SSTI Digest

While the Appalachian region began the 21st century by expanding the reaches of its fossil fuel industries, clean energy development and carbon emission reductions are not yet out of reach for Pennsylvania, Ohio and West Virginia. A set of reports developed by the University of Massachusetts’ Political Economy Research Institute (PERI) present opportunities available to these states for the advancement of clean energy technologies within the region while also detailing the economic and employment benefits of potential climate stabilization programs.

Manufacturing activity has rebounded sharply from the depths of last year’s slowdown due to the pandemic and global recession, according to the National Association of Manufacturers (NAM) first quarter outlook survey. The survey marked the third straight quarter of increased optimism among respondents, with 87.6 percent of manufacturers saying they felt either somewhat or very positive about their company’s outlook. Compare that to the 33.9 percent who responded positively in the second quarter of 2020, which was the worst since the Great Recession.

Despite the positive outlook, challenges remain. Rising raw material costs was the top business challenge cited (76.2 percent), followed by the inability to attract and retain talent, which dropped to second place (65.8 percent) after holding the top spot in 11 of the past 13 quarters prior to this one. The full report on the survey is available here.

A recent Economic Commentary from the Federal Reserve Bank of Cleveland reviews the early research surrounding the effects of the pandemic on education and examines three specific areas of concern: the spread of the virus through in-person school settings; the impact of K-12 school closures on labor force participation; and, the effects of virtual schooling on student outcomes.

In January, the Office of Management and Budget (OMB) posted a request for public comment on the recommendations it has received from the Metropolitan and Micropolitan Statistical Area Standards Review Committee for changes to metropolitan and micropolitan statistical area standards. The 123 comments that have been recorded to date reflect a level of concern regarding changing the population threshold for urban areas and the impact on future funding that would have for these areas.

Currently, a metropolitan statistical area (MSA) must contain a Census Bureau-delineated urban area with a population of 50,000 or more, while a micropolitan statistical area must contain a Census Bureau-delineated urban area with a population of 10,000 to 49,999. The review committee has recommended that the population level to qualify as a metropolitan statistical area should be increased from 50,000 to 100,000.

The Appalachian Regional Commission (ARC) is seeking public input to help identify critical opportunities and challenges facing Appalachia’s economic future through a series of virtual sessions taking place in April. ARC will use the insights gathered from these public sessions in the development of a strategic plan to inform investment priorities for fiscal years 2022-2026. Sessions are free, but pre-registration is required. ARC is also collecting input via a public survey available at arc.gov/EnvisionAppalachia.

While a new strategic plan is developed every five years, the onset of COVID-19 delayed input plans in 2020 and the current plan was extended. More information about the effort is available here.

To bolster its already thriving technology sector, the city of Austin, Texas, has partnered with Opportunity Hub (OHUB) and others from industry and academia to bring a new Equity District to the city. Similar to the innovation district model, this new Equity District will be “anchored in equitable place-making and mobility for the fourth industrial revolution” by providing coworking space, entrepreneurship support programs, a platform for fostering networking and mentorship, re-skilling training and certificates, and an investment structure to increase early-stage investment in Black founders.

The Equity District plans to deliver on its commitment of increasing economic opportunity for Black, Indigenous, and people of color not just by providing entrepreneurship training and support, but also by connecting participants to jobs. While OHUB’s historical placement rate is already 90 percent, the Austin Equity District will also ensure that each founding partner hires at least 10 people for full-time positions from the program’s talent placement arm.

Last week, members of SSTI’s Innovation Advocacy Council headed online for this year’s Hill Days in support of increases to FY 2022 appropriations for key innovation programs. Congresswoman Haley Stevens, vice-chair of the House Committee on Science, Space and Technology, kicked off the meetings by speaking with the IAC members. Stevens focused the group on the importance of science and innovation in helping to address the country’s immediate crises, as well as improving our long-term competitiveness. In all, IAC members held more than two dozen meetings with congressional offices and received largely positive responses to requests to increase funding for the Economic Development Administration’s Build to Scale program and the Small Business Administration’s Regional Innovation Clusters and Federal and State Technology Partnership programs.

To add your support to SSTI’s outreach efforts, contact Jason Rittenberg (rittenberg@ssti.org).

The American Rescue Plan Act, a $1.9 trillion spending package to address the ongoing health and economic impacts of COVID-19, was signed into law today. The legislation includes several initiatives that could strengthen regional innovation economies. Most notable among these is the $10 billion State Small Business Credit Initiative (SSBCI), $3 billion for the Economic Development Administration (EDA), and $350 billion for state and local government relief.

SSBCI Reauthorization

States often estimate their participation in the Small Business Innovation Research (SBIR) program by counting the number of awards made, total of award value, or (when available) the success rate of applications in their state. In this edition of SSTI Useful Stats, we attempt to go beyond these measures to estimate states’ untapped potential for capturing future SBIR awards. This creates a baseline proxy for tailoring and assessing a state’s outreach and support activities.

While the traditional measures of SBIR participation are important, only the success rate begins to reveal potential future growth for a state’s SBIR participation. Another approach is to estimate the participation rate in SBIR among companies that are similar to a typical SBIR awardee. Of course, identifying “similar” firms is a challenge, as there are many factors that determine which companies are willing and able to participate in the program.

Last month, Gov. Laura Kelly (D), alongside former state governors Mike Hayden (R) and John Carlin (D), and the Lt. Gov. and Secretary of Commerce David Toland, announced “Framework for Growth”, the state’s first economic development plan in over 30 years. The plan, which was a year in the making, is a collaborative effort that involves input from over 2,000 Kansans, the staff of the Department of Commerce, and two former governors.

Carlin is credited with developing an overarching economic plan for the state in 1986, with Hayden’s Republican administration assuming responsibility for implementing many of its ideas.

State revenues experienced their steepest plunge in 25 years in the final quarter of the fiscal year ending June 30, 2020, according to a recent analysis by Pew. It also notes that while some of those revenues were expected to be recovered, nearly half of all states were still projecting revenue declines this fiscal year. The federal government’s decision to delay the April 15 tax deadline pushed tax payments into the first quarter of the current fiscal year, further straining many state budgets for fiscal year 2020. Gains made before the pandemic coupled with the federal stimulus payments helped states recover somewhat, but Pew found that at least 19 states were forced to pull back on spending and at least 15 tapped into their rainy day funds to balance the fiscal 2020 budgets.

In an event organized by the Hutchins Center on fiscal and Monetary Policy at Brookings, academics from some of the nation’s leading universities sought to answer questions centered around Opportunity Zones (OZs), including what is the goal of OZs, are they helping, and how would we know? The 2017 Tax Cuts and Jobs Act created more than 8,700 Opportunity Zones (OZs) across the United States. The program was intended to spur economic development in distressed communities and offered favorable capital gains tax treatment to investments in such locations. The program has already stimulated a flurry of academic research even though final regulations for designating OZs were not published until late 2019. these questions.