21st century ar task force
TRANSCRIPT
Building a 21st Century Economy in Arkansas
October 2008FINDINGS AND RECOMMENDATIONS OF THE TASK FORCE FOR THE 21st CENTURY ECONOMY
Building a 21st Century Economy in Arkansas
Findings and Recommendations of the Task Force for the 21st Century Economy
Task Force for the 21st Century Economy
Dianne Lamberth, Chair
Judy Adams
John Barnes
Gary Campbell
Clay Curtner
Guy Fenter
Bill Ferren
James Hendren
Gene Hill
Mike Maulden
Mickey Pierce
Brad Lacey
Pat Lea
Sam Walls
John Ahlen
Mac Dodson
Gene Eagle
Maria Haley
Chris Masingill
Randy Zook
Morris Jenkins
October 31, 2008
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F i n d i n g s a n d R e c o m m e n d a t i o n s o f t h e Ta s k Fo r c e f o r t h e 2 1 s t C e n t u r y E c o n o m y
ContentsForeword
Executive Summary: Recommendations of the Task Force ...............................................................1
Introduction .....................................................................................................................................................7
The 21st Century Economy ................................................................................................................8
Role and Scope of Economic Development ........................................................................................ 11
Education ............................................................................................................................................. 11
K-12 Education ......................................................................................................................... 12
Post Secondary Education .................................................................................................... 12
Workforce Education .............................................................................................................. 13
Other Education Recommendations .................................................................................. 14
Research and Development ............................................................................................................ 15
Entrepreneurship ............................................................................................................................... 15
Risk Capital .......................................................................................................................................... 16
Existing Business Innovation .......................................................................................................... 17
Infrastructure ...................................................................................................................................... 17
Direct Economic Development Policies ....................................................................................... 18
Programs and Services for the 21st Century Economy ................................................................... 21
Education ............................................................................................................................................. 22
K-12 Education ......................................................................................................................... 22
Post Secondary Education .................................................................................................... 22
Workforce Education .............................................................................................................. 22
Other Education Recommendations .................................................................................. 23
Research and Development ............................................................................................................ 23
Entrepreneurship ............................................................................................................................... 23
Risk Capital .......................................................................................................................................... 24
Existing Business Innovation .......................................................................................................... 24
Infrastructure ...................................................................................................................................... 25
Direct Economic Policies .................................................................................................................. 25
A Constitutional Issue: Arkansas as an Equity Investor in 21st Century Firms........................ 27
Organization of Economic Development Activities in Arkansas ................................................. 31
Conclusion ..................................................................................................................................................... 35
Afterword: Additional Issues for Consideration ............................................................................... 37
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A. Task Force for the Twenty First Century
Economy Interim Report
B. Act 1024
C. Complete List of Suggested Roles, Scopes and
Strategies
D. Inventory of State Economic Development
Programs
E. Minutes of Task Force Meetings and
Documents Presented to the Task Force
January 30, 2008—April 7, 2008
January 30, 2008
February 12, 2008
ASTA Presentation
AECD Strategic Plan
March 11, 2008
Arkansas: A Natural For Business
The Future of Arkansas Higher Education
Next Steps for Arkansas’s Future
Three Forces Changing Our Nation’s Future
April 7, 2008
ABED Initiative Study
Characteristics of a 21st Century Economy
Arkansas Research Alliance
F. Minutes of Task Force Meetings and
Documents Presented to the Task Force
April 22, 2008—October 22, 2008
April 22, 2008
Education, Regionalism Seen as Economic Development Keys
May 6, 2008
Arkansas in the Global Economy
The Rules Have Changed
May 13, 2008
Building a Better Future
Arkansas: A State of Character
June 3, 2008
Delta Training and Education Consortium
June10, 2008
Factors of Production
July 8, 2008
July 22, 2008
July 28, 2008
August 12, 2008
September 2, 2008
September 11, 2008
September 17, 2008
September 23, 2008
Resource Guide for Technology-based Economic Development
September 30, 2008
October 3, 2008
October 14, 2008
October 22, 2008
G. Additional Resources Presented to the Task
Force
Missouri Downtown Economic Stimulus Act (MODESA)
Rising Above the Gathering Storm: Engaging and Energizing Arkansans for a Brighter Economic Future: Executive Summary
Report of the Task Force for the Creation of Knowledge-Based Jobs
H. Access to Success: Increasing Arkansas’s
College Graduates Promotes Economic
Development
Appendixes
Appendixes may be found on accompanying CD.
October 31, 2008
Governor Mike BeebeMembers of the Arkansas General Assembly
Governor Beebe and Honorable Members:
It is with great pleasure that I present to you the findings and recommendations of the Arkansas Task Force for the 21st Century Economy. Since its inception, as required by Act 1024 of 2007, the members and staff of the Task Force have worked diligently to understand the emerging economic conditions of the 21st Century and their impacts upon Arkansas. The charge of the Task force was to:
• define the role and scope of economic development in Arkansas,
• define the programs and services needed for the state and its communities to be globally competitive within the role and scope of 21st Century economic development,
• determine the advisability of removal of the constitutional prohibition on state equity investments in private enterprise by economic development agencies; and,
• study the organizational structure necessary for an efficient and effective 21st Century state economic development system.
ForewordDianne Lamberth, Chair
I would like to compliment you, the Governor and the Legislature, for your vision in seeing the need to identify the challenges and opportunities of the 21st Century Economy and then to prepare our state to be competitive within it. I also want to express my appreciation for the expertise that was assembled on this task force by your appointments. My thanks go to all of the members of the Task Force for their spirited conversation and debate, their many long hours of dedicated work, and their commitment to this project. The Task Force members are:
Appointed by the GovernorDianne Lamberth, Batesville, ChairJudy Adams, ForemanGuy Fenter, CharlestonBill Ferren, Pine BluffGene Hill, CamdenMike Maulden, Little Rock
Appointed by the Speaker of the House of RepresentativesJohn Barnes, Little RockMickey Pierce, StuttgartBrad Lacey, Conway
Appointed by the President Pro Tempore of the SenatePat Lea, BatesvilleClay Curtner, NewportSam Walls, Little Rock
Appointed by Accelerate ArkansasGary Campbell, Fort SmithJames Hendren, Little Rock
Representing the Arkansas Science and Technology AuthorityJohn Ahlen, President
Representing the Arkansas Development Finance AuthorityMac Dodson, PresidentGene Eagle, Vice President, Finance
Representing the Arkansas Economic Development CommissionMaria Haley, Executive DirectorRandy Zook, President and CEO, Arkansas State Chamber of Commerce and Associated Industries of Arkansas
Representing the Office of the GovernorChris Masingill, Little Rock, Director of Agency and External Affairs
This body of work would not have been possible without the dedicated Staff from AEDC, ADFA, the Governor’s Office and Institute for Economic Advancement at UALR They have labored tirelessly to provide us with the research and support we needed and to put together this final document. I would like to thank them for their quality work and keeping us on schedule:
Arkansas Economic Development CommissionLisa Cogbill, Communications Specialist
Office of the GovernorValerie Hendrix, Administrative AssistantAmanda Richardson, Administrative Assistant
UALR Institute for Economic AdvancementJames L. Youngquist, DirectorTeresa A. McLendon, Senior Research SpecialistRandall G. Wright, Associate DirectorTonya G. Hass, Assistant Research Extension SpecialistMichael L. Gerfen, Coordinator, Workplace Skills Enhancement ProgramJan L. Gibson, Business ManagerVaughan S. Wingfield, Associate Research SpecialistSusan M. Jackson, Desktop Publisher
Our work could not have been completed without the participation of dozens of representatives from communities and organizations around the state who presented us with information about issues and gave us their insights about programs and institutions that are successfully leading us into the future.
I would like to thank you for the opportunity to be of service to Arkansas, and look forward to seeing our recommendations help us to build an economy bright with the promise of prosperity.
Sincerely,
Dianne Lamberth, Chair
Between 1950 and 2000, the State of Arkansas took steps to move its
economy from an agriculture base to a manufacturing base by creat-
ing the agencies, programs, and incentives needed to attract manu-
facturing companies to Arkansas. The strategies that worked then
are no longer eff ective in providing the jobs and incomes we need to
support the people of Arkansas. We exist in a global, highly competi-
tive economy of instantaneous communications and rapid change.
Businesses that are to grow in today’s highly competitive environ-
ment demand a more highly skilled and educated workforce than
in the past, as well as a physical and human resource infrastructure
that is more advanced than the 20th Century infrastructure.
The Task Force for the 21st Century Economy was established by the
86th General Assembly of Arkansas to study the role and scope of
economic development in the 21st Century in Arkansas, and to iden-
tify the programs and services needed for continued development
in Arkansas. Additional objectives mandated to the Task Force were
to examine the constitutional prohibition on state equity invest-
ments and the current structure of the state’s economic develop-
ment agencies in light of the needs of a 21st Century Economy.
Role & Scope of Economic Development
Economic development is influenced by—and affects—nearly every
aspect of life in Arkansas. The Task Force identified nine roles of eco-
nomic development, and during its many months of work, developed
recommendations for changes in policies and strategies for each role,
and each scope within. The highest priority recommendations of the
Task Force for role and scope of economic development are described
on pages 11-201, and are listed on page 2:
1 A complete list of all role, scope, and strategy statements of the Task Force is found in Appendix C.
Executive
Summary:Recommendations
of the Task Force
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Role Recommendation K-12 education: Enhance science, technology, engineering, and mathematics (STEM)
educator talent by providing salary enhancements for Nationally Board Certifi ed math and science teachers as an economic development investment.
Phase out the number of students that opt out over the next six years by strongly encouraging school districts to adopt curriculum models that will eventually make opting out unnecessary.
Post-secondary education: Enhance incentives to encourage students to go into STEM four-year degree programs, including secondary math and science education.
Workforce education: Review and coordinate the existing workforce training programs to support the Arkansas Economic Development Commission’s (AEDC’s) targeted industries with an emphasis on best practices and support of the state’s strategic economic development initiatives.
Education Adopt the recommendations of the Task Force on Higher Education Remediation, Retention, and Graduation.
Pass a constitutional amendment to Amendments 60 and 65 of the Arkansas Constitution that would eliminate the interest rate caps for the Arkansas Student Loan Authority (ASLA).
Research and development: Expand the job-creating research and development capabilities of our universities through sustained state investment in research infrastructure and science and engineering talent.
Entrepreneurship: Develop an economics and entrepreneurship curriculum appropriate for grades K-16, including classes in personal fi nance.
Risk capital: Increase the availability of risk capital for state supported investment in early stage technology start-ups.
Existing business innovation: Expand research and development (R&D) incentives for industry; fi nancially support business retention and expansion activities through AEDC’s existing Business Retention and Expansion program, the Arkansas Science and Technology Authority’s (ASTA’s) Arkansas Manufacturing Solutions, and a variety of Arkansas Development Finance Authority (ADFA) programs; and increase incentives for existing businesses to modernize their processes through R&D and modernization of their equipment.
Infrastructure: Create a 21st Century cyberinfrastructure.
Economic development activities: Make Arkansas globally competitive in business and industry recruitment.
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Programs and Services
The Task Force was charged with studying
“the programs and services needed for the
state and its communities to be globally
competitive within the role and scope of
21st economic development.” As the Task
Force identified its priority strategies,
the role, scope and strategies became
the framework within which a subset of
the economic development programs
emerged as particularly relevant in the
near term to global competition and the
scope of 21st economic development.
The Task Force recommends that the
following 26 programs, initiatives,
and constitutional issues be given
priority consideration in the near-term
as being key to competitiveness and
contributing to economic development
in the 21st Century Economy.
The 26 programs are:
Education Programs
STEM Teacher Fund
STEM Scholarships
Workforce Training Programs
SMART Core
Higher Education Remediation, Retention, and Graduation
Programs
Usury Laws (Amendments 60, 65)
Research and Development
Arkansas Research Alliance
Arkansas Research Matching Fund
Endowed Chairs
Entrepreneurship
Entrepreneurship Curriculum
Risk Capital
Phase Zero SBIR
Product Development
Risk Capital Matching Fund
Equity Investor Tax Credits
Seed Capital Investment Fund
Existing Business Innovation
R&D Tax Credits
Applied Research Tax Credit
University Research Tax Credits
Infrastructure
Connect Arkansas
Broadband Applications
High Performance Computing
Optical Networking
Direct Economic Development
Quick Action Closing Fund
Advertising and Marketing
Dedicated Funding
Super Project Funding (Amendment 82)
Usury Laws (Amendments 60, 65)
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The process used to identify the 26 programs previously listed was
much less ambitious than thoroughly reviewing all of the economic
development programs to determine which programs contribute
to economic development in the 21st Century Economy and which
programs should be expanded, reduced or eliminated. This more
detailed examination was not feasible within the restricted timeframe
allotted to the Task Force.
The Task Force recommends that another task force be created to thoroughly review all the economic development programs of the state of Arkansas to determine which programs contribute to economic development in the 21st Century Economy, and which programs should be expanded, reduced, or eliminated.
State Equity Investments
The Task Force was asked to answer the question of whether
Arkansas should amend its constitutional prohibition on state equity
investments in private sector firms. A discussion of this issue may
be found on pp. 27-30. In response to this query, the Task Force
recommendation is as follows:
For the purpose of attracting and growing its own high technology and knowledge-based businesses to Arkansas it is advisable to remove the constitutional prohibition on state equity investments in private enterprise by economic development agencies. Further, the state should be authorized to receive, in exchange for its equity investments, stock or other securities that reflect a right to share in the growth and profits of such technology-based companies. It is also recommended that the funding shall be in the manner as provided by the General Assembly, which shall also provide for funding and implementation.
Organizational Structure
The Task Force was mandated to study the organizational structure
necessary for an efficient and effective 21st Century state economic
development system. In particular, the Task Force studied the three
primary economic development agencies in Arkansas: the Arkansas
Development Finance Authority (ADFA), the Arkansas Economic
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Development Commission (AEDC), and the Arkansas Science and
Technology Authority (ASTA). As a result of its investigation, the Task
Force makes the following recommendations:
Arkansas should create an economic development plan that has input from, and involves, all state economic development agencies.
The Governor’s Work Force Cabinet should study the consolidation of workforce development activities where possible and provide closer linkages with state economic development agencies.
A web portal should be designed as the primary starting point for all clients and interested parties wanting to research starting, locating, or expanding a business. All state services, programs, and incentives that support economic development, and other relevant private and nonprofit resources, should be linked from there.
Resources should be dedicated to further study the structure and effectiveness of the state’s economic development organizations because economic development is ever changing and the continuing review will provide information about 21st Century demands on the organizations.
ADFA, AEDC, and ASTA should colocate their operations.
The Arkansas State Chamber of Commerce should review Oklahoma’s Business Round Table concept and consider creating a similar structure tailored to fit the needs of Arkansas.
Arkansas should create a dedicated revenue stream for funding 21st Century businesses development.
Funding for AEDC and ASTA should be appropriated to accomplish the Task Force recommendations.
The budget for ADFA should be increased to accomplish the Task Force recommendations.
These are the principle recommendations of the Task Force.
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Other Issues for Consideration
In addition to these topics, the Task Force considered and discussed a
variety of issues that may impact economic development in the 21st
Century. Although formal recommendations about these issues were
not developed for them, they bear mention. They are:
• The special opportunity that exists for the development
of policies related to energy production and
consumption, and “green” and sustainable industries.
• The effect of Arkansas’s current usury
law on economic development.
• The special challenge that exists regarding Arkansas’s
physical infrastructure, especially in creating a
21st Century infrastructure while maintaining
and expanding our current infrastructure.
• The balance of funding for marketing and advertising
expenditures by state development agencies, given the
types of jobs that will enhance our 21st Century Economy.
The challenges that face Arkansas in the 21st Century are considerable,
but not insurmountable. The Task Force believes that the way to get to
a thriving 21st Century Economy is to adopt all the recommendations
described herein. It is important to understand that we will not reach
our goals by going halfway. All of the recommended roles, scopes,
programs, services, and changes in structure and Constitutional
prohibitions are essential elements of a 21st Century Economy.
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F i n d i n g s a n d R e c o m m e n d a t i o n s o f t h e T a s k F o r c e f o r t h e 2 1 s t C e n t u r y E c o n o m y
The 86th General Assembly of the State of
Arkansas in its Regular Session of Session of 2007
through Act 1024 established The Task Force for
the Twenty-First Century Economy (21st Century
Task Force). (Act 1024 may be found in Appendix B.)
Mission and Purpose
The Mission and Purpose given to the 21st Cen-
tury Task Force is to:
1. Define the role and scope of economic
development in Arkansas.
2. Define the programs and services
needed for the state and its communities
to be globally competitive within
the role and scope of 21st Century
economic development.
3. Determine the advisability of removal of
the constitutional prohibition on state
equity investments in private enterprise
by economic development agencies; and,
4. Study the organizational structure
necessary for an efficient and
effective 21st Century state
economic development system.
Task Force Membership and Staff
The 21st Century Task Force consists of 17
members. Members have been appointed by Gov-
ernor Mike Beebe, Speaker of the House Benny C.
Petrus, and President Pro Tempore of the Senate
Jack Critcher. Accelerate Arkansas nominated two
of its members with the approval of the Governor.
The Executive Director of the Arkansas Economic
Development Commission (AEDC) or her desig-
nee, the President of the Arkansas Development
Finance Authority (ADFA) or his designee, and the
President of the Arkansas Science and Technology
Authority (ASTA) or his designee serve on the Task
Force ex-officio. Governor Beebe appointed Dianne
Lamberth of Batesville as Chair. The members are:
GovernorJudy Adams, Foreman
Guy Fenter, Charleston
Bill Ferren, Pine Bluff
Gene Hill, Camden
Mike Maulden, Little Rock
Speaker of the HouseJohn Barnes, Little Rock
Mickey Pierce, Stuttgart
Brad Lacey, Conway
President Pro Tempore of the SenatePat Lea, Batesville
Clay Curtner, Newport
Sam Walls, Little Rock
Accelerate ArkansasGary Campbell, Fort Smith
James Hendren, Little Rock
Arkansas Science and Technology AuthorityJohn Ahlen, President
Arkansas Development Finance AuthorityMac Dodson, President
Gene Eagle, Vice President, Finance
Arkansas Economic Development CommissionMaria Haley, Executive Director
Randy Zook, Deputy Director, Administration
and Finance
Morris Jenkins, Division Director, Strategic
Planning and Legislative Affairs
Introduction
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Staff
The staff for the 21st Century Task Force is
led by Chris Masingill, Director of Agency
and External Affairs for Governor Beebe. Lisa
Cogbill of the Arkansas Economic Development
Commission provided administrative and
logistics assistance to the Task Force. James
Youngquist, Teresa McLendon, Randall Wright,
Michael Gerfen, Tonya Hass, Jan Gibson,
Vaughan Wingfield, and Susan Jackson of
the Institute for Economic Advancement
at the University of Arkansas at Little Rock
provided facilitation, work program design,
research, and other assistance as needed to
the Task Force and its work committees.
As reported in its Interim Report issued
July 31, 2008, the Task Force began its work by
holding work sessions to learn about the missions,
organizations, and structures of the Arkansas
Development Finance Authority, the Arkansas
Economic Development Commission, and the
Arkansas Science and Technology Authority. It also
heard presentations from Accelerate Arkansas, the
Departments of Education and Higher Education,
and Innovate Arkansas.
Following the initial work sessions, the Task
Force traveled to eight communities in Arkansas
to hear presentations about local and regional
economic development issues and innovative
solutions for the 21st Century economy.
Specifically, the Task Force met in Batesville,
Jonesboro, Helena-West Helena, El Dorado, North
Little Rock, Texarkana, Fort Smith, and Rogers.
During these meetings, Task Force members heard
16 presentations and spoke with representatives
of 33 communities around the state. Presentations
delivered to the Task Force at these meetings
are described in the Interim Report of the Task
Force, which may be found in Appendix A. Copies
of presentations delivered to the Task Force
and minutes from all Task Force meetings are in
Appendix E.
The Task Force gained important insights
during these meetings by listening to community
and economic development leaders explain their
approaches to the 21st Century Economy. Many of
these approaches are discussed in the part of this
report that addresses Role and Scope of Economic
Development.
At the conclusion of the community meetings,
the Task Force held a series of discussions during
23 meetings to analyze the information they
had received and develop its recommendations,
expending more than 1,000 man hours of
work. This report details the findings and
recommendations of the Task Force, in response to
its four charges from the Legislature in Act 1024.
The 21st Century Economy
In its research on the 21st Century Economy,
Accelerate Arkansas found a helpful comparison
between the characteristics of the “Old” (20th
Century) and the “New” (21st Century) economies.
It appears in Figure 1.
The ability to develop a competitive 21st
Century Economy will only be possible where the
culture values character, a strong work ethic, and
educational attainment and where citizens influ-
ence community, regional, and state investments in
the public goods and services needed to sustain a
competitive economic environment. The Task Force
identified some of the shifting conditions of the
21st Century Economy as:
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1. Globalization of the economy;
2. Support of knowledge-based growth;
3. Rapid changes in production processes, energy resources, and water supply propelled by risk, innovation, and technology;
4. Local and regional policies, investments, and institutions that shape knowledge-based development around existing, new, and emerging clusters of economic activity;
5. A distinctive quality of place that is essential for attracting and maintaining the talent needed for knowledge-based growth; and
6. Robust broadband connectivity that provides access to high-performance computing and communications.2
Businesses that are to grow in today’s highly com-petitive environment demand a more highly skilled and educated workforce than in the past, as well as a physical and human resource infrastructure that is more advanced than the 20th Century infrastructure.
Figure 1Keys to the Old and New Economies
ECONOMY-WIDE CHARACTERISTICS: OLD ECONOMY NEW ECONOMY
Markets Stable Dynamic
Scope of Competition National Global
Organizational Form Hierarchical, Bureaucratic Networked, Entrepreneurial
Potential Geographic Mobility of Business Low High
Competition Between Regions Low High
INDUSTRY:
Organization of Production Mass Production Flexible Production
Key Factor of Production Capital/Labor Innovation/Knowledge
Key Technology Driver Mechanization Digitization
Source of Competitive Advantage Lowering Cost Through Economies of Scale Innovation, Quality, Time to Market, & Cost
Importance of Research/Innovation Moderate High
Relations with Other Firms Go it Alone Alliances and Collaboration
WORKFORCE:
Principal Policy Goal Full Employment Higher Wages and Incomes
Skills Job-specifi c Skills Broad Skills, Cross-Training
Requisite Education A Skill Lifelong Learning
Labor-Management Relations Adversarial Collaborative
Nature of Employment Stable Marked by Risk and Opportunity
GOVERNMENT:
Business-Government Relations Impose Requirements Assist Firms’ Innovation and Growth
Regulation Command and Control Market Tools, Flexibility
Source: Atkinson, Robert D., Randolph H. Court, and Joseph M. Ward. THE STATE NEW ECONOMY INDEX: Benchmarking Economic Transfor-mation in the States. Progressive Policy Institute, July 1999, p. 5.
2 Task Force for the 21st Century. Interim Report, July 2008.
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Since agriculture and manufacturing provide
a base for our current economy, they must receive
support in raising their global competitiveness.
Increasingly often, this is done in these industries
by adopting higher levels of technology and hiring
a more educated and skilled workforce. Along with
these changes in manufacturing and agriculture,
the lion’s share of the industries that are growing
today are those which have a high level of tech-
nology, and employ a higher proportion of highly
skilled and educated workers than other indus-
tries—knowledge-based industries.
Knowledge-based growth and development
reflect a highly skilled/educated workforce capable
of responding to economic and technological
change in the medium and long term. The market
recognizes and rewards this with improved earning
potential.
As the Task Force stated in its Interim Report,
“for Arkansas’s economy—and its people—to
flourish in the 21st Century, the role and scope
of economic development must be adapted to
the current circumstances, and the programs and
services provided must enhance the global com-
petitiveness of the state and the communities that
lie within.”
The Task Force gained important insights by
traveling to communities around the state and
listening to community and economic develop-
ment leaders explain their approaches to the 21st
Century Economy. Many of these approaches are
discussed in the part of this report that addresses
Role and Scope of Economic Development.
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Although economic development occurs as a
result of investments made by the private sector,
there are many areas of state government policy
that can influence the rate and magnitude of
economic development. Many of these deal with
policy impacts on conditions present in the state
and improve the attractiveness of the area to inves-
tors. Others are policies that may more directly
impact an individual investment decision, such as
a tax incentive to act a certain way, or a program
that assists existing businesses in improving their
competitiveness in their markets.
Some of the policies may impact economic de-
velopment in a relatively short period of time. The
effects of others may not be felt for years, or even
decades. Nevertheless they all play some role in
changing the landscape of Arkansas, thus changing
the state’s potential for economic development.
The Task Force was charged with studying “The
role and scope of economic development in Ar-
kansas in the twenty-first century.” The Task Force
defined the areas of state policy that play a part in
the economic development of Arkansas, and within
each policy, the specific subsets of the policies that
most directly affect economic development in the
21st Century. During its deliberations, Task Force
members identified nine policy areas that play
roles in economic development.
The scopes of state policies can have an im-
pact on economic development in the future and
are many and varied; the roles and scopes recom-
mended by the Task Force are listed in Appendix
A of this document. The Task Force understands,
however, that state policies require resources to
implement—resources that are scarce in Arkansas.
For that reason, the Task Force has prioritized the
recommended scopes of action by the state. After
much discussion, the Task Force identified strate-
gies that can be used to specify, influence, and
better implement economic development policies
within their respective role and scope.
The roles and scopes identified by the Task
Force that can be employed as most crucial to our
success are described in the following pages, along
with the Task Force’s recommended strategies.
Education
Education was a topic of discussion at virtually
every meeting of the Task Force and in each com-
munity that the Task Force visited. The expert pre-
sentations, community discussions, and the experi-
ence brought to the Task Force by its members all
underscore that in the 21st Century, more than ever
before, success will be determined by the presence
of a skilled, knowledgeable, highly educated, and
highly trained talent base.
The increasing level of technology requires
firms to employ large numbers of scientists, mathe-
maticians, engineers, computer programmers, and
technologists. Research and development activities
are carried on by highly educated scientists. Entre-
preneurship requires creativity, a thorough un-
derstanding of the marketplace as well as specific
product-related knowledge. New technologies are
entering the market so quickly that most people
beginning their careers in the 21st Century will
work in many different jobs, for many different em-
ployers, and in several different occupations over
their lifetime. This requires the ability to grasp new
concepts quickly and engage in a lifelong process
of learning.
Role and Scope of Economic Development
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Specifi cally, the Task Force for the 21st Century
Economy examined the roles of K-12 education, post-
secondary education, and workforce education.
K-12 Education
High quality K-12 education is essential for our
children if they are to survive and thrive in a 21st
Century world, with its global, knowledge-based
economy. While recognizing that the primary re-
sponsibility for educating our youth lies with their
parents, the state’s K-12 education policies play a
distinct role in economic development. K-12 educa-
tion provides the basis for our future workforce,
and can provide students with the skills and char-
acter they will need to continue learning through-
out their lives. At this level of education children
can learn values that will help them to excel in the
workplace: discipline, determination, curiosity, co-
operation, competitiveness, prudence, judgment,
and problem solving.
In a special way, the subjects of science, tech-
nology, engineering, and mathematics (STEM) play
a major role in the 21st Century Economy. The com-
petitiveness of the American workforce in the 21st
Century will be in a great way dependent upon
the number of workers with high STEM skill levels,
and the comfort level of all workers in dealing with
STEM-related tasks. This knowledge comes from
being taught by teachers who are themselves com-
fortable with, and skilled in, STEM subjects.
The highest priority recommendation of the
Task Force is:
Enhance science, technology, engineering, and mathematics (STEM)
educator talent by providing salary enhancements for Nationally Board
Certified math and science teachers as an economic development investment.
The recommended strategy is to provide and
fund a program of economic development incen-
tive grants for the best STEM teachers in order to
encourage them to enter the class room and to stay
in the classroom, including better pay for STEM
teachers. This can be achieved by investing $1 mil-
lion in a fund for a program managed by AEDC that
would reward nationally certified STEM teachers
with an additional payment of $5,000 per year.
Additionally, the Task Force is concerned
that every student receive the rigorous educa-
tion they will need to succeed in the 21st Cen-
tury, which will not happen when students are
allowed to “opt out” of STEM coursework
With this in mind, the Task Force
recommendation is to:
Phase out the number of students that opt out of the Smart Core curriculum
over the next six years by strongly encouraging school districts to adopt
curriculum models that will eventually make opting out unnecessary.
Post-secondary Education
Arkansas’s policies regarding post-secondary ed-ucation play an important role in economic develop-ment by making the high quality education needed for 21st Century jobs available at aff ordable costs to state residents. It is in the colleges and universities that students fi nish their preparation for careers in science, technology, mathematics, and engineering: the most needed skills in the 21st Century workforce. In another link to economic development, the educa-tion of K-12 teachers through the post-secondary system provides the state with resources needed to educate children for the jobs of the future. As previ-ously stated, the Task Force endorses the recom-mendations of the Task Force on Higher Education Remediation, Retention, and Graduation.
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The highest priority recommendation of the
Task Force is:
Enhance incentives to encourage students to go into STEM four-year
degree programs, including secondary math and science education.
The recommended strategy to enhance STEM
education incentives is to encourage students to
go into STEM four-year degree programs by creat-
ing a STEM scholarship program that offers assis-
tance that is hard to get but easy to keep. This type
of scholarship program will encourage students
to attempt difficult college programs and stay in
them until graduation. The program would cost $5
million to fund, can be managed by the Arkansas
Department of Higher Education, and would pro-
vide up to $5,000 per year per student.
Workforce Education
In the 21st Century Economy, workers with tech-
nical training are needed to staff a large proportion
of 21st Century jobs. A high school diploma today is
simply not enough education to provide employers
with the level of skill needed to perform many of
the jobs available. The state’s workforce education
policies provide a role in economic development by
providing much of the skilled technical workforce
needed to staff 21st Century companies.
The highest priority recommendation of the
Task Force is:
Review and coordinate the existing workforce training programs to support the Arkansas Economic Development
Commission’s (AEDC’s) targeted industries with an emphasis on best practices and support of the state’s strategic economic
development initiatives.
(Note that this recommendation is similar to
the one found on page 31 referring to a study of
consolidation of workforce training programs by
the Governor’s Workforce Cabinet.)
The recommended strategy is to review and co-
ordinate the existing workforce training programs
to support AEDC’s targeted industries, as follows.
• Study successful workforce training models
presently in place at the University of
Arkansas at Fort Smith and Mid-South
Community College in West Memphis
to determine if these programs can be
replicated across the state; provide existing
workforce centers with adequate support
to sustain and expand their mission.
• Strengthen current P-16 efforts
by providing proven models for
instructional alignment in each grade
level in the areas of mathematics,
literacy, science, and history in support
of the core curriculum requirements.
• Establish a system for workforce
training that allows students to enter
the system while in high school
and proceed, seamlessly, toward a
proficiency in workforce training
or a baccalaureate degree.
• Students will receive concurrent college
credit while participating in this career
pathway and may take advantage
of multiple entry and exit points as
they work toward being adequately
prepared with rigor for the workforce
or the baccalaureate degree.
• The system will require a phased-
in requirement that all state funded
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vocational-technical programs affiliate
with a two-year or four-year institution of
higher education to provide for regional
workforce training centers available
to students from all high schools in
the region, and special funding will be
provided to these programs to train
workers for high-demand occupations.
• Course offerings will be supportive of
the strategic initiatives established by
the Arkansas Economic Development
Commission, which identifies the needs of
the state in each region. Priority funding
will be assigned to these courses.
• All high school juniors and seniors
will have the opportunity to earn
early college credit by providing
adequate funding for secondary
technical centers that are affiliated
with a program of higher education.
• Performance-based funding will be
established for regional secondary centers
in the areas of concurrent credit, national
credentials, and degree attainment.
• College participation will be increased
by providing incentives for students
who are not likely to participate. This
will be accomplished by providing
needs-based grants for low income and
minority students: by providing some
financial assistance for adult students
and through innovative course delivery.
• We should create a statewide common
course numbering system and a common
transfer system for use by all institutions,
based on a common curriculum.
Other Education Recommendations
The education and training policies of Arkansas
are so critical to the 21st Century Economy that
they must be examined in depth because every
facet of education and training policy will influence
our future success or failure. Moreover, the ability
of our youth to obtain advanced training past high
school, particularly college degrees, is conditioned
upon their preparation, motivation, and financial
resources available to them.
Arkansas communities recognize the impor-
tance of education to their local and regional
economies, and many have taken steps to empha-
size and encourage education by:
• Providing scholarships to high
school graduates who demonstrate
good work skills in high school;
• Strengthening the linkages between
local high schools and regional training
centers and college campuses;
• Establishing best practices for
math and science education;
• Connecting higher education resources
to the local economy; and
• Emphasizing university research
and student entrepreneurship.
In addition to communities, the Task Force
considered the work of the Task Force on Higher
Education Remediation, Retention, and Graduation.
The Task Force endorses the recommendations described in their
recent report, Access to Success: Increasing Arkansas’s College Graduates
Promotes Economic Development.
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To provide sufficient loans to students entering college-level
training programs, the Task Force recommends passage of a constitutional
amendment to Amendments 60 and 65 of the Arkansas Constitution that would eliminate the interest
rate caps for the Arkansas Student Loan Authority (ASLA).
More about this can be found in the
section titled Afterword: Additional Issues for
Consideration.
Research and Development
Research and development are the source
of advances in knowledge and technology and
one of the drivers of change in the 21st Century
marketplace. Institutions performing these
activities employ highly educated and skilled
scientists and engineers, who themselves can
become a magnet for the location of business
operations involved with innovation and new
product development. Research universities also
prepare the types of employees desired by high-
tech and knowledge-based firms. Advances made
in the research and development process can
become the basis for new product and service
development, and creation of new businesses,
and assist our firms in competing in the global
economy. For these reasons, a substantive level
of research and development activities in a
state can provide a platform for a healthy 21st
Century Economy. By encouraging research and
development, Arkansas’s policies play a significant
role in economic development. These policies also
provide a signal about our intentions and interest
in advancing technology to firms looking for
location alternatives.
The highest priority recommendation of the
Task Force is:
Expand the job-creating research and development capabilities of our universities through sustained state
investment in research infrastructure and science and engineering talent.
The recommended strategy to expand the re-
search and development capabilities of our univer-
sities is to:
• Create a fund to implement
recommendations that will be coming from
the Arkansas Research Alliance, and provide
sufficient funding for implementation.
• Sufficiently fund programs to make
matches required for federal and other
non-state government grants.
• Focus university research on
applied, job-creating research.
• Recruit research “superstars,”
groom research faculty, and
support new research faculty.
• Build relationships between research
universities and undergraduate
institutions, to make facilities and
equipment available to faculty.
Entrepreneurship
Entrepreneurship—the formation of new
businesses by individuals and groups to take new
products and services to the market—provides
extraordinary opportunities for Arkansas in the
21st Century. The Task Force heard that the state’s
entrepreneurial spirit and success illustrate that
communities that embrace entrepreneurship can
grow their own knowledge-based companies,
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jobs, wealth, and economic well being. According
to the U.S. Small Business Administration, in 2006
there were more than 25 million small businesses
in the U.S.; these firms accounted for over half of
the country’s private employment and generated
60 to 80 percent of the net new jobs every year for
the past decade. 3 Entrepreneurs tend to have roots
in the states where their businesses are created,
and are less likely than recruited firms to leave for
“greener pastures” elsewhere. Large firms may also
have greater difficulty reacting to the rapid chang-
es in technology and markets that characterize the
21st Century Economy.
At the heart of every small business is an
entrepreneur—a person who saw an opportunity
in the market, who was courageous and adventure-
some enough to strike out on his own rather than
cling to the security of employment in an existing
business, who took the risk necessary and invested
dollars and sweat and skills to build something
of his own. Entrepreneurship policies of Arkansas
affect the rate of new business formation through
their impacts on Arkansans’ attitudes about busi-
ness creation, and their knowledge about how our
economy, our businesses, and their own personal
financial dealings work.
The highest priority recommendation of the
Task Force is:
Develop an economics and entrepreneurship curriculum
appropriate for grades K-16, including classes in personal finance.
Risk Capital
Every business depends upon the existence of
risk capital in order to grow. The more risk involved
in starting or growing the business, the more dif-
3 http://www.score.org/small_biz_stats.html
ficult and costly it is for business owners to acquire
sufficient capital. The most difficult risk capital
to acquire from the private sector is capital for
early stage business start-up activities, the actions
that must be performed to take a new product or
service from the original invention to its first sales
in the market. The state plays a role in economic
development by providing access to the highest-
risk capital that would otherwise be unavailable
through the private sector. Risk capital is even
more crucial for technology-based businesses,
which may have large capital demands early in the
development process of bringing a new product or
service from the initial invention to initial sales in
the marketplace.
The highest priority recommendation of the
Task Force is:
Increase the availability of risk capital for state supported investment in early stage technology start-ups.
The recommended strategy to increase the
availability of risk capital is to:
• Support Phase Zero Small Business
Innovation Research (SBIR) (to attract
Federal SBIR), by providing proposal
writing assistance and increased funding
in support of SBIR grant requests for
start-up technology companies.
• Increase funding for Product
Development and SBIR Bridging.
• Match Risk Capital Investment Funds.
• Offer Investor Investment Tax Credits.
The recommended strategy to increase state
supported investment in early stage technology
start-ups is to:
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• Fund the existing Risk Capital Matching Fund.
• Expand funding of the Seed Capital
Investment Fund.
• Encourage Arkansas state retirement
funds to invest in nonpublically traded
Arkansas technology companies.
• Eliminate the cap on the state incentive
tax credits for investment in start-up
technology companies and angel funds.
Existing Business Innovation
Businesses operating in Arkansas provide the
foundation for our future economy, providing jobs
for Arkansans and increasing the wealth in the
state. Policies that support innovation in existing
businesses impact our economic development by
providing them with opportunities to increase their
competitiveness and profitability, increasing the
probability that they will thrive and grow in the
long run. By their nature as drivers of business de-
velopment, the full scope of policies that encour-
age innovation among existing business will affect
economic development in the 21st Century.
The highest priority recommendation of the
Task Force is:
Expand research and development (R&D) incentives for industry; fi nancially support business retention and expansion
activities through AEDC’s existing Business Retention and Expansion program, the Arkansas Science and
Technology Authority’s (ASTA’s) Arkansas Manufacturing Solutions, and a variety of Arkansas Development Finance Authority (ADFA) programs; and increase
incentives for existing businesses to modernize their processes through R&D and modernization of their equipment.
The recommended strategy to expand the
research and development (R&D) incentives for
industry is to:
• Decrease the equity investment
requirement necessary for the R&D tax
credit from $400,000 to $200,000.
• Make the Applied Tax Credit transferable.
• Make the University Tax
Credits transferable
• Expand the Research & Development
tax credit to include the transportation
and installation costs of equipment.
Infrastructure
Businesses do not exist in a vacuum; they can
only operate in an environment that provides
them with the physical infrastructure needed
to get their products and services to market:
transportation, water, wastewater and other
waste disposal, electricity and natural gas,
telecommunications, and other physical assets
external to the firm. The state’s infrastructure
policies can determine the viability of the state
as a location for business, thus affecting our
future economic development. In addition to the
traditional infrastructure, 21st Century businesses
are highly dependent upon the existence
and reliability of high speed, high bandwidth
telecommunications—“cyberinfrastructure.” The
Task Force heard in communities across the state
that broadband connectivity is an advantage in
global economic competitiveness and that the lack
of affordable broadband is a barrier to economic
growth. Any area of the state missing an element
of the infrastructure will be unable to develop
economically in the 21st Century.
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The highest priority recommendation of the
Task Force is:
Create a 21st Centurycyberinfrastructure.
The recommended strategies to create a 21st
Century telecommunications cyberinfrastructure
are to:
• Develop rural broadband connectivity
to all feasible locations in Arkansas.
• Develop broadband applications.
• Support high performance computing.
• Develop optical networks.
Direct Economic Development
Policies
A variety of state policies are directed at spe-
cific economic development activities, including
marketing and promotion of the state as a location
for businesses, financial incentives for businesses
locating in Arkansas, providing technical assis-
tance to businesses, and providing assistance to
regions of Arkansas in creating the kind of environ-
ment in which businesses thrive and the quality
of place where talented people want to live. The
21st Century is characterized by a global economy
in which businesses may extend their operations
over many states, countries, and even continents,
and can choose from thousands of communities
in which to locate. Arkansas’s economic success
will depend on strategic assessments of the state’s
business mix and, if Arkansas’s entrepreneurs and
existing businesses leave important gaps, then
Arkansas must be a suitable and competitive
environment for the operations of new companies
attracted to the state.
The highest priority recommendation of the
Task Force is:
Make Arkansas globallycompetitive in business and
industry recruitment.
The recommended strategies to make Arkan-
sas globally competitive in business and industry
recruitment are to:
• Expand funding of the state
Quick Action Closing Fund.
• Increase agency funding for advertising
and marketing to be competitive with
neighboring states. (See Afterword:
Additional Issues for Consideration for
a relative implementation method.)
• Provide funding for economic development
from dedicated revenues, rather than
the general improvement fund.
• Expand Amendment 82 to lower the
threshold of firm size that would
qualify for funding assistance but
maintain the same rate of impact on
the economy as would larger firms.
• Pass a constitutional amendment to
Amendments 60, 62, and 65 of the Arkansas
Constitution that would eliminate the
interest rate caps for the state economic
development agencies and for the cities
and counties in Arkansas. (See Afterword:
Additional Issues for Consideration.)
In addition to the state strategies listed, the
Task Force heard about targeted local and regional
initiatives that (in addition to those listed previ-
ously in the discussion about role and scope) ap-
pear to be making a difference in the 21st Century
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Economy. These complementary local strategies
that make Arkansas communities more globally
competitive include:
• local sales tax options used for
economic development activities;
• efforts to improve or enhance
quality of place;
• longer-term strategic initiatives to
systematically move communities forward;
• efforts to strengthen local business
and industry as a way to keep them
globally competitive and retain and
grow them in the community; and
• encouraging participation in
the global economy.
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State government’s economic development
policies and investments are implemented through
the programs and services of agencies and instru-
mentalities of the state.
The Task Force was charged with studying “The
programs and services needed for the state and its
communities to be globally competitive within the
role and scope of 21st Century economic develop-
ment.”
The Task Force heard presentations from each
of the economic development entities represented
by ex officio members of the Task Force. The lead-
ership from the Arkansas Economic Development
Commission, Development Finance Authority, and
Science and Technology Authority made detailed
presentations to the Task Force about their respec-
tive operations, including many relevant programs
and services. The Task Force also discussed the role
and scope of education at all levels in 21st century
economic development.
The Task Force explored the possibility of thor-
oughly reviewing all the economic development
programs to determine which contributed to the
21st Century Economy, which – if any – had be-
come outdated, which might be considered for ex-
pansion, and where there may be opportunities for
new policies, programs, and services. This objective
seemed to the Task Force to be considerable, and
the time available to carry it out limited.
The Task Force initially invested its time in its
careful definition of the role and scope of econom-
ic development in Arkansas in the 21st Century; it
defined nine areas of state policy that most directly
affect economic development in the 21st Century.
These are reported in the previous section of this
report. In the context of the discussion about role
and scope, the Task Force identified strategies,
tactics, programs, and services.
As the Task Force identified its priority strate-
gies, the role, scope and strategies became the
framework within which a subset of the economic
development programs and relevant state consti-
tutional issues emerged as particularly relevant to
global competition and the scope of 21st Century
economic development. The Task Force believes
this methodology is tactically sound and reveals a
solid core of programs that are key to competitive-
ness and contribute to economic development in
the 21st Century Economy. In the following subsec-
tions of the report, which parallel those used previ-
ously to describe role and scope, the Task Force
restates its priorities and identifies the subset of
programs and services offering the highest poten-
tial “for the state and its communities to be glob-
ally competitive within the role and scope of 21st
Century economic development.” In the following,
“Description” summarizes a program or service;
“Entity” identifies the lead agency or instrumen-
tality of the state; and “Citation” references the
relevant Arkansas Code section.
The Task Force recommends that the following 26 programs,
initiatives, and constitutional issues be given priority consideration
in the near-term as being key to competitiveness and contributing
to economic development in the 21st Century Economy.
Programs & Services for the 21st Century Economy
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Education
K-12 Education
The highest priority scope of K-12 education policies recommended for Arkansas is to enhance STEM educator talent by providing salary enhancements for Nationally Board Certified math and science teachers as an economic development investment.
DESCRIPTION ENTITY CITATION/ACTION
An Act to promote economic development by creating a
science, technology, engineering, and math fund to increase
the state’s ability to compete for jobs in the 21st Century.
Arkansas Economic
Development Commission
Act 564 of 2007
An additional high priority scope of K-12 education policies recommended for Arkansas is to phase out the number of students that opt out of the Smart Core curriculum over the next six years by strongly encouraging school districts to adopt curriculum models that will eventually make opting out unnecessary.
DESCRIPTION ENTITY CITATION/ACTION
The SMART Core Curriculum Arkansas Department
of Education
Modify Existing Program
Post-secondary Education
The highest priority scope of post-secondary education policies recommended for Arkansas is to enhance incentives to encourage students to go into STEM four-year degree programs, including secondary math and science education.
DESCRIPTION ENTITY CITATION/ACTION
Create a STEM scholarship program that offers assistance
that is hard to get but easy to keep. This scholarship will not
penalize students who enroll in difficult degree programs,
encouraging them to stay in them until graduation.
Arkansas Department
of Higher Education
New Policy
Workforce Education
The highest priority scope of workforce education policies recommended for Arkansas is to review and coordinate the existing workforce training programs to support AEDC’s targeted industries with an emphasis on best practices and support of the state’s strategic economic development initiatives.
DESCRIPTION ENTITY CITATION/ACTION
Create an initiative to review and coordinate
existing workforce training programs to
support AEDC’s targeted industries.
Arkansas Economic
Development Commission
New Policy
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Other Education Recommendations
An additional high priority recommendation is to endorse the recommendations of the Task Force on Higher Education Remediation, Retention, and Graduation.
DESCRIPTION ENTITY CITATION/ACTION
Various educational efforts related to remediation,
retention, and graduation. Education Departments
Education Departments
The Task Force recommends passage of a constitutional amendment to Amendments 60 and 65 of the Arkansas Constitution that would eliminate the interest rate caps for the Arkansas Student Loan Authority (ASLA).
DESCRIPTION ENTITY CITATION/ACTION
Eliminate the interest rate caps for the
Arkansas Student Loan Authority
Arkansas Development
Finance Authority, Arkansas
Student Loan Authority
Constitutional Amendment
to Amendments 60 and 65
Research and Development
The highest priority scope of research and development policies recommended for Arkansas is to expand the job-creating research and development capabilities of our universities through sustained state investment research infrastructure and science and engineering talent.
DESCRIPTION ENTITY CITATION/ACTION
Fund the recommendations from the Arkansas
Research Alliance [Act 563 of 2007] through the
Research Infrastructure Fund administered by the
Arkansas Science and Technology Authority
Arkansas Science and
Technology Authority
15-3-301
19-6-500
Fund the recommendations from Accelerate Arkansas
for the Arkansas Research Matching Program.
Arkansas Science and
Technology Authority
15-3-201
Establish the Endowed Chairs Program and
fund the recommendations from the Arkansas
Research Alliance for endowed chairs.
Arkansas Research Alliance New Policy
Entrepreneurship
The highest priority scope of entrepreneurship policies recommended for Arkansas extends to the development of an economics and entrepreneurship curriculum appropriate for grades K-16, including classes in personal finance.
DESCRIPTION ENTITY CITATION/ACTION
Establish an economics and entrepreneurship curriculum New Policy
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Risk Capital
The highest priority scope of risk capital policies recommended for Arkansas is increasing the availability of risk capital for state supported investment in early stage technology start-ups.
DESCRIPTION ENTITY CITATION/ACTION
Support existing Phase Zero SBIR investments (to attract
Federal SBIR) for start-up technology companies.
Arkansas Science and
Technology Authority
15-3-109
Increase funding for the existing product
development and SBIR bridging program.
Arkansas Science and
Technology Authority
15-3-109
Match private risk capital investment funds by
financially supporting the existing Risk Capital
Matching Fund [Act 1025 of 2007].
Arkansas Development
Finance Authority
15-5-1601
Enhance existing investor investment tax credits
[Act 566 of 2007] for investments in start-up
technology companies and angel funds.
Arkansas Economic
Development Commission
15-4-3305 (f)
Expand funding of the Seed Capital Investment Fund. Arkansas Science and
Technology Authority
15-3-121
Existing Business Innovation
The highest priority scope of existing business innovation policies recommended for Arkansas includes expanding research and development (R&D) incentives for industry; fi nancially supporting business retention and expansion activities through AEDC’s existing Business Retention and Expansion program, ASTA’s Arkansas Manufacturing Solutions, and a variety of ADFA programs; and increasing incentives for existing industry to modernize their processes through R&D and modernization of their equipment.
DESCRIPTION ENTITY CITATION/ACTION
Enhance the existing research and
development (R&D) tax credit.
Arkansas Economic
Development Commission
15-4-2709 (b)(3)
Enhance the existing applied research tax credit. Arkansas Science and
Technology Authority
26-51-1102 or 26-51-1103
Enhance the existing university research R&D tax credit. Arkansas Economic
Development Commission
15-4-2708(a)
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Infrastructure
The highest priority scope of infrastructure policies recommended for Arkansas is the creation of a 21st Century cyberinfrastructure.
DESCRIPTION ENTITY CITATION/ACTION
Support the ongoing effort [Act 604 of 2007] to develop rural
broadband connectivity for all feasible locations in Arkansas.
Connect Arkansas 4-112-101
Support the development of broadband and
high performance computing applications.
Public Universities ---
Support public high performance computing infrastructure
as an investment in economic development.
Research Universities ---
Develop optical networks for research and education. Public Universities ---
Direct Economic Development Policies
The highest priority scope of economic development activity policies recommended for Arkansas is to make Arkansas globally competitive in business and industry recruitment.
DESCRIPTION ENTITY CITATION/ACTION
Expand funding of the state Quick Action Closing Fund. Arkansas Economic
Development Commission
Appropriation
Increase agency funding for advertising and marketing
to be competitive with neighboring states.
Arkansas Economic
Development Commission
Appropriation
Provide funding for 21st Century economic
development activities from dedicated revenues,
rather than from the general improvement fund.
Arkansas Economic
Development Commission
and Arkansas Science and
Technology Authority
Appropriation
Expand Amendment 82 to lower the threshold of firm size
that would qualify for funding assistance but maintain the
same rate of impact on the economy as would larger firms.
Arkansas Economic
Development Commission
and Arkansas Development
Finance Authority
Constitutional Issue
Eliminate the interest rate caps for the state
economic development agencies and for
the cities and counties in Arkansas.
Arkansas Development
Finance Authority,
Arkansas Economic
Development Commission,
and Arkansas Science and
Techology Authority
Constitutional Issue
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While the methodology is tactically sound, the
Task Force recognizes that its effort did not thor-
oughly review all of the economic development
programs. There is long-term value in assessing all
programs, but this strategic task was not feasible
within the limited timeframe allotted to the Task
Force. Therefore, the Task Force makes the follow-
ing recommendation.
The Task Force recommends that another task force be created to
thoroughly review all of the economic development programs of the state
of Arkansas to determine which programs contribute to economic development in the 21st Century
Economy, and which programs should be expanded, reduced, or eliminated.
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As Arkansas enters the 21st Century, it sees an
investment community in need of restructuring.
Statistics show that the most difficult time to ob-
tain funding is the early period between research
and development and product introduction. It is
during this critical time when start-up companies
most desperately need funding and yet find their
access to it most limited. This early stage is the
riskiest and private investors are reluctant to assist,
waiting instead until later stages of the company’s
development. As a result, states wishing to attract,
create, and grow knowledge-based businesses
need to restructure public investments and offer
incentives for private investments.
As it attempts to grow and attract high tech-
nology companies to the state, Arkansas operates
under constitutional restraints that prohibit it in
many ways from taking a more active role in eco-
nomic development. Arkansas’s constitution pro-
hibits the state, and its counties and cities, from
providing public funds to private interests, and
more specifically prohibits the state from securing
any equity investment in any private venture.
Because this type of early stage investment by
the state is high risk, it is reasonable that the state
receive part of the high return that may be avail-
able from a liquidity event for the company, rather
than just royalties or interest. This produces new
funds, not at taxpayer expense, to continue to ad-
vance other technology start-ups. In the long run,
the ability to secure a return for its investment will
allow the state to generate significant economic
development with high paying jobs and wealth
creation with profits from previous investments
in prior start-ups, thus lowering the overall cost of
economic development to the citizens of the state.
Other states have begun a variety of govern-
ment sponsored programs designed to attract
and grow its own knowledge-based, high technol-
ogy businesses. Most notably, our neighbor Okla-
homa recently elected to use equity investment
as a tool to provide seed capital for technology-
based firms and research oriented businesses.
North Carolina was able to secure such a signifi-
cant return on one of its investments that it was
able to fund a large rural section of the state with
broadband access, a goal of many of the south-
ern states, including Arkansas. North Carolina
has used a public/private cooperative investment
effort in the field of biotechnology that has been
quite successful. The North Carolina fund, like the
one in Oklahoma, is managed by a professional
group of investment managers. Ohio recently
amended its law to provide for a form of equity
investment to attract small businesses and tech-
nology start-up companies. California and Mas-
sachusetts have long used equity investment as a
successful means of attracting high-risk technol-
ogy companies to their states.
There is a relevant example in Arkansas that
bears attention. A description of the Seed Capital
Investment Program was made at the Septem-
ber 17, 2008 meeting of the Task Force. The Seed
Capital Investment Program was established in
1985 to help build the state’s economy from within
by retaining Arkansas technology-based start-up
firms that might otherwise have to leave the state
to find early-stage investments.
A Constitutional Issue: Arkansas as an
Equity Investor in 21st Century Firms
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The statutory language establishing the pro-
gram was artful. It placed the program at the Ar-
kansas Science and Technology Authority, an “in-
strumentality” of the state. The legislation spelled
out the programmatic use of funds in detail (ACA
15-3-121) that included a range of qualified securi-
ties the Authority’s board of directors could invest.
Qualified security includes equity investments.
Funding for the program was also unique. It
came from interest on the state’s invested daily
balance, which was not considered “tax revenue,”
and went into a revolving cash fund to be used for
investments. This funding was not seen as violat-
ing the constitution because case law had deter-
mined that nontax revenue used by an instrumen-
tality of the state could be used for investments in
qualified securities, including equity.
At the time (1985), there were numerous
predictions why such a structure would not work,
including: (1) it had never been done before; (2)
low public-sector salaries were too low to attract
talent; (3) no financial incentives existed for the
staff (which were under strict conflict of interest
provisions); (4) possible interference of political
influences; and (5) initial funding was too small to
sustain the effort. (The original recommendation
was for a $10 million fund, which was reduced to
$5 million; ultimately $1.8 million was appropri-
ated to the fund.)
After enactment, but before implementation,
the Arkansas Supreme Court handed down a deci-
sion that reversed the case law on which the eq-
uity investment authority was based. This removed
the possibility of equity investments but allowed
for investments in other qualified securities, such
as loans and royalties.
The Seed Capital Investment Program began
making loans in 1986. The current portfolio of
projects includes 7 loans to companies (valued at
$1.5 million), 5 royalty investments in companies
(valued at $1.2 million), and $1.3 million in the
state treasury for future investments. The total
value of the portfolio is $4.0 million. A total of $6.5
million has been invested and re-invested by the
fund since 1986.
Typically, a seed capital investment begins with
an application. If the application meets the criteria
for the program, the Authority’s staff requests a
business plan, which is required by the language
establishing the program. Staff due diligence
includes the review of the technology, market,
management, operations, and financial data. An in-
vestment memorandum summarizes the evaluation
and is presented to a committee of the Authority’s
board of directors, which has the option of making
an investment recommendation to the full board,
which must approve the investment.
One example of a seed capital investment is
the 1999 investment of $300,000 in the Ultima
Group of Hardy, Arkansas. The investment was
fully paid off after the company was purchased
by a larger firm in 2001. The investment showed a
return of $24,000.
The fund would not have lost further money
had equity investments been possible, but returns
could have been higher because a small number of
companies went through transitions where equity
participation would have increased returns.
There are several key safeguards that limit
the financial exposure of the state: the amount
of cash at risk is limited by the size of the invest-
ment fund; the statutory limit for investment in
any single company is $500,000; and the amount
invested any single year is limited by the appro-
priation that authorizes investing funds from the
investment fund.
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Removal of the constitutional prohibition does
not automatically allow entities of the state to par-
ticipate in equity investments; that authority still
must be granted by specific legislative action.
The ability of the state to make equity invest-
ment should be through its economic develop-
ment agencies, Arkansas Economic Development
Commission, the Arkansas Development Finance
Authority, and the Arkansas Science and Technol-
ogy Authority. Some task force members are con-
cerned that the managing authority of any entity
whose job includes overseeing such investments
should be a professional management group, ei-
ther private or a cooperative public/private effort.
The General Assembly should ultimately legislate
the details of implementation.
The Task Force recommends that for the purpose of attracting and growing
its own high technology and knowledge-based businesses to Arkansas it is
advisable to remove the constitutional prohibition on state equity investments
in private enterprise by economic development agencies. Further, the
state should be authorized to receive, in exchange for its equity investments,
stock or other securities that reflect a right to share in the growth and profits of such technology-based
companies. It is also recommended that the funding shall be in the
manner as provided by the General Assembly, which shall also provide for funding and implementation.
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The Task Force was mandated to study the or-
ganizational structure necessary for an effi cient and
eff ective 21st Century state economic development
system. In particular, the Task Force studied the three
primary economic development agencies in Arkansas:
the Arkansas Development Finance Authority (ADFA),
the Arkansas Economic Development Commission
(AEDC), and the Arkansas Science and Technology
Authority (ASTA). At the request of the Task Force the
Institute for Economic Advancement conducted a lit-
erature survey to identify how other states fund and
organize their economic development activities. The
survey included the states surrounding Arkansas plus
several considered to be competitors with Arkansas in
economic development. They were Alabama, Florida,
Georgia, Kansas, Kentucky, Louisiana, Mississippi,
Missouri, North Carolina, Oklahoma, South Carolina,
Tennessee, Texas, and Virginia. Findings related to
selected states are detailed in Appendix H.
Task Force Recommendations
Information resulting from the literature search,
research, and interviews was consolidated, orga-
nized and presented as a resource to inform the
discussions and final recommendations of the task
force. What resulted are nine recommendations re-
lating to issues of planning, structure, and funding
of economic development in Arkansas. The recom-
mendations are described in the following pages.
There is currently no single economic develop-
ment plan for Arkansas, although AEDC has a strate-
gic plan for its agency, which has been created with
input from state agencies, local and regional authori-
ties, and economic developers throughout the state.
The research undertaken by IEA demonstrated that
several of Arkansas’s successful competitors base
their economic development activities on a state-
wide strategic plan. A broad based plan can provide
a common foundation for the economic develop-
ment activities of all the state entities, providing a
synergistic eff ect for Arkansas’s development gains.
Arkansas should create an economic development plan that has input
from, and involves, all state economic development agencies.
The State of Arkansas currently has about 104
programs located in a variety of agencies that
are in some way involved in workforce develop-
ment. Many are involved in workforce develop-
ment whether they are the Workforce Investment
Boards, Apprenticeship Programs, Department of
Workforce Education programs, or the Incumbent
Worker Training Program. In the past some pro-
grams have failed to coordinate their efforts across
agency lines and have only recently, as a result of
the Governor’s Workforce Cabinet, begun breaking
down departmental barriers. To eliminate duplica-
tion of efforts, to be fiscally responsible, and to
encourage collaborative efforts towards common
goals, it may be helpful to have close communica-
tions and lines of authority among many of the
workforce development agencies and programs.
The Governor’s Work Force Cabinet should study the consolidation of
workforce development activities where possible and provide closer linkage with state economic development agencies.1
1 For a similar recommendation, see the recommendation
regarding workforce training on page 13.
Organization and Structure of Economic
Development Activities in Arkansas
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A common characteristic of successful states
among those studied was the presence of an effec-
tive, well organized website for economic develop-
ment information. South Carolina was identified
as particularly effective because of its use of the
“One Stop Shop” format that provides a single web
page (portal) from which links have been created
that provide the customer (businesses with cur-
rent or potential operations in South Carolina and
residents interested in employment and training
programs) a seamless search experience.
A web portal should be designed as the primary starting point for all
clients and interested parties wanting to research starting, locating, or expanding a business. All state
services, programs, and incentives that support economic development, and other relevant private and nonprofit
resources, should be linked from there.
The task force believes there still remain sig-
nificant benefits to be realized by continued study
of the state’s economic development organiza-
tions and their effectiveness. An in-depth study
providing Arkansas with the level of detail needed
to make an informed decision of this magnitude
requires a minimum time frame of 18 to 24 months.
The Task Force recommends dedicating resources to further study the structure
and effectiveness of the state’s economic development organizations
because economic development is ever changing and the continuing review will provide information about 21st
Century demands to the organizations.
A number of states surrounding Arkansas have
consolidated their economic development func-
tions, many by creating a department of com-
merce. A decision to merge the Arkansas Develop-
ment Finance Authority, the Arkansas Economic
Development Commission, and the Arkansas
Science and Technology Authority into a single
agency is a complex issue with multiple consider-
ations. Discussions to this end must involve all the
affected agencies, and must be viewed as a long-
range possibility. In the meantime some significant
benefits could be obtained through colocation of
the agencies. There are advantages to colocation:
a higher level of cooperation among the agencies,
better interagency communication, and more ef-
fective strategic planning.
The Task Force recommends that ADFA, ASTA and AEDC
colocate their operations.
According to research performed for the Task
Force, the Oklahoma Business Roundtable is the
state’s primary economic development support
organization with 132 companies representing
more than 200,000 workers across Oklahoma. It
provides a venue for private sector leadership to
engage with public sector economic development
professionals in the state, creating an environment
in which state economic development plans are in
step with the needs of the business community in
Oklahoma. Additionally, the organization leverages
the state funding for economic development by
providing financial support for receptions, meet-
ings, seminars, targeted research studies, trade
and investment missions, and other domestic and
global promotion activities. In 2007 the Roundtable
directly or indirectly assisted in attracting $1.31 bil-
lion in new business investments. An organization
similar to this could be quite useful in economic
development efforts in Arkansas, and could poten-
tially be a good fit with the existing Arkansas State
Chamber of Commerce/Association of Arkansas
Industries (ASCC/AIA).
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ASCC/AIA should review Oklahoma’s Business Round Table concept and
consider creating a similar structure tailored to fit the needs of Arkansas.
In the states surrounding Arkansas and those
competing with us, economic development activi-
ties are performed in a variety of different state
agencies and organizations, making a direct com-
parison of funding patterns difficult. However, the
research performed for the Task Force indicated
that those states that have effective economic
development provide their development agencies
with dedicated revenue streams sufficient to pur-
sue their strategic economic development goals.
A direct comparison can be made by looking
at two similar agencies, the Arkansas Science and
Technology Authority (ASTA) and the Oklahoma
Center for the Advancement of Science and Tech-
nology (OCAST). Both agencies were created to
help grow their state’s knowledge-based economy.
Each has designed their own infrastructure of ex-
pertise and equipment needed to conduct nation-
ally competitive research and development. OCAST
implements programs and initiatives to impact the
entire technology development pipeline from basic
research through commercialization and applica-
tion, as does ASTA. The difference between ASTA
and OCAST is the greater level to which, Oklaho-
ma’s agency has been funded. ASTA’s FY 08 fund-
ing was $9.6 million, while the FY 2009 budget for
OCAST will be $22.4 million.
Resources for state agencies are scarce, but
economic development expenditures must be
viewed as an investment in our future, which will
pay dividends to Arkansas in the forms of more and
higher paying jobs—and repay the state’s invest-
ment through increased tax revenue. The Task
Force believes that funding levels for economic
development organizations in Arkansas be made
sufficient to pursue the goals that are set, and
competitive with funding in surrounding and com-
peting states. To this end, the Task Force has three
recommendations:
The Task Force recommends
• that Arkansas create a dedicated revenue stream for funding 21st Century businesses development;
• increasing funding for AEDC and ASTA to accomplish the Task Force recommendations; and
• increasing the budget for ADFA (which is self funded) to accomplish the Task Force recommendations.
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Over the course of many months, and after lis-
tening to the comments and recommendations of
dozens of community and organizational represen-
tatives and state agency directors, the work of the
Task Force is at an end. The mandate to the Task
Force was to define the role and scope of economic
development in Arkansas; define the programs
and services needed for the state and its commu-
nities to be globally competitive within the role
and scope of 21st Century economic development;
determine the advisability of removal of the consti-
tutional prohibition on state equity investments in
private enterprise by economic development agen-
cies; and study the organizational structure neces-
sary for an efficient and effective 21st Century state
economic development system. The preceding
pages describe the findings and recommendations
of the Task Force in completing these assignments
as charged.
The Task Force believes that if carried out, their
recommendations will provide the state with a
solid foundation upon which to build a thriving
economy in today’s 21st Century.
Conclusion
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During its meetings, many additional issues
were brought to the attention of the Task Force,
both opportunities and challenges for Arkansas’s
development in the 21st Century. A Special 21st
Century Opportunity: Energy and Sustainable “Green”
Industries outlines how unique strengths that exist
in Arkansas could be used to the state’s 21st Cen-
tury economic advantage. The Effect of Arkansas’s
Usury Limit on State Agencies: Constitutional
Amendments explains how provisions can have
unintended consequences when circumstances
change. A Special Challenge: Arkansas’s Infrastruc-
ture discusses the eroding state of physical infra-
structure, especially highway infrastructure; the
particular challenge is how to fund traditional
infrastructure in a time of transition caused by
increasing fuel prices and changing driving behav-
iors. Rebalancing Economic Development Advertis-
ing Expenditures illustrates the imbalance between
advertising expenditures for economic develop-
ment and tourism. These are each described below,
however, they may also illustrate the kinds of chal-
lenges faced by 21st Century economic developers
who, in periods of rapid change, will have to find
balance between more traditional approaches to
economic development on the one hand and the
emerging roles necessary to take advantage of
21st Century opportunities on the other, with both
competing for limited financial resources.
A Special 21st Century Opportunity: Energy
and Sustainable “Green” Industries
Energy consumption and environmental con-
siderations are issues that drive many of the chang-
es in the 21st Century. A great deal of attention is
being focused upon the opportunities that exist for
sustainable industrial development and the use of
emerging technologies in the reduction of carbon-
based energy consumption.
In one of its meetings, the Task Force heard that
the previous technology revolution (i.e., computer
technology) transformed places like Austin, North
Carolina’s Research Triangle and Seattle. The next
technology revolution, sustainability technology,
can transform Arkansas. Arkansas has been blessed
with relevant competitive advantages to build an
economic sector based on sustainability. These
advantages include:
• Wal-Mart, the largest funnel for consumer
demand and the largest proponent of
sustainability; the largest consumer goods’
supplier cluster with 1,300 companies;
• adjacency to a large energy
center, the world’s busiest cargo
airport and the highest global
concentration of plant scientists;
• one of America’s largest agri-
business centers; and
• Winrock International, which focuses
on energy and green industries.
There is an opportunity to transform Arkan-
sas into a technology cluster, often referred to as
a “Green Valley.” Arkansans have already planted
the seeds to succeed in sustainability technolo-
gies related to alternative energy and biofuels,
food and agriculture, transportation and logistics,
eco-tourism, and bioscience. The jobs generated
Afterword: Additional Issues
For Consideration
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by emerging growth in sustainability will keep our
best graduates in Arkansas.
The Southern Growth Policies Board (SGPB)
met in September 2008, to discuss why it was so
crucial that in their strategic plans for 21st Century
economic development southern states include a
strategy to attract green industries or industries
in the business of making products that enhance
the environment. The meeting focused on how
to encourage economic opportunities relating to
bio-products, alternative energy, and/or energy
efficiency. Statistically, these industries and ven-
tures are showing huge investment returns and are
bringing significant numbers of jobs into the area.
The SGPB meeting dealt with keeping in mind that
states needed to have a broader vision of what
might be the industries of the future in the South
and downplayed the reliance upon the manufac-
ture and commercialization of an individual prod-
uct. Instead, states were asked to devote more
energies into unique and innovative companies
whose internal plans and goals were energy-relat-
ed and had a proven track record or other reliable
predictors of future success.
Due to time constraints, the Task Force has not
adequately addressed these issues and possible
actions. However, on a preliminary basis, the Task
Force suggests that Arkansas develop a strategy to
• attract green industries or industries
in the business of making products
that enhance the environment;
• encourage economic opportunities
relating to bioproducts, alternative
energy, and/or energy efficiency;
• support the innovative use of
technologies to promote energy
conservation and/or energy efficiency;
• promote cross-industry collaboration
(e.g. nano-energy, green
automotive technology); and
• prepare workers for green collar jobs.
The Effect of Arkansas’s Usury Limit on
State Agencies: Constitutional Amendments
As discussed in the meetings of the Task Force
for the 21st Century Economy, the Arkansas Munici-
pal League is working on a possible constitutional
amendment that would improve and simplify
public finance in Arkansas. Those changes could
involve changes to Arkansas Constitutional Amend-
ments 60, 62, 65, and 78. The Arkansas Municipal
League has already adopted a list of suggested
changes to Arkansas law.
Knowing that an amendment will be intro-
duced, the Task Force for the 21st Century Economy
is recommending the passage of a constitutional
amendment to Amendment 60 and 65 of the Ar-
kansas Constitution that deals with the Arkansas
usury limit. The proposed amendment would raise
or eliminate the interest rate caps for the Arkansas
Student Loan Authority (ASLA) and the state eco-
nomic development agencies.
The usury limit is now 5% above the “dis-
count rate” (Primary Lending Rate) or 6.75% as of
10/20/08. A change should be made to Amend-
ments 60 and 65 dealing with the Arkansas usury
limit, which causes a problematic impediment,
particularly for taxable or variable rate bonds.
For variable rate bonds, investors or providers of
credit support are reluctant to make commitments
involving the purchase of bonds when a variable
bond interest rate is capped at an unreasonably
low level for a long period of time.
Arkansas is the only state that has a prescrip-
tive usury provision in its Constitution. In recent
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years, Congress has enacted laws preempting the
Arkansas usury provision for Arkansas banking
institutions; however, the usury provision is still
applicable to transactions involving governmental
entities such as the ASLA. As a practical matter,
not much remains of the Arkansas usury provision
except with regard to consumer transactions and
transactions of state agencies, public corporations,
and local governments.
It is important to understand the Arkansas
usury law creates difficulties for ASLA in situations
where ASLA is considered the “borrower.” Arkansas
usury laws do not affect the interest rates charged
by ASLA on student loans since the United States
Congress mandates the interest rate for Federal
education loans. However, Arkansas usury laws do
affect interest rates charged to borrowers of the
Arkansas Development Finance Authority (ADFA),
the Arkansas Economic Development Commission
(AEDC) and the Arkansas Science and Technology
Authority (ASTA).
In the past, Arkansas’s usury provision has not
completely impaired ASLA’s ability to issue bonds
to fund student loans because ASLA has typically
issued auction rate securities. ASLA has been suc-
cessful in selling auction rate bonds (which do not
require a letter of credit from a major bank) that
included maximum interest rate provisions to ad-
dress Arkansas usury. Since the recent collapse of
the auction rate bond market, ASLA has been un-
able to issue bonds to fund student loans.
ASLA and ADFA have been working with the
Arkansas Congressional delegation on a possible
preemption of the Arkansas usury law. Preemp-
tion of the Arkansas usury provision is not a new or
unique concept. Congress, in two recent instances,
has preempted the Arkansas usury provision. One
preemption relates to transactions with depository
institutions in order that Arkansas banks are on the
same footing with banks in the rest of the country,
and a second relates to Arkansas car dealers fi nanc-
ing purchases of automobiles in Arkansas. In addition
to congressional preemption, for many years corpo-
rations have structured transactions in such a way to
permit the law of a state other than Arkansas to ap-
ply in order that lenders would be induced to enter
into the transaction. There is no assurance that this
preemption will be approved, and it does not look
promising. Some involved in the preemptive debate
at the Congressional level believe that usury is a state
issue and it should be addressed at the state level.
The financial distress caused by the current
global credit crisis has exasperated the challenges
of issuing bonds to fund the activities of ASLA,
ADFA, and AEDC. In some cases, these state agen-
cies are not able to approach the bond market
at all. Arkansas is greatly impacted by the usury
limits imposed by the Arkansas Constitution re-
sulting in no credit, higher costs, and inefficient
structures. These limits create severe limitations
to the access of capital for student loans and for
economic development activities. They need to be
modernized to allow Arkansas to access the credit
markets when needed. Arkansas has excellent
credit ratings. Arkansas is not leveraged like many
other states. Arkansas is in an excellent position to
compete globally for opportunities. We cannot and
should not rely on the Federal government to do it
for us. Usury must be addressed at the state level.
A Special Challenge: Arkansas’s Physical
Infrastructure
Like many other states in the U.S., Arkansas has
a large backlog of physical infrastructure needs.
Some rural areas of Arkansas are further behind
than most areas of the U.S., in that they have never
had the infrastructure available to them that they
need for industrial development, much less the in-
frastructure needed for 21st Century development.
B U I L D I N G A 2 1 s t C E N T U R Y E C O N O M Y I N A R K A N S A S40
F i n d i n g s a n d R e c o m m e n d a t i o n s o f t h e T a s k F o r c e f o r t h e 2 1 s t C e n t u r y E c o n o m y
In the course of its meetings throughout the state,
the Task Force heard from many economic develop-
ers and community leaders about critical infrastruc-
ture needs in their areas. Many cited a crucial need
for more and better transportation alternatives, in-
cluding our roads, railways, air, and water systems.
Others cited the inadequacy of the current electric
utility distribution system. Still others spoke about a
lack of adequate water and wastewater systems.
Additionally, the changes in fuel consumption
that are occurring with increasing costs of carbon-
based fuels will pose a challenge to Arkansas in
funding our highway system, since current fund-
ing is based on fuel taxes. If fuel usage declines
(or stays at its current level), the state will be hard
pressed to maintain the current highway system,
much less expand it. Another stress on state and
local treasuries is the increasing costs of fuel and
other carbon-based products consumed in the nor-
mal operation of their offices and institutions.
For these reasons, the Task Force advises that
while new programs and projects are undertaken
to move us toward a 21st Century Economy, Arkan-
sas can not afford to relent in its efforts to improve
and expand the traditional infrastructure: its roads,
water, wastewater, and energy distribution. A com-
munity without roads or water is unlikely to attract
or grow industry, whether high technology, knowl-
edge-based, or traditional manufacturing.
Rebalancing Economic Development Adver-
tising Expenditures
The State of Arkansas currently spends a sig-
nificant amount of advertising dollars on economic
development, primarily in two areas: the AEDC and
the Arkansas Department of Parks and Tourism.
The relative spending in these two areas seems
out of balance. The State spends much more in
generating visitors for the tourism industry than it
spends on developing the knowledge-based jobs
that will dominate the 21st Century Economy. The
state should consider realigning the priorities in
this area. The Task Force recognizes that this would
be difficult because of sources of these funds, but
for the future in the 21st economy, it should be
considered.