Brookings: Topics - Intermountain West Region

Launch! Taking Colorado’s Space Economy to the Next Level

Tue, 05 Feb 2013 11:00:00 -0500

Event Information

February 5, 2013
11:00 AM - 1:30 PM EST

Auditorium
History Colorado Center
1200 Broadway
Denver, CO 80203

Time: 9:00 - 11:30am MST
Venue: History Colorado Center, Auditorium
1200 Broadway, Denver, Colorado

U.S. “advanced industries”—high-value engineering and R&D-intensive industrial concerns—make signal contributions to national and regional economic prosperity. Iconic American companies such as United Technologies, GE, Intel, Boeing, Lockheed Martin, Ford, Caterpillar, and Medtronic comprise 10 percent of the overall economy but generate 45 percent of U.S. goods exports and support over 4 million high-skill jobs and several million more ancillary ones.

The space and aerospace industry is quintessentially emblematic of the advanced industry sector. And one of the deepest and broadest concentrations of space-related activity in the country lies in Colorado. There, the space cluster pervades the state’s industrial base; cuts across the public and private sectors; and enables a fast-growing telecommunications industry, dynamic GIS and earth observation enterprises, as well as more emergent energy, cybersecurity, and advanced materials segments of the economy.

On Tuesday, February 5, the Metropolitan Policy Program at Brookings presented a dynamic public forum focused on the significance and future of the Colorado space economy as an exemplary advanced industry. Part of Brookings's new Advanced Industries Series, and anchored by the release of a new Brookings strategy report by Mark Muro, senior fellow and policy director of the Brookings Metropolitan Policy Program, the morning forum explored the best ways to advance the competitiveness of the Colorado space cluster at a time of uncertainty and disruptive change.

Hosted in collaboration with the Colorado Space Coalition and the Colorado Office of Economic Development and International Trade, the event also featured comments from leading business, civic, and government leaders as well as a panel discussion and audience Q & A. Colorado Governor John Hickenlooper concluded the event with keynote remarks.

Read the report, which was released at this event.
See also Mark Muro's presentation » (PDF)

Panel Discussion (L to R): Tom Clark, Chief Executive Officer, Metro Denver Economic Development Corporation; Frederick Doyle, Vice President and Corporate Executive, Defense and Intelligence Community, Ball Aerospace & Technologies Corporation; Walter Scott, Founder, Executive Vice President, and Chief Technical Officer, DigitalGlobe, Inc.; Stein Sture, Vice Chancellor for Research, Huber and Helen Croft Endowed Professor, College of Engineering and Applied Science, University of Colorado at Boulder; Dan Schmitt, Co-Founder, President, Chief Executive Officer, The Incubation Factory

Mark Muro, Senior Fellow and Policy Director, Metropolitan Policy Program at Brookings

Governor John Hickenlooper, State of Colorado

Video

Full Event - Launch! Taking Colorado’s Space Economy to the Next Level

Launch! Taking Colorado’s Space Economy to the Next Level

Tue, 05 Feb 2013 11:00:00 -0500

Event Information

February 5, 2013
11:00 AM - 1:30 PM EST

Auditorium
History Colorado Center
1200 Broadway
Denver, CO 80203

Time: 9:00 - 11:30am MST
Venue: History Colorado Center, Auditorium
1200 Broadway, Denver, Colorado

U.S. “advanced industries”—high-value engineering and R&D-intensive industrial concerns—make signal contributions to national and regional economic prosperity. Iconic American companies such as United Technologies, GE, Intel, Boeing, Lockheed Martin, Ford, Caterpillar, and Medtronic comprise 10 percent of the overall economy but generate 45 percent of U.S. goods exports and support over 4 million high-skill jobs and several million more ancillary ones.

The space and aerospace industry is quintessentially emblematic of the advanced industry sector. And one of the deepest and broadest concentrations of space-related activity in the country lies in Colorado. There, the space cluster pervades the state’s industrial base; cuts across the public and private sectors; and enables a fast-growing telecommunications industry, dynamic GIS and earth observation enterprises, as well as more emergent energy, cybersecurity, and advanced materials segments of the economy.

On Tuesday, February 5, the Metropolitan Policy Program at Brookings presented a dynamic public forum focused on the significance and future of the Colorado space economy as an exemplary advanced industry. Anchored by the release of a new Brookings strategy report by Mark Muro, senior fellow and policy director of the Brookings Metropolitan Policy Program, the morning forum explored the best ways to advance the competitiveness of the Colorado space cluster at a time of uncertainty and disruptive change.

Hosted in collaboration with the Colorado Space Coalition and the Colorado Office of Economic Development and International Trade, the event also featured comments from leading business, civic, and government leaders as well as a panel discussion and audience Q & A. Colorado Governor John Hickenlooper concluded the event with keynote remarks.

A report was released at this event.

Video

Full Event - Launch! Taking Colorado’s Space Economy to the Next Level

A Strategy to Rebuild Manufacturing in the Mountain West

John Hudak — Sun, 23 Sep 2012 00:00:00 -0400

Late last month, President Barack Obama issued an executive order intended to spur job creation in manufacturing. “Accelerating Investment in Industrial Energy Efficiency” recognizes that energy costs can substantially limit a company’s ability to be productive and grow and that there has been “an under-investment in industrial energy efficiency.” This order seeks to aid manufacturers nationwide, but the politics and policy of the order provide an opportunity for the Mountain West region that state and local leaders must seize.

The executive order requires that federal agencies bring together state and local officials, private sector leaders, and others to help address the problem of energy efficiency and motivate private investment in manufacturing. The Obama administration wants to “provide technical assistance to states and manufacturers” and mount a public information campaign about the cost-saving benefits of making industry more energy-efficient. Part of the order also directs federal agencies to “use existing federal authorities, programs and policies to support investment in industrial energy efficiency.” In effect, the president wants more funding funneled to manufacturers and he has told his hand-picked appointees to begin delivering that funding.

Specifically, the executive order will mean that existing energy- and manufacturing-related federal grant programs will support Combined Heat and Power, an energy system that captures excess or emitted energy (such as secondary heat) and converts it into usable energy on site for factory climate control. With CHP, manufacturers will not need to purchase additional energy to heat or cool their facility, a savings that drives down production costs and provides opportunities to expand employment and productivity.

Read the full piece at the Las Vegas Sun »

Authors

John Hudak

Publication: The Las Vegas Sun

Image Source: © Aaron Josefczyk / Reuters

New Monitor Reveals Mountain West Region Outperforms Nation's Recovery

Mark Muro and Kenan Fikri — Thu, 28 Jun 2012 12:00:00 -0400

For three years now the Mountain Monitor — Brookings Mountain West’s Mountain Zone variant of Brookings’ MetroMonitor — has been tracking the region’s protracted, in-most-places anemic, economic recovery. Quarter-to-quarter, the Monitor has reported on a slow healing of the region’s metropolitan economies that has differed starkly from the region’s past boom-bust cycles.

Now, though, that reporting is continuing, albeit in a new, web-based interactive tool presenting data through the first quarter of 2012.

The new web-based tool provides not only a more interactive way to track trends in U.S. metropolitan areas but also significantly more and better information, including industry dynamics and richer visualizations of each metro area’s economic recovery.

As to what the new Monitor reveals, one insight is that the Intermountain West looked pretty good in the first quarter of the year (all things being equal).

The region’s recovery gained momentum on both jobs and output indicators over the quarter even as the rate of decline in unemployment slowed and house prices dipped. On all fronts the region outperformed the nation, which saw slowing advances on all four indicators.

Still, significant variation in performance across the region’s major metropolitan areas belies a very uneven Mountain recovery—one that recent tepid employment reports suggest may affect second quarter readings.

One group of metros is leading the national recovery--serving the region’s historical role. Most notably, Denver rose rapidly in the economic rankings thanks to considerable job growth--a 1.3-percent increase in employment over the quarter, which ranked fifth nationally. Utah’s consistently strong metros, for their part, added jobs and expanded output once again. Las Vegas, for its part, led the nation on quarterly output growth as production expanded by 1.6 percent, led by leisure and hospitality and a range of services, even while the metro area’s nascent jobs recovery lost ground. Meanwhile Boise’s mild 0.2 percent decline in house prices was among the nation’s smallest; improving housing market conditions continued to buoy Phoenix’s overall recovery as well.

And yet for another group of metros the news was generally worse in the first quarter. Albuquerque, Colorado Springs, and Tucson all languished in the bottom quintiles of their peers on the Monitor’s measure of overall recovery, as did Las Vegas. Successive quarters of output growth in Albuquerque had yet to translate into jobs, and the unemployment rate there actually increased in early 2012. Colorado Springs’ fledgling recovery stagnated in the first quarter too, with employment levels holding flat, the unemployment rate increasing slightly, and output growing at pace with the national economy. House prices in Albuquerque, Las Vegas, and Tucson fell to new lows.

Along lines like these, then, the Monitor in its new form looks under the hood of the national recovery to reveal significant variation at the regional and metro levels. Let us know what you think.

Authors

Mark Muro
Kenan Fikri

Publication: The Avenue, The New Republic

Mountain Monitor: Tracking Economic Recession and Recovery in the Intermountain West’s Metropolitan Areas

Kenan Fikri and Mark Muro — Wed, 28 Mar 2012 15:27:00 -0400

Editor’s Note: This report reflects data from the fourth quarter of 2011. Please visit our updated MetroMonitor for the latest quarterly data and analysis.

Recovery was firmly underway in the Intermountain West by the fourth quarter of 2011 but its pace varied considerably across the region’s 10 major metropolitan areas. Six metros of the 10 metros saw job growth in the fourth quarter but only four saw it accelerate over the previous one. Output grew everywhere but only in half of the region’s metros did the pace of growth quicken. The unemployment rate was down across the board from one year earlier. House prices in most markets stabilized. Yet signs of a robust, sustained, and self-fueling recovery remained elusive.

National economic indicators from early 2012 may suggest that the economic recovery — though still very slow — is picking up speed, but the economic data for the country’s metropolitan areas now available through the fourth quarter of 2011 paint a somewhat more complicated picture.

Brookings’ national MetroMonitor, which tracks recession and recovery in the country’s 100 largest metropolitan areas, reports that the country’s major metropolitan areas saw widespread but generally slow growth in jobs, output, and housing prices in the fourth quarter of 2011. Unemployment rates fell steadily too. These broadly positive headline trends were accompanied by other more ambiguous developments: Manufacturing and high technology growth — important drivers of recovery throughout 2011 — slowed over the course of the year. In only a handful of places where job growth accelerated did output growth accelerate to match.

Mountain metros, for their part, charted rather independent courses over the fourth quarter. Phoenix roared — comparatively — ahead of its housing bust peers Las Vegas and Tucson, as did Boise. Outside of Colorado, manufacturing had a much stronger quarter in the region than it did nationally; high tech more closely tracked the national trend except in Salt Lake City, where it grew strongly. At the same time, a slowdown brought unexpected job losses to Ogden and Provo. Despite lackluster performance on individual metrics, Denver and Tucson were the only two metros in which both job and output growth accelerated at the end of 2011.

As always, conditions varied greatly across the 10 major metropolitan areas of the Intermountain West.

Downloads

Download the Report

Authors

Kenan Fikri
Mark Muro

Nevada Gets a Plan For a Better Economy

Mark Muro — Thu, 09 Feb 2012 11:59:00 -0500

Washington is paralyzed by politics and debt, but states and regions are moving to renew the drifting U.S. economy themselves. In just the last year no less than three states — Colorado, New York, and Tennessee — have begun to execute well-considered “bottom-up” development strategies that aim to restore growth and place regions at the center of economic development planning and execution.

Now comes Nevada, arguably the state most damaged by the recent real estate and consumption sector crackup, with its own effort at renewal.

Having lost 170,000 jobs in the recession (including 120,000 in real estate, construction, food and drink, and tourism), the Silver State yesterday issued a well-considered new plan for generating 50,000 new jobs by reshaping its economic development activities and diversifying a damaged gaming, tourism, and real-estate-oriented economy.

The plan represents a key step in a serious effort to place a troubled economy on a better footing.

Mandated by a bipartisan order of the Nevada Legislature and announced by Gov. Brian Sandoval (R), Nevada’s new blueprint reflects a year-long push by a troubled state not just to react to crisis but to truly reposition itself amid shifting realities.

Along those lines, the new document draws on a recent Brookings report to the state, provided in partnership with SRI International and Brookings Mountain West, and targets seven industries for growth and innovation; announces the outlines of a new “operating system” for state-regional cooperation on execution; and then sets a strategy for establishing a sound platform for innovation and export-oriented sector development.

Embedded in the plan are numerous concepts relevant to the pace and nature of 21^st century economic development in which strategy, networks, innovation, and the ability to catalyze coordinated action across myriad actors count for everything. They state will henceforth operate with a fact-based strategy. It will now manage itself and its partners through data and metrics that matter. And it will hire and embed a set of new “industry specialists” to work with the state’s sectors and clusters and facilitate growth.

And yet, what is most compelling here is the fact of a state that didn’t think it needed a plan for fostering high-value growth not only advancing one, but focusing hard on the power of regional economies and industry clusters to deliver it. For decades, massive growth in Nevada’s real estate and gaming industries stunted efforts develop a serious economic development strategy and practice. As a result, Nevada entered the Great Recession with one of the weakest, most diffuse state and regional economic development systems in the nation. Yet now that Nevada has been hammered by the crash it is fascinating to watch it go about the work of seeking advice and constructing a data-driven, intentional, best-practice-oriented diversification strategy where little existed before.

It is equally impressive to note the strong orientation to “bottom-up” strategies for rebuilding the state economy on the part of the Nevadans. Nevada leaders — like those in more and more states — seem to have realized that the state’s regional economies (in Reno, in Las Vegas) aren’t just parts of the Nevada economy but are the state economy. And so the state plan calls for a simultaneously “loose” and “tight” set of relationships between the state and its regional partners through which the state will work to evoke and support smart local initiatives. Starting now the state will ask more of the state’s regional development authorities and manage for results. It will improve the range of economic development information available to regional actors. It will encourage regional strategy-setting. And it will create a set of competitive grants, innovation prizes, and competitions to incite creative cluster and export initiatives in the regions.

In short, while managing more robustly from the center, the new governor’s Office of Economic Development will also honor, aid, and abet the profound differences that exist across regional economies. Now to be sure, plenty of questions remain. How well the state will be able to execute its new strategies is surely one of them. Likewise, another question — and a crucial one — concerns whether a conservative governor and a revenue-strapped legislature will find the will during the 2013 legislative session to make the investments in university research and knowledge transfer, workforce training, and basic education urged by our report. Those were unfortunately not mentioned in the new state plan.

And yet for all of that, it is good to see another state recognizing the centrality of its regions and conducting strategy accordingly. It bodes well that “bottom up” is becoming the top new approach in state economic development.

Authors

Mark Muro

Publication: The Avenue, The New Republic

Image Source: © Rebecca Cook / Reuters

At Recession's Epicenter Nevada Seeks Reinvention

Mark Muro — Tue, 15 Nov 2011 13:11:00 -0500

While Washington dithers on jobs and the national economy, states are taking economic development planning into their own hands.

Yesterday in Carson City, Nev., the Brookings Metropolitan Policy Program presented a wide-ranging economic development agenda to that state’s leadership. The agenda advances 10 strategies and some 37 discreet recommendations and yet, we can summarize it in less than Twitter’s mandated 140 characters: "Unify," “regionalize,” "diversify," as echoed in the report’s title.

What do we mean by this and how does this push forward a general theory of state-level economic development?

Here's how we’ve been thinking about things in Nevada:

Unify means that states like Nevada need to establish basic elements of a modern economic development system that includes both leadership from the top and smart management of its regional partners. This theme calls on Nevada to:

Set out a compelling strategy for innovation and diversification that focuses and aligns state resources on identified target industries where the empirics show promise for growth
Structure effective partnerships with and among regional actors
Use information to drive performance

The “unify” agenda is about putting in place a 21^st-century operating system for leadership, management, and cooperation.

Regionalize is a related agenda that suggests states would do well to aid and abet “bottom-up” industry sector initiatives in its regions. Nevada’s regional economies are the state economy. The more that states like Nevada can evoke and support smart local initiatives the greater will their impact on economic growth be. Along these lines states should:

support convenings of target industry and cluster actors in regions—and their planning
support well-conceived cluster initiatives in the region
support other type of bottom-up sector development, including regional innovation districts, business plans, and regional export plans

Diversify, finally, is about attending to the sectoral base. We think Nevada should broaden its industry base even as it seeks innovation within its established industries like gaming and tourism, and so we suggest the state should put in place a sound platform for higher-value growth through innovation, global engagement, and workforce enhancement. States can do this by:

investing in an effective innovation and commercialization infrastructure
developing an approach to engaging global markets for exporting and FDI particularly with rising nations, and
working to align its education and workforce training efforts to the state’s new economic strategy

As it happens, Nevada’s state leaders are already moving in the right direction towards diversification. Last June, Gov. Sandoval signed the Economic Development Bill (AB 449) which sets the stage for change. Among other things, the bill reorganizes the state’s economic development activities and places them on a higher-tier of importance in the governor’s office with the new Governor’s Office on Economic Development (GOED). AB 499 also provides new funding for economic development activities and creates a structure for future investments in knowledge and innovation.

In short, a state that may represent ground zero of the Great Recession is taking strong and thoughtful steps to restore job creation, catalyze innovation, and build new pillars of growth.

Would that Washington would work so constructively on the nation’s economic challenges.

Authors

Mark Muro

Publication: The Avenue, The New Republic

Image Source: © Richard Brian / Reuters

Unify, Regionalize, Diversify: An Economic Development Agenda for Nevada

Mon, 14 Nov 2011 00:00:00 -0500

Editor’s Note: Mark Muro, senior fellow and policy director, is the paper's lead contributor from the Metropolitan Policy Program at Brookings.

Nevada stands at a crossroads, yet it appears ready to remap its future.

Silver Staters sense that the current economic slump has not been just a temporary reversal but a challenge to the state’s traditional growth model—one that has revealed an economy over-dependent on consumption sectors, prone to booms and busts, and too little invested in innovation and economic diversification. And yet, for all that Nevadans have been early to recognize that the current slump will beget, in some places, innovation and renewal, and in other places erosion—and so requires action.

To that end, this paper draws on an intense five-month inquiry that sought to define the nature of the economic challenges the state and its major regions face; identify industries and industry clusters that have the highest potential for expansion as part of an economic diversification effort; and suggest policy options that will enable the state, its regions, and the private sector to work more effectively to build a more unified, regionally vibrant, and diversified Nevada.

Nevada possesses fundamental economic assets along with serious challenges as it seeks to build its next economy. A systematic SWOT (strengths, weaknesses, opportunities, and threats) assessment reveals considerable assets and opportunities that the state can leverage as it seeks to renew its core industries and diversify by catalyzing growth in emerging ones. This assessment confirms that Nevada’s core strength for economic development has been and will remain its overall business-friendly environment, including low taxes, relatively low costs, light regulation, and ease of business start-up/permitting. Key challenges include: spotty economic planning and cooperation; a weak innovation and technology commercialization enterprise; and substantial workforce skills shortfalls.

Seven major industries and some 30 narrower target opportunities—distributed in varying mixes in the state’s regions—hold out plausible potential for economic growth and diversification for Nevada. Building on the SWOT analysis and stakeholder consultation aimed at understanding Nevada’s statewide goals, the Brookings-SRI study team conducted an empirically grounded analysis aimed at identifying industries and sub-industries that have the highest potential to restore growth and jobs, spawn innovation in core or emerging sectors, or drive economic diversification. These industries and target opportunities include:

Tourism, Gaming, and Entertainment
Health and Medical Services
Business IT Ecosystems
Clean Energy
Mining, Materials, and Manufacturing
Logistics and Operations
Aerospace and Defense

To leverage the state’s opportunities, meanwhile, Nevada needs to upgrade its diffuse economic development system so that the state at once leads more vigorously, empowers its regions more fully, and also sets a state-wide platform for new growth. In this vein, this report calls for the state to unify, regionalize, and diversify as follows:

Unify: Install an operating system for 21st century economic development
Regionalize: Support smart sector strategies in the regions
Diversify: Set a platform for higher-value growth through innovation and global engagement

This report assumes wholeheartedly that renewal and diversification through innovation is possible in Nevada. To be sure, there is much work to be done. A strong state economic development plan needs to be crafted and followed, requiring hard decisions and painstaking execution. Yet, while this work might seem like a tough task at a difficult time, the study team is confident that the moment is right. Focused by challenge, Nevadans seem ready to reach for a new future.

Downloads

Publication: Metropolitan Policy Program at Brookings, Brookings Mountain West, and SRI International

Image Source: Â© Staff Photographer / Reuters

Unify, Regionalize, Diversify: Remarks From Mark Muro on Nevada's Economy

Mark Muro — Mon, 14 Nov 2011 00:00:00 -0500

Editor’s Note: Mark Muro presented the remarks below following the release of a new assessment on Nevada’s economic opportunities and just after a presentation by Bruce Katz, highlighting ways the state can move forward.

Ok, thanks Bruce—and good afternoon everyone.

I’m Mark Muro, a senior fellow at the Metropolitan Policy Program at Brookings and the co-director with Rob Lang of Brookings Mountain West, and as the project lead on this I wanted to add just a few words to Bruce’s presentation about operationalizing this agenda.

I’ll be brief and then want to call the whole project team up here so we can hear your reactions about what you’ve heard, answer any questions, and talk it over.

I think you on the board and steering committee—rightly—have a lot of questions about implementation, about executing.

You’ve seen a lot of studies, you’ve seen a lot of grand plans, and you’ve seen a lot of drift, squabbling, or inaction. You have been right to push us to think about action plans and how this can go from study to execution.

I want to say just a few words about that before opening this out to conversation.

First, this time is different. AB 449 has already happened and ensures that much is already in motion. We provide recommendations on preparing a state economic development plan, deploying the Catalyst Fund well, and managing dealings with the RDAs. Yet progress on all of those fronts will in some way happen because AB 449 mandates action. Things are going to change because the law says they have to and response to the ideas on the table here is now a matter of administrative action…not just talk.

Similarly, the Knowledge Fund exists—albeit unfunded—and substantial work is already under way to begin tuning state and higher-ed system to the new target industries and niche opportunities. Work has begun.

And yet, it’s true there is a lot to do. Much work lies ahead to reinvigorate and reorient the economy, and I’m sure it seems like a daunting task.

However, emerging from this work I think this study team has a few thoughts about how to address the coming challenges.

First, our work counsels you—I think—to reject grandiose thinking or silver-bullets and get your hands dirty with real-world, piece-by-piece execution.

We have tried to look at your economy as it really is rather than as you might hope it could be.

In the same way, I think the trick now is to focus on the real economy, real market niches, and the basic block-and-tackling of improving your industries firm by firm, expansion by expansion, niche-by-niche, cluster by cluster.

Rome wasn’t built in a day nor will the next Nevada likely be built with flashy 10,000-job firm relocations.

Instead, we are recommending a more grounded approach that calls on you to set a compelling sector strategy, put in place an effective set of aligned efforts, and build from the ground up.

This is why we talk so much about your regions, your documented local clusters, and about revving up the nitty-gritty mechanics of what the cluster guru Michael Porter calls “local things”: local supply chains, local coordinating councils, local trade associations, your business networks, your RDAs, your municipalities, your economic development non-profits, and your university-business-community college exchanges.

In this way, it’s about growing the economy 100 jobs, and 300 jobs, and 600 jobs at a time as you strengthen smart local cluster initiatives; fill documented supply chain gaps; and work out new export or FDI deals.

Likewise, it’s less about grandly “turning the economy around” by announcing you’re going to generate 150,000 in a few years than about seeing if you can expand the Health and Medical Services industry by 15,000 jobs over the next five years or generate 6,000 or 7,000 jobs over that timeframe in Business IT Ecosystems.

In that sense, the next phase should not be about grand schemes but about getting on the same page, breaking the work down into chunks, and getting going. It’s about advancing the ball steadily to add jobs in some of those 30 target areas within the seven broad industries.

And speaking of “getting going”: As you move toward execution, we think this agenda is staged in a way that points to how it can be plausibly implemented.

Sure, there’s a lot here: 37 recommendations supporting 10 strategies aimed at bolstering 30 target niches in seven industries.

But if you look at our three-part agenda, the recommendations within the “Unify” and “Regionalize” themes are either already mandated (produce a state plan; deploy the Catalyst Fund smartly; sharpen up RDA management) or relatively inexpensive (provide competitive matching grants to support bottom up cluster initiatives, export plans, and the like).

At the same time, our “Diversify” set of recs aimed at setting a true state platform for innovation and commercialization; global engagement; and aligned education and workforce training is definitely a heavier lift (although our global engagement ideas are pretty doable).

In light of that I would suggest that this is a very achievable and grounded agenda: You just need to stage it.

Along those lines, there is plenty of important but very achievable work to do right away to put in place a better way of operating across the state. (This is the “system” stuff in “Unify” and “Regionalize).

Yet meanwhile, you need to stage a serious statewide discussion moving forward about the platform work laid our in “Diversify” and for that you have some time before the 2013 legislative session.

In any event, there’s a logical way to move forward steadily to make immediate progress on some very doable and important reforms even as the state had a good conversation about some of the other items.

We do advance a lot but it’s pretty easy to see what should come first and what matters most.

Helping to make that clear is also the point of the policy recs list in the Executive Summary at the end of the Executive Summary and in Appendixes C and D. These lay out action steps and possible job impacts with notes on their degree of immediacy and cost.

I think these tables will be helpful.

And so with that, I’d like to invite the whole team up here—Bruce, my partner Rob Lang from Brookings Mountain West, and Ophelia Yeung and Katherine Johnston from SRI International.

All of these folks have been heavily engaged in this work and we are all delighted to hear your comments on the report and presentation and answer any questions you may have.

Authors

Mark Muro

Publication: Project Steering Committee, Nevada State Board of Economic Development

Unify, Regionalize, Diversify: Presentation and Remarks from Bruce Katz on Nevada's Next Economy

Bruce Katz — Mon, 14 Nov 2011 00:00:00 -0500

Editor’s Note: Bruce Katz appeared before Nevada leaders to announce the findings from a new analysis assessing the state’s economic potential.

Thanks Steve for that introduction, and special thanks to the governor, the lieutenant governor, the legislature leadership, and the secretary of state for your leadership on economic development.

Let me begin by setting the context for this study and your work.

Since the beginning of the recession, Nevada has lost nearly 170,000 jobs.

As you know, that impact disproportionately hit the state’s largest sectors; construction and real estate, tourism and gaming, and retail trade—accounted for more than 83 percent of the jobs lost in the recession.

There is much to work to do. Fortunately AB 449, signed into law this summer by Governor Sandoval, and the “agenda” we release today, aims to reorganize and elevate the importance of economic development activities, and set forth a new vision of the state economy.

The goal is both to grow jobs in the near term and move towards an economy that is more innovative—to catalyze sustainable and productive growth, more balanced — to insulate against volatility … and more globally engaged—to take advantage of rising global demand, particularly in emerging nations.

Today I’ll make the following proposition:

First, Nevada has economic assets and industry strengths in the next economy. Nevada starts with a generally attractive business environment: low taxes and low costs, great quality of life, excellent airport infrastructure, easy access to West Coast population centers. Our report digs deep and shows the state’s starting strengths … and unique potential … in seven key industry sectors.

Second, those industries are concentrated within Nevada’s regions. 94 percent of the state’s economic activity transpires in your two major regional economies surrounding Reno and Las Vegas. But, as you will see, these regions have distinctive assets and attributes … and different growth possibilities in the driving industries. Respecting and reflecting regional differentiation are keys to productive and sustainable growth.

Finally, in order to realize your economic potential, we propose a three part playbook for Nevada: unify your fragmented economic development efforts and install an operating system for 21^st century growth; regionalize your state efforts to support smart, tailored sector strategies in the regions where the economy comes to ground; and diversify your efforts, to set a platform for higher value growth through innovation, global engagement, and alignment of education and workforce training to new economic development.

As Mark will describe, this is an enormous task that can best be accomplished through smart staging and sequencing.

So let’s begin with the sector analysis, which shows that Nevada has economic assets and industry strengths in the next economy.

Over the course of five months, SRI and our team at Brookings have done an in-depth scan of Nevada’s industry clusters. This fine-grained, empirically grounded analysis, of seven major industries and 29 sub-sectors allows us to understand the unique industry mix across the state, and identify key opportunities for growth. This is a reality-based analysis, about building on existing strengths, rather than fantasizing about new industries which barely exist.

Let me give you just a quick overview of our profile:

First, we focused on the core traditional industries that have long been the pillar of the state economy: Tourism, Gaming and Entertainment, and Mining Materials and Manufacturing.

These sectors already have a substantial presence. Tourism, Gaming and Entertainment, for example, comprises more than a quarter of the state’s jobs.

The goal going forward is to not just to do more, but to do better , by pivoting existing strengths into higher-value and higher-growth activities.

Second, we focused on Health and Medical Services sector, a large but underperforming industry.

It is less than 6 percent of employment in the state, compared to more than 9 percent nationally. This is a tremendous opportunity for growth given general demand and the potential for specialization.

Third, we focused on a range of emerging sectors: Business IT Ecosystems, Clean Energy, Logistics and Operations, and Aerospace and Defense that already have a promising growth trajectory.

Key here is to focus on specific targeted possibilities for growth.

In Logistics and Operations, the subsectors of wholesale trade and logistics and warehousing projected to grow at 2 percent a year, faster than projected growth for the Nevada economy as a whole.

I urge everyone to examine carefully the background sectoral analyses that were prepared for this effort. They will provide a base for smart, tailored state and regional strategies for years to come.

That leads to my second point: Nevada’s economic strengths are concentrated in disparate, differentiated ways within the state’s regions.

Economies do not exist in the abstract; they come to ground in real places where there is a concentration and agglomeration of firms (large and small), advanced research institutions, community colleges, trade associations and business-friendly government.

This is particularly true in this state where population and economic activity is so intensely concentrated. The seven major industries and the 30 sub-sector opportunities are not evenly spread across the state’s three regions of Northern Nevada (centered around the Reno metropolitan area), Southern Nevada (centered around greater Las Vegas), and Rural Nevada. Nevada’s urban and rural regions contain distinctive mixes of the state’s top industry sectors.

Lets drill down a bit and let’s start with Northern Nevada and Clean Energy:

Nevada is already the epicenter of geothermal energy development for the country. The state has the second highest installed geothermal capacity (behind California) and is set to surpass California in installed geothermal capacity in the near future; most of these plants are based around the Reno area. We believe Northern Nevada has the opportunity to become the knowledge center for the global geothermal industry, and also to become a source for drilling equipment, expertise, design, and manufacture.

Similar potential for moving up the value chain exists in other sectors, as seen here for Mining, Materials and Manufacturing; Logistics and Operations; Aerospace and Defense, and IT and Business Services:

Northern Nevada, for example, has the highest concentration of manufacturing companies in Nevada, but the sector is currently small and fragmented. We believe the industry could grow by situating more neatly into global supply chains, expanding into higher-growth/higher-tech manufacturing opportunities (such as advanced composite materials), and building off of manufacturing linkages with other key industries in the state (including mining, energy, logistics/distribution, tourism/gaming, construction, and agricultural sectors).

Any discussion of Southern Nevada must start with Tourism, Gaming and Entertainment: Las Vegas is of course at the epicenter of Nevada’s Tourism, Gaming and Entertainment sectors as well as an established global hub for the gaming industry, and this is a logical target for the region to support both job creation and diversification aims. Recommended focuses in areas such as online gaming, becoming an intellectual capital of global gaming, film/media, niche tourism (especially culinary tourism), and retirees/second homes can support the longer-term diversification of the region’s existing industry into new higher-value activities and higher-skill jobs.

But there are other niche possibilities in IT and Business Services, Health and Medical Services, Clean Energy, and Logistics and Operations.

To drill down quickly on IT and Business Services: Las Vegas already has an established and growing base of business services activities, and is also home to world-class (but little known) technology assets – most notably the Switch SuperNAP (possibly the most advanced and well-connected data center in the world), as well as the headquarters of Zappos.com. Opportunities exist to build on these assets by continuing to expand back office and call center activities while simultaneously pursing longer-term IT-based activities that could include e-commerce headquarters, cloud/high-performance computing, and cyber security. By expanding and marketing existing IT assets, over time Las Vegas could position itself as the country’s “cloud city” with a sophisticated ecosystem of firms conducting high-end data- and technology-intensive activities.

We apply the same analysis to Rural Nevada … which already has one of the highest concentrations of mining activity in the country, but has little related downstream processing and manufacturing activity from the high-value minerals that are extracted. The region can seek to expand upstream activities in the mining value chain (e.g., exploration and mine-site services) in order to reap greater benefits from its existing mining activities. Another key opportunity in this industry is to expand the extraction and upstream/downstream supply chain for medium-value minerals (such as lithium, boron, and vanadium), as these materials are abundant in Nevada and could have development linkages with the Clean Energy industry.

Similar opportunities to move up the value chain exist in Tourism, Gaming, and Entertainment and Clean Energy.

One thing to note about our analysis: clean energy shows up as a foundational asset of all three regions, although the starting point and short term opportunities are quite distinct—geothermal in the North, solar and wind farms in the Rural areas; and manufacturing and production in the South.

That leads to final point: how to leverage your strengths and assets.

We see a three-part play: the state must unify the state’s economic development efforts; regionalize to support smart sector strategies across the state; and diversify, to set a platform for growth through innovation and global engagement.

The need to modernize the state’s economic development system flows not only from the urgency of the present economic challenges but also from the weakness of the system currently available for addressing them.

Going back decades the state has lacked an overarching strategy for growth and economic diversification. A general absence of quality information—and basic performance management—has allowed the combined state-local system to drift

Drift, meanwhile, has led to fragmentation, since at least in the two largest regions funding has typically been allocated to regional development authorities (RDAs) through automatic transfers rather than on the basis of performance criteria.

The high degree of local autonomy and the proliferation of disparate visions and approaches have undermined efforts to construct and brand cohesive regional identities

And the lack of critical foundational investments in university knowledge enterprises in economic development has meant that the platform for diversifying the economy has been weak and fractured.

The report we’re unveiling today addresses each of these challenges head-on:

First, the state should:

Unify a drifting and fragmented state economic development community by setting an overarching strategy; mobilize multiple partners while holding them accountable for success; and making sure the necessary information and data-sharing is available to all players.

Second, the state should:

Regionalize its economic development activities and unleash the potential of “bottom up” initiative in the state’s metropolitan and rural communities. As you saw, Nevada’s urban and rural regions contain distinctive mixes of the state’s top industry sectors; these need to be empowered, supported, and channeled.

And third, the state must begin to:

Diversify the economy for the long haul by greatly strengthening its innovation, global engagement, and workforce training capacity -- prerequisites for the sort of lasting enhancement and diversification of the Nevada economy.

In total, we have identified a range of strategies across these goals and ultimately 37 policy recommendations—supported by best practices in the U.S. and abroad.

There’s a lot here, and we’ll be able to get into this in more detail during our panel discussion, but let me just walk through some of the key strategies and specific policies:

Let’s start with the first part of this three-part play: unifying at the state scale to install a modern operating system for economic development.

The initial step toward constructing a state-of-the-art economic development enterprise in Nevada is already mandated by AB449: produce a credible and balanced state economic development strategy, to innovate and diversify. We believe the strategy should identify the state’s best opportunities for growth given its real-world strengths and weaknesses and it should do this with reference to the state’s documented industry opportunities and the particular target opportunities within them. We are encouraged by Gov. Sandoval’s appointments to the Board on Economic Development that include members from a majority of the recommended industries in this report.

This new direction must be communicated consistently and constantly—both within the state, to get everyone on the same page, and externally to highlight the state’s new focus on supporting and growing strategic growth sectors.

With its own economic development strategy in place, the state should help regions structure strong regional partnerships to promote aligned collaborative execution. The new economic development mantra that has emerged post recession is “collaborate to compete,” particularly given the size and scale of metros and nations that US regions are competing against. We recommend a series of ways in which collaboration could be catalyzed and rewarded.

The state also needs to organize itself to execute on the mechanics of sector- and cluster-based economic development. We believe the economic development office should hire a set of dedicated “industry champions”—one for each of the state’s target industries—to spearhead state and local efforts to address the needs and opportunities of the state’s target clusters.

Single-mindedly focused, these sector champions would be responsible for aiding and abetting region-based cluster initiatives and working out the state dimension of their execution. Their task, in short, would be to do whatever it takes to facilitate growth in Nevada’s strategic industries.

The state will need to make direct investments in growing its target industries. The Catalyst Fund, aimed generally at job creation, with a presumptive use for “deal closings” in firm- relocation competitions—has been capitalized at $10 million and stands ready for deployment. This fund should allow the state to engage in faster, more direct, and flexible dealings with companies considering Nevada locations. Ideally such a fund will help it win important business. We believe the funds impact will be magnified if it is reserved for attraction of firms and expansions relevant to the state’s target industries and clusters.

To link state leadership and regional execution, finally, and to make it all smart, the state needs to maximize its use of information and data. After all, quality information—whether in the form of rich data flows, indicator systems, best practices, or benchmarking—represents the most fundamental way states can generate a common point of reference for stakeholders, identify challenges, and develop and evaluate action steps.

Second, the state must regionalize to support smart sector strategy in Nevada’s regions.

This could entail several kinds of efforts, both bottom up and top down.

Nevada’s regions should be encouraged as a starting proposition to develop in the next nine months their own parallel regional plans for sector-based development and economic diversification, aided by state support. In some cases, regions may decide to go beyond basic planning and engage in more intensive, inclusive and comprehensive efforts around business planning, export planning and innovation districts that are now being modeled in metros around the country. This includes metropolitan business plans in Greater Seattle and Northeast Ohio, metropolitan export plans in Los Angeles and Minneapolis-St. Paul, and innovation districts in San Francisco and Boston. Nevada’s regions should be encouraged to embrace these models.

At the same time, on a more targeted basis, the new sector champions should work closely with their regional colleagues to identify the full universe of relevant funding, resources, and programs offered by the state that impact regions and sectors and could be leveraged to support bottom-up sector and cluster initiatives: state R&D and tech transfer initiatives, export promotion efforts, venture-related financing regulations, tax policy, or education and workforce policy. Critically, the Catalyst Fund should be deployed strategically to build out regional clusters by filling gaps in supply chains or securing expertise that augments existing knowledge bases in key sectors.

Third, the state must focus on diversifying its economy to set a platform for higher-value growth.

This will require an intensive focus on building the capacity for innovation and commercialization.

In the past decade, innovation—or the development and introduction into the market of new products, services, and business models—has become even more of an imperative for the success of firms, industries, regions, and nations.

More and more, innovative regions and states are characterized by close collaborative linkages between scientists and researchers, entrepreneurs, economic development leaders, governments, venture capitalists, and firms

One critical tool is to make strategic investments in “impact scholars” to boost research output and new discoveries. Research universities and institutes form the nucleus of a state’s innovation capacity and top-flight researchers anchor top research universities. Such top scholars are the linchpins of how universities draw R&D funding from federal and private sources, attract and train top talent, and produce discoveries with potential for commercialization in the regional economy.

Global engagement also matters because Nevada firms sell their goods and services in an increasingly globalized market. Global engagement helps build a platform for growth through innovation because exporting in particular makes companies more competitive by forcing them to continuously innovate. Selling to foreign consumers boosts production at home and allows companies to hire more workers. Inward FDI, too, brings with it technologies and knowledge that can spillover into the regional economy. Exporting firms and foreign-owned plants alike pay higher wages.

As it happens, Nevada stands in a decent position to take its global engagement to the next level.

Finally, the state must align higher education and workforce development to strategic economic opportunities.

One critical way of doing this is to expand research universities’ role in workforce development. To take just one compelling example, the University of North Carolina (UNC) system’s UNC Tomorrow planning process stands out as an especially instructive model for Nevada with its 20-year strategic plan to make the UNC system more responsive to the emerging and future economic needs of a growing state. Closer home, the establishment of the National Geothermal Academy at UNR—as the first of its kind university training program for the geothermal industry—reflects the critical role that Nevada’s research universities have begun to play in educating and training the next generation of workers for the state’s key industry sectors.

What’s key here is a deepening of university-industry partnerships. To begin with, Nevada’s higher education institutions should intentionally engage business leaders to articulate upcoming skills needs in high-demand occupations; participate in the design of curricula and requirements for certification; and, more broadly, to help develop education pathways that are matched to career pathways.

CONCLUSION

Let me end where I began. The recession has been a wake-up call to the country and the state. Our pre-recession economy, this state’s pre-recession economy, was overly characterized by consumption and debt and innovating in the wrong things. Post recession, there is an enormous opportunity to grow jobs in the near term and retool for the long haul.

Our rallying cry: Unify, Regionalize, Diversify.

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Authors

Bruce Katz

Publication: Project Steering Committee, Nevada State Board of Economic Development

Advancing the Clean Economy: The View from Colorado

Mark Muro and Devashree Saha — Mon, 11 Jul 2011 10:51:00 -0400

As the governor of Colorado from 2007 to 2011, Bill Ritter led the nation in arguing for the economic development value of “decarbonizing” the U.S. energy system. Moreover, he showed how to advance such development through catalytic, market-smart public policies.

At our clean economy event this week, we'll get to hear him expound his strategies and goals.

During his tenure as governor, Ritter issued Colorado’s first Climate Action Plan in 2007, calling for a 20 percent reduction in greenhouse gas emissions by 2020 and an 80 percent reduction by 2050. In 2010, he successfully pushed for a 30 percent renewable portfolio standard in Colorado, the second highest in the nation.

More broadly, Ritter, a Democrat, signed dozens of pieces of clean energy legislation that turned Colorado into a national model for generating new clean energy technologies and start-ups, attracting firms, and creating jobs by providing a supportive policy framework to boost demand, ensure the availability of finance and drive innovation.

Ritter also tirelessly marketed Colorado as a place where clean energy businesses can grow. Denmark-based Vestas Wind has made Colorado its North American manufacturing hub. SMA Solar is opening its first manufacturing plant outside of Germany in Colorado. Others, including Siemens, SMA Technologies, Abound Solar, Ascent Solar, and Solix Biofuels, are also growing and adding jobs in Colorado.

This combination of economic development fervor and steady policy has contributed to Colorado’s high ranking among states for the share of its total employment comprised by “cleantech” workers as measured by our forthcoming “Sizing the Clean Economy” report and database, debuting Wednesday.

Today Ritter is bringing the same commitment to growing the national and Colorado clean economy that he showed as governor to his activities as the director of a newly established Center for the New Energy Economy at Colorado State University. The center has the mandate to shape national energy policy and advance economic initiatives related to clean and renewable energy. With the present stalemate at the federal level on moving a clean energy agenda, Ritter in his new role will be working with a small group of states as well as municipalities to build the clean economy in America region by region and state by state. We’ll be looking forward to hearing his reflections on the way forward in a closing dialogue at our Wednesday event, to be webcast here.

Authors

Mark Muro
Devashree Saha

Publication: The Avenue, The New Republic

How States Can Tackle Budget Deficits

Mark Muro — Thu, 03 Feb 2011 00:00:00 -0500

It's pretty common knowledge by now that many states are drowning in red ink. Most notably, the weak economy has created operating gaps ranging from the hundreds of millions of dollars in Arizona to the tens of billions in California, Illinois, and New Jersey.

Deep cuts in public spending have become the order of the day, some executed with more care than others, and although political rhetoric presents an obstacle, some leaders are contemplating whether to raise taxes, as Illinois did recently.

And yet, that's just part of the deficits problem. Bad as this situation is, this year's difficulties are arguably one of the lesser aspects of a longer-term, public finance crisis in the states that actually won't improve, like the short-term one will, as the economy recovers.

How is that? A new report recently released by my group at Brookings Mountain West, working in partnership with the University of Tennessee economist Matt Murray and Morrison Institute of Public Policy at Arizona State University, lays out the problem, focusing on California and in the Intermountain West.

On the one hand, the large "cyclical" deficits most states are grappling with represent the temporary fallout of the Great Recession These shortfalls are daunting but will pass once the picks up. In that sense, these gaps of hundreds of billions of dollars are the easier part the problem.

The hard part; because they are more entrenched, are what we call "structural" deficits -- the more or less permanent imbalances of revenues and expenditures arising from flaws in a state's fiscal structure, fundamental changes in the regional economy or the state's demographics, or, especially, imprudent or shortsighted policy choices.

In Arizona, this sort of structural shortfall now adds up to a cool $2.1 billion -- a chilling 21 percent of stable general fund expenditures. In California, the figure is about $9.2 billion -- about 9 percent of stable expenditures. And these figures leave aside such other long-term challenges like pension obligations and retiree health insurance.

How do these structural problems arise and what needs to be done about them? The contrasting messes in California and Arizona -- two of the Western states we studied in our report--display in extreme versions the kinds of rashness and imprudence that have gotten so many states in trouble.

California's budget problems show how overly-optimistic spending, combined with voter mandates and institutional constraints (with none of it linked together), can lead to calamity. There, a proposition directing half of all new revenue to schools has combined with multiple state and local voter-approved limits on taxing and revenue raising to produce a train-wreck.

Arizona's fiscal problems demonstrate, meanwhile, how a single-minded emphasis on tax-cutting combined with California-style voter mandates and institutional constraints can also lead to a crack up. Arizona basically gave away the store in better times by handing out an inflation-adjusted $2.9 billion in ill-advised tax cuts over some 15 years unaccompanied by spending cuts. Major new education and Medicaid expansions in the last decade added to the problem, but for the most part a fiscal disaster resulted from the combination of massive tax cuts, voter mandates and a super-majority requirement for any revenue increase.

The long-predicted result: The Arizona general fund is now short some $3.4 billion, or a full 33 percent of the needed total, for FY 2011 with fully two-thirds of that amount associated with the state's permanent structural gap.

The bottom line: Arizona and California, notwithstanding their contrasting political tilts, each ran into the ditch by combining rash, basically optimistic spending and tax decisions in good times with rigidity and narrowness all along. In each place, moreover, the basic need to constantly compare spending and revenue-raising broke down thanks to ideological fixity, a loss of consensus, and the recourse to voter mandates.

So what should these and similarly afflicted other states like Illinois and New Jersey do? States need to break with business-as-usual in three fundamental ways.

First, they will need to take unprecedented steps to close gaps--and the sooner the better. Austere states will need to add revenue increases to the mix while profligate ones will need to discipline spending.

Second, states need to broaden, balance, and diversify their revenue bases while looking to the long-haul balance of taxing and spending. Over-reliance on narrow bases won't cut it now.

And third, states need to improve the information sharing and budgeting processes.

And yet, to achieve any of this, there is one other requirement: States are going to need to reject conventional dynamics. They need to reconstruct the integrity of their budget process, make it harder for interest groups to pass budget-blowing measures that undermine sound fiscal policy, and get beyond ideological warfare to foster more collaboration.

The choice couldn't be more clear. States need to make the sound policy decisions necessary to putting their fiscal house back in order, or prolong over many years a world of hurt.

Authors

Mark Muro

Publication: Huffington Post

Addressing State Budget Deficits in the Western U.S.

Mark Muro — Fri, 28 Jan 2011 14:36:00 -0500

As California Governor Jerry Brown continues to push for a referendum on increasing tax revenues in his state, Mark Muro discusses budget deficits across various states in the western U.S. Muro explains the longstanding disconnect between revenues and expenditures and offers lessons to legislators eager to balance their budgets.

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State Budget Deficits in the Western U.S.

State Budgets' Unsound Structures

Mark Muro — Fri, 07 Jan 2011 09:42:00 -0500

There’s been a lot of talk about state budget woes across the country as impacted by the Great Recession. However, beneath these cyclical declines in revenues are some far more daunting issues that states must confront to get themselves on a sustainable fiscal path.

Today in Phoenix, Brookings Mountain West and its Arizona partners are formally releasing an important new report we've done on the troubling state budget messes on display in California and three Mountain region states—Arizona, Colorado, and Nevada.

Produced by my group here at Brookings with University of Tennessee economist Matt Murray and the Morrison Institute for Public Policy at Arizona State University, the new study (entitled "Structurally Unbalanced") is meant to welcome Western legislators back to work with a clear comparative primer intended to motivate and inform the hard work of closing this year's daunting budget gaps and moving to reduce more entrenched longer-term problems. (Hey, welcome back lawmakers!)

Along these lines, the report—though focused on California and the three Intermountain states—serves as a kind guide to the varied ways almost all states have gotten into serious fiscal trouble in recent years.

At the center of our work is a key distinction between two types of budgetary trouble.

On the one hand, the large "cyclical" or deficits we flag in all of the Western states represent the temporary fallout of the Great Recession and its aftermath given the sharp and presently continuing decline of taxable economic activity in states. Ranging from 9 percent of stable general fund spending in Colorado to a whopping 17 percent of general fund spending in Nevada, these shortfalls are truly scary but at least will pass once the still-troubled Western economy picks up. In that sense, these gaps of hundreds of billions of dollars are the easier part the problem.

Harder because more entrenched, on the other hand, are what we call the states' "structural" deficits—the more or less permanent imbalances of revenues and expenditures that can arise from flaws in a state's fiscal structure, fundamental changes in the regional economy or the state's demographics, or, especially, imprudent or shortsighted policy choices. In Arizona, this sort of structural shortfall now adds up to a cool $2.1 billion—a chilling 21 percent of stable general fund expenditures. That structural gap is more than twice as mammoth on a percentage point basis as that of California, the leading poster-child for fiscal mismanagement.

But as I said the states in our report represent a catalogue of the varied ways states get in trouble. And that's true. Basically, the four Western states put on display four different styles of trainwreck that should be duly noted as cautionary tales elsewhere:

California basically enacted too many permanent spending increases (notably on education) during the dot.com boom and more recent good times even as it left in place a series of rigid voter mandates and tax limitations
Arizona, by contrast, basically gave away the store in better times by handing out a series of ill-advised tax cuts (total value, adjusting for inflation and growth: $2.9 billion since 1993) unaccompanied by spending cuts. Also a problem: Voter and court mandated spending on schools and Medicaid is combined with super-majority requirements for any revenue increase
Nevada, for its part, doesn't yet have a structural deficit (it just has a gargantuan 18 percent cyclical problem for FY 2011!) but it will soon. Here the problem is that the state's narrow, consumption and real estate-oriented revenue system may well now be ill-attuned to a post-Recession "new normal" in which migration, homebuilding, and gaming are permanently depressed
And finally there's Colorado. Colorado doesn't have a structural deficit, or even quite as large a temporary problem—it’s just damaging itself the slow way though adherence to its Taxpayer Bill of Rights (TABOR). Thanks to TABOR's spending and revenue raising limits, that is to say, expenditures and revenues track with each other but both are being inexorably ratcheted down. One indication of trouble: State funding for both K-12 and higher education as a percentage of personal income has declined precipitously under TABOR: from 35^th in the nation in 1992 to 48^th in 2006 and 2008, respectively, on both accounts.

In sum, there are few ways to completely avoid fiscal problems in bad times (well, a well financed rainy day fund can help) but there are many ways to create a deeper mess and they frequently begin in good times.

With that said, narrowness and rigidity and voter mandates sure turn up often as sources of trouble, which is why our report suggests that states wanting to improve their fiscal stability commit to a balanced approach (including of revenue- and spending-side responses), a broadening of the tax base, and the preservation of lawmakers' flexibility. Creatively restructuring government is also essential. Such adjustments—along with improved information sharing and budget processes—represent the only way states will be able to ease the present crisis while using it to get onto a more stable course into the future.

With many of them facing similar problems as legislatures reconvene this month, lawmakers in lots of places should study carefully the past mistakes and current predicament of the Western states.

Authors

Mark Muro

Publication: The Avenue, The New Republic

Cyclical and Structural State Budget Deficits in California and the Intermountain West

Sue Clark-Johnson, Mark Muro, Matthew Murray and Jennifer S. Vey — Wed, 05 Jan 2011 00:00:00 -0500

As state legislatures reconvene this month, numerous states are contending with substantial budgetary turmoil, aggravated by the recent Great Recession and slow recovery. Such turmoil has visited substantial hardship on citizens and threatens to weaken many states’ ability to provide basic services and make in vestments for their long-term economic vitality.

This brief takes a careful look at the fiscal situation in Arizona, California, Colorado, and Nevada and examines the states’ serious cyclical budget shortfalls—those resulting from the recession and its aftermath—as well as the critical longer-term structural imbalances between revenues and expenditures that have developed in Arizona, California, and, to a lesser extent, Nevada. Along these lines, the study—produced by Brookings Mountain West in partnership with the Morrison Institute for Public Policy at Arizona State University— uses a unique methodology to estimate the size of the states’ structural deficits (or, in Colorado, the surplus) and explores the mix of forces, particularly the policy choices, that created them. After that, the authors highlight the dramatic impacts these states’ fiscal challenges, and government responses to them, are having on service delivery as well as local governments. The brief concludes by suggesting some of the steps state policymakers must take to close their budget gaps over the short and longer term. Accompanying the brief is a special single-state drill-down on the particularly dire situation in Arizona.

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Authors

Sue Clark-Johnson
Mark Muro
Matthew Murray
Jennifer S. Vey

Publication: The Brookings Institution and the Morrison Institute for Public Policy, Arizona State University

Climate Forecast: Balancing Ethics, Politics and Uncertainty

William J. Antholis — Wed, 08 Sep 2010 00:00:00 -0400

UNLV and Brookings launched our partnership one year ago. We saw in Neal and his team a vision for UNLV to be both a national university, a thought-leader in Southern Nevada's resurgence. I believe that UNLV is taking the lead in helping Las Vegas become not just a global destination, but also a world class city.

UNLV does in Vegas what Brookings aspires to do in D.C. – research defined by its quality, independence and impact, and that goes from the local to the national to the global. Yesterday’s Clean Energy Summit and today’s forum speak to the quality of this university: well-designed, well executed, terrific speakers – scientists, economists, business leaders and policy experts.

As a historian of political ideas, I’d like to suggest that history provides three guideposts for thinking about where we currently stand in seizing control of our energy future. And why the three related issues of job creation, clean energy, and climate change should not be separated from one another.

The first guidepost is ethical. We are the first generation to know we are warming the planet, and probably the last with any chance to stop it.

The second guidepost is political. Transforming the planet’s energy system is probably the most complex political transaction in the history of mankind.

The third guidepost is heuristic. We must embrace uncertainty – scientific uncertainty, economic uncertainty, and political uncertainty. Only if we recapture the humility and hunger that comes with uncertainty are we going to fully tackle this challenge.

First, the ethical imperative.

We are fundamentally altering our climate, and we are the first generation to know this. We may also be the last generation to have any chance of doing something about it. Our forebears had the excuse of ignorance. Our descendants will have the excuse of helplessness. We have no excuse.

If nine out of ten doctors said that we were running a fever, and that we were passing it on to our kids, we surely would ask at least two questions: Can we treat it? How long do we have? The basic answer: we have about a decade to act before the warming reaches an irreversible and truly dangerous stage.

My youngest daughter, Kyri, will turn my age (45) in the year 2049. On our current path, the earth will have warmed by at least 3.6 degrees Fahrenheit -- warming that will be dangerous to Kyri and her kids -- unless we act now.

There is a precedent, of sorts, to this ethical imperative. My dad's generation was the first to be able to destroy the entire planet. Not doing so has simply required us to not push the nuclear button. Still, that has not been a cost-free enterprise. The Cold War demanded dangerous diplomacy, and vibrant domestic debate about how to structure our economy and even our political life. From the interstate system to international trade to the internet, we take for granted Cold War-era investments and innovations. There was also a political cost: the nation’s social fabric was occasionally stretched and torn by McCarthyism and overseas proxy wars.

We persevered, ultimately, because the country united around some core ideas, including that global destruction was too grave to bear.

Today’s ethical imperative does have the potential to unite the nation. Lindsey Graham, the Republican Senator from South Carolina, has urged his GOP colleagues to realize that conservationism and conservatism can go hand in hand. "I have been to enough college campuses to know — if you are 30 or younger, this climate issue is not a debate," he told the New York Times in February. "It's a value ... From a Republican point of view, we should buy into it and embrace it and not belittle them."

Graham was speaking strategically. But the larger point is that, when facing an existential crisis, conservatives and liberals can unite in defense of shared values.

Previous conservatives have built ethical systems around these values.

Edmund Burke saw society and civilization as a “partnership of generations . . .between those who are living, those who are dead, and those who are to be born.” He saw members of any one generation as “temporary possessors and life-renters in” society and in the earth; he feared that citizens might become “unmindful of what they have received from their ancestors, or of what is due to their posterity,” and therefore run the risk of “leav[ing] to those who come after them a ruin instead of an habitation.”

Thomas Jefferson – a favorite of both Tea Parties and progressives – made much the same point. Though he famously argued that “the earth belongs in usufruct [in effect, in trust] to the living,” he went on to argue that “no generation can contract debts greater than may be paid during the course of its own existence.”

Conservation is fundamentally a conservative value. I'm particularly cheered by the growing dialogue across religious faith traditions -- from Orthodox and Catholic leaders, to Episcopalians and Evangelicals, to Jews and Muslims and Buddhists -- that all embrace "creation care" as a common rallying cry, and about turning the world back to our children.

Guidepost 2: The politics

Of course, a huge distance remains between Lindsey Graham’s vision and effective action. Graham’s climate bill never reached the Senate floor. Worse still, he never endorsed his own bill.

The problem is not just the Senate. Former House Speaker Richard Gephardt once described the effort of changing how the planet generates and consumes energy as “the single most difficult political transaction in the history of mankind.”

Here is why. Energy is one sixth of our economy, roughly the same as health care. Senator Reid yesterday said, “If we can pass health care, we can pass anything.” But U.S. action alone is not enough.

To avoid dangerous global warming by the time Kyri turns 45, the world needs to cut global CO2 emissions from about 30 billion tons each year to about 15 billion tons each year.

So take the politics of health care. Multiply those politics by the world’s 192 nations. Do that all at the same time. That is what did NOT happen at the world climate talks in Copenhagen. The meeting turned from Hopenhagen to Nopeinhagen.

In Fast Forward, Strobe Talbott and I argued that the global challenge is manageable. We focus on four key players – the Big Four of the United States, EU, China and India. We were immediately and loudly reminded by friends in Japan and Brazil (among others) that, they too, were critical to the solution.

So extend the focus to six and you have a Rubik’s Cube. You remember the toy -- six faces, nine squares on each of the faces. Move one square in one country, and it moves five similar faces in other countries. That is the political challenge of climate change. Call it the Gephardt Cube.

U.S. leadership is one face of the cube. It is not sufficient, but it is necessary. The U.S. alone is responsible for one-fifth of annual emissions – about 6 billion tons a year, just behind China.

We must eventually cut our emissions by well more than half. The U.S. has been by far the world’s largest historic contributor of CO2. Developing countries such as China and India are far behind us in how much they have emitted historically, and only have a fraction of what they emit per capita. They won’t act unless and until we do.

By mid-century, the U.S. probably needs to cut our emissions to about one billion tons a year if the planet has any chance of getting global emissions down to 15 billion.

In that context, how are we doing?

Considering that Lindsey Graham was in favor of his own bill before he was against it, it seems to have gone from bad to worse. But it is easy to ignore progress. A little over a year ago, the House of Representatives passed the American Clean Energy and Security Act that would have begun cutting United States emissions to roughly the one billion ton target by 2050.

That bill has now died in the Senate. Most Republicans opposed any action. Some still deny the science. Others still see any Democratic victory as a Republican defeat. A handful have been waiting on the wings, watching to see what Democrats would do.

Many Senate Democrats were ready to act. But those from states such as coal-rich West Virginia and the manufacturing communities of the Midwest or oil-oriented states such as Louisiana feared that they would bear a disproportionate share of the costs of going green.

Senator Reid and President Obama hoped to convince five or more Democrats to support the bill by giving them valuable emissions permits or off-shore drilling concessions. They hoped to gain five or more Republican supporters out of concern for energy security. If Mary Landreau Democrats could be convinced to act, then Lindsey Graham Republicans might be convinced to go along as well.

This fragile coalition-making ended up being another casualty of the Gulf Oil spill. Off-shore drilling was now off the table. The nation focused on near-term disaster, and lost sight of the long-term crisis.

Climate change and clean energy activists are now distraught. The House bill will expire at the end of this Congressional session. New legislation next Congress must start from scratch. That will be harder, since Democrats are predicted to lose seats in both houses of Congress on November 2.

It is important not to lose sight of the big picture. We have to assume that the unforgiving math of carbon emissions will continue to grind forward -- much as nuclear weapons shaped my dad’s generation.

The public gets this. Despite so-called "climate-gate", the public continues to largely believe the science. There has been little decline in the same core 50% of the public who are either “alarmed” or “concerned” enough to take action. Some decline in support has taken place among “cautious” segments of the public who believe something is happening, but are cautious about the costs of action. But that is hardly an irrational response coming out of the Great Recession.

And opinion polls have shown between 60 and 75 percent of the general public, including a majority of Republicans, believe that the EPA can and should regulate carbon emissions.

Eight GOP House members supported Waxman-Markey last summer. While that was hardly a mass defection, it was a meaningful one -- a high-water-mark of bipartisanship over the past two years. Mike Castle of Delaware and Mary Bono Mack of California are from districts with active environmental constituents. Leonard Lance of New Jersey hoped his constituents would benefit from the creation of “green jobs.” John McHugh of New York—now secretary of the Army—wanted to cut our dependence on imported oil.

This is not to overstate support, or underestimate the opposition to action. President Obama won many of those districts two years ago, and he might not win many of those districts today.

But support continues to build. A decade ago, the Global Climate Coalition successful lobbied on behalf of most energy companies to stop global warming legislation. In 1997, Al Gore held a meeting in the Roosevelt Room with green groups to discuss the prospects of cap and trade legislation. He asked them how many votes they could bring in the Senate. An activist responded, “We’ve got Wellstone”. Gore shot back: “Who else?” The response was silence.

We live in a far different world. The GCC disbanded in 2002. The most prominent and effective corporate lobbying group has been Climate Action Partnership – including General Electric, Duke Energy, Alcoa, Dow Chemical, DuPont, Ford Motor, NRG, and Honeywell – which worked with lawmakers in the House to create the framework for the Waxman-Markey bill.

These businesses see big opportunities in clean-energy – nuclear, natural gas, and other clean fuel production sources, more efficient homes, buildings, trains, and automobiles.

Many states and cities have made clean energy central to their strategic planning. Forty U.S. states have adopted climate change action plans. Cities from Seattle to Boston to Las Vegas are seeking to lower their carbon footprints by promoting energy efficiency, light rail, and “smart metering”.

And then there’s the Feds. The Obama Administration is investing about $90 billion on energy efficiency, renewable energy, smart-grid technology, and public transportation.

Let’s pause on that for a second. In any other time period, that commitment of resources would be considered revolutionary. But in a time when the government spent $700 billion to repair the financial system, and another $700 billion on the recovery act, the final $90 billion seems small. But it is really extraordinary, and its benefits are only now being felt.

Considerable stimulus money remains to be spent. Next year, a possible energy bill might be fashioned around a renewable energy standard. Republicans, such as Senator Sam Brownback, seem willing to support a standard, particularly if “renewable” includes nuclear energy or clean coal or electric vehicles.

And last, but not least, the President still has a very blunt but powerful tool in his kit. Thanks to activist state governments -- such as Mitt Romney's Massachusetts -- the Supreme Court ruled that EPA should treat CO2 as a pollutant, subject to the Agency’s responsibility to regulate any air pollutant that endangers human health and safety. EPA has since ruled that CO2 is indeed such a pollutant, and that climate change does indeed pose such a threat.

EPA authority only applies to power plants. If the President uses it, he could run into charges that this is undermining needed economic growth. Congress could choose to pass legislation that limited EPA's authority. Even if the President were to veto such a move, and EPA were to act, it would set back the idea of the country coming together around climate change.

Internationally, progress is being made. As I noted above, at Copenhagen the G-192 proved that the UN is not an effective place to negotiate. A small group of countries refused to block the unanimous consent required in the UN to embrace a new global deal.

But Copenhagen marked real progress as well. For the first time, the heads of state of the most important nations of the world sat down and hammered out an agreement. China, India and Brazil – one third of humanity, listed a set of emissions cuts that they were prepared to take, right alongside the United States, European Union, and Japan. And that general political agreement now has 100 national pledges. While it short of a legally binding treaty, it is the outline of how the world is going to tackle this problem.

Embrace uncertainty

So the ethical challenge is unique. The political challenge is daunting.

One thing that both have in common is that no outcomes are certain. That applies to science, as well as to economics and politics.

To tackle the problem, we need to let the science speak for itself. That includes being honest about what we do not know.

We know that the planet is warming, but we don’t know exactly how fast or how much. We know that humans are causing some or much of this, but we don’t know exactly what that contribution is or will be. We know that places from Southern Nevada to sub-Saharan Africa will likely feel the impacts, but we don’t know the magnitude.

Our society has long been divided between “know it alls” and "know-nothings." But we are not a binary nation. In the middle those two groups sit most Americans. They are dismissive of "know-nothings," but they don’t necessarily trust “know it alls.” The following quote, from a leading foreign policy thinker Walter Russell Mead, captures a reality about how these Americans view climate change:

“… the environmental movement has gotten itself on the wrong side of doubt. It has become the voice of the establishment, of the tenured, of the technocrats. It proposes big economic and social interventions and denies that unintended consequences and new information could vitiate the power of its recommendations. It knows what is good for us, and its knowledge is backed up by the awesome power and majesty of the peer-review process.”

Mead has seen this in other foreign policy challenges, and it worries him. Lesson to all of us: it is important to embrace and not silence those who question the science of climate change. Skeptics are what move the scientific process forward.

But it is also important to acknowledge not only those who are skeptical that the planet is warming or that humans are causing it, but also those who find the current projections to be way too cautious.

This scientific uncertainty may actually be the most important reason that countries such as China and India have come to the table. There is a growing awareness that negative impacts of climate change could be worse than are being projected – or could be taking place right now. It is uncertainty about exactly how dramatic those changes will be that suddenly have China and India worried.

We often talk of greenhouse gases, but for me, the greater uncertainties have to do with greenhouse liquids and solids. This won't be news to anyone who lives in Southern Nevada, but water is as critical -- and as difficult to understand -- as any part of the climate equation. Recent floods in Pakistan remind us that climate change leads to intense storms and droughts, as well as to the melting of polar ice caps and glaciers. We can never know with certainty when the next hurricane or drought will hit. China and India both live in the shadow of the same Himalayan Mountains as Pakistan.

We also are only beginning to understand how water can help cut greenhouse gas emissions. That doesn't just mean our friends down past Boulder City at the Hoover Dam. It also refers to the considerable water needed in natural gas exploration.

Likewise, we need to have a better understanding of the “solids” out there that contribute to climate change – especially “black carbon” or “soot”. While we have largely addressed black carbon in the United States, it is underexplored in developing countries.

We also need to understand, and even embrace, economic uncertainty – both in the US, and overseas.

Yesterday we heard a lot about where businesses see opportunities for profitable investment and job creation in clean energy. Clean energy is also an effective strategy for facing uncertainty about regulations in fossil fuels. The prospect of EPA regulating greenhouse gas emissions is creating considerable uncertainty in the business community -- which for the time-being may not be a bad thing. Investors in traditional power generation are either holding back from those investments, or are choosing ones least likely to run afoul of regulation.

There at least two more important sources of economic uncertainty -- geopolitics and global competition. The fact that nearly all transportation fuels depend on a global market that fluctuates wildly based on the latest crisis in the Middle East, Russia, Venezuela, or sub-Saharan Africa. Likewise, China and India are as dependent on those places as we are, and they have begun to notice that these are not the most stable regions of the world.

Whether solids, liquids or gases are the driving concern, leaders around the world recognize that clean energy technology is a key hedge against both climactic uncertainty, and the uncertainty of the economics and politics of fossil fuels.

China hopes to spend $738 billion, and India will spend $110 billion, on green technology. Along with Europe’s continued leadership, that should be a cause for some optimism.

It is also a cause for concern for American efforts to stay globally competitive. Even if the threat of climate change does not spur us to action, economic competition may be enough.

As we heard yesterday, a price on carbon and a long-term target for emissions would be the most effective way to do this. By providing a bit more certainty to investors, it would spawn the greatest public-private partnership in our history, letting a thousand flowers bloom in response to the promising uncertainty of new opportunities.

Lastly, we need to embrace political uncertainty. Not that we have much choice, two months before the midterm elections. It is hard to predict what narrow Democratic majorities or narrow GOP majorities will do – whether climate and energy will be a priority, and if so, whether the White House or Congress will choose to lead.

But we can plan for that uncertainty now. What would a grand compromise on energy reform look like that would reflect a national consensus for change? A true, bipartisan effort would attract support from moderates in both parties who have been reluctant to take a stand during this election season. But there are not likely to be enough moderates, so we need to stretch ourselves to think about what unites environmentalists and Tea Party members.

As the world’s leading democracy, we should embrace that debate. Debate and uncertainty are not an excuse for paralysis. Instead, they are a call to prudent action. We must embrace politics as the art of the possible in the face of what we must hope is only a nearly impossible problem.

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William J. Antholis

Publication: UNLV Clean Energy Forum

Leveraging the Mountain West Innovation Complex for Energy System Transformation

Mark Muro and Sarah Rahman — Wed, 01 Sep 2010 00:00:00 -0400

Over and over America has looked to the West to work out the future. In this thinly populated terrain, experiments could still be attempted and national agendas advanced more swiftly than in the congested East, so the federal government has sought breakthroughs of every kind in the Mountain region.

In the West, giant dams now generate electricity in new ways. Major science research laboratories lead our nation’s alternative energy program. And for that matter, military test sites, engineering programs, and research and development contracts with universities have contributed to a constant dynamic of radical invention in the Intermountain states. For a century and more, in short, the West has provided an inviting frontier for technological innovation and experimentation, and a powerful symbiosis between federal and Western resources has emerged there.

Now, as the nation works out another future—a clean energy future—in order to create a more competitive “next economy,” it should look once again to the Intermountain West.

As in the past, a mutually beneficial synergy supportive of the nation’s and region’s interests appears not just possible but necessary.

America needs to transform its energy system to reduce its carbon intensity and make clean energy cheap. At the same time, the Intermountain West region (including Arizona, Colorado, Idaho, New Mexico, Nevada, and Utah) possesses a unique confluence of world-class innovation assets (research universities, national and corporate research labs, and top-fl ight science and engineering talent); varied energy resources ranging from lowsulfur coal to solar, wind, and geothermal energy potential; and unparalleled opportunities to build out next-generation energy systems, whether smart energy grids or energy efficient buildings, as future population growth demands the building of new infrastructure from the ground-up.

In view of that, this brief contends that a new partnership should be forged between the federal government and the Intermountain states metropolitan areas to leverage the region’s unique strengths in support of the national interest.

To begin that partnership the federal government should construct in the Mountain region a distributed network of federally funded, commercialization-oriented sustainable energy research centers. These regional centers would combine aspects of the “discovery-innovation institutes” concept proposed by the National Academy of Engineering and the Metropolitan Policy Program at Brookings (as articulated in the Brookings paper “Energy Discovery-Innovation Institutes: A Step toward America’s Energy Sustainability”); the “energy innovation hubs” being created by the U.S. Department of Energy (DOE); and the agricultural experiment station/cooperative extension model of the land-grant universities that has played such an important role in the growth of the West.

In the spirit of the earlier land-grant university paradigm, the new network would involve the region’s research universities and national labs and invoke strong participation from industry, entrepreneurs, and investors as well as state and local government. Each individual breakthrough center would have a different theme, though all would conduct focused translational research necessary to move fundamental scientific discoveries from the laboratory to commercialization to system-wide deployment.

Done correctly, these centers could be just as transformational as the construction of the major science-engineering-technology-military complex that the nation brought into being in the West during World War II and the Cold War. If created at the scale envisioned here, a new generation of high-powered university-industry-government clean energy innovation partnerships would have the power to catalyze the growth of a major new clean-energy economy in the region perhaps even more signifi cant than the microchip and aerospace industries created by mid-century defense investments. At a minimum, seeding the aridlands with an array of high-intensity research centers would introduce a powerful model for linking national leadership and local capabilities in service of national and regional prosperity.

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Mark Muro
Sarah Rahman

How Intermountain West Metros Can Lead National Export Growth

Emilia Istrate, Mark Muro and Jonathan Rothwell — Mon, 26 Jul 2010 00:00:00 -0400

In the beginning of 2010, with U.S. output growth modest and job growth nonexistent, President Obama devoted a portion of his State of the Union Address to “fixing the problems that are hampering our growth.” One of these problems, according to the president, was a lack of international export sales. The president linked an increase in exports to an increase in jobs, and pledged to double the nation’s exports over the next five years.

Doubling exports, whether or not it happens in the next five years, would be a major boon to the Intermountain West’s largest metropolitan areas. Such a doubling would bring the West’s large metros thousands of good jobs and see them expand on their existing strengths in the world economy. The prospect of such gains is especially attractive in the Mountain zone, moreover, given the present moment of self-reflection in a region that appears faced with the partial breakdown of its traditional migration- and real estate-driven growth machine.

An analysis of export activity in the 10 largest metros of the Intermountain West for the years 2003 to 2008 reveals that:

Exports are an important source of good jobs in the Mountain West and export growth has the potential to generate significant and much-needed job creation in the region. In 2008 fully 454,000 workers in the 10 largest Intermountain region metros were employed in export-related jobs, with thousands of other local jobs dependent on the spending on local services that those earnings generate. What is more, export jobs are good jobs: The typical Mountain metro worker employed in his or her metro’s top export industry earns nearly 1.5 times the wage of the average American worker.
The major Mountain region metropolitan areas are not exceptionally large exporters in dollar terms but a number of them export a significant portion of their overall output. Seven out of 10 of the Intermountain West’s large metros depend on exports for larger shares of their gross metropolitan product (GMP) than the nation’s largest 100 metros taken together. Mountain metros, moreover, not only expanded their export sales but also grew more export intensive from 2003 to 2008. Only in Phoenix did export intensity decline.
Services constitute a greater share of export activity in the Intermountain West metros than they do in the average large metro nationally. Service exports—ranging from architecture and engineering to consulting, education, and tourism—represent a strength of the Mountain region. Service sales comprise a much larger share of Mountain metro exports, at 45 percent, than they do for the country’s largest 100 metros as a group In two Mountain metros—Las Vegas and Denver—services account for the majority of all regional exports. In fact, Las Vegas generated a larger share of its GMP from service exports in 2008 than any other major metro.
The Mountain region’s large metros are quite varied in their export specializations. Computer and electronic product manufacturing stands out as one of the region’s clear specializations, as well as transportation equipment (frequently related to defense); service production, including tourism; and metal manufacturing. Across metros, however, the export bases of some economies appear far more diversified. However, export earnings in the prominent computer and electronics industry actually fell in seven metros over the five-year period studied, pointing to the need to maintain constant vigilance in the face of changing global markets.
Strengths in manufacturing and innovation tend to drive metropolitan export power. Manufacturing industries nationally are the most export oriented and tend to be more innovative, defined by patent production. Exemplifying this in the West is Boise, the region’s patent leader and number two metro on manufacturing and export intensity indicators.
Canada and Mexico remain the region’s leading export markets but major growth opportunities reside in large emerging markets like Brazil, India, and China (the “BICs”). With years of potentially tepid domestic sales ahead, companies need to redouble their search for new sources of demand. Despite the region’s close proximity, exports from the large Mountain metros are no more likely to be destined for Mexico than the average large metropolitan area’s. And while five of the Mountain metros capitalized on opportunities farther afield—in the BICs, for example—five stood on the sidelines with below average growth in exports to these markets.

Confronted by a malfunction of the region’s real estate-driven long boom, the Mountain West metros need to locate new sources of demand to power sustainable growth. Exports of goods and services to international markets can provide one such source. For that reason, metropolitan leaders and their federal, state, and private sector partners need to engage in exports to create good-paying jobs at home.

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