The Commonwealth of Pennsylvania recently announced improvements to a key economic development program, the Redevelopment Assistance Capital Program (RACP). Among other efficiencies, the Commonwealth has streamlined the application process by replacing the 22-tab Application & Business Plan with a more efficient, 10-section fillable Project Management Proposal post-award application process. Ultimately, the changes will provide a more efficient, effective, and transparent process for grant awardees and help to find quicker ways to disperse needed capital to stimulate economic activity.
However, improvements to RACP are reflective of a much larger story, the Commonwealth’s recent commitment to make Pennsylvania a leader in economic development, innovation, and job creation. According to CNBC’s 2023 Top State for Business Ranking, Pennsylvania currently ranks 15th overall in the nation for a place to do business. It is also interesting to note that 6 of the top 10 states are located in the South with none in the Northeast.
States find themselves in a position where they are competing regionally, nationally, and even globally. This is particularly true with Northeast states, who have traditionally been the primary hub for economic activity nationally. According to a Bloomberg report, the U.S. economy is experiencing a wealth migration towards the South. The report states that approximately 2.2 million people moved to the Southeast in just over two years, which is roughly equivalent to the population of Houston. The entire South, from Florida to Texas and north to Kentucky, is where businesses are flocking to, jobs are being created, and homes are being bought. The Southeast accounted for more than two-thirds of all job growth across the country since early 2020, almost doubling its pre-pandemic share. The South’s contribution to the national GDP has also surpassed that of the Northeast for the first time in government figures going back to the 1990s. The report also estimates that about $100 billion in new income flowed into the Southeast in 2020 and 2021 alone, while the Northeast lost about $60 billion based on an analysis of recently published Internal Revenue Service data.
Pennsylvania, along with its fellow Northeastern states, find themselves in a position where they have to make investments that will not only retain jobs and population, but allow for innovation and new growth. The pivot that states must make to be more competitive, as well as have a more prosperous economic outlook, will only occur by implementing policy reforms and passing bold budgets to meet the moment.
The Commonwealth is attempting to do both to enhance its economic position. For example, in January 2023, Governor Josh Shapiro signed an Executive Order to improve licensing, permitting, and certification processes, beginning a comprehensive review of how long it takes agencies to process applications and how workers and businesses apply online. This was done to help make government more efficient and speed up processes in order to get needed grants and capital to businesses, nonprofits, and government partners to accelerate economic investment.
Pennsylvania’s $45.5 billion dollar budget, which was passed in July 2023, is being touted as a financial plan designed to spur job creation, fosters innovation, and provide the funding to make the Commonwealth more competitive on a national scale. This budget includes investment in a wide range of areas including infrastructure, housing, education, workforce development, agriculture, and community & economic development. Highlights from the budget include:
- A $50 million dollar investment in the Whole-Home Repairs program, taking a burden off the shoulders of those living paycheck to paycheck while ensuring they can afford to maintain their homes.
- $20 million dollars to fund the Historically Disadvantaged Business Program to invest in small minority-, women-, and veteran-owned businesses in the Commonwealth and provide sustainable support.
- $13 million dollars to make Pennsylvania more competitive on a national scale and help the Commonwealth become a leader in economic development, innovation, and job creation.
- $2 million dollars in the Municipal Assistance Program to help the local, municipal, and county governments that are on the frontlines of supporting their communities and a $1.25 million increase for the Strategic Management Planning Program (STMP) to help local governments create long-term plans for financial success.
- $1 million dollars in the Manufacturing PA Innovation Program, which connects Pennsylvania’s universities with businesses to spur innovation and job creation here in the Commonwealth.
Although the Northeast’s big cities including Philadelphia, Pittsburgh, New York, Baltimore, and Washington, D.C. are powerful drivers of economic growth that have traditionally kept the region’s economies ahead of the South’s, we have reached a tipping point. The combined GDP of Texas, Florida, Georgia, Tennessee, and the Carolinas surpassed the GDP of the Northeast region that includes Washington, D.C. and the 11 states stretching from Maryland up to Maine. In 2005, the Northeast’s share of national GDP was 23.5%, while the six-state South’s was 21.8%. In 2022, the numbers flipped: The South’s share was 23.8% while the Northeast’s was 22.4%.
In order to maintain competitiveness, Pennsylvania and its fellow Northeast states must position themselves to reform economic strategies including tax policies and regulations, as well as make smart investments in infrastructure, economic stimulus, and quality of life assets (housing, environment, education, etc.). A new way forward will hopefully encourage more people and businesses to follow their neighbors, customers, and suppliers to economic prosperity in their respective states. Can the Commonwealth position itself to move from number 15 into the top ten states to do business? Only time will tell, but unequivocally we know that innovative and decisive action will be needed for this to come into fruition.
Frank Robinson is a vice president at ESI. Mr. Robinson has been a leader in the economic development and sustainable development industries for over 20 years, working with corporate, government and nonprofit clients, banks and credit unions, as well as community development financial institutions (CDFI) and small businesses.