Much like the nation as a whole, Arizona is looking to job growth as a way to pull itself out of the economic doldrums and reverse its fortunes amid a recession.
But some proposals call for the elimination of the Arizona Department of Commerce as a way to close massive budget gaps, a move some policymakers say would be disastrous for the state’s economic development.
Doing so would run counter to the advice economic development experts gave policymakers and others in the business community during a recent forum that focused on strategies the state could take to boost economic growth in a bad economy.
John Lenio told the 60 or so people at the Jan. 16 gathering how important a state’s commerce department can be in attracting businesses. Lenio, the managing director of CB Richard Ellis’ economic incentives group, works with corporations interested in relocating or expanding and helps them find the best place to do so. He said the states that are most aggressive about economic development have strong commitments in state government to bringing in new business.
“Ninety percent of successes are a company feeling like they’re needed…and the state rolling out the red carpet to those opportunities,” he said.
States with the highest commitment to economic development — Kansas, Missouri and Oklahoma made that list, as did several others — have plans in place to attract the types of businesses they want. A significant part of why those states are successful, Lenio said, is because their political leaders have made economic development a priority. Their top officials and commerce departments continually reach out to consultants such as Lenio to tout their states’ benefits.
That kind of approach should be what Arizona does, said House Commerce Committee Chairman Michele Reagan, a Republican from Scottsdale, who co-hosted the forum with her Senate counterpart, Barbara Leff of Paradise Valley.
“(The Department of Commerce) should be very small and very powerful… and an arm of the Governor’s Office that’s guiding us and directing us,” Reagan said.
Such a department also could serve as a cheerleader of sorts for Arizona, telling prospective investors things about the state that may not be widely known. For instance, a Commerce Department as envisioned by Reagan and Leff could let aerospace businesses know that Arizona is 8th in the nation in employment in that industry.
“We need to make sure people know we’re as important to aerospace as we are,” said Vicki Panhuise, Honeywell’s vice president of military aircraft. She said most people in Arizona don’t even realize the role her industry plays in the state’s economy, much less businesses outside the state.
The biggest reason the department isn’t a force, Leff said, is because governors haven’t always named the most qualified people to helm the agency.
“It has been a place where governors have placed people who are receiving political payback, not those who are qualified,” she said.
That inevitably leads to a lot of turnover. Barry Broome has seen four Commerce directors in the four years he’s been president of the Greater Phoenix Economic Council.
“You cannot win in this state until you have a subject-matter expert (in charge) that the Legislature can trust,” he said.
But with a good director and an ability to act with the authority of the Governor’s Office, Leff envisions a Department of Commerce that plays a major role in helping to diversify Arizona’s economy.
Doing so requires vision, Steve Partridge told the forum. Partridge, a one-time employee at the Arizona Department of Commerce and most recently the senior vice president of the Charlotte Chamber of Commerce, said North Carolina did that decades ago when it established the “Research Triangle” in the area around three research universities.
“It’s that long-term planning that puts you on the map,” he said.
But if the department is eliminated and many of its core functions are assigned to other agencies, as was proposed by legislative budget leaders earlier this month, Leff said it will make Arizona even more irrelevant for companies looking to relocate or expand.
“The message (will be) Arizona’s not open for new business — we don’t care to invite new business here,” she said. “It goes against everything I believe about getting jobs to Arizona.”
Others don’t share Leff’s fatalistic view of an Arizona without the Department of Commerce. Rep. Doug Quelland, a Republican from northwest Phoenix, expects the department will be a casualty of the budget and said it won’t hurt economic development a lick.
“It’s an educated work force that’s going to attract businesses and our tax structure and our regulation structure. A department of commerce doesn’t even enter in to any of those three things,” he said.
House Appropriations Committee Chairman John Kavanagh, R-Fountain Hills, said that belief is prevalent among his colleagues and warrants further discussion.
“I think enough people are questioning the existence of Commerce for us to examine whether it does, in fact, have a future in government, so long as its vital functions can be picked up elsewhere,” he said.
The tough economic times could serve as a catalyst for reforming the Department of Commerce, said House Speaker Kirk Adams. Part of the discussion will certainly be whether the dollars spent on the agency would be better spent elsewhere, but Adams also wants to use the recession as a way to refocus the state’s economic development effort.
“I think that leadership comes from a political leadership, and for the last six years we have not had our top political leadership — including the governor — focused on diversifying the economy and opening the door for businesses,” he said. “Times have changed and we have an opportunity to re-examine our efforts in that regard.”
To properly grow the economy, Adams said it is incumbent on policymakers to look at the institutions currently in place — the Department of Commerce among them –assess their performance and make any necessary changes. Lawmakers also must examine tax and regulatory policies to ensure they are in line with the end goal.
“Our goal is to grow the economy, grow us out of the recession and diversify it so we are not as susceptible to downturns of the real estate market,” he said.