Raising Incomes Focus Of Accelerate Arkansas

Last updated Saturday, September 29, 2007 8:45 PM CDT in Business

By Michael Tilley
THE MORNING NEWS

LOFTY GOAL

Adams said Accelerate Arkansas' primary goal is to close that income gap by 2020.

"I hope they are successful, but mathematically it's a steep hill to climb," said Greg Kaza, director of the Arkansas Policy Foundation, an organization formed in 1995 to analyze public policy and make recommendations.

High income growth rates are not uncommon, according to Kaza's calculations.

His numbers show that between 1941 and 1945, Arkansas' per capita personal income grew from 47 percent to 60 percent.

"Arkansas would improve from 77 to 90 percent of the U.S. if its economy could replicate this high growth rate," Kaza wrote in a June research note.

Kaza's research note also shows that Arkansas' per capita income grew from 59 percent of the U.S. average to 71 percent between 1954 and 1971. This period, Kaza wrote, was when many manufacturing operations moved to Arkansas.

Adams admits that the goal is not easy, and he doesn't suggest that Accelerate Arkansas has all the answers. He asserts that the group's efforts are more focused on finding things that can happen now instead of issuing reports on what needs to happen.

"We've tried to look at the framework, at what it would take to build a knowledge-based economy," Adams said. "This (report to be released Tuesday) is not, 'What do I want to be when I grow up?' This is, 'What am I doing now?'"

LEGISLATIVE EFFORTS

Accelerate Arkansas was influential in getting eight bills passed in the 2007 Arkansas legislative session that Adams said were written to "help build that framework."

Of those eight bills, Adams is the most effusive of Acts 563, 1024 and 1596.

Act 563 authorizes the Arkansas Science and Technology Authority to work with the state's research universities and business interests to create a research alliance.

Adams said the alliance will be modeled after the Georgia Research Alliance, which has been in place for about 17 years. The GRA, according to its Web site, was created by a partnership between research universities, state government and business leaders to help "build a technology-driven economy fueled by innovative university research."

The Georgia program recruits top scientists and scholars who are the most likely to generate ideas and technologies that can be commercialized. The GRA Web site notes that in the organization's 17-year history it has invested $400 million in research, recruited more than 50 scientists/scholars, acquired $2 billion in federal and private funding, generated 120 new technology companies and created more than 5,000 new technology jobs.

"That's what we have to do. We have to support job-creating research," Adams said. "University research talent can be a strong driver of economic development."

REFOCUSING, EDUCATION

Act 1024 created the Task Force for the 21st Century to study how Arkansas can improve its economy. Heads of the Arkansas Economic Development Commission, Arkansas Development and Finance Authority, and Arkansas Science and Technology Authority are part of the task force.

Adams said the task force will be important because state government "needs to be refocused for the 21st century."

Act 1596 gives the state more flexibility in providing incentives for research that can lead to higher-wage jobs or the recruitment or retention of knowledge-based jobs.

Public school education is a focus of Accelerate Arkansas. Specifically, Adams wants to boost funding for programs that will result in more and better math and science instruction. He said the group is doing all it can to support the fledgling Arkansas STEM Coalition (STEM: science, technology, engineering and math).

"We are trying to get more money to good math and science teachers," Adams said.

Adams refused to be drawn into a discussion about the ability of Arkansas' public schools to prepare students for knowledge-based jobs.

"We can't go through (an education) revolution in Arkansas," Adams said. "We have limited resources. We've really got to work with what we have."

Kaza and the Arkansas Policy Foundation have been willing to critique the state's education system. The foundation, which stresses economic improvement through tax reduction and education reform, is an advocate of charter schools and other programs to bring competition to the education sector.

"The deficiencies in the education system are an obstacle that must be overcome going forward," Kaza said Tuesday.

MANUFACTURING ISSUES

Kaza said he hopes Accelerate Arkansas is "very successful" in pursuing its goals, but expressed concerns that manufacturing appears to be ignored in the passion to create a more knowledge-based economy.

"There are people in the universities who do question the commitment to manufacturing in the long-term. But the reality is that not everyone can work in a high-tech company," Kaza said.

He said reductions in the state income tax, capital gains taxes and more transparency and accountability in the education system will provide an environment in which Arkansas can best recruit and retain good manufacturing jobs.

Arkansas has lost more than 40,000 manufacturing jobs in the past 12 years.

"We're bleeding manufacturing jobs in Arkansas and have been since about 1995," Kaza said.

Mike Malone, director of the Northwest Arkansas Council, said advanced manufacturing jobs could result from the commercialization of university research. That's one reason he's excited about the potential of an Arkansas research alliance based on the Georgia model.

"It will really link business and industry research needs with the research that goes on at our universities," Malone said. "Advanced manufacturing could come from that (university research). I think that's a very reasonable goal."

DYNAMIC ACCESS

Fayetteville-based Process Dynamics Inc. is an example of how access to university facilities can aid in job growth.

The company announced Wednesday it sold its intellectual property rights for IsoTherming technology to chemical giant Dupont. IsoTherming is a process by which refiners produce cleaner fuels at a lower cost. The partnership with Dupont gives Process Dynamics the chance to better market its technology to refineries worldwide.

Mike Ackerson, the University of Arkansas professor of chemical engineering who developed the process and president of Process Dynamics, said Thursday that access to the Genesis Technology Incubator -- a UA facility -- was key to the creation of Process Dynamics.

"It would have been very difficult because it's virtually impossible to find wet (use of chemicals) lab space for lease," Ackerson said. "And it's cost-prohibitive to build if you're a start-up company."

Process Dynamics has seven full-time and five part-time employees.

"Quite a bit higher than both levels," Ackerson said when asked if Process Dynamic wages are below, at or above state and national income averages.

He said the company will probably add three full-time and five part-time posts within three years.

NEW COMPANY SUPPORT

Ackerson is also an entrepreneur, which also is a focus of Accelerate Arkansas. The group wants to establish regional entrepreneurship centers like the one in Fort Smith.

The Innovation and Entrepreneurship Center at Fort Smith -- created and funded by a partnership between the Fort Smith Regional Chamber of Commerce, the city of Fort Smith and the University of Arkansas at Fort Smith -- opened in August.

Center Director Michelle Hall said Adams asked her to help Accelerate Arkansas develop similar centers around the state.

To be successful, Hall said the group will have to avoid three common pitfalls.

First, the state needs an entrepreneurship "alliance" to avoid a proliferation of entrepreneurship "service providers" and programs that only serve to confuse those seeking help.

"I have seen this problem in many states and it is hard to overcome if someone is not willing to bring the providers together to work together for the greater good of the state," Hall said in an e-mail question-and-answer session.

Also, state officials must get serious about entrepreneurship development by "reviewing tax and regulatory policies that hinder innovation and entrepreneurship within the state."

Another pitfall is in the improper, or inadequate, utilization of an entrepreneurship center, Hall said.

"In other words, telling a community to focus on biotechnology when they do not have access to a research university within their region is not setting the community up for success," Hall noted.

VENTURE CAPITAL

While not necessarily a pitfall, greater access to capital is fundamental to the success of any statewide effort to promote entrepreneurship, Hall said.

Entrepreneurs with potentially lucrative ideas often need the most start-up assistance, Hall said. Often that assistance requires the new company to locate outside of Arkansas.

"If I had the (idea) to start a business that needed $25 million to get started, I would have a very tough time raising that level of capital. If I were successful at finding the funding, I would most likely have to relocate the business outside Arkansas either to be near the venture firms or by the request of the venture firm," Hall wrote.

Ackerson with Process Dynamics listed better access to venture capital as a must if Arkansas is serious about new company growth.

"(State) officials need to infuse seed capital to get (a new company) started. My opinion is that you could grow these companies and more than likely they'll stay where they start," Ackerson said.

Despite minor philosophical differences with regard to what it will take to improve Arkansas' economy, Kaza said Accelerate Arkansas should be applauded for its efforts to raise incomes.

"They are trying. They are trying to accomplish a goal that Arkansas government policymakers have pursued for several decades," he said.

MEDIA MOVES

Locations at which Accelerate Arkansas will unveil its new strategy for improving Arkansas' economy. All events begin at 10:30 a.m.

* Fayetteville: Genesis Technology Incubator, AT&T Conference Room, 700 W. Research Center Blvd.

* Fort Smith: University of Arkansas at Fort Smith, Business and Industrial Institute Building, Latture Conference Room, 5210 Grand Ave.

* Hot Springs: Greater Hot Springs Chamber of Commerce, 659 Ouachita Ave.

* Jonesboro: Arkansas State University Biosciences Institute Conference Room, 504 University Loop East.

* Little Rock: Acxiom Corp., Rivermarket location, Auditorium, 601 E. Third St.

* Pine Bluff: Economic Development Alliance of Jefferson County, Alliance Board Room, 510 Main St.

SOURCE: Accelerate Arkansas

THE STRATEGY

The five core strategies of Accelerate Arkansas.

FIVE CORE STRATEGIES

* Support job-creating research. (Create an Arkansas Research Alliance.)

* Develop risk capital that is available for all stages of the business cycle, especially the funding gap.

* Encourage entrepreneurship and accelerated new enterprise development.

* Increase the education level of Arkansans in science, technology, engineering and math.

* Sustain successful existing industry through advancing technology and competitiveness.

SOURCE: Accelerate Arkansas

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