also boost college 2004 2005 2006 2007 2008 enrollment. A phenomenal example is the El Dorado Promise, a $50 million scholarship program Figure 14 inaugurated by Murphy Oil in El Dorado. Graduates Full-time, First-time Freshmen Entering College: 2003-2007 of El Dorado High School who meet basic program 64.7% requirements are eligible to obtain scholarships that 17,800 65% fund up to 100 percent of costs to obtain Associate 17,600 63.9% 64% 86 17,608 and Baccalaureate degrees. This program is 17,400 one excellent model that should be replicated in 63% 17,200 62% communities throughout Arkansas. 17,000 62% 60.8% 60.9% 17,016 Enhanced accessibility to post-secondary educational 16,800 61% institutions has helped increase the college-going rate 16,600 16,741 16,640 60% (the percentage of high school graduates that go to 16,400 16,560 college) to 64.7 percent. 87 59% 16,200

16,000 58% 2003 2004 2005 2006 2007

Number of Entering Freshmen

College Going Rate %

This surge has helped increase total enrollment which has reached historical levels. 88

85 America’s Best Colleges 2008, US News and World Report, online, available from http://colleges.usnews.rankingsandreviews.com/usnews/edu/ college/rankings/rankindex_brief.php. 86 El Dorado Promise webpage, “El Dorado’s Promise to You,” accessed 15 Mar. 2008, available from http://www.eldoradopromise.com/. 88 Arkansas Department of Higher Education, Planning and Accountability, 87 Arkansas Department of Higher Education, Planning and Accountability, Total On-Campus Enrollment by Type of Institution, 1989-2007, online, Total Full-Time, First-Time Entering Freshmen as of October 20, 2008, available from http://www.arkansashighered.com/Research/Enrollment- online, available from http://www.adhe.edu/Research/Enrollment-2007.html 2007.html. Arkansas StRategic Plan page 29

Figure 15 Table 1 Arkansas Higher Education On-Campus Average ACT Scores by Level of Preparation Enrollment: 2003-2007 Arkansas High School Graduating Class of 2007

140,000 ACT CATEGORY ACT SCORES ACT SCORES (FULL CORE) (PARTIAL CORE) 135,000 135,000 Math 20.6 17.9 132,103 Science 20.8 18.3 130,448 130,000 Composite 21.3 18.3 126,749 124,478 125,000 However, a vast majority of Arkansas students continue to score below ACT benchmark scores for math and science. 120,000 (Benchmark scores are measures of college readiness.) Only

115,000 34 percent of 2007 high school graduates who took the ACT 2003 2004 2005 2006 2007 scored the requisite 22 benchmark for math, while only 21 percent scored the requisite 24 benchmark for science. 90 However, many students, especially those with core course

deficiencies, are unprepared for college as evidenced by low ACT As a result, remediation percentages, especially for mathematics, scores, high remediation percentages and low graduation rates. are disconcerting. 91 This is a major reason why Arkansas ranks 47th in the number of science and engineering degrees Composite ACT scores for first-time freshmen entering awarded per 100,000 inhabitants, and last among states in Arkansas public post-secondary institutions have increased scientists and engineers as a percentage of the labor force. 92 slightly during the past seven years, but currently trail the U.S. Remediation increases the cost of post-secondary education by ½ point.Figure 16 89 and prevents many students from graduating in a timely

Figure 1689 Figure 17 Average ACT Composite Scores for Arkansas Math Remediation Rates: 2005-2007 Freshmen: AR vs US 2003-2007 80% 70.6% 67.9% 66.8% 21.4 Arkansas United States 70% 21.2 60% 21.1 21.2 47.8% 50% 44.9% 45.1% 20.9 20.9 21 36% 20.8 40% 33.5% 33% 20.8 30% 20.6 20.6 20.5 20% 20.4 20.4 20.3 20.3 10% 0% 20.2 Fall 2005 Fall 2006 Fall 2007 20 Total 2-Year 4-Year 19.8 2003 2004 2005 2006 2007 90 ACT, ACT High School Profile Report – National, online, available from http://www.act.org/news/data/07/data.html, p. 8. High-school students completing the full complement of core 91 Arkansas Department of Higher Education, Research and Accountability, First-Time Freshmen Assigned to Remediation in Mathematics, 2005- classes scored much higher on ACT exams. 2007, online, available from http://www.arkansashighered.com/Research/ Enrollment-2007.html. 92 Beacon Hill Institute, 2007 State Competitiveness Index, online, 89 ACT, ACT High School Profile Report – National, online, available from accessed 2 Jan. 2008, available from http://www.beaconhill.org/Compete07/ http://www.act.org/news/data/07/data.html, p. 7,. StateCompete2007-071116.htm. Arkansas StRategic Plan page 30 manner, or at all. Latest data show that only 36.3 percent of freshmen entering college earn degrees within five years. Only 41.7 percent earn degrees within six years. 93 Encouraging students to take pre-Advanced Placement (AP) and AP courses will better prepare students for ACT tests, enhance college readiness and decrease remediation percentages.

During the past four years, degrees earned in Arkansas have increased by 17.7 percent; however, the award of baccalaureate degrees has only increased by 7.8 percent. 94 As a result, the percentage of Arkansans aged 25 and over with a baccalaureate degree, 19 percent, ranks 49th among all states. The U.S. average is 28 percent. 95

Figure 18 Degrees and Certificates Awarded by Degree Type: 2003/04-2007/08

2003-04 4,804 10,782

Other Post-Bacc Degrees 2004-05 5,029 11,179 Master's Degrees Baccalaureate Degrees 2005-06 5,292 11,318 Associate Degrees Certificates 2006-07 5,586 11,422

2007-08 5,428 11,507

0 5,000 10,000 15,000 20,000 25,000 30,000

93 Arkansas Department of Higher Education, Research and Accountability, Statewide Retention and Cumulative Graduation Rates of First-Time Freshmen by Gender, Race/Ethnicity and Age, Fall 1992-2006 Entering Cohorts, online, available from http://www.arkansashighered.com/Research/ Enrollment-2006.html. 94 Arkansas Department of Higher Education, Total Degrees and Certificates by Sector, online, available from http://www.arkansashighered. com/Research/Degrees-2007/01.pdf. 95 Department of Commerce, Bureau of the Census, Educational Attainment of the Population 25 Years and Over by State, online, available from http://www.census.gov/population/www/socdemo/education/cps2006. html. Table 13. Arkansas StRategic Plan page 31

Action Items:

• The AEDC will support any efforts by the ADHE to increase funding for its Student Undergraduate Research Fellowship (SURF) program.

• The AEDC will request that the ADHE work with post-secondary institutions to expand scholarship opportunities for students in STEM and other demand disciplines.

• The AEDC will assist the ADWE in designing future career education clusters to reflect existing industry needs and targeted recruitment opportunities.

• Act 265 of 2005, created “Centers of Excellence” which have the potential to enhance a regional approach to workforce development based on business clusters and targeted opportunities. The AEDC will review Act 265 of 2005 with ASTA and ADHE to ensure optimum development of programs that meet regional economic growth opportunities. For example, regional centers of excellence modeled after the University of Arkansas at Fort Smith’s Western Arkansas Technical Center and Mid-South Community College’s ADTEC could focus on sectors such as aviation, metal fabrication and industrial technology throughout the state.

• The AEDC will support EAST leaders’ development of strategies that encourage the expansion of entrepreneurial and technological vision in all secondary schools throughout Arkansas.

• The Commissioners of the AEDC will be requested to pass a resolution strongly encouraging the State Board of Education to encourage students to participate in Smart Core curriculum. Arkansas StRategic Plan page 32 b. Workforce Training difficulty hiring employees with sufficient work skills. The The illiterate of the 21st century will not be those who deficiencies range from basic skills like reading, applied math, and verbal communications to more advanced technical needs cannot read and write, but those who cannot learn, such as computer skills, advanced manufacturing techniques, unlearn, and relearn. equipment maintenance, and a host of others. – Alvin Toffler These diverse, specialized and immediate needs of businesses Global competitiveness, rapid technological changes and are sometimes unmet by post-secondary institutions who emerging skill needs require an Arkansas workforce that receive funding based largely on enrollment of students taking is proficient, productive and adaptable. Area Development credit classes for degrees. This funding formula prohibits Magazine’s 22nd Annual Corporate Survey, which quantifies colleges from developing innovative technological programs 24 site-location factors identified by corporate executives, desperately needed by businesses simply because the cost listed availability of a qualified workforce as the fourth most per student exceeds available per-student funding. A key important site-location variable. Availability of unskilled recommendation is to review the funding formula for two-year labor ranked 17th. Eighty-eight percent of respondents who schools to ensure that schools offering courses that address the indicated difficulty recruiting labor in new locations had needs of business and industry are not unduly penalized. It difficulty finding high-skilled workers. 96 appears that, over time, our two-year schools have gravitated to courses that are more closely aligned with four-year schools. Arkansas’s two-year colleges, the premier providers of The traditional Vo-tech courses, if offered, are serving fewer workforce training, must continue to develop math, science and fewer students each year. Often, vocational courses (such and technology curricula based upon specific workforce needs as welding) attract relatively small numbers of students and of businesses. Recent efforts to create regional consortia such are more expensive to offer. The funding formula may not as the Arkansas Delta Training and Educational Consortium, adequately compensate schools for courses that draw lower and industry specific training at several two-year colleges numbers of students or for courses that cost more to offer. are steps in the right direction. However, intensified efforts Additionally, two-year colleges must increase funding to are needed. Citing a study by the Southern Growth Policies update state-of-the-art equipment for technical education. Board, Ed Franklin, Executive Director of the Arkansas Association of Two-Year Colleges, laments that Arkansas will As a result, industry training not conducted at two-year experience a seven percent decrease in its prime workforce (25- colleges is attained through a myriad of programs provided by 54 years old) by 2025. 97 several state workforce training providers. The perception of many businesses is that state training services are fragmented, As the role of two-year colleges has changed, a smaller portion difficult to access and have unrealistic eligibility criteria. This of customized technical and vocational programs are being is compounded by the state’s poor understanding of short- delivered. There is an ongoing shortage of two-year college term and long-term workforce requirements relative to actual course offerings to develop the skills required in today’s workforce capabilities. workplaces. All across Arkansas, companies are having Below is a brief summary of major workforce development participants: 96 Geraldine Gambale, ed., “The 22nd Annual Corporate Survey,” Area Development Online, available from http://www.areadevelopment.com/ The AEDC provides workforce training through two annualReports/dec07/corporateSurveyIntro.shtml. and “The 4th Annual Consultants Survey,” Area Development Online, available from http://www. programs, the Existing Workforce Training Program (EWTP) areadevelopment.com/annualReports/dec07/pdf/consultantsSurvey.pdf. 97 Nate Hinkel, “2-Year Colleges Key to Economic Growth,” Arkansas Business, 27 Aug. 2007, 1. Arkansas StRategic Plan page 33 and the Business and Industry Training Program (BITP). The Education, Career and Technical Education, Secondary EWTP was created to serve two primary purposes: Vocational Training, Technical Training at Technical Institutes, and the Arkansas Technical Careers Student Loan 1. To deliver customized, industry-specific training to upgrade Forgiveness Program. the skills and knowledge of Arkansas’s existing workforce. 2. To increase the capacity of state-supported educational The Arkansas Workforce Investment Board (WIB) focuses institutions to supply the ongoing training needs of on “putting people to work” through the Arkansas “one-stop” Arkansas companies. Workforce Centers. The WIBs provide locally-developed and operated services linking employers and jobseekers through a delivery system that includes: recruitment and screening, labor Training funds are reimbursed to participating companies and market information, job seeker services (especially for dislocated training consortia based on the current rules and regulations workers), identification of skill requirements, job listings, and at the time an application is approved. employee training. The WIBs also implement the Arkansas Mature Worker Initiative, the Incumbent Worker Training The BITP is designed to assist businesses and industries in Program, and the Arkansas Youth Development Collaboration. locating, selecting and training startup personnel for newly- created jobs. The program also includes the capacity to assist The Arkansas Department of Higher Education (ADHE) companies in preparing existing employees to apply new serves two- and four-year Arkansas colleges in a variety of technologies to workforce practices. Eligible expenditures capacities including: include advertising, pre-employment training, train-the- trainer instruction and initial on-the-job training. Companies • reviewing and approving academic programs; not receiving direct training may be eligible for tax credits • administering statewide financial aid programs and administered by the AEDC. contracts with the Southern Regional Education Board for support of graduate and first professional study outside The Arkansas Department of Workforce Services (ADWS) is of Arkansas; also a major provider of industry training. Their programs are • recommending institutional operating, capital, and personal more specific to institutions; however, some programs fund services budgets; training for individual companies. The ADWS programs • collecting and reporting student course data as part of a utilize state and federal funds to provide services that link statewide data-base and academic program inventory for employers with job seekers. Examples of programs include the policy studies; and, Arkansas Delta Workforce Innovations in Regional Economic • administering the Statewide Systemic Initiative for Development (ADWIRED) and the Governor’s Dislocated improvement of math and science education, the Carl Perkins Workers Task Force. Grant for academic program improvement, and the Youth Opportunities Unlimited Program, a high-school dropout The mission of the Arkansas Department of Workforce prevention program for economically disadvantaged students. Education is to serve the diverse workforce training needs of youth and adults. Programs administered include Adult Arkansas StRategic Plan page 34

The Arkansas Association of Two-Year Colleges (AATYC) Action Items: works with businesses to establish training partnerships with • The AEDC recommends that the Governor’s Workforce Arkansas’s 22 two-year colleges. Cabinet propose consolidation of all workforce development programs under the auspices of one agency Recent initiatives illustrate that Arkansas’s workforce providers director who is directly accountable to Governor Beebe. are developing and implementing innovative solutions to This new entity would be process — not program solve workforce problems. All of the above entities worked — driven, and would have a primary goal of providing collaboratively to implement a statewide Career Readiness people with easy access to training that equips them Certificate (CRC) program. The CRC is a WorkKeys© with skills relevant and marketable in today’s economy. assessment-based credential that gives employers and career Additionally, co-location of complementary services seekers a uniform, standard, objective measure of key (e.g., co-locating one-stop centers on two-year college workplace skills including reading for information, applied campuses) should be evaluated. mathematics, and locating information. The CRC is being used by job seekers across the country as an employment • The current four-year pilot project to utilize up to $2.5 credential, and by employers to assess entry-level hires. million annually in surplus Unemployment Insurance Workforce and education entities are also using the KeyTrain© funds has been well-received by the AEDC and recipient curriculum, software, and management system statewide employers. The AEDC will work closely with the ADWS to teach foundational workplace skills as defined by ACT’s to evaluate the effectiveness of this inaugural program to WorkKeys© system. KeyTrain© provides a comprehensive determine future funding potential. learning system for common skills required by all jobs, based on ACT’s WorkKeys© employment system. • The AEDC will ask Governor Beebe and the Legislature to review the two-year college funding formula to insure WorkKeys© is a skills measurement/analysis system that that schools that offer courses that address the needs of improves companies’ workforces by sharpening the workplace business and industry are not penalized. skills of students and employees and matching them in jobs that correspond to their skill levels. • Arkansans receiving AEDC-administered training programs should be required to participate in Work Keys©, Key Train©, Career Readiness Certificate and other available workforce development/assessment programs.

• The AEDC will intensify efforts to integrate AEDC- defined targeted opportunity and existing workforce occupational needs into the ADWS high demand targeted jobs initiative.

• The AEDC will meet with the state Workforce Investment Board (WIB) Executive Director to request restructuring of the state WIB. Currently there are nearly 400 board members — ten regional boards with 30 to 40 members each plus the state board with 43 gubernatorial appointees. A streamlined board with more meaningful business and industry participation would enhance service delivery. Arkansas StRategic Plan page 35 c. Labor Force nearing retirement) will outgrow those aged 10-44 (those Recent labor force trends and projections have identified entering or remaining in the workforce) by 15,500. 99 It is clear several challenges that must be resolved before a knowledge- that current population projections, if realized, will result in a based workforce can be developed. net loss of working-aged population during the next decade.

Third, many rural Arkansas counties continue to lose population — and labor force — as residents move to urban areas for educational and occupational opportunities. One- third of Arkansas counties lost population between 1990 and 2007. 100 Unfortunately, many of these persons have left the state. Migration of these individuals needs to be studied and programs developed to reduce the economic impact of out-migration.

Fourth, immigration has become a significant policy issue, especially in regard to workforce development. The social and economic impacts of immigration in Arkansas have not been studied sufficiently to develop specific recommendations at First, Arkansas will continue to lose jobs as globalization this time. intensifies. Many jobs lost during the past decade were low-wage, low-skilled manufacturing jobs. Between 1997 Fifth, a variety of workforce insufficiencies have resulted in and 2007, Arkansas lost more than 60,000 manufacturing thousands of vacant jobs and a workforce participation rate jobs. Industries most affected included: lumber and wood — 62.5 percent — 3.5 percent below the national average. 101 products (10,170 jobs lost); textiles and apparel (8,838 jobs A recent survey of Arkansas business leaders by the ADE lost); printing and publishing (6,234 jobs lost); electronics found that many employers were dissatisfied with workplace and computer equipment (5,044 jobs lost) and industrial skills of recent high-school graduates. Specifically, 76 percent machinery (4,858 jobs lost). 98 However, more recent job losses stated that more than half of job applicants who recently have affected high tech manufacturing and certain service graduated from high school lack necessary writing and basic sectors, such as back-office facilities. Future job losses could math skills. More than 60 percent were dissatisfied with affect any economic sector. high-school graduates’ abilities to read and understand written instructions and materials. All respondents believed that Although some attritioned workers will be of retirement age, a internships and service-learning would improve students’ majority will need retraining for higher-skilled jobs to remain in workforce performance. 102 the labor force. Workforce development programs should focus efforts on retraining displaced workers for high-tech jobs. 99 Gregory Hamilton, Teresa A. McLendon and Vaughan Wingfield, Arkansas 2020 Arkansas Population Projections and Demographic Characteristics for 2020 (Little Rock, UALR Institute for Economic Second, many Arkansas employers, particularly Advancement, 2006) 22. manufacturers, are losing employees as the Baby Boomer 100 Neva Wayman, Arkansas State and County Economic Data (Little Rock, generation retires. Population projections for 2020 calculated UALR Institute for Economic Advancement, 2006) 1. 101 Data calculated as ratio of Arkansas labor force to working age by the UALR Institute for Economic Advancement estimate population from Arkansas Department of Workforce and Bureau of Census the population growth of Arkansans aged 45-64 (those data. 102 Arkansas Department of Education, Combined Research Report of Business Leaders and College Professors on Preparedness of High School 98 1997 and 2007 Annual Covered Employment and Earnings. Graduates, (Little Rock, 2007) 2, 12. Arkansas StRategic Plan page 36

Finally, Arkansas spends 68 cents of every dollar collected Action Items: in general revenues on education (FY’s 2008-2009). 103 It • The AEDC will convene a workgroup with ADHE and is imperative that educational systems prepare students to DWS to review the status of current monitoring systems enter the workforce with skills required for the 21st century. to track post-secondary student dropout, graduation, To do so, we need to provide employment opportunities residency and employment status. for our graduates of two- and four-year institutions to serve industries identified in the Targeted Opportunities Report (see • The AEDC will meet with ASTA to determine the Component 2, Business Development for further discussion). feasibility of developing a post-doctoral incentive program We must also intensify post-secondary efforts to stimulate to incent companies that hire individuals with demand entrepreneurship from new technology-based enterprise start- doctoral degrees. ups. To do otherwise would squander significant state resources. • The AEDC will lead the design of a pilot program involving AEDC, ADHE and ADE, that will strengthen Expanded workforce readiness programs can better prepare the relationship between educators and business. youth for current jobs and can also help underemployed Arkansans find better paying jobs. Expansion of programs • The AEDC and ADWE will staff an advisory group such as Arkansas Career Pathways can help some remove of business and community leaders to influence career barriers to employment such as child care, transportation and technical training curriculum development, career tuition costs. counseling and delivery of workforce education programs.

• The AEDC will propose to the Governor’s Workforce Cabinet development of a statewide training needs analysis, skill assessment of the existing workforce, and skilled-worker recruitment strategy.

• The AEDC will continue implementation and marketing of the Career Readiness Certificate program and will require employers assisted with AEDC training funds to participate.

• The AEDC will research the issue of immigration further by reviewing existing studies to determine if additional data is needed.

103 Data calculated as a ratio of state educational expenditures to total state expenditures. Arkansas StRategic Plan page 37

Component 2 business Development

A. A Diversified Economy

B. Business Development and Labor Growth

C. Creating a Targeted Development Strategy

D. Sector-Based Business Development a. A Diversified Economy and JB Hunt, added tens of thousands of office Despite the lack of statewide economic development strategy, Arkansas sector jobs to Arkansas’s economy during the past has achieved considerable economic success by capitalizing on competitive 25 years. 105 advantages to gradually create a diversified economy. As stated in the overview, prior to 1955, Arkansas’s economy was based primarily The AEDC helped develop other sectors such as on natural resources such as crops, timber, minerals and livestock. warehousing/distribution, customer service centers Industrialization dramatically shifted the economy towards manufacturing and scientific and technical service providers. of non-durable, resource-based goods such as forest products, clothing and Expansion of these and other sectors such as textiles, and food and kindred products. health care and leisure services has created a diversified economy as illustrated in Figure 19. Early industrial employers capitalized on abundant and 106 cost-effective labor as displaced agricultural workers Figure 19 and women entering the labor force for the first time Arkansas Economy: 2007 Covered Employment 2% 2% provided a ready and willing workforce. During the 1980s and early 1990s demand for semi-skilled workers 15% 5% 2% Natural Resources to produce durable goods such as primary and fabricated 5% Construction metals, industrial and transportation equipment, and 16% 16% Manufacturing electronics increased manufacturing employment to 9% 21% Trade, Trans, Utilities historic levels. Covered employment between 1985 2% Information – 1995 increased from 750,000 to more than 1,000,000. 5% FIRE

By 1995, manufacturing employment peaked at 258,532 13% 10% Pro & Bus Services or 25.3 percent of covered employment. 104 13% Ed & Health Services 21% 9% Leisure & Hospitality 10% Arkansas’s white collar employment also began to 15% Government 5% grow during the 1980s and 1990s. Many of Arkansas’s 2% Other Fortune 500 companies (currently Wal-Mart, Tyson, 2% Murphy Oil, Dillard’s and Alltel) began to solidify their 105 Arkansas Economic Development Commission, positions as national leaders. The growth of these and other Research, Arkansas Corporate Headquarters 2007, online, corporate headquarters including Acxiom, Stephens, Inc., available from http://www.arkansasedc.com/data_center/ reports_publications/files/Arkansas%20Corporate%20Headq uarters%20January%202007%20.pdf. 106 Arkansas Department of Workforce Services, Covered Employment and Earnings, 2007 annual edition, Statewide 104 Covered Employment and Earnings, 1985 and 1995 annual editions. Summary Table 5. Arkansas StRategic Plan page 38

Figure 20 The diversity of Arkansas’s economy is also Arkansas Economy GDP by State: 2007 manifest in the State’s Gross Domestic Product 2% (GDP), illustrated in Figure 20. Trade accounted for 21 percent of Arkansas’s GDP, followed 6% 13% 6% Natural Resources 4% closely by: manufacturing; services; government; 4% Construction 3% and, finance, insurance and real estate (FIRE). 18% Manufacturing Covered Employment and GDP percentages by 8% 21% Trade, Trans, Utilities 18% sector were virtually identical. For example, the 4% Information 13% FIRE GDP and Covered Employment percentages for 8% 8% Pro & Bus Services trade were equal. Noticeable differences include 8% Ed & Health Services the FIRE sector that required a small percentage 13% 3% Leisure & Hospitality of workers to produce 12 percent of GDP, while 21% 13% Government the leisure and hospitality sector required almost 4% 2% Other 10 percent of Covered Employment to produce 3 percent of GDP. 107

Arkansas’s GDP has grown by 42.8 percent since 2000 — 23rd best among states. Most of this growth, however, has been at the expense of PCPI Table 2 (see Table 2). As a result, much GDP growth is a PCPI Growth 2000-2007 result of low-paying jobs. The PCPI gap between STATE 2000 PCPI/US 2007 PCPI /US DIFFERENTIAL Arkansas and the United States grew by $545 DIFFERENTIAL DIFFERENTIAL CHANGE FROM 2000 TO 2007 dollars from $7,919 in 2000 to $8,464 in 2007. Louisiana $23,081/$6,764 $35,770/$2,794 +$3,970 Arkansas’s ranking among bordering states is Oklahoma $24,409/$5,436 $34,910/$3,654 +$1,782 listed below. 108 Texas $28,314/$1,531 $37,006/$1,558 -$27 Arkansas $21,926/$7,919 $30,100/$8,464 -$545 Mississippi $21,007/$8,838 $28,527/$10,037 -$1,199 Tennessee $26,095/$3,750 $33,373/$5,191 -$1,441 Missouri $27,242/$2,603 $33,984/$4,580 -$1,977 United States $29,845 $38,564 n/a

107 Department of Commerce, Bureau of Economic Analysis, Gross Domestic Product by State, online, accessed 15 Oct. 2008, available from http://www.bea.gov/regional/gsp/action. cfm, Table05. 108 Per Capita Personal Income. Arkansas StRategic Plan page 39 b. Business Development and Labor Growth Arkansas must constantly add workers to the labor force to fill new job openings and vacancies from retirement and out- migration. Arkansas’s labor force showed marked growth from 2003 to 2005, but has slowed since that time (see Figure 21). 109 Rising unemployment has led to annual unemployment rates that now exceed national averages (see Figure 22).

Figure 21 Figure 22 110 Figure 21 Arkansas Labor Force Composition 2001-2007 As skill shortages intensify and unemployment rates increase, Arkansas 1,400,000 Employed Unemployed could be moving towards the “2010 1,350,000 Meltdown” as theorized by Edward Gordon. According to Gordon, the 1,300,000 twin economic shocks of baby-boomer 1,250,000 retirements and too few well-educated 1,200,000 younger people will create a labor vacuum in a rising tide of high-skilled, 1,150,000 technology-related jobs. 111 1,100,000 2001 2002 2003 2004 2005 2006 2007 Business and workforce development strategies must be designed collaboratively Figure 22110 to ensure that new and existing businesses Unemployment Rates AR vs US: 2001-2007 have an adequate supply of skilled workers. Extensive surveys of existing 7% Arkansas United States industries, coupled with labor force gap 6% analyses, need to be conducted by the 5% AEDC Business Retention and Expansion 4% Division to determine which occupations 3% are most in demand. The AEDC must 2% work with regional economic developers, 1% businesses, and training providers to 0% ensure that Arkansas does not experience 2001 2002 2003 2004 2005 2006 2007 the “Meltdown” predicted by Gordon. This is especially challenging given the industrial and occupational diversity of the Arkansas economy.

Unlike past targeted strategies that have matched available labor with potential industries, the Targeted Opportunities Report identified several business sectors which will require development of new — or redevelopment of existing — labor pools.

109 Department of Labor, Bureau of Labor Statistics, Local Area Unemployment Statistics, not seasonally adjusted, online, available from http://data.bls. gov/PDQ/outside.jsp?survey=la. 110 Local Area Unemployment Statistics and Department of Commerce, Bureau of Labor Statistics, Current Population Survey, online, available from http:// www.bls.gov/cps/home.htm#data. 111 Edward Gordon, “More & Better: Preventing a Workforce Meltdown,” presented at the UALR Fourth Annual Regionalism Conference, Little Rock, AR., 13 Feb. 2008. Arkansas StRategic Plan page 40

Arkansas must focus training resources on those occupations Oklahoma and Alabama). Indeed, several strategic plan action that can most quickly expedite transition to a knowledge- items were formulated with these states’ successes in mind. based economy. c. Creating a Targeted Development Such strategies must incorporate selective labor growth if Strategy PCPI is to increase. Many “high growth” states have incurred Economic balance is desirable, especially during economic significant labor force growth at the expense of diminishing downturns when specific business sectors may experience PCPI growth. A few examples are noted in Table 3. dramatic declines. However, as the guiding principles indicate, the continued fragmentation and anticipated 112 Table 3 reduction in resources make it impossible to achieve success Labor Force vs. PCPI Growth without targeted strategies. Selected States 2000-2007 Most interviewees believed the AEDC should strive to STATELABOR FORCE PER CAPITA GROWTH PERSONAL maintain a diversified economy by balancing recruitment of (2000-2007) INCOME GROWTH new industries with expansion of existing businesses. Several STATE RANK (2000-2007) STATE RANK direct quotes exemplify this opinion: Arizona 2nd 33rd Utah 3rd 41st • Economic development should aim to diversify and Idaho 5th 22nd strengthen the state economy by creating, attracting, Georgia 6th 49th retaining and expanding more high-wage industries. Colorado 7th 46th • The AEDC should have a three-tiered job creation focus Texas 9th 26th — recruitment, developing existing industries and start-ups. Washington 10th 31st • Not enough resources are devoted to new technologies and Arkansas 13th 9th existing industries. North Dakota 32nd 4th Kansas 31st 21st Nebraska 38th 24th Several of Governor Beebe’s and AEDC Executive Director Minnesota 33rd 35th Maria Haley’s economic goals specifically demonstrate the need for a multifaceted business development strategy. Table 3 112 Generally, PCPI growth correlates with advanced educational • We will expand entrepreneurship focusing on knowledge- attainment levels. New England, West Coast and Upper based enterprises. Midwest states have traditionally graduated more students who • We will compete more effectively in the global marketplace have the requisite skills for knowledge-based employment. for new businesses and jobs, and we will create a business States such as North Dakota, Kansas, Nebraska and Idaho retention strategy to reduce closures. have recently closed the PCPI gap by targeting knowledge- • Our economic development policy will meet the special based companies that are best suited to their well-educated needs and take advantage of the extraordinary assets of workforce. various areas of the state. It will not be one size fits all. • We will increase the number of workers with post-secondary States with low educational attainment can succeed if they training so they are prepared when they enter the workforce have unique resources (e.g., Wyoming and Nevada) or have and equipped for new jobs in the future. invested heavily in planning, infrastructure and training (e.g., • Economic development is global.

112 Data calculated from Per Capita Personal Income and Local Area Unemployment Statistics. Arkansas StRategic Plan page 41

Finally, strategic plan action items must be inclusive of all i. Strategy 1: Promote Innovation, Entrepreneurship, and socio-economic groups. The AEDC Small and Minority Commercialization Business Division will be a catalyst for enhancing inclusive The transition to focusing on innovation, entrepreneurship, business and economic opportunities by establishing, and commercialization has already begun, but must be preserving, strengthening and promoting the growth and enhanced. About 10 years ago, several state universities development of small and minority businesses. To this end, began to focus more on scientific research, while both public the Small and Minority Business Division has established and private groups began to simultaneously focus more on aggressive goals to guide their enhanced mission. These entrepreneurial development. It has taken some time, and this goals include: investment has not completely matured, but these two actions have now caused many commercially-viable opportunities 1. To improve small and minority business contribution to to occur through university research, spin-offs of major Arkansas’s economy by encouraging State procurement of corporations and entrepreneurial innovation. certified small and minority business contractors. 2. To expand the number of qualified certified minority To capitalize on these opportunities, the Arkansas General businesses through improvement of Minority Business Assembly and Governor Mike Beebe have provided increased Enterprise (MBE) Certification programs. funding for research and enacted many programs managed by 3. To increase the performance capacity and income earned by various state agencies. These programs focus on facilitating minority and small businesses by providing certified firms the growth of start-up, technology-based and traditional with access to comprehensive integrated entrepreneurial, businesses. Unfortunately, many of the programs enacted financial and technical services customized to their by the General Assembly go unfunded or underfunded. development growth plans. This lack of funding is one of the reasons why Arkansas’s economy has been held back from transitioning to an economy To accomplish these goals, the AEDC has developed a four- supported by knowledge-based jobs. pronged business development strategy to be implemented by the AEDC’s Global Business Development Division. Programs to help these companies, and the companies Workforce Development, discussed in the above section, is themselves, are extremely important to the economy because considered a separate strategy because its transcendence is they provide high-paying knowledge-based employment. It recognized as a critical component of economic development. is also important to help these companies within Arkansas grow because of the competitiveness and cost in recruiting a company to Arkansas. The state must equally focus on the growth of these companies as well as recruiting new companies and retaining existing businesses. Strategy 1: Promote Innovation, Entrepreneurship and Commercialization Entrepreneurship One of the most important factors of a strong economy Strategy 2: Target Business Recruitment is a strong entrepreneurial base. The Second Edition of Gov Guide ranked Arkansas as the 16th best state for Strategy 3: Enhance Business Retention and Expansion small business and entrepreneurship. 113 This is a strong ranking and not very surprising, given the entrepreneurial Strategy 4: Attract Global Investment history of Arkansas. The largest corporate headquarters

113 Spencer L. Tracy Jr., “Best States for Small Business and Entrepreneurship,” Gov Guide, 2nd ed., (Washington D.C., National Policy Research Council, n.d.) 29. Arkansas StRategic Plan page 42

located in Arkansas were all started as entrepreneurial businesses and nascent entrepreneurs to operate profitable efforts by Arkansans and all help in the transition to an ventures. The AEDC partners with the ASBDC through the economy supported by knowledge-based jobs. Further, Small and Minority Business Division and the Technology the Economic Acceleration Corporation performed a study Development Division. These two divisions focus on the on entrepreneurialism sponsored by the Arkansas Capital creation and growth of traditional and technology-based Corporation, the AEDC and others for the 2007 General business start-ups. Assembly. 114 This study revealed that 78 percent of the net jobs created (30,759 of 39,576 jobs) during 1999-2003 were The AEDC also partners with the Arkansas Capital created by businesses employing 1-4 individuals. Further, Corporation (ACC) on the Donald W. Reynolds Governor’s companies employing more than 100 individuals created a Cup Business Plan Competition and the Youth Entrepreneur net job loss of 9,594 jobs. These statistics (see Figure 23), Showcase (YES). YES is a statewide business plan competition which mirror the national trends, show the importance of for students in the fifth through eighth grades, and the Reynolds entrepreneurialism to Arkansas’s economy. Governor’s Cup Competition allows undergraduate and graduate students to submit business plans for funding a new business start-up. To ensure this program and entrepreneurship Figure 23 as a whole grows, the AEDC has engaged the Arkansas Net Jobs in Arkansas Department of Higher Education to become involved through by Employer Size: 1999-2003 the Student Undergrad Research Fund (SURF). SURF LOST EMPLOYER CREATED is a state-funded program that provides small grants to SIZE undergraduate students for research projects. To enhance both 1-4 30,759 programs, the AEDC will encourage the ADHE to request 5-9 6,212 additional funding for SURF projects that could lead to 10-19 1,860 commercially viable technologies. Should funding be secured, the AEDC will look to develop a stronger partnership between 20-99 745 ADHE and ACC and look for ways to directly incorporate -6,993 100-499 SURF into the Reynolds Governor’s Cup Competition.

-2,601 500+ While the AEDC, ACC, and ASBDCs work on entrepreneurial growth every day, more efforts must be With more than 85 percent of job creation occurring focused in this area. To help provide the tools for this focus internally, Arkansas must nurture and support entrepreneurs to occur, Governor Beebe and the 2007 Arkansas General and continue to build on the strong “culture” by further Assembly enacted the legislation to create Innovate Arkansas. developing a “pipeline” of entrepreneurship from Kindergarten Innovate Arkansas is an Accelerate Arkansas initiative focused through adulthood. on providing support to start up companies that are fast- growing, high-paying, technology-based, or knowledge-based. To facilitate the next round of corporate giants in Arkansas Support will be provided through all phases of the business and further develop the “pipeline,” many entrepreneurial cycle and may include helping to raise money, evaluate and efforts have been undertaken. In partnership with the Small develop management teams, evaluate intellectual property Business Administration (SBA), the Arkansas Small Business and develop market studies. Innovate Arkansas is run by the Development Centers (ASBDC) strive to achieve a significant AEDC through a contract with Winrock International, which positive economic impact by providing quality service to assist opened Innovate Arkansas on January 1, 2008. The formation of Innovate Arkansas allows the state to increase its focus on 114 Arkansas Capital Corporation Group, Economic Acceleration Corporation, 5. Arkansas StRategic Plan page 43 transforming university, Federal, and industrial research (basic AEDC and ASBDCs work daily to grow this market, more and applied) and development into commercial opportunities. assistance is needed.

Along with Innovate Arkansas, the AEDC and ASTA Many communities around the state have ASBDCs and also partner with UAMS BioVentures, the University some communities have taken the next step and created of Arkansas Research and Technology Park, the UALR private entrepreneurial development centers. Specifically, the Nanotechnology Center, and the Arkansas Biosciences University of Arkansas Fort Smith, the Greater Fort Smith Institute Commercialization Center to foster technology-based Chamber of Commerce, and the City of Fort Smith created businesses from university research. the Innovation and Entrepreneur Center (IEC) in the fall of 2007. The IEC strives to foster innovative ideas, inspire However, the growth of the existing and newly formed new product development, assist entrepreneurs, build and companies at these facilities is being stifled by the lack of strengthen businesses, and encourage youth to think big with private wet and dry laboratory space. It would be expected their lives and careers. This example provides a great blueprint that a private developer would alleviate this issue, but because for other communities or regions interested in developing an of extremely high upfront costs, startup technology-based entrepreneurial base. The AEDC will closely monitor and companies cannot afford to lease space if developed by a review the IEC to determine its potential for success. The private group. In an attempt to help, legislation during the IEC is just one example of how communities and regions can 2007 General Assembly was passed creating the Arkansas begin to focus on innovation and entrepreneurship — others Research Park Authority. This allows a city or county the include Wynne, El Dorado, Camden, Dumas, and Arkansas authority to raise money through a bond initiative to build a State University’s Delta Center for Economic Development Research Park. To aid the development of research parks in in Jonesboro — the AEDC will continue to work with Arkansas, Senator Mark Pryor introduced Federal legislation partners such as the IEC, ASBDCs, the ACC, and Winrock that would provide financing for feasibility studies and loan International to create additional regional entrepreneurial guarantees for research park development. This legislation centers around Arkansas. has bipartisan support and is currently being reviewed by the Commerce, Science and Transportation Committee, which Funding Senator Pryor is a member. The AEDC will continue to To ensure the efforts of the AEDC and its partners are fruitful work with Senator Pryor on this issue and provide assistance in developing the next round of corporate giants in Arkansas, when needed. Even with the passage of the Federal legislation private funding for the programs discussed above must be proposed by Senator Pryor, adequate funding for private available. Arkansas is not the only state that views innovation laboratory space will not be available. To see that this funding and entrepreneurship as an important part of economic is found, the AEDC will continue to work with ASTA, the development strategy. Since August of 2007, Oregon invested universities, the Federal delegation, and Accelerate Arkansas $28.2 million in a statewide innovation plan, Wisconsin on this issue. invested $23.1 million in the Wisconsin Development Fund for the biennium, South Dakota Governor Mike Rounds With Innovate Arkansas providing the support required proposed a $65 million bond initiative to expand university to develop more technology-based startups into the next research capabilities, West Virginia Governor Joe Manchin generation of economic drivers, a focus must now be put on proposed investing $80 million in research and job training the development of a group or program that will provide designed to propel the state toward a knowledge-based the support needed by the AEDC and the ASBDCs to economy, and New York unveiled a $350 million Regional cause traditional entrepreneurial growth. A majority of all Blueprint Fund designed to create development-ready sites businesses formed are not technology-based and while the and industrial parks and to provide loans for small businesses. While empirical data evaluating the success of these early Arkansas StRategic Plan page 44 state initiatives have not been compiled, the AEDC believes It is important to note that other important ASTA programs that these programs may serve as future models for Arkansas also face funding challenges. These programs include the to increase funding for technology-based and traditional Applied Research Grant Program and the Arkansas Research entrepreneurial efforts. The AEDC will thoroughly review Matching Fund. The Arkansas Research Matching Program, each of these programs. Successful strategies will be analyzed initiated in 1999, has received funding for only one biennium and specific funding recommendations based upon successful since its inception. That brief period of funding proved that programs will be developed for future legislative consideration. Arkansas researchers, given match resources, can significantly increase the amount of Federal research funds provided to Just as important, funding — in the form of equity and debt Arkansas. Specifically, for every one state dollar provided, financing — must be accessible to both the technology-based about seven dollars in Federal match was received. Further, and traditional entrepreneur. To ensure this type of funding this type of research typically leads to commercialization is available, the AEDC will continue to work with the ADFA, opportunities, which in turn leads to job opportunities ASTA, ACC and community partners to develop regionally- for Arkansans. Because this type of research is so vital to based investment groups to provide funding to entrepreneurs transitioning to an economy supported by knowledge-based and small businesses. These funding mechanisms are crucial not jobs, the AEDC will partner with ASTA to see funding for only to the success of the companies and entrepreneurial growth, these programs is provided. but also in garnering Federal matching funds and transitioning to an economy supported by knowledge-based jobs. An AEDC program that provides a stimulus for investment is the Equity Investment Tax Credit (EITC). Formerly the State Funding Commerce Capital Development Corporation (CCDC) Tax Currently, AEDC, ASTA, and ADFA each have programs Credit, the EITC helps knowledge-based startup companies designed to foster the development of entrepreneurial entice investors to provide equity needed for business growth. endeavors. Two of the most successful programs have This program is currently capped at $6.25 million tax credits been the AEDC Targeted Business Tax Incentives and the per year, which has traditionally been an adequate supply to ASTA Seed Capital Fund. Both of these programs provide meet demand. funding for extremely early stage companies and success of both programs can be attributed to proper management Unfortunately, this program has not caused the type of and available funding. The Seed Capital Fund was initially investment as intended for multiple reasons. However, it is the funded with $1.8 million in the mid-1980s and ASTA has belief of most everyone working to drive additional investment been able to grow the fund through sound investments to its in early-stage, knowledge-based business that two major current balance of about $4 million. The Targeted Business problems are causing investors to choose to invest in other Tax Incentives provide transferable tax credits to technology- opportunities. Those two issues are a lack of adequate deal based companies. Traditionally, the qualified companies are flow and investor apprehension. still in the development stages and do not have a state tax liability. As such, the credits may be sold to an individual or There are many initiatives already mentioned that are designed institution with a state tax liability. This program has been to create adequate deal flow throughout the state, and the very successful in providing operating capital that, in turn EITC was designed to help alleviate investor apprehension. allows the companies to create knowledge-based jobs and Unfortunately, the program is not working as intended as continue the development cycle to prosperity. Success has evidenced by the small amount of tax credits provided over also been achieved because adequate funding for the program the last five (5) years. Since 2004, a total of $31.25 million has traditionally been available. To date, AEDC Targeted worth of tax credits could have been issued, but approximately Incentives have been awarded to 17 companies that have only $7.08 million credits have actually been issued. The lack created 215 jobs with average salaries over $60,000. of use is probably attributed to other issues besides investor Arkansas StRategic Plan page 45 apprehension and other initiatives have begun to alleviate businesses, the AEDC believes the initial mission of the those issues. However, nothing up to this point has been Research Alliance should be to ensure adequate facilities are tried to address investor apprehension. A study performed available to meet current needs. by the National Governor’s Association concludes that the most efficient way to cause investors to invest in early-stage While funding has been released for the AEDC to contract companies is to cause the formation of early-stage (Angel) with Winrock International for the initial two years investment groups. 115 The formation of these groups brings of Innovate Arkansas, future success depends on the additional safety to early-stage investments and provides an availability of predictable and recurring funding. The institution around the process. Currently, these investments AEDC will work with Winrock International and Accelerate (if they are made at all) are made by a single investor with little Arkansas to garner adequate funding for Innovate Arkansas. formal process. Private Funding A proposal will be submitted to amend the EITC to offer a As successful as the state programs can be, it cannot be fifty (50) percent tax credit to investments made by qualified expected of state government to fund all entrepreneurial regional or community-based alliance funds created to invest efforts. Private funding in the form of debt and equity in early-stage, knowledge-based companies. This credit would must also be available if start-up companies are to prosper. only be available to investments made by funds which have Typically, this financing has been available in the later stages met the qualifications outlined in the law and approved by the of company growth through private lending institutions AEDC in consultation with ADFA and ASTA. However, this and investment groups, but funding in the early stages cap may need to increase should deal flow intensify. can be difficult to access. Specifically, Stephens Inc. has been extremely instrumental in the past success of many Accelerate Arkansas of Arkansas’s major corporations. Local banks have During the 2007 session of the Arkansas General Assembly, a also traditionally provided the debt services needed by number of initiatives supported by Accelerate Arkansas were entrepreneurs to prosper. Unfortunately, this service has enacted into law. Of the eight initiatives, the three requiring become more difficult to access because of structural changes new funding were Innovate Arkansas, the Risk Capital in the banking industry. The AEDC will continue to further Matching Fund, and the Arkansas Research Alliance. The partnerships with local banks to ensure that proper financial Risk Capital Matching Fund is an early-stage investment services are available to entrepreneurs. fund to be managed by a private fund manager under the control of ADFA. The Research Alliance is a private entity While many state programs are in place to help provide this managed by ASTA to focus on developing job-creating form of funding, it will never be adequate to finance every research opportunities among Arkansas research institutions. deal. To aid in this financing, Arkansas-based venture funds, To develop this research, the Research Alliance will look to such as the Fund for Arkansas Future and Diamond State focus the universities and develop Centers of Excellence by Ventures provide early-stage risk capital. Because adequate empowering existing researchers, providing adequate facilities, funds are still not available, the AEDC is partnering with and recruiting talented researchers through an Eminent community-based organizations to develop innovative Scholars Program. Because of the lack of private laboratory approaches to form regionally-based investment alliance funds space available for small, developing, technology-based designed to provide additional funding opportunities for entrepreneurs.

115 National Governor’s Association for Best Practices Issue Brief. “State Strategies to Promote Angel Investment for Economic Growth.” Hayter, Chris. February 14, 2008 Arkansas StRategic Plan page 46

Action Items: Reactive recruitment involves responding to externally- • The AEDC will meet with ASTA to determine the generated “leads.” Typically, these leads emanate from importance of establishing recurring and predictable businesses, consultants, utility companies and community funding for the Applied Research Match Program, developers. Despite its negative connotation, “reactive” leads Arkansas Research Match Program, and Basic Research can be quite fruitful. However, relying exclusively upon Grant Program. external leads limits the quantity, quality and variety of businesses that may be recruited. In reality, many consultants • To ensure technology-based businesses have the and businesses gather information and eliminate locales long proper tools to succeed in Arkansas, the AEDC will before economic developers learn of projects. As a result, lead efforts in conjunction with ASTA, the universities, the chance of becoming a finalist for any particular project the Federal delegation, and Accelerate Arkansas to is miniscule. Additionally, many corporations do not use develop additional private laboratory space. consultants for site selection and may not be aware of what Arkansas can offer. Reactive recruitment strategies miss • The AEDC will work with Accelerate Arkansas these opportunities. and Winrock International to garner predictable and recurring funding for Innovate Arkansas. Reactive recruitment also restricts the types of projects that can be recruited to those specified by the external source. Too • The AEDC will lead efforts in conjunction with the often, states and communities are either overlooked or typecast ACC, ASBDCs, Winrock International, the IEC and based upon incomplete or outdated information. What a others to foster the development of regional innovation consultant or business “knows” about Arkansas may limit and entrepreneur centers throughout Arkansas. what types of projects Arkansas is considered for — or even considered at all. • The AEDC will propose incentive legislation to promote the formation of regionally based investment Proactive recruitment is much more focused. Proactive “leads” groups to provide small business early stage funding. are generated internally from a variety of intelligence including corporate and industry research, professional contacts, and • The AEDC Small and Minority Business Division direct relations with companies. Proactive recruitment will review existing legislation pertaining to small and allows economic developers to lead the recruitment process minority business development — Minority Business and choose the companies that best meet specific business Enterprise Certification, Minority Business Advisory development strategies. The number of potential leads is Council, Regulatory Flexibility, and the Small Business limitless so long as resources are secured to maintain contacts Loan Program — to enhance the potential to procure, and offer incentives. capitalize, and nurture small and minority businesses. The major difference between reactive and proactive recruitment is not just who initiates leads but who controls ii. Strategy 2: Target Business Recruitment the business development process. The current AEDC As in athletics, a key to continued success in economic business recruitment process is weighted heavily toward development is effective recruitment. Although multiple reactive recruitment. As such, a significant amount of economic development recruitment strategies abound, recruitment is externally influenced and therefore beyond the there are two basic philosophies of recruitment—reactive immediate control of the AEDC. To maximize recruitment and proactive. leads, the AEDC must ultimately determine the types of projects desired and effectively develop strategies to ensure their proactive recruitment. Arkansas StRategic Plan page 47

Determining what types of projects to recruit requires Although proactive recruitment vastly expands the both intelligence and a focused strategy. The Targeted opportunities for business development, resource constraints Opportunities Report discussed below accomplished both limit the number of projects that may be recruited. To better by evaluating and recommending recruitment of businesses determine which industries have the greatest potential to within six industry clusters that align closely with Arkansas’s improve the state’s economy, the AEDC’s advertising firm, competitive advantages. The scope of businesses is expansive StoneWard, engaged the firm of Boyette-Levy to prepare a enough to ensure recruitment of knowledge-based businesses Targeted Opportunities Report. 116 while maintaining a balanced economy throughout each region of Arkansas. Targeted opportunities reports help economic developers direct scarce resources toward recruitment efforts that parallel A proactive, targeted business recruitment strategy will also national and international trends and correspond to the expedite regional economic development. As the responsibility competitive advantages of regions. A 1996 report prepared by of AEDC business developers shifts from responding to reactive Wadley Donovan was successful in helping Arkansas attract leads to proactively developing targeted leads, regions will back office facilities, call centers, food processors, production become empowered to respond directly to most reactive leads machinery and equipment manufacturers, distribution centers, with minimal AEDC involvement. This transition will occur and plastics companies. 117 gradually after regions are adequately trained by the AEDC. Preparation of the Boyette Levy Targeted Opportunities Local economic developers will also work directly with AEDC Report included: business developers to proactively recruit targeted industries that align closely with regional clusters and competitive “Reviewing existing research on potential targeted industry advantages. It is anticipated that the AEDC will continue to sectors and conducting a series of stakeholder interviews to learn lead statewide recruitment of global businesses. However, local more about the state’s opportunities within each targeted sector. economic developers will continue to accompany AEDC on In addition, further research into the current status of these recruitment missions and help respond to prospect inquiries. industry sectors in Arkansas, as well as nationally and globally, was conducted to determine the targeted sectors best suited for The AEDC will still respond directly to requests for the state of Arkansas. Following identification of the targeted information from businesses and consultants when projects sectors, the final phase of the project included development of a clearly fulfill the AEDC mission statement. The AEDC can summary of each of the targets, as well as sales-oriented targeted be more “proactive” in “reactive” recruitment by convincing industry profiles for each of the selected industry sectors.” 118 consultants and companies that we are professional, competitive (“a player”) and credible. The AEDC must project an image of confidence to change mindsets.

116 Boyette Levy, Arkansas Economic Development Commission Targeted Opportunities Report, (Atlanta, 2007). 117 Ernst & Young/The Wadley Donovan Group, Executive Summary & Target Industry Profiles, (n.p., 1996) preface. 118 Arkansas Economic Development Commission Targeted Opportunities Report, 4. Arkansas StRategic Plan page 48

Table 4119 Targeted Opportunities by Industry Sector

GROWTH MANUFACTURING TECHNOLOGY Aerospace/Aviation Biosciences Automotive Assembly and Suppliers Data Centers Bottled Water Information Technology/Telecommunications Health and International Foods Logistics Services

CLEAN, GREEN AND SUSTAINABLE NON-PROFIT HQ AND REGIONAL OPERATIONS Renewable Energy Alternative Fuels and Wind Power GLOBAL BUSINESS - CHINA Green or Sustainable Building Materials Forest Products TOURISM Steel Appliances/Electronics

Table 4 119 Action Items: In January 2008, the AEDC launched a series of regional • The AEDC will conduct a series of training sessions roll-out presentations to reveal the targeted industries to each to prepare qualified communities/regions for business region of the state. development opportunities and responding to prospect inquiries. The business development division, in consultation with the research division and the strategic planning group, must • An operational definition of Clean, Green and develop a recruitment strategy for each of the targets identified Sustainable, especially in regard to sustainable economic above. The AEDC has already begun transitioning to development practices and standards, needs to be crafted targeted business recruitment by reassigning AEDC business by the AEDC. The AEDC will define what is meant by developers from geographic territories to specific industries. sustainable standards and practices in order to help state Also, the research division of the AEDC Communications and local economic development compete locally. Division is supplementing the Targeted Opportunities Report industry summary sheets with industry and company • The AEDC will develop proactive strategies for specific information that business developers can use during implementing the recommendations of the Targeted recruitment activities. Opportunities Report in business development strategies.

Enhanced recruitment efforts for one of Arkansas’s targeted • The AEDC will develop decision criteria to ensure that industries, aerospace, have already begun. In addition to discretionary incentives are used to attract targeted, targeted marketing materials, a specially designed Arkansas knowledge-based businesses. Aerospace Alliance web page was developed and an AEDC- sponsored aerospace summit in February 2008 was well • The AEDC marketing plan will be redesigned to reflect received. Further work, however, is needed to fully implement strategic plan recommendations, particularly marketing targeted opportunity recommendations. initiatives for targeted industry recruitment, consistent with the annual planning process.

119 Arkansas Economic Development Commission Targeted Opportunities Report, 10-19. Arkansas StRategic Plan page 49 iii. Strategy 3: Enhance Business Retention and Expansion with recognition of agency deliverables, developing and As communities are the lifeblood of economic development, maintaining partnerships is critical for the success of this and existing businesses are the lifeblood of employment. other AEDC programs. Top priority for the BR&E division is Approximately 1.15 million Covered Employees earned more to assist local economic development partners in creating and than $38.8 billion in 2007. 120 Data show that almost two- maintaining their own BR&E activities for AEDC to partner thirds of all new jobs created by the AEDC between 2000 with. The BR&E division is uniquely positioned to carry out and 2007 involved existing business expansions. 121 Despite a program with statewide impact due to the locations of the their importance, much is unknown about existing employers division’s regional offices. especially in regard to workforce needs, changing market shares, technological innovation, supplier relationships, fiscal Action Items: viability and regulatory affairs. Local industry visitation • The AEDC will evaluate resurrecting the Cross Match programs, once the staple of economic development, have program which matches outputs of Arkansas suppliers declined considerably. Several businesses interviewed during to manufacturers. the strategic planning process could not recall when, if ever, anyone from the AEDC last visited their companies. • Manufacturing’s contribution to GDP by State and Covered Employment requires that a focus of AEDC’s Recognizing Governor Beebe’s desire to develop a viable burgeoning business retention and expansion program be existing industry program, AEDC Director Maria Haley on development of strategies, programs and deliverables created the AEDC Business Retention and Expansion (BR&E) that enhance the profitability of manufacturers. Division to work exclusively with existing employers and their representatives to stimulate job retention and expansion. The mission of the BR&E Division is:

To lead statewide BR&E activities, partner with local BR&E programs, economic developers and communities to create and implement strategic programming focused on solutions for industry and business, and provide for an atmosphere of statewide professional development in BR&E with the purpose of maintaining and growing our existing business base. 122

To accomplish this mission, the BR&E Division will focus primarily on providing services that will result in the retention and expansion of existing businesses of all kinds across Arkansas. Services to industry and business will primarily be in the form of company visits and referrals, publications of data and information pertinent to industry, forums on issues for discussion and solutions, programs bringing BR&E to the forefront across Arkansas, and as specialized agency technical support. Because the need for support is perpetual

120 Covered Employment and Earnings, Annual 2007. 121 Arkansas Economic Development Commission, Database of New and Expanded Businesses, 2000-2007. 122 Mark Goodman, E-Mail to Kurt Naumann, 25 Feb. 2008. Arkansas StRategic Plan page 50 iv. Strategy 4: Attract Global Investment Few Arkansans fully comprehend the magnitude of globalization on Arkansas’s economy. As the table below shows, foreign corporations are major employers in every region of Arkansas.gn-Owned Employers in Arkansas 123 Table 5 Largest Foreign-Owned Employers in Arkansas123 COMPANY COUNTRY LOCATION(S) PRODUCTS Husqvarna Sweden De Queen and Nashville Yard equipment Dassault Aviation France Little Rock Aircraft Evergreen Packaging New Zealand Pine Bluff Paper products Rheem Manufacturing Japan Fort Smith Heating and air equipment Domtar Canada Ashdown Paper Maybelline/L’Oreal France North Little Rock Cosmetics Nucor-Yamato Japan Armorel Steel Quebecor World Canada Jonesboro Printing Gerber Products Switzerland Fort Smith Baby food Bridgestone/Firestone Japan Prescott and Russellville Rubber products Bekaert Corporation Belgium Rogers and Van Buren Tire cord Gates Rubber Company England Siloam Springs Automotive parts Hino Motors Japan Marion Automotive parts Denso Manufacturing Japan Osceola Automotive parts

Arkansas companies are also prodigious exporters, shipping $4.88 billion in commodities during 2007. 124 A breakdown of commodities is presented in Figure 24.

North American export destinations are prominent. However, Arkansas products are shipped throughout the world. 125

Arkansas companies also import significant volumes of commodities. Although comprehensive import data is unavailable, it is estimated that Wal-Mart alone accounts for 15 percent of all U.S. imports of consumer goods from China. 126

123 Arkansas Economic Development Commission, Research Division, Arkansas Foreign Owned Business Report 2007, online, accessed 25 Feb. 2008, available from http://www. arkansasedc.com/data_center/reports_publications/files/Foreign%20Investment%20List %202007%20(March%202008).pdf. 124 Arkansas Economic Development Commission, Research Division, Arkansas Goes Global: 2007 Exports to the World, June 2008, online, accessed 20 Oct. 2008, available from http://www.arkansasedc.com/media/63024/2007%20export%20statistics.pdf 125 2007 Exports to the World. 126 Emek Basker and Pham Hoang Van, “Wal-Mart as Catalyst to U.S.-China Trade,” (April 2008), online, available from Social Science Research Network http://ssrn.com/ abstract=987583. Arkansas StRategic Plan page 51

Figure 24 However, with the decline of the U.S. dollar and Arkansas’s Top Export Commodities 2007 increasing North American expansion of global companies, Arkansas’s position in the global 7% 13% 6% Electrical Machinery economy is strengthening. The weak dollar has 6% 5% Organic Chemicals enabled multinational corporations, particularly 5% 4% Cereals European and Asian, to increase profitability due 4% 4% Plastic to advantageous exchange rates. Additionally,

4% 4% Iron & Steel foreign corporations such as Haier have chosen to 24% 4% Vehicles/Not Railway 4% manufacture products in the United States to be 3% Arms & Ammunition closer to their markets. 4% 3% Paper/Paperboard 3% 23% Other 3% Consequently, during the past year, the AEDC 24% Aircraft/Spacecraft 23% hired global business developers to focus on Asian 13% Machinery and European investments and named Hideichiro 7% Meat Chikahiro, former president of Hino Motors Manufacturing USA, Inc., as director of the AEDC’s Japan Office. Figure 25 Arkansas’s Top Export Markets 2007 Until recently, most economic developers did 2% 2% 2% 5% France not consider global business recruitment as a 3% 3% 3% 4% United Kingdom significant component of economic development 4% 4% 4% Russia strategy. Efforts by AEDC Executive Director Maria Haley are helping to assimilate terms such 5% 3% Japan 3% Germany as globalization and foreign direct investment into 6% 3% Belgium the lexicon of economic developers statewide. 30% 2% Brazil 2% Portugal 11% In 2007, Arkansas opened its first World Trade 2% Turkey Center in Rogers and its first foreign diplomatic 30% Other office, a Mexican Consulate, in Little Rock. 25% Canada Additionally, several Arkansas cities participate 25% 11% Mexico in Sister Cities programs that further solidify 6% China Arkansas’s international presence. In consultation The AEDC’s International Business Division, once a pioneer among with the Arkansas Congressional Delegation, state economic development organizations, was almost eliminated by the AEDC will strengthen relationships with 2007. Prior to its contraction, the International Business Division global development partners such as the U.S. consisted of four global offices and six internal staff exclusively dedicated Department of Commerce, the Arkansas World to international business development. During this period, significant Trade Center and the Mexican Consulate. foreign direct investments were made throughout Arkansas. International trade increased precipitously as Arkansas corporations found new markets Enhanced global business development efforts are for products. However, as priorities shifted and budget constraints paying off. Dassault, Hino, Hawker Beechcraft, intensified, the AEDC gradually reduced international resources, reaching and Hiram Walker have recently announced its nadir in 2007. expansions of existing facilities and LM Glasfiber, Emergya (Polymarin Composites) and Welspun Arkansas StRategic Plan page 52 have become welcome additions to the Arkansas economy. that business development, recruitment and expansion The AEDC must leverage relationships with existing strategies acknowledge the contribution of each sector to companies conducting business abroad to identify potential economic development. investment opportunities in Arkansas. i. Corporate/Non-Profit Headquarters The Targeted Opportunities Report specifically identified Cities such as Nashville and Chicago have successfully enticed China as a business recruitment opportunity. 127 Arkansas’s several corporate headquarters to relocate to their cities. Such global corporations, in particular Wal-Mart, also provide relocations are rare but often generate considerable publicity abundant opportunities for foreign direct investment. due to the enormous economic impacts that suddenly accrue Locating business offices and manufacturing facilities closer to the new city. Most major corporate headquarters, however, to Wal-Mart facilities would reduce transportation costs and choose to remain in their “birth cities” for many of the same provide a closer working relationship. It would be remiss for reasons that drew them there in the first place — family ties, AEDC to design a business development strategy without markets, workforce, etc. considering global investment potential.

The AEDC’s global business development strategy will include foreign direct investment, foreign trade missions, global branding, global tourism, and marketing of Arkansas products abroad.

Action Items: • The AEDC must collect more comprehensive information and measurements data regarding foreign activities of Arkansas businesses: investments abroad, importing, exporting, international transactions (diplomatic, monetary, transportation, etc.). Undoubtedly, Arkansas’s corporate headquarters generate • The AEDC will enhance its working relationship with substantial economic wealth, particularly in northwest and the Arkansas World Trade Center (AWTC). central Arkansas. Five of these companies (Wal-Mart, Tyson, Murphy Oil, Dillard’s and Alltel) are on the Fortune 500 List. 128 Arkansas’s largest corporate headquarters are listed d. Sector-Based Business Development in Table 6. It should be the avowed policy of every economic Implementing each of the above strategies will directly impact developer to maintain close relationships with local corporate the growth of many economic sectors. Indirect and induced headquarters to ensure that they remain a vital part of impacts from suppliers and service providers to these sectors their community. will further strengthen the Arkansas economy. A brief review of six targeted sectors is provided below. It is important to note that these six sectors provide a cross section of targets that include manufacturing, natural resources and knowledge- based sectors. Building a diversified economy will require

128 “Fortune 500 Annual Ranking of America’s Largest Corporations,” 127 Arkansas Economic Development Commission Targeted Opportunities Fortune Magazine, online, accessed 5 Apr. 2008, available from http:// Report, 122-126. money.cnn.com/magazines/fortune/fortune500/2008/full_list/index.html. Arkansas StRategic Plan page 53

Table 6 Arkansas’s Largest Corporate Headquarters129 COMPANY LOCATIONSECTOR Wal-Mart Stores, Inc. Bentonville Retail Tyson Foods, Inc. Springdale Food and Kindred Products JB Hunt Transport Services, Lowell Transportation Inc. Baptist Health Little Rock Health Care Alltel Corporation Little Rock Telecommunication Arkansas Children’s Hospital Little Rock Health Care USA Truck Van Buren Transportation Dillard’s, Inc. Little Rock Retail Arvest Bank Group, Inc. Rogers Finance Acxiom Corporation Little Rock Information Headquarters 129

In addition to for-profit corporate headquarters, non-profit Action Item: corporate headquarters are ideal development targets. National • The AEDC will recommend amending the existing and international non-profit corporations traditionally pay Non-Profit Incentive Act to enhance the presence of well, are environmentally and socially conscious, and enhance non-profit headquarters in Arkansas. communities’ quality of life, thus encouraging recruitment of other business sectors. Non-profit corporations are also “clean” industries that import dollars from dues, Federal funds, donations, etc.

Arkansas is fortunate to be the home of many world-renowned non-profit corporations including: • Arkansas Community Foundation • Charles A. Frueauff Foundation • Community Resource Group • Donald W. Reynolds Foundation (NV HQ but large AR focus) • Family Life • Heifer International • Lion’s World Services for the Blind • Tyson Foundation • Walton Family Foundation • Wal-Mart Foundation • William J. Clinton Presidential Foundation • Winrock International • Winthrop Rockefeller Foundation

It is imperative that the AEDC maintain close relationships with each of its corporate headquarters/non-profits to ensure long-term viability and contribution to Arkansas’s economy.

129 Arkansas Corporate Headquarters 2007. Arkansas StRategic Plan page 54 ii. Manufacturing Consequently, one-half of Arkansas’s 10 largest Manufacturers comprise a significant percentage of Arkansas’s major manufacturers primarily process poultry products. employers. Because these facilities are often large regional employers, The other five produce forest products, recruiting workers from a multi-county labor shed, the effects of plant electric motors, aircraft, lawn equipment, and closures are potentially devastating. Imagine the impact of closures such automotive parts.Table 8 132 as Nucor in northeast Arkansas, Georgia Pacific in southeast Arkansas, 132 Domtar in southwest Arkansas, or Tyson Foods in a number of western Table 8 Arkansas counties. Forty-three percent of Arkansas’s largest employers Arkansas Top 10 are manufacturers. 130 Manufacturing Employers 2008 Figure 26 1. Tyson Foods Arkansas’s Largest Employers by Sector: 2007 6. Dassault Aviation 1% 2. Pilgrim’s Pride 7. Husqvarna 3% 3% 3. Georgia-Paci c (Koch Industries) 43% Manufacturing 5% 8. OK Industries 16% Health Care 4. Baldor Electric 7% 13% Retail 9. George’s Processing, Inc. 5. Simmons Foods 9% Transportation 10. Superior Industries 43% 9% 7% Information 5% FIRE

3% Restaurants In addition to retaining Arkansas’s existing 13% 3% Government manufacturing base, the AEDC must develop 1% Utilities a strategy to recruit new manufacturers to

16% Arkansas to ensure that manufacturing remains a vital component of GDP by State. The Targeted Opportunities Report identified several Food and beverage manufacturing, historically a major employer, remains recruitment possibilities that, as previously Arkansas’s largest manufacturing sector, employing more than one-quarter mentioned, best match Arkansas’s competitive of all manufacturing employees. 131 advantages. Short reviews of each manufacturing target are provided below: Table 7

Largest Manufacturing Sectors in Arkansas Aerospace/Aviation: Central, northwest and MANUFACTURING SECTOR EMPLOYEES PERCENT OF MFG southwest Arkansas have a substantial base EMPLOYMENT of aerospace employment. In fact, aerospace Food and Beverage Manufacturing 50,790 26.8% Metals (Primary and Fabricated) 25,506 13.5% products are Arkansas’s number one valued Transportation Equipment 16,582 8.8% export commodity. The AEDC’s first aerospace Machinery Manufacturing 14,368 7.6% development priority will be to help existing Wood Product Manufacturing 12,276 6.5%

132 Arkansas Economic Development Commission, Research, Top 40 Manufacturing Employers in Arkansas 130 Arkansas Economic Development Commission, Research, Arkansas’ Largest Employers 2007, online, accessed 13 Oct. 2008, available from 2006, online, accessed 5 Apr. 2008, available from http://www.arkansasedc.com/data_ http://www.arkansasedc.com/media/38180/Top_40_ center/reports_publications/files/Arkansas’%20Largest%20Employers%202006%20(Code Manufacturing_Employers_2007.pdf adjusted for 2008 s).pdf. projected layoffs and closures from the Arkansas Department 131 Covered Employment and Earnings, Annual 2007. of Workforce Services. Arkansas StRategic Plan page 55 employers such as Dassault, Hawker Beechcraft, Raytheon, • An automotive assembly plant will have tremendous Chem-Fab, AMFUEL, Aerojet, LaBarge, Pratt & Whitney, multiplier effects and will stimulate the growth of existing Lockheed Martin, Airborne Nacelle and others develop businesses, particularly automotive suppliers. workforce and expand production. Health and International Foods: Development of these niche food products will help retain existing manufacturers and provide recruitment opportunities for companies desiring Arkansas’s abundant food products and central geographic location. Arkansas is home to many nationally-known corporations such as Tyson Foods, Riceland, and Allen Canning. Other food processors with operations in Arkansas include: Frito-Lay, Nestlé, Gerber, Kraft, Pilgrim’s Pride and McKee Foods. Serving new markets, especially for the growing health and international food segment, will help utilize Arkansas’s agricultural products and strengthen the Arkansas’s largest aerospace company, Dassault, is foreign- manufacturing sector. owned and may help influence recruitment of other global aerospace companies such as Airbus, EADS or Bombardier. Wind Powered Equipment: Arkansas became a rising star Potential targets identified in the Targeted Opportunities in wind energy equipment production when LM Glasfiber Report include ‘very light’ regional jets, defense craft and announced construction of its 1,000-employee production completion centers. 133 Many companies that manufacture facility in Little Rock in 2007. Recently, Polymarin parts and sub-assemblages in adjacent states (Oklahoma, Composites and Wind Water Technologies have announced Missouri and Texas) are experiencing phenomenal growth and rotor blade manufacturing projects in Little Rock that may be enticed to expand in Arkansas. will add $20 million in investment and 830 jobs to the Arkansas economy. Automotive Assembly and Suppliers: Although Arkansas has an extensive network of automotive parts suppliers, we are one of only two southern states (North Carolina is the other) without an automotive assembly plant. Despite diligent efforts, landing a major facility has eluded Arkansas. Landing an automotive assembly plant is a recruitment priority and is a fit for each of the four business development strategies above:

• Automotive assemblers have been targeted by the AEDC for many years. • Automotive assemblers employ highly-skilled, knowledge- based employees. Bio-Products: As the Baby Boomer generation approaches • Most automotive assemblers locating in the South are retirement and Arkansas continues to attract retirees, the global corporations. demand for health-related products and diagnostic equipment will continue to increase. Additionally, products for disaster recovery, environmental remediation, water purification, etc. are needed throughout the world. As the price of oil continues 133 Arkansas Economic Development Commission Targeted Opportunities to rise, it creates new opportunities for bio-based products to Report, 34-43. Arkansas StRategic Plan page 56 replace many of those now reliant upon petroleum. Arkansas iii. Transportation and Logistics is as well-positioned as any state in the region to be a leader in Arkansas’s comprehensive transportation infrastructure and bio-based products. central U.S. location position the state as a strategic distribution center. Located within 500 miles of 26 other states, Arkansas is Sustainable Building Products: Sustainable building a natural choice for logistics. Halfway between Montreal and products are composed of renewable materials that meet Mexico City, Arkansas is also a mid-point for North American high standards of energy efficiency. Arkansas corporations trade. Arkansas’s expanding infrastructure system provides manufacture an arsenal of building products such as lumber, access to national destinations via: gypsum, plumbing fixtures, stone/brick products, steel, insulation, roofing materials, windows and doors, HVAC • Interstates 30, 40, 55, 430, 440, 530, 540, and 630. units, and consumer electronics. As demand for sustainable • More than 1,000 miles of navigable waterways building products increases, Arkansas companies can develop including major port facilities along the Arkansas and products that meet the demand of this emerging market, in Mississippi Rivers. many cases doing so with indigenous Arkansas products such • Rail service to major cities throughout the nation provided as timber, clay, limestone, gypsum, etc. by Burlington Northern/Santa Fe, Union Pacific, and Kansas City Southern Railway. Action Items: • Air transportation from Arkansas’s eight commercial • The AEDC will convene a meeting with Arkansas airports including Little Rock National, with non-stop Manufacturing Solutions to develop a plan to ensure flights to 18 major cities, and Northwest Arkansas Regional that manufacturers are continuously upgrading Airport near Bentonville with non-stop flights to 15 technologies and commercializing new products to major cities. remain globally competitive. • Major intermodal facilities in Little Rock, Pine Bluff, Van Buren, and Marion. The Marion facility, located 10 miles • South Arkansas’s forest products industry is in jeopardy of west of Memphis, is a $70 million state-of-the-art facility further decline. The AEDC will convene a joint meeting owned by Union Pacific Railroad. The Southeast Arkansas of forestry stakeholders to propose commissioning a study Intermodal Authority has also made significant progress in of this industry to help regions and companies develop a recent years. sustainable economic development business strategy. Arkansas is home to several transportation companies that • The AEDC will evaluate reviving the Goodwork serve North America. J.B. Hunt, a Fortune 500 company, is Arkansas program as a mechanism to promote products one of the nation’s leading transportation providers and largest manufactured in Arkansas. publicly traded truckload carrier, serving all 48 contiguous states and major destinations in Canada and Mexico. Arkansas Best Freight (ABF), a Fortune 1000 company, serves all 50 states and through its affiliates, provides international service to130 countries. PAM Transport and USA Truck each serve all 48 contiguous states, Mexico, and Canada. Also providing nationwide service are Maverick Transportation, Inc., Willis Shaw Express, Continental Express, CalArk International, and Southern Refrigerated Transport. Additionally, FedEx Ground maintains a major facility in Harrison and UPS operates a significant processing center at the Little Rock National Airport. Arkansas StRategic Plan page 57

Arkansas’s central location and transportation network have encouraged the growth of distribution facilities statewide. As Table 9 shows, Arkansas has become a distribution destination.

Table 9 Major Distribution Centers in Arkansas

Wal-Mart Tyson Foods S-B Power Tools Dillard’s United Parcel Service Target Windmere ACE Hardware Family Dollar Harp’s Food Stores Af liated Foods Millard Refrigeration Georgia-Paci c Walsh Heartland Kimberly-Clark Virco Manufacturing

Action Item: • The AEDC will confer with representatives of major freight carriers to analyze future capacity needs. Arkansas StRategic Plan page 58 iv. Bio Resources Natural resources (crops, timber, livestock and minerals) contribute significantly to regional economies. The University of Arkansas’s Division of Agriculture estimated that in 2006, agriculture added $15.934 billion in value to the Arkansas economy, accounting for 11.62 percent of Gross Domestic Product by State and 274,150 jobs. 134 As Table 10 below illustrates, Arkansas produces an abundance of natural resources: Mineral135136

Table 10 Natural Resource Production in Arkansas: 2006-2007 MINERAL135 PRODUCTION/HARVEST YEAR TOP 12 AMOUNT NATIONAL RANKING? Brine 293,118,746 barrels 2006 1st Oil 6,031,000 barrels 2007 no Natural Gas 201,611,955 mcf 2006 no Timber n/a n/a 4th Coal 83,000 short tons 2007 no CROPS/FOOD COMMODITY136 Rice 94,487,000 cwt 2007 1st Corn 99,120,000 bushels 2007 no Soybeans 100,440,000 bushels 2007 10th Chickens (broilers) 1.135 billion 2007 2nd Cotton 1,880,000 bales 2007 2nd Cat sh (foodsize) 90,400,000 lbs 2007 3rd Turkeys 31,000,000 2007 3rd

134 J. Popp, N. Kemper and W. Miller, Impact of the Agricultural Sector on the Arkansas Economy in 2006, Research Report 981, (Fayetteville, AR: Arkansas Agricultural Experiment Station, University of Arkansas Division of Agriculture, 2008, 6-8. 135 Sources include: Impact of the Agricultural Sector on the Arkansas Economy in 2006; Arkansas Oil and Gas Commission, Annual Report of Production 2006, online, available from http://www.aogc.state.ar.us/OnlineData/reports/Annual%20Report%20of%20Production%2 01970%20-%202006.pdf; Department of Energy, Energy Information Administration, Coal Production and Number of Mines, online, available from http://www.eia.doe.gov/cneaf/coal/ page/acr/table1.html; Department of Energy, Energy Information Administration, Petroleum Supply Annual, Table 13, available from http://www.eia.doe.gov/pub/oil_gas/petroleum/ data_publications/petroleum_supply_annual/psa_volume1/current/pdf/volume1_all.pdf and Department of Energy, Energy Information Administration, Top Natural Gas Producing States, available from http://www.eia.doe.gov/neic/experts/natgastop10.htm. 136 Impact of the Agricultural Sector on the Arkansas Economy 2006, 17, and U.S. Poultry and Egg Association, online, accessed 21 Oct. 2008, available from http://www.poultryegg. org/economic.data/ Arkansas StRategic Plan page 59

America’s appetite for bio-based fuels and products is increasing as the price of petroleum continues to rise. Therefore, Arkansas’s best natural-resource based development opportunities may involve bio-based fuels and products, natural gas production, and lignite development.

Bio-based fuels and products (such as ethanol and biodiesel) are becoming increasingly important. Corporations such as FutureFuel Chemical and Pinnacle Biofuels are actively producing biofuels while others such as Delta American, Arkansas SoyEnergy, Colusa Biomass, Jerome BioRefinery, and AgBioEnergy are in various stages of planning and pre- production activities. Another, Patriot Biofuels, may resume production following tornado damage. Forest biomass and rice hulls, too, are potential feedstock for cellulosic biofuel production. Several Arkansas companies have expressed interest in such technologies. Because approximately 60 percent of Arkansas is forest covered, forest biomass may help Lignite reserves in South Arkansas are also significant, Arkansas sustain biofuel production, in the form of cellulosic estimated at about nine billion tons at depths of less than ethanol, indefinitely. 150 feet. 139 The Arkansas Geological Survey has prepared a preliminary application for Federal funds for test drilling. Production of natural gas from the Fayetteville Shale began However, matching state funds are needed. The potential in 2004 and is significantly benefitting the economies of for lignite as a fuel stock for electricity production or for many counties in Western, Central and East-Central Arkansas producing synthetic fuels is great; however, many preliminary through leasing land and mineral rights, drilling, production, steps must be taken. These include: transportation, gas services and “induced” service sector jobs.

1. Working with Southern Arkansas University to review Preliminary estimates project a short term (2008-2012) existing Arkansas Geological Survey data to determine the economic impact of $17.9 billion in expenditures, creation commercial viability of lignite mining. of nearly 11,000 jobs, and $1.9 billion in state and local 2. Determining what products could be derived from lignite. tax revenue. 137 As long as natural gas prices remain high, 3. Determining who owns lignite reserves. drilling and production is expected to increase significantly 4. Approaching electric utilities and other private companies in the next few years and could remain viable for 15-25 years. to see if there is support to establish a Southern Arkansas Currently 10 counties, Cleburne, Conway, Faulkner, Franklin, Research Center for lignite technology. Independence, Jackson, Johnson, Pope, Van Buren and White 5. Determining if there is sufficient water and infrastructure to have production wells in the Fayetteville Shale Area. 138 support lignite production. 6. Examining state policies regarding lignite, (i.e. current severance taxes of two cents per ton on lignite extraction). 137 Kathy Deck, Projecting the Economic Impact of the Fayetteville Shale 7. Examining the environmental ramifications of lignite Play for 2008-2012, (Fayetteville, AR: University of Arkansas, Center for production. Business and Economic Research, 2008), iii-iv. 138 Arkansas Oil and Gas Commission, Fayetteville Shale Production Information, online, accessed 21 Oct. 2008, available from http://www.aogc. 139 Arkansas Geological Survey, “Lignite,” online, available from http:// state.ar.us/Fayprodinfo.htm. www.state.ar.us/agc/lignite.htm. Arkansas StRategic Plan page 60

Bioscience, the study of living organisms, is a transcendent v. Information Services industry, influencing virtually every economic sector. Arkansas is headquarters to three major information Agriculture, manufacturing, education, health care, research, technology companies, Alltel, Acxiom and Windstream. and others all benefit from bioscience development. These companies provide a wide variety of data networking, software, telecommunications services, systems integration, Arkansas has a growing biosciences sector, anchored by technical, and customer support services. Other companies the University of Arkansas for Medical Sciences (UAMS), such as AT&T, Wal-Mart, Dillard’s and Entergy have large the National Center for Toxicological Research (NCTR), regional facilities that employ hundreds of information the University of Arkansas at Little Rock, the Arkansas services employees. Biosciences Institute, the University of Arkansas, the USDA’s Dale Bumpers National Rice Research Center, and the National Aquaculture Research Center.

Development of biosciences businesses will require significant investments in workforce, infrastructure such as wet labs, incubators and research parks, seed and venture capital, and close collaborations with educational institutions.

Arkansas clearly has a stake in biofuels and bioenergy development by virtue of our large and diverse biomass The State of Arkansas’s strengths related to attracting resources. It is therefore important that the AEDC provide information technology and telecommunications guidance to the private and public sectors in a coherent and projects include: cohesive manner. The AEDC should provide the leadership to coordinate the development of a statewide strategic plan, likely • Access to reliable and affordable electricity developed by Arkansas universities, that articulates policy • A statewide system of 14 fiber parks objectives and describes a technology roadmap for the future. • A qualified labor force • Undergraduate and graduate technology programs Action Items: • Abundant office space and land • The AEDC will propose policies and target industries • Fiber optic connectivity that can benefit from utilization of our natural resources. • Lucrative incentives

• The AEDC will work with Southern Arkansas University The Targeted Opportunities Report recommends that the and the Arkansas Geological Commission to secure AEDC focus recruitment efforts toward data centers which matching funds for lignite studies. house computing, data storage and networking equipment. 140

• The AEDC will create an agency subgroup of biofuels Action Item: and policy expertise that will develop a bioenergy • The AEDC will assess the current capacity of existing strategic outline for internal vetting and eventual fiber parks to support recruitment of targeted industries. development into a statewide plan.

140 Arkansas Economic Development Commission Targeted Opportunities Report, 73-84. Arkansas StRategic Plan page 61 vi. Tourism A recent analysis of the Arkansas Film Industry was submitted Tourism continues to generate significant income and to the Arkansas Film Commission by Economics Research employment benefits to all regions of Arkansas. According Associates on October 15, 2008. The AEDC will review this to the Arkansas Department of Parks and Tourism (ADPT), study and determine if new legislation should be proposed to tourism-related expenditures in 2007 reached an all-time high nurture further development of this industry. of $5.4 billion. The Arkansas travel industry employed 59,797 persons and paid more than $1 billion in wages and salaries. 141 Action Items: • The AEDC will evaluate how the Arkansas Film Office Over the past 10 years, the AEDC has become increasingly can better partner with the Arkansas Department involved in tourism development. In 1999, the AEDC of Parks and Tourism to jointly leverage promotion of assumed responsibility for administering tax incentives tourism and film development. available through the Tourism Development Act of 1997. 142. Phillips and Clark Counties have recently developed strategic • The AEDC will review the current Arkansas Film plans that showcase tourism development as a key community Industry Analysis submitted by Economics Research development component. The AEDC Community Associates to determine if legislation should be proposed Development Division will continue to encourage regions at the 2009 legislative session to nurture the industry. to evaluate the economic potential of tourism in regional strategic plans. • The AEDC will consult with the Arkansas Department of Parks and Tourism to devise a tourist recruitment With support from the AEDC, passage of the Rail strategy including the possibility of specific strategies Abandonment Act 143 requires local officials to be notified of such as certified retirement communities. any plans to abandon rail service in their areas and provides a timeframe under which local officials can seek to maintain • The AEDC will work with the Arkansas Department the rail corridor for possible future use. One such option is of Parks and Tourism to make business recruitment to request authorization by ADPT to permit the rail corridor material available to persons through its portfolio of to become a trail system under the Rails to Trails program. marketing materials. The AEDC will work closely with the ADPT to evaluate the feasibility and desirability of establishing more rails to trails opportunities.

Finally, the Arkansas Film Office enhances tourism through the filming of feature films such as Sling Blade, The Painted House, I Walk the Line, Chrystal and Come Early Morning. Arkansas’s rich cultural heritage provides many opportunities for stories to be told to future generations eager to learn of Arkansas.

141 Arkansas Department of Parks and Tourism, Economic Impact of Tourism in Arkansas 2007, online report, available from http://www. arkansas.com/governors-conference/pdfs/2007-2008%20FinancialARIST. pdf. 74. 142 1999 Ark. Acts 1135. 143 2007 Ark. Acts 747. Arkansas StRategic Plan page 62

Component 3 Economic Development Infrastructure

A. Transportation Assets

B. Utilities

C. real Estate (Buildings and Sites)

As the scope of economic development has broadened, so has the definition of infrastructure. Economic developers have traditionally viewed infrastructure as those physical structures and services such as roads, utilities and buildings that are necessary for residential and commercial development. As information technology has proliferated, telecommunication assets have been integrated into the definition. Today, economic developers consider workforce, intellectual property and other non-structural resources as “soft” infrastructure components. Defined most broadly, infrastructure can refer to almost any resource that contributes to economic development.

Action Items: a. Transportation Assets • The AEDC will request dedicated sources of funding for 4th Annual Consultant’s knowledge-based infrastructure during the next legislative session. Area Development Magazine’s Survey and 22nd Annual Corporate Survey ranked

• Future requests for AEDC infrastructure funding will be highway accessibility as the No. 1 determinant of site- evaluated based upon state and local strategic plan priorities, local selection decisions among corporate consultants and funding contributions, and economic development impacts. business leaders in 2007. Several other transportation assets ranked considerably lower. Table 11 144 Table 11144 Site Selection Determinants DETERMINANT 4TH ANNUAL 22ND ANNUAL CORPORATE CONSULTANT SURVEY SURVEY Important/ Ranking* Important/Very Ranking* Very Important Important Percent* Percent* Highway Accessibility 97.6% 1st 96.9% 1st Access to Major Airports 74.4% 14th 54.4% 21st Railroad Service 35.1% 22nd 38.1% 22nd Access to Waterways 32.5% 23rd 15.2% 24th

*Percentages refl ect the percent of respondents who rated determinants as being “important” or “very important” to site selection decisions. Rankings ranged from 1 to 24, with 1 being the best.

144 The 22nd Annual Corporate Survey, Table 11 and The 4th Annual Consultant’s Survey, Chart R. Arkansas StRategic Plan page 63

These rankings are not surprising, given the nation’s over- i. Highways reliance upon trucking as the preferred method of freight Arkansas’s state highway system is a vast network of 16,419 movement. As highways deteriorate, railroads maximize miles of roadway and 7,120 bridges. Within this network is capacity, and waterways transportation remains underutilized. a 655-mile Interstate system, which, despite comprising only The capability of Arkansas’s transportation system to meet two percent of all roadway lane miles in the state, carries 26 future economic development needs remains uncertain. percent of all vehicular traffic. 146 Pipelines, too, have capacity issues and may influence development and transportation of natural gas from the During the 1990s, Arkansas embarked on an impressive quest to Fayetteville Shale Play. improve and expand state and Interstate roadways. In 1991, the Arkansas State Highway Commission launched a 15-year state Undoubtedly, infrastructure needs will forever exceed highway improvement program that resulted in improvements available revenues. As revenue available to state and Federal to 8,800 miles of highway and 1,400 bridges. 147 agencies continues to decrease, it will be incumbent upon regions to thoroughly assess, prioritize, communicate and Interstate reconstruction and new construction were fund infrastructure needs to ensure maximum returns on prioritized later that decade. Utilizing state Grant Anticipated investment. An increase in local self-reliance is critical to Revenue Vehicles (GARVEEs) bond funds and Federal meeting our current and future infrastructure needs. transportation appropriations, construction began to improve 380 miles, or approximately 60 percent, of Arkansas’s As fuel costs increase, intermodal plans should maximize Interstates. 148 Additionally, Arkansas’s Interstate system grew the use of rail and waterways whenever practical. As Table in 1999 with the opening of Interstates 530 and 540. 12 below illustrates, these transportation modes offer substantial cost efficiencies that will increase in importance To bolster continued funding of highway improvements, as oil prices rise. Transportation Efficiencies 145 Governor Beebe signed legislation on April 3, 2008 to raise the severance tax from the current rate of three-tenths of 1 percent As each of the sections below emphasize, all infrastructure per 1,000 cubic feet of gas to 5 percent of the market value of components are vital to the success of the strategic plan. the gas, with reductions for some wells. The increase, which becomes effective January 1, 2009, is expected to generate Table 12 about $57 million next year and an estimated $100 million by Transportation Effi ciencies145 2013. All but 5 percent of the additional revenue is earmarked for state and local road improvements. 149 TRANSPORT TON MILES PER COST PER TON MODE GALLON OF FUEL MILE Barge 514 0.97¢ Rail 202 2.53¢ Truck 59 5.35¢ 146 Arkansas Highway Commission, 2006 Arkansas State Highway Needs Study and Highway Improvement Plan, online report, available from http://www.arkansashighways.com/planning/Policy%20Analysis/ 2006%20Needs%20Study%20and%20Highway%20Improvement%20Plan.

pdf, 1. 147 2006 Arkansas State Highway Needs Study, 47. 148 Dan Flowers and Sandra L. Otto, “Arkansas Combines Best Practices for an Innovative Interstate Rehabilitation Program,” Public Roads, March/April

2002, online, available from http://www.tfhrc.gov/pubrds/02mar/02.htm. 149 Rob Moritz and Doug Thompson, “Beebe Signs Severance Tax Hike; Nelson Pulls His Proposal,” Stephens Media Group, 3 Apr. 2008, online, 145 Arkansas Waterways Commission webpage, http://www.waterways.dina. available from http://www.arkansasnews.com/archive/2008/04/03/ org/advantage.html. News/345817.html. Arkansas StRategic Plan page 64

Figure 27 Arkansas Major Roadways

62 62

412 49 412

62 67 65 167

63

64

67

64 71

70 270 79

71 70 270 165 67

65 371 167

61 79 49 425

82 167

371 165

Interstate Highway

Arkansas, however, cannot rest on its laurels. On-going maintenance, connecting isolated areas of the state, and alleviating traffic congestion remain urgent priorities. A recently-published AHTD planning study estimated that statewide needs and improvements would total $19.1 billion during the next 10 years. 150

Table 13 2006-2016 Arkansas State Highway Needs NEEDS AND IMPROVEMENTSTOTAL ESTIMATED COSTS* Capacity Needs $3.4 billion System Preservation Needs $8.8 billion High Priority Corridor Development $5.2 billion Economic Development Connectors $1.7 billion (Four-lane access to communities of 5,000 or more) Total Needs and Improvements $19.1 billion

*In 2006 dollars, not adjusted for infl ation. Estimates project that costs may increase by up to 79 percent by 2016.

150 2006 Arkansas State Highway Needs Study, 23-24. Arkansas StRategic Plan page 65

Several of the above improvements have been identified Despite our small geographic area and population, Arkansas by regional officials as critical economic development has the 12th largest state highway system in the nation. 152 priorities. Examples include building Interstate 555 from Maintaining such a vast system, with increasing maintenance Jonesboro to Interstate 55, connecting major cities in South and construction costs, coupled with flat revenue, continues to Arkansas via four-lane highways, and funding Interstates 49 frustrate state highway officials who concede that additional and 69. Fortunately, several of these roadway projects have funds must be raised. Highway user fees, which have only been identified by Congress as High Priority Corridors in grown at 1.4 percent annually during the past five years, 153 specific legislation. High Priority Corridors include proposed must be increased to accomplish a bulk of these improvements. Interstates 49, 69 and 555; Highways 67, 71, 226 and 412; The amount of discretionary revenues available to undertake and, existing Interstates 30 and 40. 151 all improvements is inadequate.

Regions, too, will likely be required to share roadway infrastructure costs with the AHTD via partnerships such as those authorized through the Regional Mobility Act. This Act can expedite construction projects by permitting the formation of Regional Mobility Authorities to finance transportation projects through the collection of local funds received from sales taxes, tolls, motor vehicle taxes, bond proceeds and turn back funds in accordance with terms specified in cooperative agreements. 154

Action Items: • The AEDC will work with regional economic developers and the AHTD to identify economic development priorities for inclusion in the Statewide Transportation Improvement Plan (STIP).

• The AEDC will develop informational fact sheets for community developers regarding the establishment of Regional Mobility Authorities.

In addition to these identified needs, there are other roadway- related projects important to economic developers that have yet to be incorporated into AHTD planning studies. Examples include access roads, turn-out lanes, and entrance and exit ramps. Regional plans must identify these needs and communicate them to the AHTD so that funding may be considered.

151 Department of Transportation, Federal Highway Administration, 152 2006 State Highway Needs Study, 5. “Listing of High Priority Corridors,” online, available from http://www. 153 2006 State Highway Needs Study, 27. fhwa.dot.gov/planning/nhs/hipricorridors/hpcorqk.html. 154 2005 Ark. Acts 2275. Arkansas StRategic Plan page 66 ii. Waterways Arkansas enjoys one of the largest inventories of navigable waterways in the nation with 1,000 miles along five rivers. A navigable river is within 65 miles of every county in the state. 155Arkansas’s extensive waterway system, principally along the Arkansas and Mississippi Rivers, has enabled development of several ports.

Figure 28 Arkansas Ports

U PP ER WH ITE R R IVER

CK RIVE A

BL Osceola

ARKANSAS

Fort Smith RIVE R West Memphis

WHITE RIVE

Little Rock

R Helena

Pine Bluff R

RED RIVE Camden QUACHI Yellow Bend MISSISSIPPI RIVE

TA R R IVE R Crossett

River Ports Rivers

Water-borne transportation can inexpensively move large objects or bulk commodities vast distances. Economic impact studies have determined that ports generate significant direct and indirect regional economic impacts. Consequently, recruitment of businesses that may utilize port facilities should be a component of each region’s economic development strategy.

Each port in Arkansas could justify additional infrastructure improvements. For example, Yellow Bend Port, near McGehee, has substantial promise, especially due to port concerns in New Orleans; however, significant infrastructure deficiencies must be corrected first. Cities such as Russellville and Newport have diligently worked to develop new ports; however, environmental and fiscal concerns have slowed progress.

155 Arkansas Waterways Commission. Arkansas StRategic Plan page 67 iii. Railroads (local service) — serve Arkansas. There is no Class II railroad The Memphis and Little Rock Railroad, chartered in January service in Arkansas. The Class I railroads own or lease to 1853, was the first rail operation in Arkansas, providing service Class III railroads most of the rail miles with approximately between Memphis and Little Rock. By 1884, the St. Louis 1,893 miles or 69 percent of track mileage. The Class III Southwestern Railroad (commonly called the “Cotton Belt”), railroads’ share is approximately 857 miles (31 percent). 156 established interstate operations between Texarkana and St. Louis. Rapid rail growth ensued so that by the early 1900s Business prospects working with the AEDC are increasingly there were nearly 200 railroads providing freight and passenger identifying rail access as a primary criterion for site selection. services in most parts of the state. The volume of freight currently carried by most Class I railroads is such that additional capacity is desperately needed. Now a fraction of this system, 28 railroad companies — three Class I railroads (national service) and 25 Class III railroads

Figure 29 Arkansas Railroad System

B S NS UP F P KC U

UP BNSF

P BNSF U P

U UP UP UP Marion UP Intermodal KCS Facility

UP

UP UP S KC UP

UP UP UP KC S S

KC UP

UP

UP

UP

UP

Class I Lines Class III Lines

BNSF - Burlington Northern Sante Fe Railway KCS - Kansas City Southern Railway UP - Union Pacific Railroad

156 Minnie Beth White, E-Mail to Kurt Naumann, 3 Jan. 2008. Arkansas StRategic Plan page 68 iv. Intermodal Facilities v. Air Intermodal facilities, which are equipped to serve and Passenger and freight transportation to regional, national connect two or more modes of transportation, are increasing and international destinations is also a primary consideration in popularity among businesses and consultants. The of many companies, especially multinational corporations, sophistication of such facilities combine water, rail and road which desire international flights. Many corporations also infrastructure to offload facilities where material may be require point-to-point on-demand regional jet (air taxi) service loaded from trucks to rail or vice versa. or have corporate jets that frequently traverse regions. Finally, corporate management also desires hangar space for One of Arkansas’s premier intermodal facilities, in Marion 10 private aircraft. miles west of Memphis, is a $70 million state-of-the-art facility owned by Union Pacific Railroad. Another facility, owned by the Southeast Arkansas Regional Intermodal Authority, near Wilmar, is expected to be completed soon. Arkansas currently has four regional intermodal freight authorities and 19 intermodal freight facilities. 157

Figure 30 Arkansas Commercial Airports

Highfill Harrison

Jonesboro

Little Rock

Hot Springs

Texarkana El Dorado

Commercial Airports Freeway System

157 Clif McKinney, “List of Arkansas Freight Facilities and Authorities,” 16 Apr. 2007, E-Mail to Kurt Naumann, 5 Oct. 2007. Arkansas StRategic Plan page 69

B. Utilities Utilities are private and public service facilities that provide natural gas, electricity, telecommunications, water, and waste water services to their customers. Regions, especially rural ones, face a multitude of utility issues (listed below) that affect economic development. Regional economic developers should thoroughly evaluate the following considerations in economic development plans:

• Are utilities, especially broadband, available throughout the region?

• Are buildings and sites marketed to prospects adequately today, multiple states have begun to focus on broadband served by all major utilities? If not, how may upgrades deployment and uptake. North Carolina and Kentucky have be financed? both targeted broadband deployment as a priority and have • Are existing supplies (e.g., water, wastewater) sufficient been extremely successful in increasing broadband uptake. to sustain residential and industrial needs and allow for New York is also investing $7 million to expand the state’s anticipated growth during the next 10 years? Universal Broadband Initiative. Additionally, “Broadband • Can the efficiency, and hence cost, of providing service Initiatives: Enhancing Lives and Transforming Communities” be improved? finds broadband deployment contributes to regional economic • Is a disaster recovery plan in place which coordinates rapid dynamism by reducing employment in stagnant, lower-paying resumption of services following emergencies? sectors while creating new jobs in higher-paying ones. • Are regions evaluating the use of alternative energy sources?

• Is energy efficiency a component of local/regional Because this resource has become so vital, the 2007 General strategic plans? Assembly passed legislation enacting Connect Arkansas. Act 604 of the General Assembly created Connect Arkansas An issue related to energy costs, state sales taxation of as a non-profit organization tasked to promote broadband manufacturers’ electricity consumption, is being evaluated education and deployment in Arkansas. As defined by Act by the AEDC. The state sales tax reduction to 4 percent 604, broadband is any service used to provide Internet access on July 1, 2008, has helped reduce energy costs. However, at a minimum of 384 kilobytes per second in either direction. Arkansas remains competitively disadvantaged as surrounding Unfortunately, the Arkansas Capital Corporation, which is states have greatly reduced or eliminated state sales taxes on legislatively tasked to manage Connect Arkansas, did not electricity consumed by manufacturers. This tax particularly receive state funding through appropriation. For broadband impacts large energy users (e.g., paper mills, chemical plants) deployment and uptake to expand in Arkansas, the state which also represent the manufacturers paying the highest should help ACC adequately fund Connect Arkansas during wages in the state. The AEDC will work with legislators the 2009 Legislative Session. to determine the fiscal practicality of further reducing or eliminating sales taxes. Another information technology issue that has the potential to stifle 21st century economic growth is the lack of expanded As information technology progresses, broadband connectivity High Performance Computing (HPC) capacity in Arkansas. has become an increasingly important infrastructure resource Because of the flexibility, power, and relatively low cost, HPC and requirement in the business community. Recognizing systems increasingly dominate the world of supercomputing. that without broadband, it is almost impossible to do business HPC is most commonly associated with computing used for scientific research, but recently HPC has also come to be Arkansas StRategic Plan page 70 applied to business uses of cluster-based supercomputers, such Community developers quickly learned that perfect as data warehouses, line-of-business (LOB) applications and buildings and sites rarely exist, although optimal ones do. transaction processing. Compounding these issues is that buildings and sites are much like fingerprints - no two are alike. For example, sites As the research capabilities of universities have expanded, the with no slope are generally preferred to those with 5 degree need for additional HPC capabilities, specifically for university slopes. One-owner sites are preferred to multiple-owner collaboration has intensified. Other states are also seeing sites, especially if acquisition time and price are key project the need for investment in the HPC area. South Dakota is determinants. However, is a site with floodplain issues investing millions of dollars to provide university scientists the preferred to one in an earthquake zone? Is it better to have highest network speeds available. These network speeds will access to fiber optic cable or rail? The answer is obvious — it allow scientists to share research with scientists throughout the depends on the attributes that the prospect values most highly. world and could potentially lead to breakthroughs that lead to commercialization of products. Multiple university research Another problem is the fact that different types of projects institutions within Arkansas are working to find the funding require different types of buildings and sites. A vacant retail for this project and the AEDC will support their efforts store may be ideal for a call center but would generally be when appropriate. useless for scientific and technical applications. A defense contractor may desire a secluded site and shy away from Action Items: industrial parks while a metal fabricator may wish to locate • The AEDC will confer with the Arkansas State Chamber, in the park adjacent to potential suppliers. Some prospects the Arkansas Economic Developers, the Arkansas may prefer to build a facility on a green field site while their Department of Finance and Administration, and competitor may want an existing building. Governor Beebe to evaluate the feasibility of reducing or eliminating the state sales tax on the consumption of The variety of buildings and sites that the AEDC has electricity by certain industrial sectors. catalogued, merely a subset of those statewide, is impressive.

• The AEDC recommends that funding be appropriated • There are 175 sites ranging in size from 10 to 4,000 acres. for Connect Arkansas. • There are 265 buildings ranging in size from 10,000 to 705,000 square feet. • Buildings range in age from a few months to a few C. Real Estate (Buildings and Sites) decades old. 158 Available buildings and sites are the foundation of most economic development programs. In fact, a critical While maintaining a broad inventory of buildings and sites requirement of the early AEDC ACE program was that that appeal to a wide variety of prospects is optimal, variety communities acquire at least 40 acres of land for development. is impractical for most communities. The cost of acquiring, Most communities established 40-acre industrial parks and developing and maintaining such property (if it is available) set out to recruit whatever industry expressed interest. The is prohibitive to all but the most resourceful economic quality of such parks varied considerably. Some communities, development entities. This is especially true for broad-based seeking to distinguish themselves from others, built general recruitment efforts proposed by the strategic plan. purpose speculative or “spec” buildings that were in various stages of completion. Communities also began to “acquire” As technology-based businesses increasingly form and spawn buildings as businesses closed or relocated. out of university, industrial, and entrepreneurial research,

158 Arkansas Economic Development Commission, Database of Available Buildings and Sites, accessed 15 Mar. 2008. Arkansas StRategic Plan page 71 additional private wet laboratory space has become almost impossible to access. Currently, no private wet or dry laboratory space is available anywhere in Arkansas. This is a major impediment to the growth and expansion of technology- based businesses. This space should be developed at the existing incubators on university campuses and newly formed research parks that can be created through the formation of a Research Park Authority. It is important to state that this is an issue throughout the United States. Arkansas needs to develop this space in order to cause increased development of existing Arkansas-based businesses and to recruit burgeoning technology-based companies from other areas of the country. The AEDC will continue to work with all appropriate state, local, and Federal groups to find the funding required to develop the lab space needed.

Action Items: • The AEDC buildings and sites coordinator will match available buildings and sites to recruitment targets (e.g., plug-and play facilities, logistics centers, super sites, etc.).

• The AEDC will update its web-based buildings and sites database to ensure that it is accurate, comprehensive and user friendly. The feasibility of collecting and displaying additional data regarding industrial and office parks will be evaluated.

• The AEDC will evaluate the practicality of initiating a statewide “certified,” “shovel ready,” or other similar type of available site program. Arkansas StRategic Plan page 72

The State and the city of Jonesboro Component 4 obviously know how to work with business Competitive Business Climate — they’ve built an industrial infrastructure A. The Nature of Competitiveness particularly attractive to the food industry.

B. Capital Infrastructure (Financing) This site in Jonesboro offered the best

combination of an enthusiastic workforce, C. Economic Development Incentives competitive operating costs, a central U.S. D. Taxation and Regulatory Policies location and a strong emphasis on ‘quality Figure 31 of life.’ Nestlé USA-Jonesboro, Arkansas – Jay Weaver, Vice President of Operations

for Nestlé USA’s Prepared Foods Division 159

159 a. The Nature of Competitiveness scrutinized. Through early 2007, there were successes Ending a search that initially involved 700 contending — Denso, Cardinal Health, and Hino Motors are excellent cities, Nestlé USA chose Jonesboro, Arkansas, in 2001 as examples. However, the loss of several high-profile “super the site for its new $165 million, 1,000-employee frozen- projects” to Oklahoma, Texas, Mississippi and Alabama food manufacturing facility. 160 In essence, Jonesboro ousted brought skepticism from critics who believed that Arkansas the competition as a result of many factors — workforce, no longer possessed the necessary resources to compete infrastructure, location, state and local incentives, utility successfully. costs, and quality of life. The AEDC and Jonesboro were prepared, determined to win and aggressive — the essence One of Governor Beebe’s avowed economic goals, to compete of competitiveness. more effectively in the global marketplace for new jobs, removed all doubt that Arkansas was no longer competitive. Since locating the Nestlé facility, the ability of Arkansas Enhanced incentives, creation of the Governor’s Quick Action to compete successfully for new projects has been closely Closing Fund (QACF), intensified efforts for workforce development, and close partnerships with regional economic 159 “ Nestlé to Build Its Fourth Frozen Food Plant in Arkansas,” Press developers have landed numerous projects including Welspun, Release, 2001 Jul. 30, online, accessed 2008 Jan. 14, available from http:// findarticles.com/p/articles/mi_m0EIN/is_2001_July_26/ai_76787145. LM Glasfiber and MARS, Inc. Arkansas is gaining a 160 Jack Lyne, “ Nestlé Picks Northeast Arkansas for $165 Million, 1,000 competitive advantage. However, much work is needed to Employee Plant,” Site Selection Magazine, online, accessed 2008 Jan. 14, sustain momentum. available from http://www.siteselection.com/ssinsider/bbdeal/bd010806.htm. Arkansas StRategic Plan page 73 i. Factors of Competitiveness Successful implementation of the strategic plan requires the Despite the efforts of many, it is much easier to qualify than AEDC to better understand and leverage those factors that quantify competiveness. Numerous studies by the Milken can best be influenced through state initiatives. Institute, the Tax Foundation, the Beacon Hill Institute, the Progressive Policy Institute, the Corporation for Enterprise ii. Strategic Recruitment Development, the Kauffman Foundation (and dozens more) The AEDC’s multi-faceted business development strategy have developed a plethora of “competitiveness rankings” for — to recruit, attract, create and expand jobs — requires states, regions and cities. These rankings are helpful to policy economic developers to understand which factors are most makers identifying economic strengths and weaknesses but important throughout businesses’ lifecycles. For example, are far too subjective to be used exclusively as measures of new manufacturing start-ups often require large infrastructure competitiveness or policy performance. investments, competitive tax incentive agreements, and sites that are accessible to transportation and raw materials. In The Competitive Advantage of Nations,161 Michael Porter Entrepreneurial start-ups may require venture capital, access to proposed that a four-factored “Diamond of Advantage” research and development facilities, and a pipeline of scientists determined the competitiveness of regional industry clusters. and engineers. Existing businesses may need assistance in developing new markets or enhancing workforce productivity The most competitive regional clusters excelled in meeting to remain competitive. A brief review of each facet of business these factors: recruitment illustrates how development strategies have affected strategic policies. a. Factor conditions - Specialized labor, education and infrastructure. Recruitment of new businesses has been a critical component b. Demand conditions - Customer needs and preferences. of the AEDC’s economic development strategy since its c. Firm strategy - Competitiveness, innovation and inception in 1955. Arkansas’s success can be attributed to entrepreneurial skill. capitalizing on competitive advantages such as raw materials, d. Related/supporting industries - Suppliers, infrastructure, location, incentives and available labor. related businesses and distribution. As competition for new projects, especially “super projects” Other variables such as capital, tax and incentive policies such as automotive assembly and steel plants, has intensified, and regulatory climate are additional factor conditions that the costs of remaining competitive have increased are pertinent to economic development. In the broadest exponentially. Projects such as Kia, Nissan, Toyota, and sense, almost every variable identified in the strategic plan Thyssen Krupp have received incentive packages ranging could be considered an element that influences economic from $250 million to nearly $1 billion dollars. These “super competitiveness. projects,” employing at least 500 workers and investing $500 million, are rare but have the potential to revitalize regions in Quantifying competitiveness is further complicated by the a relatively short timeframe. fact that no economy can create a business climate that is competitive for all types of businesses. Recruitment, even After Toyota selected San Antonio, Texas, over Marion, targeted, will be ineffective unless economic developers Arkansas, as the site for its North American truck facility in understand which of their regional advantages match February 2003, the AEDC worked to pass Amendment 82 to particular business sectors. Jonesboro, in the above example, the Arkansas Constitution. Amendment 82 permits Arkansas has excelled in doing this for food processing companies. to issue revenue bonds for infrastructure costs associated with projects that invest $500 million and employ at least 161 Michael Porter, The Competitive Advantage of Nations, (New York: The Free Press, 1990), 71-73. Arkansas StRategic Plan page 74

500 workers. 162 The lack of such financing was a competitive coordinate innovation and entrepreneurial development. disadvantage because other states such as Mississippi and Although resulting in a smaller portion of total jobs created, Alabama can issue significant amounts of state bonds to and reflecting a long-term perspective, incentives for targeted finance local infrastructure. businesses will boost innovative employers’ potential for becoming Arkansas’s next generation of Fortune 1000 Recruitment of “mega” or “super” projects, however, is only companies. Through September 2008, 17 targeted companies a small portion of economic development. Southern Business have committed to create 250 new jobs paying annual salaries and Development reported only 17 super projects from 2003 to averaging more than $60,000.166 the spring of 2007. The number of projects with employment from 250-499 and investment between $150 million and iii. Statewide Competitiveness Policies $500 million was 29. 163 Reducing the investment criteria Economic development policies during the past decade for Amendment 82 projects would increase opportunities for have been somewhat helpful in improving the business headquarters, financial services, and information technology climate of Arkansas by eliminating some of the competitive projects with large employment numbers but moderate disadvantages of restrictive tax and incentive policies. Several capital investment. recommendations issued by Fluor Global Location Strategies in their April 2002 and October 2006 competitiveness reports A review of AEDC incentive agreements accepted by new to the Arkansas Legislature have been adopted.167 These companies between January 1, 2003, and December 31, 2007, included expanding incentive accrual periods, reducing sales found that the average new project employed 100 workers and tax on energy used by manufacturers, targeting statewide invested $17.4 million. 164 Overall, new projects accounted recruitment efforts, increasing incentives for knowledge-based for 37 percent of all jobs created through AEDC incentive industries, and creating a project superfund (Governor’s Quick agreements. Expansion of existing projects accounted for Action Closing Fund). Recent legislation, summarized in 63 percent of projects and approximately two-thirds of all the overview section, has increased incentives for investments incentives. 165 The importance of existing business retention (particularly research and development and equity), instituted and expansion projects was recognized with the establishment Tax Increment Financing, and expanded incentive eligibility of the AEDC Business Retention and Expansion Division in to non-profit organizations and targeted businesses. early 2007. It is impossible for the AEDC to influence every determinate Recent agency activities have begun to stimulate job creation of business competitiveness. State government can effectuate by focusing on innovation, commercialization of technology, those policies, such as state taxes, incentive programs, and entrepreneurship. During the past decade, the AEDC workforce development programs, etc. that enhance intra-state established the Task Force for the Creation of Knowledge- competitiveness. Based Jobs, expanded existing incentives to extend eligibility to knowledge-based jobs, added incentives for research and As stated throughout the strategic plan, statewide economic equity investment, and established a full-time position to development must focus on targeted strategic initiatives that

162 Ark. Const. Amendment 82 (2004). 163 See SB&D Job 100 Annual Lists from 2003-2007, Southern Business 166 Arkansas Economic Development Commission, Database of Targeted and Development Magazine, online, accessed 14 Jan. 2008, available from New and Expanding Businesses. http://www.sb-d.com/. 167 These reports include Arkansas Business and Economic Development 164 Arkansas Economic Development Commission, Database of New and Incentives Study, Final Report, presented to the Arkansas Bureau of Expanding Businesses, 2003-2007. Legislative Research, 22 Apr. 2002, (Greenville, SC., Fluor Global Location 165 Economic Development Incentives Information compiled by AEDC Strategies, 2002) and Arkansas Business and Economic Development from information supplied by: Arkansas Department of Finance and Incentives Study, Final Report, presented to the Arkansas Bureau of Administration, Revenue Division, office of Excise Tax Administration, Legislative Research, 20 Oct. 2006, (Greenville, SC., Fluor Global Location Business Incentives and Tax Credits Annual Program Costs. Strategies, 2002) Arkansas StRategic Plan page 75 best leverage Arkansas’s assets. The AEDC must garner a b. Capital Infrastructure (Financing) better understanding of tax policies as they relate to business Funding economic development activities requires an infusion development barriers, further evaluate the competitiveness of capital from a variety of sources. Local, state, Federal of existing incentives and work to remove barriers to and private entities can contribute cash, grants, real estate, development. Working closely with statewide partners such in-kind services, loans, tax incentives, donations, etc. to as Accelerate Arkansas to create knowledge-based growth, activities. Frequently, economic endeavors require financial the Governor’s Workforce Cabinet to prepare Arkansas’s commitments from multiple participants. workforce and the legislature to implement strategic initiatives will enhance competitiveness. Despite diligent planning efforts, most endeavors have been funded incrementally, reflecting reactive responses to Energy and the environment may also determine individual issues or projects. Biennial legislative sessions are competitiveness in the near future. To prepare Arkansas often consumed with larger, broader issues such as education industry for a future of scarce energy resources and that require a majority of legislators’ time and the state’s environmental regulations, the AEDC should encourage budget. This often results in unpredictable program funding, policies that provide signals to the marketplace that will attract fragmented economic policy, and emphasis on short-term capital for energy technology deployment, energy efficiency accomplishments rather than long-term economic investments. services and carbon systems management. This approach will not only prepare businesses for an uncertain future, but Consequently, most communities rely heavily upon state tax it will create economic development opportunities in a post incentives and infrastructure funds to finance local projects. carbon economy. Additionally, state funding of local projects diverts scarce resources from innovative long-term initiatives with deferred Ultimately, the competitiveness of regions will be determined returns that are less appealing to policy makers. This is a locally. The AEDC must build regions’ capacities to plan precarious strategy as typically state infrastructure funds are strategically, respond to prospect requests, fund projects and scarce and rarely available. nurture existing industries. This will require communities to plan regionally to improve their abilities to compete nationally. Many objectives of the strategic plan require direct capital investments rather than tax incentives. Therefore, as stated Action Item earlier, a guiding principle of the strategic plan is development • The AEDC will work with statewide economic of predictable and flexible revenues for economic development partners to develop a list of possible energy infrastructure. This funding mechanism will commit funding legislation that will assist Arkansas’s transition to efficiently and equitably to statewide strategic planning a knowledge-based economy. objectives.

This new model is constructed on the basis of a state and regional economic funding partnership. As this partnership grows, the AEDC will be able to increase commitment of funds to strategic planning objectives as regions increase funding capacity by maximizing fiscal partnerships with Federal, state and private sector participants. Arkansas StRategic Plan page 76 i. The New AEDC Funding Model Figure 32 Arkansas has a long, innovative history of funding economic AEDC Direct Job Creation Compared development activities including being one of the first states with Per Capita Personal Income to offer a manufacturing investment tax credit (MITC 45,000 – now InvestArk), job creation rebates based on payroll 40,000 (Create Rebate) and tax rebates for film production (Nickel 35,000 Rebate). While incentives based on job creation and corporate 30,000 investment are not the only economic development funding 25,000 tool available, they have served as the main instrument for 20,000 funding economic development projects. Consequently, 15,000 incentives have comprised between 65 to 100 percent of 10,000 annual total expenditures since 2002. Traditionally, these 5,000 types of incentives allowed the AEDC to significantly 0 affect statewide economic growth, but as the state economy 2001 2002 2003 2004 2005 2006 2007 has flourished and the 21st Century Economy has become US PCPI AR PCPI AEDC Avg Wage increasingly global, traditional incentives have proven not to be enough for the AEDC to lead the transition to an economy supported by knowledge-based jobs. The chart above shows the type of impact a tool like the QACF can have on increasing the wealth of Arkansans. From As Governor Beebe set forth his Five Goals for Economic 2002-2006, the average wage of jobs directly created by the Development, he understood the transition to a knowledge- AEDC mirrors, or is slightly above the Arkansas Per Capita based economy is required for Arkansas to flourish in the Personal Income (PCPI) and is significantly below the national global marketplace. These goals encompass more than just average. However, in 2007 — with the aid of the QACF a focus on business recruitment, expanding the mission of — the average wage of jobs directly created by the AEDC is the AEDC, and making it the leader in accomplishing the significantly above the state PCPI and also tracks the growth Governor’s economic development goals. This expanded of the national PCPI. While the gain in Arkansas PCPI mission requires adequate funding not only for incentives, but compared to the national PCPI cannot solely be attributed to also for the mechanisms targeted at infrastructure investment. the 6,616 projected direct jobs created by the AEDC in 2007, The AEDC will only be successful in leading the transition to this chart does show that the AEDC is helping to increase the a knowledge-based economy if adequate, predictable funds for wealth of Arkansans. Most importantly, the years in which st 21 century infrastructure investment are available. the average wage of jobs created by the AEDC is above the state average can directly be attributed to the availability To enhance state infrastructure funding, in 2007, the of infrastructure funding through either the Economic Arkansas General Assembly enacted the Governor’s Quick Infrastructure Fund, the QACF, or both. Action Closing Fund (QACF). The QACF provides a flexible source of infrastructure money to help “close the deal” on Proposed Funding Formula major projects. Traditionally, the tax incentive programs with which the AEDC has to offer have been adequate in the past to cause job creation and investment. Unfortunately, available funding mechanisms targeted at infrastructure investment have been traditionally funded below appropriated levels. The basis of the proposed funding formula is the ability for the AEDC to have access to predictable, recurring funds for Arkansas StRategic Plan page 77 infrastructure investment. These funds will be used to not been available, but just as detrimental, the mechanisms make strategic investments required to transition the state in place are not set up to currently make the required to an economy supported by knowledge-based jobs. investments even if funding was available. Having the required flexibility to make these types of investments Additional funds for infrastructure investment will help is tantamount to success in transitioning to an economy alleviate pent up demand (from lack of past available supported by knowledge-based jobs. infrastructure funds) as well as meet the needs of the ever- growing 21st century economy, which will allow the AEDC Fortunately, with a few minor changes, the funding to focus on both short- and long-term economic stability. mechanisms required to make the necessary infrastructure During the 2007 General Assembly, the Senate appropriated investments are already in place. The Economic Infrastructure roughly $1.8 million to the AEDC to provide infrastructure Fund (EIF) has traditionally been an available funding grants to communities. An interested community was mechanism to the AEDC and the QACF is now available as required to submit an application to the AEDC in order to well. Unfortunately, the funding for both programs is drawn be eligible. The demand for infrastructure improvements from the General Improvement Fund (GIF), which allocates is so high that the AEDC received 121 applications totaling funds to appropriations based on available surplus state $24,095,383. Many of these projects went unfunded because revenues. Typically, GIF funds cannot meet the need of all of the huge discrepancy between the funds available and appropriations, which is why EIF and QACF are not funded at the applications. The AEDC is grateful to the Senate for appropriated levels. To ensure state funds for infrastructure providing these funds, but the community response shows investment are available, the AEDC recommends EIF and the state and regions must both provide additional funds for QACF be funded from state General Revenues. infrastructure investment in order to grow the state’s economy. With both infrastructure funding and incentives available, the AEDC will have a more pronounced affect on the economy and potentially cause statewide economic growth at a Figure 33 greater pace. Funding of State EIF Programs: 1993-2008

$25,000,000 The definition of “infrastructure” continues to expand as quickly as the $20,000,000 global marketplace and while some investments may only show minimal short-term benefit, they are required $15,000,000 to ensure long-term economic growth. Because of this expansion, the use of $10,000,000 funds must expand to include the requests outlined in the Economic Development Infrastructure section of the strategic $5,000,000 plan. Just as access to roads and water systems have always been important keys $0 07 01 97 02 94 93 98 95 03 04 08 05 96 in economic development, tools such as 06 999 000 19 19 19 19 19 1 19 20 20 20 20 20 20 20 20 broadband and laboratory space are now 2 just as important to knowledge-based Appropriated Funded growth. Unfortunately, funding has Arkansas StRategic Plan page 78

Making infrastructure and training funds available at and infrastructure investment intended to cause knowledge- traditionally appropriated levels (EIF is traditionally based economic growth. If these increases are made, the total appropriated at $20 million per biennium) is increasingly state expenditures for economic development will represent 2.8 important because funding has been scarce for much of the percent of General Revenues Projections for 2009. last 15 years. These investments are not seen as incentives designed to entice business to locate in Arkansas, rather as Asking for a modest increase in infrastructure investment investments required for any business — new or existing — to funds is coupled with the intent of deemphasizing the succeed. If these investments are not made, businesses will be future use of incentives. However, the prolonged lack of forced to locate or relocate to areas of the nation or world that infrastructure funds has caused the AEDC to rely so heavily can provide essential infrastructure. Thankfully, during the on incentives that it will take some time before the amount 86th General Assembly, Governor Beebe and the Legislature claimed will decline. Over time, a majority of the expenditures provided the largest amount of EIF funding since 2000, made by the AEDC has been through incentives (see chart totaling $10 million. above), which has been the only predictable funding source available. Since 2002, these expenditures have ranged from The state already spends significant dollars intended to cause $49 million to roughly $76 million and represented 65 to economic growth. Specifically, the QACF provided a major 100 percent of outside expenditures.168 Fortunately, the boost to these funds during 2007 and 2008. The state spent AEDC does have some control of the amount of incentives roughly $96 million in 2007 and roughly $97 million in committed to future projects and proposes to decrease 2008 for operations, incentives, and funds for infrastructure the amount offered if adequate funding for infrastructure investment. As shown above, the QACF also had a significant investment becomes available. positive effect on performance. Based on this success, the AEDC is requesting the state increase economic development If EIF and QACF receive fully appropriated funding, the state expenditures to $122.5 million annually for 2009 and 2010. economic development expenditures would increase to roughly This increase will be entirely for technology-based development $107 million annually, but the chart shows a request of $122.5

Figure 34 Past and Proposed State Economic Development Expenditures by Allocation Technology Development GQACF EIF $140,000,000 Customized Training-EWTP Incentives Operations $120,000,000

$100,000,000

$80,000,000

$60,000,000

$40,000,000

$20,000,000

$0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

168 Incentive amounts for 2007-2010 are projections based on prior data provided by DFA Arkansas StRategic Plan page 79 million annually. The additional request represents funds EIF and QACF through General Revenues. As these funds for initiatives designed to enhance growth in the technology- become available, the use of incentives will be de-emphasized. development sectors of Arkansas’s economy. This request Finally, to kick start the transition to an economy supported combined with fully funding EIF and QACF will bring the by knowledge-based jobs, an additional pot of funds for annual state economic development expenditures to $122.5 Accelerate Arkansas initiatives should become available. million. As part of the 86th General Assembly, Accelerate However, these funds should only be available if a local/ Arkansas initiatives intended to expedite the transition to a regional match is provided. As more regions/communities knowledge-based economy were passed into law. The AEDC, are able to provide this match, the AEDC will transition to ASTA, ADFA, and Accelerate Arkansas are asking for a fund requiring a match for all infrastructure investments. This to be created in the same fashion as the QACF for technology- requirement will necessitate the regions/communities to based initiatives. The amount jointly requested from the provide their fair share as well as allow state dollars to fund three agencies and Accelerate Arkansas is for $15 million to more projects. be committed annually for 2009 and 2010. State funding for these initiatives should only be released on a project-by-project ii. Regional Funding Model basis if a region/community provides the required 1:3 match. As expenditures for statewide strategic plan initiatives increase, This formula represents the region/community providing regions will be empowered to finance local projects that have one non-state dollar for every three state dollars provided traditionally been state funded. Therefore, legislation may to a project. need to be proposed to ensure regions are provided the proper mechanisms to develop local sources of dedicated revenues for Currently, most communities rely heavily upon state tax economic development. (Potential existing revenue sources are incentives and infrastructure funds to finance local projects. discussed in the Local Taxes section of the strategic plan.) Sole funding by the state is a flawed strategy because every economic development project has a larger local Figure 35 rather than state impact. To drive increased regional/ local financial participation, the AEDC will begin MEET IN THE transitioning to a point where all infrastructure MIDDLE TO FORM State $ AN ECONOMY Local $ funds will require a match. This requirement will SUPPORTED BY transition to regions/communities providing a fair KNOWLEDGE-BASED JOBS share in economic development projects as well as allow state dollars to go further. The first step in this transition is requiring the 1:3 match for Accelerate Arkansas initiatives. Of course, not all communities/regions This transition will not only enable regions to compete for of the state are currently able to meet this requirement, so a projects more effectively with communities in other states match will not initially be required for use of EIF or QACF that offer substantial local incentives but will also generate infrastructure investments. However, it is the intent of matching funds for statewide initiatives that could benefit the AEDC to transition to requiring a match for all their regions. As regional funds increase, the cumulative infrastructure funds. amount of state and local funds for economic development will rise. The new AEDC funding formula is based on the philosophy that the transition to an economy supported by knowledge- Just as there is a timeline associated with the transition to an based jobs will only occur if the proper infrastructure economy supported by knowledge-based jobs, there is also a investments are made. To make the proper investments, timeline associated with the transition to the regional funding the AEDC must have adequate and predictable funding for model. This model will evolve gradually as regions develop, Arkansas StRategic Plan page 80 determine priorities, and establish funding mechanisms. • The Federal Aviation Administration funds airport However, it is the belief of the AEDC that regions that construction. develop more quickly than others will reap the benefits of • The U.S. Army Corps of Engineers constructs and collaboration and their economies will grow at a greater rate maintains a wealth of recreation and transportation projects. than those who are slow to transition. Research suggests that Arkansas does not garner an adequate iii. Federal Funding share of Federal funding. Stakeholders interviewed for the Federal entities are important, but often overlooked, strategic plan believe Arkansas should aggressively pursue contributors to economic development. The AEDC currently Federal funding to accomplish strategic objectives. For receives significant Federal funding from the U.S. Department example, the USDA might fund bio-based agriculture of Housing and Urban Development (HUD) and from the initiatives and Arkansas businesses can secure U.S. U.S. Department of Energy (DOE). Since 1983, HUD has Department of Defense contracts. Federal funds are the allocated hundreds of millions of dollars to Arkansas’s Small lifeblood of much research and development and are often the Cities Community Development Block Grant (CDBG) stimulus for development of knowledge-based clusters. As program and to individual entitlement cities. Since 2000 stated above, Federal contributions to infrastructure projects alone, the AEDC has received $178.8 million in CDBG are enormous. funds. 169 The AEDC’s State Energy Office also receives considerable funds from the DOE.

Other state and regional entities receive significant Federal funding for activities that benefit economic development. A few examples (others abound) include:

• The Economic Development Administration (EDA) partially funds planning and development districts, EDA centers and individual economic development projects throughout Arkansas. • The Delta Regional Authority, encompassing 42 counties in Arkansas, is a Federal-state partnership that serves as Governor Beebe has also asked the AEDC to become more a regional advocate, planner, funder and coordinator to involved with Arkansas’s Congressional delegation and improve the economy and quality of life for Delta residents. this process has begun. One issue that the AEDC intends • EPSCoR participants including NASA, USDA, NSF, NIH, to discuss is procuring more Federal funds for economic the Department of Defense and others provide funding to development. The AEDC also intends to partner with private Arkansas research institutions. non-profit foundations within Arkansas to procure more • The U.S. Department of Labor annually provides millions Federal funds. Specifically, the AEDC will diligently work of dollars for workforce development programs such as with ADFA and ACC to ensure that New Market Tax credits WIRED. are awarded. • The Federal Highway Administration funds a significant amount of Arkansas’s transportation infrastructure. iv. Private Sector Partnerships Long-term, statewide economic growth will require the AEDC to strengthen existing partnerships with private business 169 Arkansas Economic Development Commission, Community leaders and other state agencies. These partnerships will Development Block Grant Small Cities Program, data from annual help fund more projects by collectively leveraging resources appropriation agreements, 2000-2007. Arkansas StRategic Plan page 81 to accomplish shared economic goals. This interaction will increasing participation within the private community also provide the AEDC with insight regarding the types of by forming programs that will drive increased interest. projects that partners prioritize. Further, it is the belief of Specifically, the Alabama model could serve as a template the AEDC that duplication of effort both internally and with for Arkansas. external partners is a major reason for diffused funding. To rectify this, the AEDC pledges to work with all economic Action Items: development partners to understand how the AEDC and the • Statewide economic development infrastructure stakeholders can enhance efficiency. program funding levels should be predictable and reliable and appropriated consistently with strategic One extremely important partner that warrants specific plan recommendations. mention is the Arkansas Economic Development Foundation (AEDF). The AEDF is a private non-profit 501c(6) • A statewide fund of $30 million per biennium for corporation that was developed to support the AEDC in its technology-based initiatives should be created. This efforts to facilitate economic growth in Arkansas. Arkansas fund should be created in the same mold as the QACF is not the only state that benefits from a private economic and the creation of this fund is supported by AEDC, development foundation. In fact, almost every state has this ASTA, ADFA, and Accelerate Arkansas. type of partner supporting state-led economic development efforts. These foundations provide a wide range of functions • The scope of fundable EIF and QACF activities including marketing, fund-raising, and research. should be expanded to include infrastructure initiatives formulated by the strategic plan. While the AEDF has been extremely important to past economic development efforts and continues to be a vital • The AEDC will support Arkansas Municipal League partner, it must transition into a stronger entity to provide the efforts to propose constitutional reform for public support needed by the AEDC. The final determination of financing which will empower regions to develop how the AEDF should transform has not been concluded, but dedicated sources of economic development funding. discussions are ongoing between the two organizations. Once this transformation takes place, the AEDF will be the active • The AEDF should be strengthened, expanded or leader in a more formal partnership between the AEDC and merged to enhance private partnerships. the private sector.

One way to expand private sector participation is for the c. Economic Development Incentives AEDC to periodically convene meetings of influential There’s no sense in taking powder home, boys. Let’s shoot it. individuals with Arkansas roots to discuss the economic – Joe Max Higgins, CEO of the Columbus-Lowndes future of the state. This was once a very important meeting Development Link, on maximizing the use of incentives to that traditionally brought about many significant ideas which attract a Kia automotive assembly plant to Mississippi.170 would ultimately lead to economic growth in Arkansas. Unfortunately, this meeting was discontinued, but the AEDC In their evaluation of economic development incentives, Alan is working to reconstitute this summit. Peters and Peter Fisher recognized that “The boundaries that

Other ideas being discussed include: changing the non-profit designation to a 501c(3), combining the AEDF with Accelerate Arkansas, developing an AEDF website, forming an Arkansas 170 “Top 10 Quotes from 2006 and 2007,” Southern Business and Development Magazine, online, accessed 14 Jan. 2008, available from http:// Ambassador Program, resurrecting the Arkansas 100, and www.sb-d.com/issues/summer2007/features/Top10Quotes.asp. Arkansas StRategic Plan page 82 define what a business incentive is are not always clear.” 171 For however, are finite resources that must be utilized judiciously strategic planning purposes, we have adopted their definition to ensure optimal inducement of economic growth. This is of incentives which includes “tax instruments — property tax especially true for discretionary incentives. Policies must abatements, tax increment financing, sales tax exemptions ensure that incentives are both competitive and expedient. and credits, corporate income tax exemptions and credits for investment or jobs — and non-tax incentives such as business i. Existing Incentives grants, loans and loan guarantees.”172 The AEDC must continue to evaluate the efficiency and effectiveness of existing incentive programs to ensure they The use of government incentives to stimulate private reflect Governor Beebe’s economic development goals and the economic development has proliferated throughout the AEDC’s new mission statement. United States during the past 25 years. By 1986, 38 states had established state-sponsored industrial development authorities. Data compiled by the AEDC since 2001 have projected Most of these states offered “traditional” incentives provided that economic development incentives return approximately to companies within certain sectors that met job creation and $2.5 dollars in state tax revenue for every dollar invested.176 investment thresholds — 31 offered tax incentives for job Legislation enacted in 2007, permitting the AEDC to review creation and 29 offered tax incentives for industrial investment 173 state income tax data for companies receiving incentives, will By the late 1980s, tax incentives had become the cornerstone of allow the AEDC to better quantify the efficiency of individual most state economic development programs. incentive agreements. 177

As competition for projects increased, three incentives trends All incentive programs must be evaluated to ensure they are began to emerge. First, customized incentive packages for achieving stated purposes. Despite the addition of several specific businesses became the rule, rather than the exception. incentives during recent legislative sessions, approximately The Jones and Bachelor study of Michigan’s efforts to retain 80 percent of incentive expenditures are for two programs, General Motors is an excellent case study.174 Second, the scope InvestArk and Create Rebate. InvestArk, a sales and use of incentives increased as payroll rebates and cash incentives tax credit for modernization and expansion investments, is for land and infrastructure were developed. This, in turn, led to increasingly being used as a means to ameliorate high sales a third trend — the necessity for local incentives as costs soared. taxes on energy consumption. Almost two-thirds of all As a result, annual state and local incentive expenditures have AEDC incentives are for InvestArk projects. It is thought that increased to an estimated $50 billion annually. 175 further reducing sales taxes on industrial energy consumption will greatly reduce dependence on InvestArk. Additional There is considerable national debate regarding the practicality analysis is needed to determine which policies can best and effectiveness of business incentives. Unfortunately, no stimulate industrial capital investment. state can unilaterally abolish incentive programs without substantial economic ramifications. It is not the purpose of Create Rebate, a discretionary incentive providing businesses the strategic plan to justify the use of incentives. Incentives, financial payments for new payroll, comprises less than 20 percent of incentive expenditures but is being increasingly 171 Alan Peters and Peter Fisher, “The Failures of Economic Development utilized as competition for new projects intensifies. It is Incentives,” Journal of the American Planning Association, 70, no. 1 (2004), 172 The Failures of Economic Development Incentives, 28. anticipated that reliance on this program will lessen as 173 Keon S. Chi and Drew Leatherby, State Business Incentives: Trends and Arkansas strengthens its competitive advantage by implementing Options for the Future, (Lexington, KY.: The Council of State Governments, 1997), 2-3. 174 See Bryan D. Jones and Lynn W. Bachelor, The Sustaining Hand: 176 Arkansas Economic Development Commission, Annual Activity Reports Community Leadership and Corporate Power (Studies in Government and (2002-2007), as required by Act 1282 0f 2001 and filed annually in May Public Policy), (Lawrence: University of Kansas Press, 1986). with the Arkansas Legislative Council. 175 The Failures of Economic Development Incentives, 28. 177 2007 Ark. Acts 437. Arkansas StRategic Plan page 83 recommendations contained within this strategic plan. ii. Proposed Legislation Revised tax policies, regional partnerships and investments in New legislation has the potential to bolster economic workforce and infrastructure will gradually reduce the amount development and ensure progress toward Governor Beebe’s of tax incentives necessary for business recruitment. goals. Strategic investments in talent (education, higher education, and workforce education) and activities (research, Many incentive programs are ineffective due to entrepreneurship, and risk capital investing) that correlate with underutilization. For example, tax increment financing higher per capita personal income need to be explored. When (TIF) is no longer a viable economic development tool for appropriate, the AEDC will study and propose amendments most projects because state law requires every school district to existing legislation as well as new economic development to dedicate at least 25 mills exclusively to operations. The initiatives. These proposals will always be based on fact and remaining millage that can be dedicated to TIF projects is will be tools designed to achieve the recommendations of the often insufficient to retire bonded indebtedness. strategic plan.

As stated above, Amendment 82, which permits the issuance d. Taxation and Regulatory Policies of state revenue bonds to finance infrastructure improvements i. State Taxes for projects investing $500 million and creating at least 500 Despite the efforts of consultants and independent new jobs, has never been utilized. The AEDC will review organizations, the myriad of multi-state tax structures and Amendment 82 and propose revised eligibility criteria that will policies have made it virtually impossible to definitively target beneficial investments. compare tax burdens among states. Most studies conclude that Arkansas has a slightly regressive tax structure that Other incentive programs, such as Advantage Arkansas, the ranks slightly below national averages on most quantitative Non-Profit incentive, and the Targeted Business incentive, measures. For example, the 2008 State Business Tax Climate can be better utilized with slight modifications to eligibility Index published annually by the Tax Foundation ranked criteria. Finally, the Governor’s QACF should be replenished Arkansas 35th based upon poor scores for corporate income to ensure that a consistent source of economic development and sales taxes and good scores for property taxes. 178 Overall, infrastructure funds is available for major projects. Several approximately 11.3 percent of Arkansans’ per capita personal sections of the Consolidated Incentives Act must be amended income was expended for state and local taxes. This was to correct omissions, clarify ambiguous language and slightly higher than the national average but 13th worse expand eligibility. among states. 179

Action Items: The State of Arkansas receives 39.1 percent of general revenues • The AEDC will continue to evaluate the Consolidated from sales and use taxes, 54.4 percent from income taxes and Incentive Act and other economic development incentives the remainder from miscellaneous taxes. 180 These percentages based on the recommendations of the strategic plan and have remained fairly consistent. A decade ago, 41 percent of propose amendments to the legislation where appropriate. Arkansas’s General Revenues were from sales and use taxes • The AEDC will partner with the Arkansas Municipal League and the Arkansas Economic Developers to 178 Chris Atkins and Curtis S. Dubay, “2008 State Business Tax Climate evaluate the feasibility of lowering investment thresholds Index (Fifth Edition)”, Tax Foundation, online, accessed 14 Jan. 2008, for Amendment 82 “super projects.” available from http://www.taxfoundation.org/publications/pronter/22658. html. 179 “Tax Friendly Places, 2007, Money, available from http://money.cnn. com/galleries/2007/pf/0704/gallery.tax_friendliest/8.html. 180 Arkansas Department of Finance and Administration, Arkansas 2007 Individual Income Tax Forms and Instruction, online, available from http:// www.state.ar.us/dfa/income_tax/documents/LongBooklet2007.pdf, 5. Arkansas StRategic Plan page 84

better mechanisms for ongoing review of tax systems in light of changes in the economy. 186

Other studies have suggested that Arkansas’s current taxing structure is a competitive disadvantage for business recruitment. According to the 2002 Fluor study, Arkansas ranked in the lowest quadrant of southern states in regard to several state taxes, especially sales and use tax on energy consumption. 187 The updated 2006 Fluor study acknowledged improvement but still chastised Arkansas for high sales and use taxes and unemployment insurance rates for new employers. 188

The AEDC’s ongoing review of other states’ tax systems found that several had distinct advantages regarding specific tax policies. For example, two adjacent states, Tennessee and while income taxes comprised 52 percent. 181Arkansas relies Texas, do not tax income. While other taxes in these states, little on severance taxes, which comprise less than $25 million such as excise taxes and franchise taxes, do tax wealth, the in annual revenues, and gaming revenue which accounts for net effects of these taxes on capital formation and long-term approximately $5.5 million. 182 More than three quarters of investment are poorly understood. every state tax dollar is spent for public education and health Further, most states allow businesses to carry forward and human services. 183 operating losses over longer periods and exempt ad valorem taxation of inventory. Despite the above data, there is The January 2008 edition of Governing Magazine suggested no consensus regarding the effect of taxes on business that most states need to modernize their tax policies to development and capital retention. encourage economic vitality in a knowledge-based economy. The best tax systems would be “simple and transparent, ii. Local Taxes with broad-based taxes that provide a balanced revenue To remain competitive, local governments must strike a stream, spread the tax burden fairly and heighten the chance delicate balance between providing an increasing number of of compliance.” 184 Arkansas has made significant progress amenities required for economic growth and not overtaxing by broadening the base of taxable services and by working their citizens. As state economic infrastructure funding wanes towards compliance with the Streamlined Sales and Use Tax and local incentives gain in importance, local governments Act. Governing Magazine does note that Arkansas “needs should look to develop dedicated sources of revenue to fulfill improvement” in efforts to reduce tax and administrative regional economic development initiatives. burdens on the telecommunications industry 185 and needs

A majority of local governments have maximized the use of 181 Arkansas Department of Finance and Administration, Arkansas 1998 sales and use taxes as primary sources for general operations. Individual Income Tax Forms and Instruction, online, available from http:// www.state.ar.us/dfa/income_tax/ind_tax/1998_forms/98-ar1000inst.pdf, 6. Currently, 267 municipalities levy sales and use taxes. 182 Bureau of Legislative Research, Office of Economic and Tax Policy, Arkansas Legislative Tax Handbook 2006, Sept. 2006, 90 and 94. 183 Arkansas 2007 Individual Income Tax Forms and Instruction, 5. 186 “Growth & Taxes,” 22. 184 Katherine Barrett and Richard Greene, “Growth & Taxes Why 187 Arkansas Business and Economic Development Incentives Study, Final Outdated State Tax Systems Undercut Economic Vitality, and What States Report, 2002, 42-48. Can Do About It,” Governing, January 2008, 23. 188 Arkansas Business and Economic Development Incentives Study, Final 185 “Growth & Taxes,” 24. Report, 2006, 34-36, 41, 44-49, and 54-61. Arkansas StRategic Plan page 85

Including state taxes, the average municipal sales and use tax Action Item: rate has now risen to 8.695 percent and exceeds 10 percent in • The AEDC will prepare information materials and 14 cities. 189 communicate to cities and counties that expanded use of the Interlocal Cooperation Act is a high priority of Further complicating this balance is the fact that few entities AEDC’s regional strategic planning emphasis. are dedicating funds to economic development initiatives.

Fewer than two dozen county and municipal governments dedicate any portion of sales and use tax collections specifically to economic development. Although a few entities such as Clark County have successfully enacted economic development sales and use taxes, a majority of recent initiatives have failed. One suggestion is to dedicate revenue from existing taxes or to rededicate expiring taxes to economic development.

Local ad valorem taxes are the second most popular source of local government funding, but are underutilized. Local governments may dedicate up to five mills to general operations, including economic development, but few do. In 2007, the average millage rate in Arkansas was 46.3 mills. This results in an effective property tax burden (without exemptions) of $926 per $100,000 of fair market value. Average millage rates for counties (7.43) and cities (3.69) result in effective tax burdens of $148.60 and $73.80 respectively per $100,000 of fair market value. 190

It is understood that funding will be a critical component of regional development. As stated in the competitive business section of this strategic plan, regions will be empowered to secure a dedicated source of revenue to accomplish strategic initiatives. Counties and cities are also encouraged to enter into agreements under the Interlocal Cooperation Act to enhance sharing of resources and responsibilities. The Interlocal Cooperation Act is a vehicle that can be used to leverage local partnerships and expand funding pools to levels required to achieve common regional economic development goals.

189 Arkansas Department of Finance and Administration, Sales and Use Tax Section, Local Sales and Use Taxes in Arkansas, online, accessed 25 Feb. 2008, available from http://www.state.ar.us/dfa/excise_tax_v2/ et_su_local.html. 190 Arkansas Assessment Coordination Department, 2007 Millage Report, February 2008, available from http://www.arkansas.gov/acd/pdfs/ MillageBook2007.pdf, 1. Arkansas StRategic Plan page 86

Several interviewees acknowledged that one of the AEDC’s Component 5 greatest strengths is its ability to lead economic development Collaborative Partnerships efforts. The AEDC has been the catalyst for most economic A. Federal development legislation, has facilitated strategic planning in scores of communities and has been instrumental in recruiting B. State many projects to Arkansas. These achievements, of course, could never have occurred without partnerships involving the C. regional Governor’s Office, legislators, local officials, local economic developers, agency leaders, businesses and citizens. D. Non-Governmental

Several partners stated they had been consulted too late in Collaborative partnerships succeed when colleagues work previous activities and therefore were unable to meaningfully together with shared resources and mutual accountability contribute. Others were unfamiliar with the mission of to achieve consensual objectives. The strategic planning AEDC and lamented the fact that they had never been asked process involves many active and prospective partners who to collaborate. Most believed this was not due to lack of will be instrumental in helping the AEDC achieve the trust but to an insufficient understanding of how they could objectives of the strategic plan. Each mission statement action contribute to economic development initiatives. verb emphasizes the importance of building collaborative partnerships: A vast majority of interviewees were encouraged by involvement in the strategic planning process and To lead statewide economic development, create targeted complimented current leadership for increasing transparency strategies that produce better-paying jobs, promote and encouraging partnerships. Although interviewees believed communities, and support the training and growth of a 21st that much work remained, the opportunity to leverage century skilled workforce. (December 2007) strategic resources through partnerships is at its zenith.

As stated in the guiding principles, leadership is not The AEDC must continue to lead the state’s economic synonymous with direct control. Scarce resources preclude development charge by challenging new Federal, state and the AEDC from directing economic development activities local partners to embrace economic development and share that are best accomplished regionally. As regions engage our vision. The AEDC must also work to understand the more in strategic planning, prospect recruitment and issues of others — poverty, affordable housing, public safety, business retention and expansion, the AEDC will be able healthcare, historic preservation, etc. — that affect economic to prioritize targeted development activities requiring state development. This is the essence of collaborative partnerships. assistance. Examples of such activities include global business development/international relations, super projects, targeted business recruitment, multi-regional projects, and statewide policy initiatives.

The AEDC’s aptitude for formulating collaborative partnerships was identified differently by interviewees as a strength, weakness and opportunity. Such incompatibility requires further explanation. Arkansas StRategic Plan page 87 a. Federal Most active partners wanted to be consulted earlier and Because of the importance of Arkansas’s Federal Delegation more often in the recruitment process while new partners to the success in transitioning to an economy supported by were encouraged by the strategic planning effort and desired knowledge-based jobs, Governor Beebe requested the AEDC enhanced participation. The AEDC will make every possible become more involved with Federal economic development effort to make sure all agencies are involved at the earliest issues. To ensure this partnership is developed, staff members appropriate time during every project. from Arkansas’s Congressional delegation have been actively involved in the strategic planning process and are encouraged Several internal and external interviewees suggested that by the renewed atmosphere of cooperation. All recognize AEDC staff be more involved with statewide organizations their potential to influence economic development and have such as the Arkansas Economic Developers, the Cooperative pledged to work more closely with the AEDC to help achieve Extension Service, and the Arkansas Municipal League. Staff the objectives of the strategic plan. The significant resources should seek opportunities for presentations, training sessions, dedicated by AEDC to nurture this renewed partnership will panel discussions, workshops, etc. Additionally, AEDC provide access to untapped funding opportunities for state and staff should meet regularly with groups such as the planning regional investments as well as the Federal agencies involved in and development district directors, county judges, and the a myriad of issues that affect economic development. Arkansas State Chamber of Commerce. b. State c. Regional Undoubtedly, the AEDC’s ability to forge partnerships As the guiding principles suggest, building an economy with state agencies, organizations, elected officials and supported by knowledge-based jobs will require AEDC other entities has been critical to past and current economic to coordinate statewide planning, lead targeted business development success. Recognizing today’s complex economic recruitment, and invest in activities that cause the transition development issues (which cut across agencies, geographies, to occur as quickly as possible. The AEDC’s current and programs) require extensive intra-agency partnerships, community-level business recruitment and strategic planning the AEDC interviewed a comprehensive cross section of efforts, while well-intentioned, frequently result in diffusion current and potential state partners to help create our new of scarce resources. Too few staff, dwindling infrastructure economic development vision. However, more relationships funding and the need to deploy resources to knowledge-based with existing partners will be formalized as the AEDC has and global endeavors mandates focused efforts to maximize benefited greatly from existing partnerships with the Water regional planning and business recruitment partnerships. Wastewater Advisory Committee (WWAC) and meetings The basis for regional economic development is well with the departments of Education, Higher Education, and established. Currently, in addition to the eight planning Workforce Education. and development districts that represent all of Arkansas’s 75 counties, 13 separate regional partnerships represent 59 A prevalent suggestion was for the AEDC to conduct joint counties in Arkansas. Therefore, regionalized economic commission meetings with other cabinet level agencies to development, as hereby envisioned, is more an intensification better plan, fund, and implement economic development of effort rather than a change in philosophy. initiatives. Also, reciprocal board memberships among agency partners were suggested to help agencies integrate economic i. Regional Planning development into their strategic missions. Specifically, the Since the inception of the AEDC, communities have potential to co-locate some functions/offices of agencies typically worked individually with the AEDC on economic involved in economic development should be evaluated. development projects. However, as the Arkansas economy has grown from an agrarian, community-based economy into an industrial, international-based economy, increasing amounts Arkansas StRategic Plan page 88 of funding and financial tools for economic development ii. Regional Recruitment have become required. Businesses and investors often As the AEDC transitions from a reactive to a proactive base decisions on criteria such as population/labor mass, targeted business development strategy, a significant amount plentiful housing stock, diverse cultural and social amenities, of recruitment efforts will be expected of regions. Only a few educational opportunities and comprehensive infrastructure. regions in Arkansas are equipped to develop and implement Because Arkansas is a rural state with a relatively small a comprehensive economic development strategy called for population base, it has become almost impossible for most by this plan. Therefore, before this transition can occur, the communities to alone provide the tools required to compete in AEDC must better engage and prepare regions in all facets today’s global economy. of global economic development by providing leadership, education, training, and some financing. Finally, the AEDC must modify existing programs to promote and reward Many areas of the state have already seen the benefits of regional economic development initiatives. developing regional consortiums focused on economic development, but typically these groups are volunteer-based For the AEDC to be successful in preparing regions and have little or no funding dedicated to cause economic in all facets of global economic development, AEDC’s growth. Because these regions have taken the initial steps, the community development efforts must be reborn. In the past, AEDC will now work to more formally develop an operational community planning efforts have tended to encompass overly structure designed to empower each region to prosper in a comprehensive strategies which are impossible to implement global economy. given current levels of resources. The past ACE process has

Action Items: compounded this problem by requiring communities to develop intricate plans based on numerous “components” • A high priority of the AEDC will be to implement which are often poorly integrated into the plans of other regional economic development. This new strategy will: regional communities. What has resulted is a hodge-podge of components that often perpetuate fragmentation of efforts • Encourage regions to consult with professional planners that retard regional growth. in developing regional strategic plans. Ideally, regional and statewide plans should be symbiotic. The new AEDC community development process will not solely focus on a single program as it has in the past. Rather, • Empower regions to excel at all facets of economic the community developers will focus on providing a process development. This will require extensive collaboration and guidance for regions. Because the AEDC will be working and training provided by the AEDC. at a regional level, the community developers will be able to provide assistance in an on-going, “evergreen” approach. • Gradually shift non-targeted business recruitment responsibility from AEDC to individual regions. Action Item: • The AEDC will replace the current Arkansas • Emphasize a collaborative approach to community Community of Excellence (ACE) program with development which transforms AEDC community a process that closely mirrors the objectives of developers into “regional managers” who develop this strategic plan. relationships on a regional level and strategically deploy AEDC resources in furtherance of shared objectives.

• Recommend legislation or constitutional amendments that will allow regions to develop funding mechanisms. Arkansas StRategic Plan page 89 d. Non-Governmental In short, economic development goes far beyond the efforts Many private and non-profit entities have significantly of formal economic development organizations. The AEDC contributed to economic development in Arkansas. Utility has developed some, but not enough partnerships with non- companies such as Entergy (formerly Arkansas Power and governmental entities. Involving the Arkansas Economic Light) and financiers (such as local bankers) were economic Development Commission and Arkansas Economic development pioneers and remain active in community Development Foundation in developing partnerships and and economic development. Private corporations such as securing funding for innovative knowledge and wealth Wal-Mart have contributed to economic development both creating initiatives can supplement current accomplishments. as corporations and philanthropists. And of course the Currently, their financial resources and political influence are thousands of businesses that create and retain jobs throughout being underutilized. the state are important economic development practitioners.

The work of non-profit organizations such as Winrock International and Heifer International exemplify how important non-governmental contributors are to global economic development. National and regional associations such as the National Governor’s Association and the Southern Growth Policies Board can effectuate policy recommendations that greatly influence the economic development capacity of Arkansas. Staffers and consultants advising these organizations provide a wealth of resources that can help shape development. Arkansas StRategic Plan page 90 V. Conclusion

A New Mission Action items were chosen based upon the Strategic Planning The strategic plan began with a simple statement: Arkansas Division’s belief that they would help bring about a systematic is at an economic crossroads. We are now at the point where transition to a knowledge-based economy. Responsibility a definitive direction must be taken. Economic developers for implementing each recommendation is delineated within must choose between a familiar but well-worn path of reactive the context of this and subsequent annual implementation recruitment, which produces predictable results but results in plans. As a result of this plan, milestones will be set and disjointed policies and disbursed resources, or blaze a new path measurements established to track the progress of the built upon targeted proactive recruitment that promises to lead plan’s implementation. to a new destination, an economy supported by the creation of Unlike traditional plans, the strategic plan will be updated knowledge-based jobs. annually to maintain focus. These annual plans will measure accomplishments of the preceding year, identify future The consensus of stakeholders statewide was to embark on a legislative and budgetary priorities, and propose strategic new course of economic development. The AEDC espoused actions to accomplish the agency’s mission. The operational this desire by reformulating the AEDC mission statement cycle of this and future plans coincides with biennial legislative which reflects this transition. sessions and budgeting cycles to ensure applicable legislation is enacted and sufficient funding is secured to implement To lead statewide economic development, create targeted strategic initiatives. strategies that produce better-paying jobs, promote communities, and support the training and growth of a 21st century skilled All internal and external AEDC business practices and processes workforce. (December 2007) must be evaluated to guarantee efficiencies of operation Five Guiding Principles and mission focus. Inefficient processes should be corrected immediately, while others must be evaluated over a period of Most plans, however well-written, fail for three time to determine if they are properly focused. reasons: dispirited or imperceptible leadership, deficient implementation, and/or the absence of accountability. The A comprehensive matrix of qualitative and quantitative guiding principles of the strategic plan address each of these by measures must be established and continuously evaluated establishing definitive tenets that must be adhered to, in order to ensure AEDC operations are achieving the objectives set to achieve success. forth in the strategic plan. These measures will not only guide agency operations, but will effectuate implementation To generate wealth for Arkansans, the state requires a of strategic objectives at the AEDC division level. All AEDC systematic plan causing a transition to an economy supported by divisional operations will be budgeted and evaluated annually knowledge-based jobs. to ensure alignment with strategic objectives. Consolidation, co-location and contraction or elimination of activities will be Systematic statewide economic development planning will evaluated to achieve maximum efficiencies. efficiently allocate resources toward those activities that directly support strategic objectives. The strategic plan will Scarce and diffused economic resources mandate a coordination also serve as a guide to local/regional economic development of efforts led by the AEDC to transition the Arkansas economy organizations that want to align their local economic to an economy supported by knowledge-based jobs. development plans with the state’s plan. Arkansas StRategic Plan page 91

Many objectives of the strategic plan will require the AEDC Five Key Economic Development to partner with other state agencies, regions, the Congressional Components Delegation, and the private sector to be successful. The Economic development is a system comprised of five AEDC must work with partner agencies to develop qualitative interdependent components: workforce development, business and quantitative measurements of partners’ economic development, economic development infrastructure, business development efforts specific to the action items of the strategic climate and collaborative partnerships. Each component is plan to ensure that objectives are being accomplished. augmented by a vast array of resources — people, capital, entities and policies — that collectively delineate the blueprint The AEDC must help provide the needed tools to allow regions for this strategic plan. to control their own economic development. 1. Workforce Development The AEDC will begin a transition to working with Workforce development is the process by which knowledge communities in the state on a regional basis. The development and skills are attained by the labor force. Contributing to of regional economic development plans consistent with the this process are educational institutions, training providers, AEDC strategic plan should enhance the ability of regions employers and employees. The success of the strategic plan is to meet specific goals. Regions will create regionally-funded predicated on advancing a streamlined workforce development organizations focused solely on economic development. The system that focuses resources on increasing educational concept of regionalism is one of the most critical long-range attainment at all levels and enhancing the technical skills goals of the strategic plan. required by knowledge-based employers.

A new approach to state and regional economic development Economic development strategies are ineffective without an funding must be employed to ensure resources are predictable educated workforce. Education entities at all levels must be and flexible. This approach will allow funds to be committed attuned to the workforce needs of businesses and align their efficiently and equitably. missions with those of the AEDC.

Dedicating specific revenues to economic development Arkansas’s potential to retain and expand existing businesses will remove budgeting uncertainty and allow long-term and to recruit targeted companies is constrained by skilled revenue streams to fund long-term objectives. Funding at labor shortages. Successful business recruitment will require the regional level must be developed to implement regional substantive changes to educational and training systems in strategic planning objectives. As regional resources are regard to curriculum development and delivery, flexibility created, state funding will be available to target statewide and funding of existing programs, and construction of new strategic plan objectives that precipitate the transition to programs which reflect economic goals. Students must be an economy supported by knowledge-based jobs. The new engaged in innovative programs to help increase educational funding strategy will increase statewide funding for economic attainment and technical skills. development initiatives and allow transition to an economy supported by knowledge-based jobs. 2. Business Development Economic balance is desirable, especially during economic downturns when specific business sectors may experience dramatic declines. However, as the guiding principles indicate, the continued fragmentation and anticipated reduction in resources make it impossible to achieve success without targeted strategies. Arkansas StRategic Plan page 92

To accomplish this goal, the AEDC has developed a four- limitless so long as resources are secured to maintain contacts pronged business development strategy to be implemented by and offer incentives. the AEDC’s Global Business Development Division. To effectuate this change, the AEDC commissioned a Strategy 1: Promote Innovation, Entrepreneurship and Targeted Opportunities Report which identified several Commercialization business recruitment targeting opportunities based on The transition to focusing on innovation, commercialization, Arkansas’s unique competitive advantages. The Business and entrepreneurship has already begun and must be enhanced. Development Division, in consultation with the strategic About 10 years ago, many of the state universities began to planning group, will develop a strategy for recruiting each of focus more on scientific research, while both public and private the identified targets. Additionally, the AEDC marketing groups began to simultaneously focus more on entrepreneurial plan will incorporate marketing strategies based upon these development. To capitalize on these opportunities, the recommendations. Arkansas General Assembly and Governor Beebe have provided increased funding for research and enacted many state Local economic developers will also work directly with AEDC programs run by various state agencies. These programs focus business developers to proactively recruit targeted industries on facilitating the growth of start-up, technology-based and that align closely with regional clusters and competitive traditional businesses. Unfortunately, many of the programs advantages. It is anticipated that AEDC will continue to lead enacted by the General Assembly go unfunded or underfunded. statewide recruitment of global businesses. However, regional This lack of funding is one of the reasons Arkansas’s economy economic developers will continue to accompany AEDC on has been held back from transitioning to an economy supported recruitment missions and help respond to prospect inquiries. by knowledge-based jobs. Strategy 3: Enhance Business Retention and Expansion Programs to help these companies are extremely important As communities are the lifeblood of economic development, to the economy because they provide high-paying, existing businesses are the lifeblood of employment. knowledge-based employment. It is also important to Recognizing the need for outreach services to existing help these companies within Arkansas grow because of businesses, AEDC Executive Director Maria Haley created the competitiveness and cost in recruiting a company to the AEDC Business Retention and Expansion (BR&E) Arkansas. The state economic development plan must focus Division to work exclusively with existing employers and their on the growth of these companies as well as recruiting new representatives to stimulate job retention and expansion. companies and retaining existing businesses. The mission of the BR&E Division is: Strategy 2: Target Business Recruitment As in athletics, the key to continued success in economic To lead statewide BR&E activities, partner with local BR&E development is effective recruitment. The AEDC Global programs, economic developers and communities to create Business Division must espouse a focused proactive and implement strategic programming focused on solutions recruitment strategy where proactive “leads” are generated for industry and business, and provide for an atmosphere of internally from a variety of intelligence including corporate statewide professional development in BR&E with the purpose and industry research, professional contacts, and direct of maintaining and growing our existing business base. negotiations with companies. Proactive recruitment allows economic developers to lead the recruitment process and The AEDC BR&E Division must continue to create programs choose the companies that best meet specific business and services to ensure the long-term viability of existing development strategies. The number of potential leads is Arkansas businesses. Arkansas StRategic Plan page 93

Strategy 4: Attract International Investment The AEDC will continue to assist regions with infrastructure Global businesses play an important role in Arkansas’s funding as funds allow. However, as state infrastructure economy. Several major employers are global corporations funding shifts to initiatives identified in the strategic plan, it who import and export a significant amount of commerce. is anticipated that regions must work closely with state and However, until recently, most economic developers did Federal funding sources to secure appropriations for regional not consider global business recruitment as a significant infrastructure projects. component of their economic development strategy. 4. Competitive Business Climate Efforts by AEDC Director Maria Haley are helping to Despite the efforts of many, it is much easier to qualify than assimilate terms such as globalization and foreign direct quantify competiveness. In The Competitive Advantage investment into the lexicon of economic developers statewide. of Nations, Michael Porter proposed that a four-factored The AEDC will design a global business development strategy “Diamond of Advantage” determined the competitiveness of to include foreign direct investment, foreign trade missions, regional industry clusters. global branding, global tourism, and marketing of Arkansas products abroad. The most competitive regional clusters excelled in meeting these factors: 3. Economic Development Infrastructure a. Factor conditions- Specialized labor, education and As the scope of economic development has broadened, so has infrastructure. the definition of infrastructure. Economic developers have b. Demand conditions- Customer needs and preferences. traditionally viewed infrastructure as those physical structures c. Firm strategy- Competitiveness, innovation and and services such as roads, utilities and buildings that are entrepreneurial skill. necessary for residential and commercial development. As d. Related/supporting industries- Suppliers, infrastructure, information technology has proliferated, telecommunication related businesses and distribution. assets have been integrated into the definition. Today, economic developers consider workforce, intellectual property and other Other variables such as capital, tax and incentive policies non-structural resources as “soft” infrastructure components. and regulatory climate are additional factor conditions that Defined most broadly, infrastructure can refer to almost any are pertinent to economic development. In the broadest resource that contributes to economic development. sense, almost every variable identified in the strategic plan could be considered an element that influences economic Undoubtedly, infrastructure needs will forever exceed available competitiveness. revenues. As revenue available to state and Federal agencies continues to decrease, it will be incumbent upon regions It is impossible for the AEDC to influence every determinate to thoroughly assess, prioritize, communicate and fund of business competitiveness. State government can effectuate infrastructure needs to ensure maximum returns on investment. those policies, such as state taxes, incentive programs, workforce development programs, etc. that enhance intra-state Utilities are private and public service facilities that provide competitiveness. natural gas, electricity, telecommunications, water, and waste water services to their customers. Regions, especially rural The AEDC’s multi-faceted business development strategy ones, face a multitude of utility issues that affect economic — to recruit, attract, create and expand jobs — requires development. Regional economic developers should economic developers to understand which factors are most thoroughly evaluate relevant utility concerns in economic important throughout businesses’ lifecycles. For example, development plans. new manufacturing start-ups often require large infrastructure Arkansas StRategic Plan page 94 investments, competitive tax incentive agreements, and to prioritize targeted development activities requiring state sites that are accessible to transportation and raw materials. assistance. Examples of such activities include global business Entrepreneurial start-ups may require venture capital, access to development/international relations, super projects, targeted research and development facilities, and a pipeline of scientists business recruitment, multi-regional projects, and statewide and engineers. Existing businesses may need assistance in policy initiatives. developing new markets or enhancing workforce productivity to remain competitive. The AEDC must continue to lead the state’s economic development charge by challenging new Federal, state and As stated throughout the strategic plan, statewide economic local partners to embrace economic development and share our development must focus on targeted strategic initiatives that vision. The AEDC must also work to understand the issues best leverage Arkansas’s assets. The AEDC must garner a of others — above poverty, affordable housing, public safety, better understanding of tax policies as they relate to business healthcare, historic preservation, etc. — that affect economic development, further evaluate the competitiveness of existing development. This is the essence of collaborative partnerships. incentives and work to remove barriers to development. Working closely with statewide partners such as Accelerate Arkansas to create knowledge-based growth, the Governor’s Workforce Cabinet to prepare Arkansas’s workforce and the Legislature to implement strategic initiatives will enhance competitiveness. The AEDC must also continue to evaluate the efficiency and effectiveness of existing incentive programs to ensure that they reflect Governor Beebe’s economic development goals and the AEDC’s new mission statement.

Ultimately, the competitiveness of regions will be determined locally. The AEDC must build regions’ capacities to plan strategically, respond to prospect requests, fund projects and nurture existing industries. This will require communities to plan regionally to improve their abilities to compete nationally.

5. Collaborative Partnerships Collaborative partnerships succeed when colleagues work together with shared resources and mutual accountability to achieve consensual objectives. The strategic planning process involves many active and prospective partners who will be instrumental in helping the AEDC achieve the objectives of the strategic plan.

As stated in the guiding principles of the plan, leadership is not synonymous with direct control. Scarce resources preclude the AEDC from directing economic development activities that are best accomplished regionally. As regions engage more in strategic planning, prospect recruitment and business retention and expansion, the AEDC will be able Arkansas StRategic Plan page 95

Year One Implementation Steps 6. The AEDC’s biennial budget will be consolidated into As this is a five-year strategic plan, it cannot be expected that fewer appropriations to improve efficiency and flexibility all policy recommendations will be implemented immediately. by allowing the budget to synchronize with strategic plan Fortunately, many activities have already been initiated. For objectives. example, many collaborative partnerships have been formed 7. The AEDC will work with existing partners to analyze and draft legislation is being prepared in anticipation of existing processes to determine if co-location could achieve the 2009 General Assembly. Below is a summary of major efficiency by improving delivery of economic development year one activities that have or will commence to effectuate services. changes to stimulate transition to an economy supported by 8. The AEDC must effectuate the transition to regional knowledge-based jobs. economic development by providing the tools necessary for regions to plan, fund, and implement strategic objectives. 1. The AEDC will design a “roll out” strategy to communicate This will require substantial changes to existing AEDC the recommendations of the strategic plan to all community development programs and assistance with stakeholders. enhancing proactive, targeted recruitment. 2. The AEDC Policy Division will develop an implementation 9. The AEDC will work with Governor Beebe and the matrix for all policy recommendations of the strategic plan. Legislature to ensure that specific revenues are dedicated 3. The AEDC has begun to meet with AEDC internal division to economic development. This will remove budgeting directors to craft inaugural annual division-level plans uncertainty and allow long-term revenue streams to fund which operationalize initiatives identified in the strategic long-term objectives. plan. These plans will identify specific objectives, propose 10. The AEDC will work with Governor Beebe and all resources necessary for their accomplishment, and specify workforce development agencies to develop a streamlined quantitative measures to track progress. Emphasis will be workforce development system that focuses resources placed on implementing the four business development on increasing educational attainment at all levels and strategies identified within the strategic plan. Necessary enhancing the technical skills required by knowledge-based changes to organizational structures will be recommended employers. to enhance efficiency and ensure accomplishment of 11. The structure and function of the Arkansas Economic strategic objectives. Development Foundation will be evaluated and changes 4. A comprehensive matrix of qualitative and quantitative proposed which may enhance private funding of strategic measures will be developed to ensure AEDC operations are plan objectives. achieving the objectives set forth in the strategic plan. It 12. The AEDC will nurture existing partnerships and suggest is recommended that a designated person or persons assist new ones to expedite accomplishment of strategic plan each division director and the human resources staff to recommendations. create proper measurements that will allow each division director to quantify success of the objectives set forth by the strategic plan. The person(s) responsible for measurement will lead conceptualization and implementation of valid and reliable measures for each division and employee. 5. The AEDC is consulting with partners to ensure that applicable legislation is enacted and sufficient funding is secured to implement strategic initiatives. Currently, the AEDC Policy Division is finalizing funding proposals and preparing draft legislation for consideration by the 2009 General Assembly. Arkansas StRategic Plan page 96 VI. Appendices

Appendix A - Industrial Development Recommendations of 1976 Economic Development Study Commission Report

1. The State should place the Arkansas Industrial Development 7. The AIDC should intensify assistance to existing business Commission (AIDC) and the Tourism Division of the and industry. Department of Parks and Tourism under the jurisdiction of a new Department of Economic Development. 8. The State should provide funds to the Geological Commission to complete their aeromagnetic mapping 2. The State should issue an administrative and legislative program and to reevaluate the current and future probable policy statement that presents industrial development as an use of Arkansas mineral resources. important tool of economic development. Responsibility for its success should be assigned to all state agencies 9. The State should perform a study to determine the coordinated by the AIDC. feasibility and effectiveness of grouping industries with serious pollution problems, both to limit pollution and 3. The AIDC, Arkansas Energy Office, and other state to achieve economies from joint use of pollution control agencies should encourage the implementation of programs facilities. that promote the efficient use of available energy sources and the discovery and development of alternative sources. 10. The State should publicize Arkansas products and 4. The state should develop feasibility studies of in-state use or investment opportunities, both within the United States and processing of Arkansas farm production. internationally.

5. Arkansas Industrial Development incentive programs should 11. Act 397 of 1969 should be amended to raise the bond be evaluated, partly in relation to those of other states. guaranty limit on Act 9 bonds from $500,000 to $1 million.

6. The AIDC in cooperation with the Department of Local Services and Pollution Control and Ecology, should initiate a community assistance program to develop the local leadership and facilities needed to attract industry. Arkansas StRategic Plan page 97

Appendix B - Recommendations for Jobs for Arkansas’s Future (1986)

A. Invest in Arkansas’s People D. Enhance State Government Capacity to Develop a. Campaign for Adult Literacy Policy and Coordinate Programs b. Strengthen the Educational Governance Capacity a. Coordinate Resources, Planning and c. Strengthen the Vo-Tech System Communication Across all State Agencies d. Increase Workforce Productivity b. Track and Analyze Long-Term Trends and Help e. Improve and Expand Retraining Programs Ensure State Policies (Anticipate Rather than React to Events) B. Target Economic Development Resources c. Develop with the Agencies and Enforce a Coherent More Strategically Policy Direction for the State. a. Coordinate Economic Development Agencies b. Expand Small Business and Entrepreneur Support E. Develop Private Sector and Local Leadership Capacity c. Improve Infrastructure Development a. Establish Stronger State-Level Leadership Among d. Continue Industry Recruitment and Support Government and Business e. Increase Support to Service Firms b. Better Educate and Involve Local Leadership f. Encourage Growth of Retirement c. Make Grants Available at the Local Level for Long- and Tourism Industries Range Infrastructure and Economic Development. g. Refocus Support of Agriculture h. Link Higher Education with Economic Development

C. Increase Availability of Financial Resources a. Provide More Risk Capital, Especially from the Private Sector b. Develop a Plentiful Supply of Long-Term, Fixed-Rate Financing c. Provide Credit Assistance to Help Small Firms Gain Access to National and International Capital Markets Arkansas StRategic Plan page 98

AppenAppendixdix C - I nDfluence Tree for Action Items Influence Tree for Action Items

STRATEGIC PLAN

AEDC DIRECT AEDC INFLUENCE CONTROL

Strategic Division Direct Indirect Planning Directors Inuence Inuence Control Control

Highway AEDC Speci c Healthy Infrastructure Legislative AEDC Arkansas Funds Agenda Projects Arkansas StRategic Plan page 99 Appendix E AppendArkansasix D - Arkan Regionalsas regional Partnerships Partnerships

Missouri / Arkansas Partnership Northwest Arkansas Council North Central Arkansas Regional Economic Development Buffalo Island Partnership Greater Fort Smith Regional Initiative Arkansas River Valley Economic Development Compact Metro Little Rock Alliance Crossroads Coalition Memphis Regional Economic Development Council Texarkana Regional Initiative Golden Triangle Economic Development Mayoral Alliance Southeast Arkansas Cornerstone Coalition, Inc. Arkansas Economic Development Commission One Capitol Mall Little Rock, Arkansas 72201 501.682.1121 1.800.Arkansas Arkansasedc.com