21st Century Ar Task Force

Building a 21st Century Economy in Arkansas
October 2008
FIND ING S AND RECOMMENDATI ON S OF T HE TAS K FORC E FOR T HE 21 s t C E N T URY ECO NO MY

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

BUILDING A 21st CENTURY ECONOMY IN ARKANSAS
I

Contents
Foreword
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

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 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

III

Appendixes
A. Task Force for the Twenty First Century May 13, 2008
Economy Interim Report Building a Better Future
B. Act 1024 Arkansas: A State of Character
C. Complete List of Suggested Roles, Scopes and June 3, 2008
Strategies
Delta Training and Education
D. Inventory of State Economic Development Consortium
Programs
June10, 2008
E. Minutes of Task Force Meetings and
Documents Presented to the Task Force Factors of Production

January 30, 2008—April 7, 2008 July 8, 2008

January 30, 2008 July 22, 2008

February 12, 2008 July 28, 2008

ASTA Presentation August 12, 2008

AECD Strategic Plan September 2, 2008

March 11, 2008 September 11, 2008

Arkansas: A Natural For Business September 17, 2008

The Future of Arkansas Higher September 23, 2008
Education Resource Guide for Technology-based
Next Steps for Arkansas’s Future Economic Development

Three Forces Changing Our Nation’s September 30, 2008
Future October 3, 2008
April 7, 2008 October 14, 2008
ABED Initiative Study October 22, 2008
Characteristics of a 21st Century G. Additional Resources Presented to the Task
Economy Force
Arkansas Research Alliance Missouri Downtown Economic Stimulus Act
F. Minutes of Task Force Meetings and (MODESA)
Documents Presented to the Task Force Rising Above the Gathering Storm: Engaging
April 22, 2008—October 22, 2008 and Energizing Arkansans for a Brighter
Economic Future: Executive Summary
April 22, 2008
Report of the Task Force for the Creation of
Education, Regionalism Seen as Knowledge-Based Jobs
Economic Development Keys
H. Access to Success: Increasing Arkansas’s
May 6, 2008 College Graduates Promotes Economic
Arkansas in the Global Economy Development
The Rules Have Changed

A p p e n d ix es ma y be found on a c c ompa nying C D .


Foreword

October 31, 2008

Governor Mike Beebe
Members 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.

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 Governor
Dianne Lamberth, Batesville, Chair
Judy Adams, Foreman
Guy Fenter, Charleston
Bill Ferren, Pine Bluff
Gene Hill, Camden
Mike Maulden, Little Rock

Appointed by the Speaker of the House of Representatives
John Barnes, Little Rock
Mickey Pierce, Stuttgart
Brad Lacey, Conway

Appointed by the President Pro Tempore of the Senate
Pat Lea, Batesville
Clay Curtner, Newport
Sam Walls, Little Rock

Appointed by Accelerate Arkansas
Gary Campbell, Fort Smith
James Hendren, Little Rock

Representing the Arkansas Science and Technology Authority
John Ahlen, President

Representing the Arkansas Development Finance Authority
Mac Dodson, President
Gene Eagle, Vice President, Finance

Representing the Arkansas Economic Development Commission
Maria Haley, Executive Director
Randy Zook, President and CEO, Arkansas State Chamber of Commerce and
Associated Industries of Arkansas

Representing the Office of the Governor
Chris 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 Commission
Lisa Cogbill, Communications Specialist

Office of the Governor
Valerie Hendrix, Administrative Assistant
Amanda Richardson, Administrative Assistant

UALR Institute for Economic Advancement
James L. Youngquist, Director
Teresa A. McLendon, Senior Research Specialist
Randall G. Wright, Associate Director
Tonya G. Hass, Assistant Research Extension Specialist
Michael L. Gerfen, Coordinator, Workplace Skills Enhancement Program
Jan L. Gibson, Business Manager
Vaughan S. Wingfield, Associate Research Specialist
Susan 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,


Between 1950 and 2000, the State of Arkansas took steps to move its
Executive economy from an agriculture base to a manufacturing base by creat-
ing the agencies, programs, and incentives needed to attract manu-

Summary: facturing companies to Arkansas. The strategies that worked then
are no longer eﬀective in providing the jobs and incomes we need to
support the people of Arkansas. We exist in a global, highly competi-
Recommendations tive economy of instantaneous communications and rapid change.
of the Task Force 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.

2

Role Recommendation
K-12 education: 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.

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 finance.

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; financially
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.


3

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
Programs and Services Entrepreneurship Curriculum

The Task Force was charged with studying Risk Capital
“the programs and services needed for the Phase Zero SBIR
state and its communities to be globally Product Development
competitive within the role and scope of Risk Capital Matching Fund
21st economic development.” As the Task Equity Investor Tax Credits
Force identified its priority strategies, Seed Capital Investment Fund
the role, scope and strategies became
Existing Business Innovation
the framework within which a subset of
the economic development programs R&D Tax Credits
emerged as particularly relevant in the Applied Research Tax Credit
near term to global competition and the University Research Tax Credits
scope of 21st economic development. Infrastructure
The Task Force recommends that the Connect Arkansas
following 26 programs, initiatives, Broadband Applications
and constitutional issues be given High Performance Computing
priority consideration in the near-term Optical Networking
as being key to competitiveness and
Direct Economic Development
contributing to economic development
in the 21st Century Economy. Quick Action Closing Fund
Advertising and Marketing
The 26 programs are: Dedicated Funding
Super Project Funding (Amendment 82)
Usury Laws (Amendments 60, 65)


4

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


5

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.


6

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.


7

Introduction
The 86th General Assembly of the State of nee, the President of the Arkansas Development
Arkansas in its Regular Session of Session of 2007 Finance Authority (ADFA) or his designee, and the
through Act 1024 established The Task Force for President of the Arkansas Science and Technology
the Twenty-First Century Economy (21st Century Authority (ASTA) or his designee serve on the Task
Task Force). (Act 1024 may be found in Appendix B.) Force ex-officio. Governor Beebe appointed Dianne
Lamberth of Batesville as Chair. The members are:
Mission and Purpose Governor
The Mission and Purpose given to the 21st Cen- Judy Adams, Foreman
tury Task Force is to: Guy Fenter, Charleston
Bill Ferren, Pine Bluff
1. Define the role and scope of economic Gene Hill, Camden
development in Arkansas. Mike Maulden, Little Rock

2. Define the programs and services Speaker of the House
needed for the state and its communities John Barnes, Little Rock
to be globally competitive within Mickey Pierce, Stuttgart
the role and scope of 21st Century Brad Lacey, Conway
economic development.
President Pro Tempore of the Senate
3. Determine the advisability of removal of Pat Lea, Batesville
the constitutional prohibition on state Clay Curtner, Newport
equity investments in private enterprise Sam Walls, Little Rock
by economic development agencies; and, Accelerate Arkansas
4. Study the organizational structure Gary Campbell, Fort Smith
necessary for an efficient and James Hendren, Little Rock
effective 21st Century state Arkansas Science and Technology Authority
economic development system. John Ahlen, President

Arkansas Development Finance Authority
Task Force Membership and Staff Mac Dodson, President
The 21st Century Task Force consists of 17 Gene Eagle, Vice President, Finance
members. Members have been appointed by Gov- Arkansas Economic Development Commission
ernor Mike Beebe, Speaker of the House Benny C. Maria Haley, Executive Director
Petrus, and President Pro Tempore of the Senate Randy Zook, Deputy Director, Administration
Jack Critcher. Accelerate Arkansas nominated two and Finance
of its members with the approval of the Governor. Morris Jenkins, Division Director, Strategic
The Executive Director of the Arkansas Economic Planning and Legislative Affairs
Development Commission (AEDC) or her desig-

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 F o r c e f o r t h e 21s t C e n t u r y E c o n o m y

8

Staff are described in the Interim Report of the Task
The staff for the 21st Century Task Force is Force, which may be found in Appendix A. Copies
led by Chris Masingill, Director of Agency of presentations delivered to the Task Force
and External Affairs for Governor Beebe. Lisa and minutes from all Task Force meetings are in
Cogbill of the Arkansas Economic Development Appendix E.
Commission provided administrative and
The Task Force gained important insights
logistics assistance to the Task Force. James
during these meetings by listening to community
Youngquist, Teresa McLendon, Randall Wright,
and economic development leaders explain their
Michael Gerfen, Tonya Hass, Jan Gibson,
approaches to the 21st Century Economy. Many of
Vaughan Wingfield, and Susan Jackson of
these approaches are discussed in the part of this
the Institute for Economic Advancement
report that addresses Role and Scope of Economic
at the University of Arkansas at Little Rock
Development.
provided facilitation, work program design,
research, and other assistance as needed to At the conclusion of the community meetings,
the Task Force and its work committees. the Task Force held a series of discussions during
23 meetings to analyze the information they
As reported in its Interim Report issued
had received and develop its recommendations,
July 31, 2008, the Task Force began its work by
expending more than 1,000 man hours of
holding work sessions to learn about the missions,
work. This report details the findings and
organizations, and structures of the Arkansas
recommendations of the Task Force, in response to
Development Finance Authority, the Arkansas
its four charges from the Legislature in Act 1024.
Economic Development Commission, and the
Arkansas Science and Technology Authority. It also
The 21st Century Economy
heard presentations from Accelerate Arkansas, the
Departments of Education and Higher Education, In its research on the 21st Century Economy,
and Innovate Arkansas. Accelerate Arkansas found a helpful comparison
between the characteristics of the “Old” (20th
Following the initial work sessions, the Task
Century) and the “New” (21st Century) economies.
Force traveled to eight communities in Arkansas
It appears in Figure 1.
to hear presentations about local and regional
economic development issues and innovative The ability to develop a competitive 21st
solutions for the 21st Century economy. Century Economy will only be possible where the
Specifically, the Task Force met in Batesville, culture values character, a strong work ethic, and
Jonesboro, Helena-West Helena, El Dorado, North educational attainment and where citizens influ-
Little Rock, Texarkana, Fort Smith, and Rogers. ence community, regional, and state investments in
During these meetings, Task Force members heard the public goods and services needed to sustain a
16 presentations and spoke with representatives competitive economic environment. The Task Force
of 33 communities around the state. Presentations identified some of the shifting conditions of the
delivered to the Task Force at these meetings 21st Century Economy as:


9

1. Globalization of the economy; 5. A distinctive quality of place
that is essential for attracting and
2. Support of knowledge-based growth;
maintaining the talent needed for
3. Rapid changes in production knowledge-based growth; and
processes, energy resources, and 6. Robust broadband connectivity that
water supply propelled by risk, provides access to high-performance
innovation, and technology; computing and communications. 2
4. Local and regional policies, Businesses that are to grow in today’s highly com-
investments, and institutions that petitive environment demand a more highly skilled
shape knowledge-based development and educated workforce than in the past, as well as
around existing, new, and emerging a physical and human resource infrastructure that is
clusters of economic activity; more advanced than the 20th Century infrastructure.

Figure 1
Keys 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-speciﬁc 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.


10

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.


11

Role and Scope of Economic Development
Although economic development occurs as a recommended scopes of action by the state. After
result of investments made by the private sector, much discussion, the Task Force identified strate-
there are many areas of state government policy gies that can be used to specify, influence, and
that can influence the rate and magnitude of better implement economic development policies
economic development. Many of these deal with within their respective role and scope.
policy impacts on conditions present in the state
and improve the attractiveness of the area to inves- The roles and scopes identified by the Task
tors. Others are policies that may more directly Force that can be employed as most crucial to our
impact an individual investment decision, such as success are described in the following pages, along
a tax incentive to act a certain way, or a program with the Task Force’s recommended strategies.
that assists existing businesses in improving their
competitiveness in their markets. Education
Some of the policies may impact economic de- Education was a topic of discussion at virtually
velopment in a relatively short period of time. The every meeting of the Task Force and in each com-
effects of others may not be felt for years, or even munity that the Task Force visited. The expert pre-
decades. Nevertheless they all play some role in sentations, community discussions, and the experi-
changing the landscape of Arkansas, thus changing ence brought to the Task Force by its members all
the state’s potential for economic development. underscore that in the 21st Century, more than ever
before, success will be determined by the presence
The Task Force was charged with studying “The
of a skilled, knowledgeable, highly educated, and
role and scope of economic development in Ar-
highly trained talent base.
kansas in the twenty-first century.” The Task Force
defined the areas of state policy that play a part in The increasing level of technology requires
the economic development of Arkansas, and within firms to employ large numbers of scientists, mathe-
each policy, the specific subsets of the policies that maticians, engineers, computer programmers, and
most directly affect economic development in the technologists. Research and development activities
21st Century. During its deliberations, Task Force are carried on by highly educated scientists. Entre-
members identified nine policy areas that play
preneurship requires creativity, a thorough un-
roles in economic development.
derstanding of the marketplace as well as specific
The scopes of state policies can have an im- product-related knowledge. New technologies are
pact on economic development in the future and entering the market so quickly that most people
are many and varied; the roles and scopes recom- beginning their careers in the 21st Century will
mended by the Task Force are listed in Appendix work in many different jobs, for many different em-
A of this document. The Task Force understands, ployers, and in several different occupations over
however, that state policies require resources to their lifetime. This requires the ability to grasp new
implement—resources that are scarce in Arkansas. concepts quickly and engage in a lifelong process
For that reason, the Task Force has prioritized the of learning.


12

Specifically, the Task Force for the 21st Century The recommended strategy is to provide and
Economy examined the roles of K-12 education, post- fund a program of economic development incen-
secondary education, and workforce education. tive grants for the best STEM teachers in order to
encourage them to enter the class room and to stay
K-12 Education in the classroom, including better pay for STEM
High quality K-12 education is essential for our teachers. This can be achieved by investing $1 mil-
children if they are to survive and thrive in a 21st lion in a fund for a program managed by AEDC that
Century world, with its global, knowledge-based would reward nationally certified STEM teachers
economy. While recognizing that the primary re- with an additional payment of $5,000 per year.
sponsibility for educating our youth lies with their Additionally, the Task Force is concerned
parents, the state’s K-12 education policies play a that every student receive the rigorous educa-
distinct role in economic development. K-12 education they will need to succeed in the 21st Cen-
tion provides the basis for our future workforce, tury, which will not happen when students are
and can provide students with the skills and char- allowed to “opt out” of STEM coursework
acter they will need to continue learning through-
out their lives. At this level of education children With this in mind, the Task Force
can learn values that will help them to excel in the recommendation is to:
workplace: discipline, determination, curiosity, co- Phase out the number of students that
operation, competitiveness, prudence, judgment, opt out of the Smart Core curriculum
and problem solving.
over the next six years by strongly
In a special way, the subjects of science, tech- encouraging school districts to adopt
nology, engineering, and mathematics (STEM) play curriculum models that will eventually
a major role in the 21st Century Economy. The com- make opting out unnecessary.
petitiveness of the American workforce in the 21st
Post-secondary Education
Century will be in a great way dependent upon
the number of workers with high STEM skill levels, Arkansas’s policies regarding post-secondary ed-
and the comfort level of all workers in dealing with ucation play an important role in economic develop-
STEM-related tasks. This knowledge comes from ment by making the high quality education needed
being taught by teachers who are themselves com- for 21st Century jobs available at affordable costs to
fortable with, and skilled in, STEM subjects. state residents. It is in the colleges and universities
that students finish their preparation for careers in
The highest priority recommendation of the science, technology, mathematics, and engineering:
Task Force is: the most needed skills in the 21st Century workforce.
In another link to economic development, the educa-
Enhance science, technology,
tion of K-12 teachers through the post-secondary
engineering, and mathematics (STEM)
system provides the state with resources needed to
educator talent by providing salary educate children for the jobs of the future. As previ-
enhancements for Nationally Board ously stated, the Task Force endorses the recom-
Certified math and science teachers as mendations of the Task Force on Higher Education
an economic development investment. Remediation, Retention, and Graduation.


13

The highest priority recommendation of the (Note that this recommendation is similar to
Task Force is: the one found on page 31 referring to a study of
consolidation of workforce training programs by
Enhance incentives to encourage the Governor’s Workforce Cabinet.)
students to go into STEM four-year
degree programs, including secondary The recommended strategy is to review and co-
math and science education. ordinate the existing workforce training programs
to support AEDC’s targeted industries, as follows.
The recommended strategy to enhance STEM
education incentives is to encourage students to • Study successful workforce training models
go into STEM four-year degree programs by creat- presently in place at the University of
ing a STEM scholarship program that offers assis- Arkansas at Fort Smith and Mid-South
tance that is hard to get but easy to keep. This type Community College in West Memphis
of scholarship program will encourage students to determine if these programs can be
to attempt difficult college programs and stay in replicated across the state; provide existing
them until graduation. The program would cost $5 workforce centers with adequate support
million to fund, can be managed by the Arkansas to sustain and expand their mission.
Department of Higher Education, and would pro-
• Strengthen current P-16 efforts
vide up to $5,000 per year per student.
by providing proven models for
Workforce Education instructional alignment in each grade
level in the areas of mathematics,
In the 21st Century Economy, workers with tech-
literacy, science, and history in support
nical training are needed to staff a large proportion
of the core curriculum requirements.
of 21st Century jobs. A high school diploma today is
simply not enough education to provide employers • Establish a system for workforce
with the level of skill needed to perform many of training that allows students to enter
the jobs available. The state’s workforce education the system while in high school
policies provide a role in economic development by and proceed, seamlessly, toward a
providing much of the skilled technical workforce proficiency in workforce training
needed to staff 21st Century companies. or a baccalaureate degree.

The highest priority recommendation of the • Students will receive concurrent college
Task Force is: credit while participating in this career
pathway and may take advantage
Review and coordinate the existing
of multiple entry and exit points as
workforce training programs to support
they work toward being adequately
the Arkansas Economic Development
prepared with rigor for the workforce
Commission’s (AEDC’s) targeted industries
or the baccalaureate degree.
with an emphasis on best practices and
support of the state’s strategic economic • The system will require a phased-
development initiatives. in requirement that all state funded


14

vocational-technical programs affiliate Other Education Recommendations
with a two-year or four-year institution of
The education and training policies of Arkansas
higher education to provide for regional
are so critical to the 21st Century Economy that
workforce training centers available
they must be examined in depth because every
to students from all high schools in
the region, and special funding will be facet of education and training policy will influence
provided to these programs to train our future success or failure. Moreover, the ability
workers for high-demand occupations. of our youth to obtain advanced training past high
school, particularly college degrees, is conditioned
• Course offerings will be supportive of upon their preparation, motivation, and financial
the strategic initiatives established by resources available to them.
the Arkansas Economic Development
Arkansas communities recognize the impor-
Commission, which identifies the needs of
tance of education to their local and regional
the state in each region. Priority funding
economies, and many have taken steps to empha-
will be assigned to these courses.
size and encourage education by:
• All high school juniors and seniors
• Providing scholarships to high
will have the opportunity to earn
school graduates who demonstrate
early college credit by providing
good work skills in high school;
adequate funding for secondary
technical centers that are affiliated • Strengthening the linkages between
with a program of higher education. local high schools and regional training
centers and college campuses;
• Performance-based funding will be
established for regional secondary centers • Establishing best practices for
in the areas of concurrent credit, national math and science education;
credentials, and degree attainment.
• Connecting higher education resources
• College participation will be increased to the local economy; and
by providing incentives for students
• Emphasizing university research
who are not likely to participate. This
and student entrepreneurship.
will be accomplished by providing
needs-based grants for low income and In addition to communities, the Task Force
minority students: by providing some considered the work of the Task Force on Higher
financial assistance for adult students Education Remediation, Retention, and Graduation.
and through innovative course delivery.
The Task Force endorses the
• We should create a statewide common recommendations described in their
course numbering system and a common recent report, Access to Success:
transfer system for use by all institutions, Increasing Arkansas’s College Graduates
based on a common curriculum. Promotes Economic Development.


15

To provide sufficient loans to The highest priority recommendation of the
students entering college-level Task Force is:
training programs, the Task Force Expand the job-creating research
recommends passage of a constitutional and development capabilities of our
amendment to Amendments 60 and universities through sustained state
65 of the Arkansas Constitution investment in research infrastructure
that would eliminate the interest and science and engineering talent.
rate caps for the Arkansas Student
Loan Authority (ASLA). The recommended strategy to expand the re-
search and development capabilities of our univer-
More about this can be found in the sities is to:
section titled Afterword: Additional Issues for
• Create a fund to implement
Consideration.
recommendations that will be coming from
Research and Development the Arkansas Research Alliance, and provide
sufficient funding for implementation.
Research and development are the source
of advances in knowledge and technology and • Sufficiently fund programs to make
one of the drivers of change in the 21st Century matches required for federal and other
marketplace. Institutions performing these non-state government grants.
activities employ highly educated and skilled
• Focus university research on
scientists and engineers, who themselves can applied, job-creating research.
become a magnet for the location of business
operations involved with innovation and new • Recruit research “superstars,”
product development. Research universities also groom research faculty, and
prepare the types of employees desired by high- support new research faculty.
tech and knowledge-based firms. Advances made • Build relationships between research
in the research and development process can universities and undergraduate
become the basis for new product and service institutions, to make facilities and
development, and creation of new businesses, equipment available to faculty.
and assist our firms in competing in the global
economy. For these reasons, a substantive level
Entrepreneurship
of research and development activities in a Entrepreneurship—the formation of new
state can provide a platform for a healthy 21st businesses by individuals and groups to take new
Century Economy. By encouraging research and products and services to the market—provides
development, Arkansas’s policies play a significant extraordinary opportunities for Arkansas in the
role in economic development. These policies also 21st Century. The Task Force heard that the state’s
provide a signal about our intentions and interest entrepreneurial spirit and success illustrate that
in advancing technology to firms looking for communities that embrace entrepreneurship can
location alternatives. grow their own knowledge-based companies,


16

jobs, wealth, and economic well being. According ficult and costly it is for business owners to acquire
to the U.S. Small Business Administration, in 2006 sufficient capital. The most difficult risk capital
there were more than 25 million small businesses to acquire from the private sector is capital for
in the U.S.; these firms accounted for over half of early stage business start-up activities, the actions
the country’s private employment and generated that must be performed to take a new product or
60 to 80 percent of the net new jobs every year for service from the original invention to its first sales
the past decade. 3 Entrepreneurs tend to have roots in the market. The state plays a role in economic
in the states where their businesses are created, development by providing access to the highest-
and are less likely than recruited firms to leave for risk capital that would otherwise be unavailable
“greener pastures” elsewhere. Large firms may also through the private sector. Risk capital is even
have greater difficulty reacting to the rapid chang- more crucial for technology-based businesses,
es in technology and markets that characterize the which may have large capital demands early in the
21st Century Economy. development process of bringing a new product or
service from the initial invention to initial sales in
At the heart of every small business is an
the marketplace.
entrepreneur—a person who saw an opportunity
in the market, who was courageous and adventure- The highest priority recommendation of the
some enough to strike out on his own rather than Task Force is:
cling to the security of employment in an existing
business, who took the risk necessary and invested Increase the availability of risk capital
dollars and sweat and skills to build something for state supported investment in
of his own. Entrepreneurship policies of Arkansas early stage technology start-ups.
affect the rate of new business formation through
The recommended strategy to increase the
their impacts on Arkansans’ attitudes about busi-
availability of risk capital is to:
ness creation, and their knowledge about how our
economy, our businesses, and their own personal • Support Phase Zero Small Business
financial dealings work. Innovation Research (SBIR) (to attract
Federal SBIR), by providing proposal
The highest priority recommendation of the
writing assistance and increased funding
Task Force is:
in support of SBIR grant requests for
Develop an economics and start-up technology companies.
entrepreneurship curriculum
• Increase funding for Product
appropriate for grades K-16, including
Development and SBIR Bridging.
classes in personal finance.
• Match Risk Capital Investment Funds.
Risk Capital
• Offer Investor Investment Tax Credits.
Every business depends upon the existence of
risk capital in order to grow. The more risk involved The recommended strategy to increase state
in starting or growing the business, the more dif- supported investment in early stage technology
3 http://www.score.org/small_biz_stats.html
start-ups is to:


17

• Fund the existing Risk Capital Matching Fund. The recommended strategy to expand the
research and development (R&D) incentives for
• Expand funding of the Seed Capital
industry is to:
Investment Fund.
• Decrease the equity investment
• Encourage Arkansas state retirement
funds to invest in nonpublically traded requirement necessary for the R&D tax
Arkansas technology companies. credit from $400,000 to $200,000.

• Eliminate the cap on the state incentive • Make the Applied Tax Credit transferable.
tax credits for investment in start-up
• Make the University Tax
technology companies and angel funds.
Credits transferable
Existing Business Innovation
• Expand the Research & Development
Businesses operating in Arkansas provide the tax credit to include the transportation
foundation for our future economy, providing jobs and installation costs of equipment.
for Arkansans and increasing the wealth in the
state. Policies that support innovation in existing Infrastructure
businesses impact our economic development by
Businesses do not exist in a vacuum; they can
providing them with opportunities to increase their
only operate in an environment that provides
competitiveness and profitability, increasing the
them with the physical infrastructure needed
probability that they will thrive and grow in the
to get their products and services to market:
long run. By their nature as drivers of business de-
transportation, water, wastewater and other
velopment, the full scope of policies that encour-
age innovation among existing business will affect waste disposal, electricity and natural gas,
economic development in the 21st Century. telecommunications, and other physical assets
external to the firm. The state’s infrastructure
The highest priority recommendation of the policies can determine the viability of the state
Task Force is:
as a location for business, thus affecting our
Expand research and development future economic development. In addition to the
(R&D) incentives for industry; ﬁnancially traditional infrastructure, 21st Century businesses
support business retention and expansion are highly dependent upon the existence
activities through AEDC’s existing and reliability of high speed, high bandwidth
Business Retention and Expansion telecommunications—“cyberinfrastructure.” The
program, the Arkansas Science and Task Force heard in communities across the state
Technology Authority’s (ASTA’s) that broadband connectivity is an advantage in
Arkansas Manufacturing Solutions, and a
global economic competitiveness and that the lack
variety of Arkansas Development Finance
of affordable broadband is a barrier to economic
Authority (ADFA) programs; and increase
growth. Any area of the state missing an element
incentives for existing businesses to
modernize their processes through R&D of the infrastructure will be unable to develop
and modernization of their equipment. economically in the 21st Century.


18

The highest priority recommendation of the The highest priority recommendation of the
Task Force is: Task Force is:

Create a 21st Century Make Arkansas globally
cyberinfrastructure. competitive in business and
industry recruitment.
The recommended strategies to create a 21st
Century telecommunications cyberinfrastructure The recommended strategies to make Arkan-
are to: sas globally competitive in business and industry
recruitment are to:
• Develop rural broadband connectivity
to all feasible locations in Arkansas. • Expand funding of the state
Quick Action Closing Fund.
• Develop broadband applications.
• Increase agency funding for advertising
• Support high performance computing.
and marketing to be competitive with
• Develop optical networks. neighboring states. (See Afterword:
Additional Issues for Consideration for
Direct Economic Development a relative implementation method.)
Policies • Provide funding for economic development
from dedicated revenues, rather than
A variety of state policies are directed at spe-
the general improvement fund.
cific economic development activities, including
marketing and promotion of the state as a location • Expand Amendment 82 to lower the
for businesses, financial incentives for businesses threshold of firm size that would
locating in Arkansas, providing technical assis- qualify for funding assistance but
tance to businesses, and providing assistance to maintain the same rate of impact on
regions of Arkansas in creating the kind of environ- the economy as would larger firms.
ment in which businesses thrive and the quality
• Pass a constitutional amendment to
of place where talented people want to live. The
Amendments 60, 62, and 65 of the Arkansas
21st Century is characterized by a global economy
Constitution that would eliminate the
in which businesses may extend their operations
interest rate caps for the state economic
over many states, countries, and even continents,
development agencies and for the cities
and can choose from thousands of communities
and counties in Arkansas. (See Afterword:
in which to locate. Arkansas’s economic success
Additional Issues for Consideration.)
will depend on strategic assessments of the state’s
business mix and, if Arkansas’s entrepreneurs and In addition to the state strategies listed, the
existing businesses leave important gaps, then Task Force heard about targeted local and regional
Arkansas must be a suitable and competitive initiatives that (in addition to those listed previ-
environment for the operations of new companies ously in the discussion about role and scope) ap-
attracted to the state. pear to be making a difference in the 21st Century


19

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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21

Programs & Services for the 21st Century Economy
State government’s economic development These are reported in the previous section of this
policies and investments are implemented through report. In the context of the discussion about role
the programs and services of agencies and instru- and scope, the Task Force identified strategies,
mentalities of the state. tactics, programs, and services.

The Task Force was charged with studying “The As the Task Force identified its priority strate-
programs and services needed for the state and its gies, the role, scope and strategies became the
communities to be globally competitive within the framework within which a subset of the economic
role and scope of 21st Century economic develop- development programs and relevant state consti-
ment.” tutional issues emerged as particularly relevant to
global competition and the scope of 21st Century
The Task Force heard presentations from each
economic development. The Task Force believes
of the economic development entities represented
this methodology is tactically sound and reveals a
by ex officio members of the Task Force. The lead-
solid core of programs that are key to competitive-
ership from the Arkansas Economic Development
ness and contribute to economic development in
Commission, Development Finance Authority, and
the 21st Century Economy. In the following subsec-
Science and Technology Authority made detailed
tions of the report, which parallel those used previ-
presentations to the Task Force about their respec-
ously to describe role and scope, the Task Force
tive operations, including many relevant programs
restates its priorities and identifies the subset of
and services. The Task Force also discussed the role
programs and services offering the highest poten-
and scope of education at all levels in 21st century
tial “for the state and its communities to be glob-
economic development.
ally competitive within the role and scope of 21st
The Task Force explored the possibility of thor- Century economic development.” In the following,
oughly reviewing all the economic development “Description” summarizes a program or service;
programs to determine which contributed to the “Entity” identifies the lead agency or instrumen-
21st Century Economy, which – if any – had be- tality of the state; and “Citation” references the
come outdated, which might be considered for ex- relevant Arkansas Code section.
pansion, and where there may be opportunities for
The Task Force recommends
new policies, programs, and services. This objective
that the following 26 programs,
seemed to the Task Force to be considerable, and
initiatives, and constitutional issues
the time available to carry it out limited.
be given priority consideration
The Task Force initially invested its time in its in the near-term as being key to
careful definition of the role and scope of econom- competitiveness and contributing
ic development in Arkansas in the 21st Century; it to economic development in
defined nine areas of state policy that most directly the 21st Century Economy.
affect economic development in the 21st Century.


22

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 Arkansas Economic Act 564 of 2007
science, technology, engineering, and math fund to increase Development Commission
the state’s ability to compete for jobs in the 21st Century.

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.

The SMART Core Curriculum Arkansas Department Modify Existing Program
of Education

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.

Create a STEM scholarship program that offers assistance Arkansas Department New Policy
that is hard to get but easy to keep. This scholarship will not of Higher Education
penalize students who enroll in difficult degree programs,
encouraging them to stay in them until graduation.

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.

Create an initiative to review and coordinate Arkansas Economic New Policy
existing workforce training programs to Development Commission
support AEDC’s targeted industries.


21st Century Ar Task Force

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