Viewpoint

Aliceann Wolhbruck, Executive Director, NADO Research Foundation

At least 40 states and the District of Columbia were forced to make emergency cuts in their budgets this year totaling $27 billion according to The New York Times. “State revenue across the country dropped more sharply in the first three months of this year than at any time since 1991 and tax collections have deteriorated in many places since then,” warned a front page story in The Washington Post.

In the past ten years states cut taxes for individuals and businesses and increased spending for many programs. Experts have also identified two serious structural problems affecting state revenues. The Times noted:

Services, the dominant element of the 21st century economy, are not taxed.

The huge rise in health care and drug costs now consume 27 percent of all state spending.

With the decline in the economy and the “trickle down” effect of federal tax cuts, almost all states are facing severe budget shortfalls and deficits. And, what hurts states hurts local governments and the regional development organizations that serve them. The economic domino effect is being felt in places that benefited from the 90s boom and also in distressed regions that did not have significant improvement in their economy and tax base. This decline has made entrepreneurial regional approaches more important than ever as a way to gain the greatest return on public investments.

The National Association of State Budget Officers warns that the next fiscal year beginning on July 1 will be challenging for 46 states. When the economy slows, the need for entrepreneurialism in the private and public sectors is greater than ever. Development professionals must search for new opportunities for job creation and retention. As illustrated in this issue, small towns in Minnesota and Virginia were able to revive their regions economically when deciding to build prisons in their communities. And, in the story, Powdered Metal Cluster Has Widespread Impact on page 6, the powdered metal industry cluster in Ridgway, Pennsylvania, has proved to be a very lucrative investment for that region.

In the private sector, the importance of entrepreneurs continues to be of critical importance to the economic recovery. Recognizing this, the Kauffman Center for Entrepreneurial Leadership and the Appalachian Regional Commission are supporting the NADO Research Foundation's 2002 Pioneer Awards program that will recognize NADO members who have overcome obstacles to promoting entrepreneurship in their regions. For more information, visit www.nado.org or contact Bill Amt at 202/624-8467 or bamt@nado.org.

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