Report: Colorado is a ‘destination state’ for companies and workers, but faces ongoing issues in tax and education performance
Annual benchmark study analyzes factors related to economic growth and competitiveness
On Nov. 18, 2015, the Metro Denver Economic Development Corporation (Metro Denver EDC) released the 11th edition of its Toward a More Competitive Colorado (TMCC) report. The annual benchmark study analyzes Colorado's strengths, challenges, and opportunities for future job growth and economic expansion.
First published in 2005, TMCC is the foremost effort to compare Colorado's competitive position against the other 49 states. The study is researched by the Metro Denver EDC's Chief Economist Patty Silverstein, along with Senior Economist David Hansen of Development Research Partners, and is presented in cooperation with Wells Fargo.
According to Silverstein, more than 10 years of data paints a broad picture of Colorado’s performance through periods of both economic expansion as well as economic downturns. Findings show that Colorado has emerged as a ‘destination state’ for both companies and workers.
“We’ve found that over this period that Colorado has excelled following two recessions, with considerable strength in economic performance and employment growth compared to other states and countries,” said Silverstein. “The state is a significant global competitor in attracting new industry, jobs, and investment.”
This year's report shows that Colorado is the No. 3 state for employment growth—at 3.5 percent—for the second straight year. The most dire year for job growth in the past 10 years was 2010, when the state ranked 40th.
Throughout TMCC’s history, innovation has stood out as another of Colorado’s major economic strengths. This year is no exception, with Colorado’s reputation as a hub for innovation even further validated. All 18 innovation measures reported as strengths, with the state tallying top 10 rankings in 15 measures. Further, since Colorado is now the location of a regional U.S. Patent and Trademark Office, business leaders expect innovation to position the state favorably for years to come.
"Innovation measures point to states that are poised for continued prosperity and growth,” explained Pam Reichert, Vice President of the Metro Denver EDC. “Colorado’s competitiveness in innovation is further enhanced by its focus on creating spaces and support systems for innovation through private- and public-sector platforms that provide training, mentorship, and entrees to venture capital.”
Another area where Colorado maintains a significant competitive advantage is in the health of its workforce, which is first for physical activity and also the second-most highly educated in the country (behind Massachusetts), further boosting Metro Denver's economic development brand: Energetic Bodies. Energetic Minds.
Additional strengths for Colorado:
- Fourth-most competitive state (Beacon Hill’s 2014 State Competitiveness Report), up from seventh last year
- Continues to post strong population growth, ranking as the fourth-fastest growing state in 2014; ranking No. 4 five of the past six years.
- Top-10 rankings in key innovation measures:
- NASA Prime Contract Awards (second)
- High-Tech Employment (third)
- State Technology and Science Index (fourth)
- Initial Public Offerings (fourth)
- Number of New Businesses per 1,000 Employees (fourth)
- Small Business Innovation Research grants (fourth)
- Clean Tech Leadership Index (fourth)
- Proprietors as a Percentage of Total Employment (fifth)
- Maintains top-10 positions in major health and wellness rankings:
- Adult obesity rate (lowest in nation)
- Physical activity (highest in nation)
- Cancer deaths (third lowest)
- Retail prescriptions filled (fourth lowest)
- Diabetes deaths (fifth lowest)
- Overall well-being (sixth highest)
TMCC also draws attention to areas that challenge Colorado’s competitiveness. Since its inception, the report has called out the threats faced by declining funding for higher education, with tuition costs skyrocketing to offset declining state support. In addition, this year’s findings show another disparity—that Colorado isn’t keeping pace in graduating sufficient numbers of students for key professions, including teachers, nurses, and engineering technicians.
Another of the state’s persistent challenges lies in its performance in key K-12 rankings. In 2014, Colorado generally ranked in the second or third quintile in the 16 data measures included in TMCC. With the race for talent growth becoming ever more competitive among the states, these modest results challenge Colorado’s ability to expand its 21st century workforce.
“We see Colorado’s performance in K-12 education as merely average,” explained Tom Clark, CEO of the Metro Denver EDC. “If we want to see continued economic growth in our state, we need to ask ourselves ‘is average ok for Colorado?’”
Although Colorado continues to garner national attention as one of the country’s most desirable places to live—especially among millennials—housing is becoming increasingly unaffordable, notes the study. The report recommends that the state find more avenues to provide affordable rental housing and pathways to first-time residential ownership in order to continue attracting millennial workers, a demographic vital to the future workforce. Currently, the Metro Denver EDC is leading a coalition of stakeholders evaluating the effects of construction defect laws and how such policies have brought the construction of condominiums—often the only purchase option for first-time homebuyers—to a near grinding halt in the region.
Throughout 11 years of TMCC research, another theme remains consistent: Colorado’s unbalanced tax system between state and local governments creates critical funding issues for infrastructure and education.
“We have a tax paradox in Colorado. Although we have the lowest state sales tax rate among the states that levy one, when both state and local sales tax rates are combined, Colorado actually has the eighth-worst tax structure in the United States,” explained Kelly Brough, President and CEO of the Denver Metro Chamber of Commerce.
“Colorado’s tax policies are dictated by a number of Constitutional amendments, making reform complex and difficult to achieve,” she said. “But thanks to the efforts of Building a Better Colorado—a grassroots effort bringing citizens and business together to address these challenges—reform might finally be on the horizon.”