In 2023 State of the State addresses, Governors outlined efforts to grow and diversify their states’ economies.
By Sally Rood, Sophia Yager, Katie Nichols
In their 2023 State of the State addresses, Governors announced bold investments to grow and diversify their states’ economies, from attracting billion-dollar mega-sites to reducing barriers for small business owners. Bipartisan priorities emerged on regional development, infrastructure, outdoor recreation and more. These policies and programs work together to boost states’ competitive edge in attracting and retaining businesses and workers while also increasing economic opportunity across the country.
Investing in New Place-Based Regional Development Projects
States are preparing for large facility projects tied to new federal funding and incentives under the Infrastructure Investment and Jobs Act (IIJA), the Inflation Reduction Act (largely renewable energy projects) and Chips and Science Act (for semiconductor manufacturing). As a result, many Governors are employing place-based strategies to strengthen regional industry clusters and maximize the economic impact of these new investments. Several Governors announced the largest economic development projects in their states’ histories. South Dakota Governor Kristi Noem’s Office of Economic Development has facilitated $1.7 billion in new investments over the last year, including the recent groundbreaking on the state’s first ever billion-dollar investment at the Gevo Net-Zero-1 site in Lake Preston. Georgia Governor Brian Kemp announced that four new economic development projects are expected to bring more than 20,000 new jobs and more than $17 million in investments to rural communities.
Governors and legislatures have also worked together to create special economic development funds to attract and recruit new businesses. These funds support activities including: developing shovel-ready mega-sites, leveraging research assets of educational institutions to increase regional innovation, supporting clusters of small and medium-sized firms, and launching major workforce training initiatives. Nevada Governor Joe Lombardo proposed a $315 million Nevada Way Fund to fund transformational economic development and critical infrastructure, and Minnesota Governor Tim Walz’s Forward Fund would create grants, loans and forgivable loans for infrastructure or large-scale economic development projects. In Tennessee, Governor Bill Lee is proposing legislation to revitalize 175 brownfields and prepare them as economic development sites.
Several Governors are tying federal investments to innovation partnerships, such as North Dakota Governor Doug Burgum’s announcement that the state will join the Regional Technology & Innovation Alliance to pursue federal research grants, and Washington Governor Jay Inslee’s goal to fund the Washington State University Tri-Cities Institute for Northwest Energy Futures to support the regional energy economy.
“We want all regions of the state to participate in Ohio’s economic revival… Every region of the state has good sites, however, many are not yet ready for development. When a business is looking for a site, they want to move quickly, and we must get sites ready so we can capture these jobs in every part of the state.”
Ohio Governor Mike DeWine
Supporting Small Businesses and Entrepreneurs
Governors are balancing larger-scale development with investments to support small businesses and entrepreneurs, recognizing the critical role they play in creating thriving local, regional and state economies. These resources include business navigation and technical assistance; access to capital through grants, loans and private investment; streamlining regulations; specialized tax credits; partnerships with higher education institutions to catalyze research and development; and downtown and main street development programs. Many programs are also specifically targeted to businesses owned by women, people of color, veterans, indigenous people and other diverse populations to increase business ownership among underrepresented populations. Michigan Governor Gretchen Whitmer allocated $200 million for Michigan Regional Empowerment Program grants to support the regional economic growth, diversification and resiliency; $135 million to start and expand small and micro businesses through the Michigan Main Street Initiative and $100 million for Community Downtown Economic Development grants. Ohio Governor Mike DeWine plans to invest $150 million to create new Innovation Hubs in regions throughout the state.
“While there is still uncertainty in our national economic climate, we must create stability here at home. Our stability begins and ends with our small businesses – the backbone of our state’s economy.”
Alabama Governor Kay Ivey
Doubling Down on Infrastructure Investments
Investments in infrastructure are a high priority for Governors as they work to attract new businesses and provide opportunities for existing companies, funding projects for roads, bridges, water, sewer, electric vehicles and more. To ensure all communities are benefitting from these economic development investments, some states are targeting rural communities specifically, such as South Carolina Governor Henry McMaster’s proposed allocation of $380 million to the Rural Infrastructure Authority for competitive grants to support rural water, sewer and stormwater transformations. Governors have also proposed historic investments to expand high-speed internet across their states and improve connectivity for businesses and workers. Kentucky Governor Andy Beshear touted the state’s “largest public sector investment in expanding high-speed internet” through his Better Internet initiative. Many Governors have also specifically dedicated state funds to leverage as state matches that are required to access certain programs under IIJA.
“Regardless of political party, we all want our rural communities to be hubs of commerce and economic activity.”
Kansas Governor Laura Kelly
Boosting Housing Production and Improving Affordability
As housing remains one of the top barriers to workforce recruitment and retention, Governors are moving to increase both the availability and affordability of housing to meet employer demand. Hawai‘i Governor Josh Green, M.D. proposed allocating over $1 billion to renovate public housing units, provide state rental subsidies to low-income families and increase financing for additional affordable housing units. Vermont Governor Phil Scott proposed $45 million for housing development and rehabilitation, including rental housing for middle-class families and increased funding for Vermont Housing Improvement Program grants to bring vacant rentals up to code, add new units to an existing building, and create accessory dwelling units.
Championing Tourism and Outdoor Recreation Initiatives
Governors have championed tourism and outdoor recreation as economic drivers for their states and their budgets reflect increased investment in this sector. To promote both environmental conservation and economic development, Tennessee Governor Bill Lee proposed improving and expanding three state natural areas, building two new park lodges, completing four outdoor trails and creating four new state parks. Minnesota Governor Tim Walz put forward $12 million to improve the Metropolitan Regional Parks System as part of the state’s Get Out MORE (Modernize Outdoor Recreation Experience) initiative to revitalize camping infrastructure, enhance fisheries, modernize boating access and restore streams.
“In the coming years, we will reposition our economy to pursue global opportunities — retooling tourism, developing green technologies, and expanding our reach into international markets for our small businesses and our world-class professional sector.”
Hawai‘i Governor Josh Green, M.D
Offering Tax Relief and Incentives for Businesses
To reduce the burden on businesses of all sizes and attract new investments in growing industries, Governors have proposed a variety of tax relief and incentive measures. These approaches include establishing or expanding performance-based tax incentives, raising the threshold for exemptions (such as those for taxes on business equipment) or eliminating certain taxes altogether. Indiana Governor Eric Holcomb proposed increasing the flexibility for the Indiana Economic Development Corporation (IEDC) to raise the cap for IEDC’s business tax credits as a tool for business attraction. New York Governor Kathy Hochul has moved to increase funding for the Empire State Development Corporation’s Excelsior Jobs Program tax credits, incentivizing job growth to promote business relocation and expansion.
As Governors work to achieve their vision for economic and community development, the National Governors Association Center for Best Practices is prepared to support their implementation of these bipartisan priorities through technical assistance, sharing of best practices and facilitation of peer-to-peer exchange. For more information, please visit www.nga.org/bestpractices/workforce-development-economic-policy.