Should Missouri pick one key industry – even one massive project – to jump start innovation as a means of creating more and better-paying jobs?
That's among the more provocative of dozens of ideas suggested in a report by the Governor's Innovation Task Force. Overall, it suggests tax breaks, more direct support for business incubation and a greater focus on blocking and tackling, that is, education.
“New technology startups are critical to Missouri's competitiveness, the growth of its economy, and the creation of more high-paying, good quality jobs,” the task force report says.
It did come back with the main recommendation it was expected to support – cutting so-called red tape to make life easier for entrepreneurs.
“Eliminate all unnecessary regulations and make Missouri the easiest place in the country to start a business,” it says high in a list of policy options.
The task force had some significant limitations. Its work, including roundtable discussions in Kansas City and four other locations this summer, was not open to the public. And it only touches on some of the state's deeper problems, such as a couple of anonymous comments in the report calling out the ways in which Missouri is deeply fragmented – divisions that play out when resources are divided up in Jefferson City and when leaders are asked to rally around a big idea for the good of the whole state.
Among the group's findings:
• “Missouri ranks mid tier in innovation nationwide.” Citing the Bloomberg 2016 U.S. State Innovation Index, it says Missouri is 32nd among the states. The only Midwestern states that ranked highly are Minnesota, Michigan and Illinois. Bloomberg factors in such things as spending on research and development, worker productivity and the number of people with degrees in science and engineering. Also, “Missouri has consistently ranked mid tier for state science and technology,” citing the Center for Jobs and Human Capital at the Milken Institute.
• Citing the Kauffman Index, the task force says Missouri is only in the mid-tier of larger states when it comes to startups and in the bottom tiers in “Main Street entrepreneurship” and entrepreneurial business growth.
• Other than Washington University's highly regarded medical school, graduate programs in medicine, plant sciences, engineering and computer science are out of the top tier – but that's a plain flub by the task force. It bases that on rankings by U.S. News, but it should be pointed out the many engineering programs at the Missouri University of Science & Technology in Rolla are considered among the best in the country and consistently draw students from around the world.
• The state loses more young college graduates than it attracts, which is true of every Midwestern state except Minnesota and Illinois.
“Significant talent migrates out of Missouri, especially among young professionals who seek a ‘coastal’ experience,” the report says.
• The report says Missouri faces “considerable brand headwinds” and makes a great deal – a bit much, one might argue – about protests three years ago in Ferguson, Mo., and two years ago at the University of Missouri.
Here's the nub of it: Missouri ranks well behind the states that the task force considers peers – Minnesota, Tennessee, Texas, Colorado, Iowa, Illinois and Kansas – in educational attainment. Missouri is in the middle of the pack nationally in eighth graders’ proficiency in math and science and in those 25 and older with a bachelor’s degree. Just 58 percent of Missourians 25 and older have at least some college and 25.5 percent of those with degrees are in science, engineering or technology – both in the bottom tier nationally.
Put another way, outside of agriculture, the state doesn't have a lot of national caliber to build on, the report suggests.
The task force has many suggestions. Create an entrepreneurship mentor network, establish an incubator association and develop a sister-state “innovation relationship,” suggesting Massachusetts might be a good fit. Missouri could swap agricultural technology and crop research for “world-class mentors, models of successful innovation organizations, and investor access.”
• Have “a permanent, high-level advocate for innovation” in the governor's cabinet.
• Lots of ideas on taxes: research-and-development tax credits, “angel investor” tax credits, philanthropic tax credits, lower taxes on income “derived from intellectual property,” accelerated depreciation, a capital gains deduction for innovation reinvestment, and transferable net operating losses.
• “Set a bold ‘moonshot’ goal (such as the building of a Hyperloop between KC and STL) as a challenge to establish Missouri’s credentials as state truly committed to innovation and risk taking.”
Elsewhere the report highlights human biosciences, logistics, animal health and “ag/plant tech” and suggests pick one to three of those industries in which to try to become a national or world leader – not a regional leader.
• Missouri should become “a national leader in offering non-traditional technical degree programs ...” It suggests loan forgiveness and scholarships. It suggests the same for students generally who take up science, technology, engineering and math.
“Growth in the innovation economy will require a technically literate workforce,” the report says.
• Create a “Missouri Innovation Fund,” with private and public money to support startups.
Bigger picture: “... a simple, fair and low tax system would eliminate many special tax credits and deductions and directly reduce tax rates for all businesses and individuals,” though the report adds “May cause lower tax revenue.”
As favorable as the Missouri General Assembly is to lowering taxes, legislators are looking at a budget crisis of their own making for years to come, and the state’s hundreds of millions of dollars set aside annually for tax credits are one of the problems. Legislators have growled but made no significant changes in those credits. Still, new credits figure to be a tough sell.
The task force issued its report just before Amazon said it wants to build a second headquarters in a North American city of 1 million or more, bringing an estimated 50,000 high-paying jobs.
Getting Amazon’s “HQ2” would qualify as a moonshot, right? Perhaps, but the state would immediately face a tough choice – backing St. Louis or Kansas City, each of which has thrown its hat in the ring. Looking at Amazon's stated criteria, both metro areas have some significant challenges, including overall economic vibrancy, an airport with significant overseas connections and public transit.
Still, PC magazine called Kansas City “possibly the nation's most underrated tech hub” and listed it at the top of the six likely cities it settled on. The New York Times Upshot team looked at Amazon’s criteria and bounced out half of the likely cities – including Kansas City – on economic vibrancy alone. It’s calculations pointed it to Denver, though one wonders if that’s far enough away from HQ1 in Seattle.
GeekWire put Kansas City 24th out of 59 cities. It looked at education, tech talent, taxes, home prices and public transit. As you would expect, Kansas City was in the top 15 in taxes and housing, but it ranked 45th in transit. GeekWire led its list with Toronto, one of four Canadian cities in its top 10.
-- Jeff Fox is The Examiner’s business editor and reporter. Reach him at 816-350-6313 or firstname.lastname@example.org. He’s on Twitter @FoxEJC.