Colorado’s Declining Competitiveness

Lean and mean. The well-worn aphorism is wearing thinner in this economy, but I admit it’s what came to mind when I read “Toward a More Competitive Colorado,” the 5th annual study by the Metro Denver Economic Development Corporation (MDEDC) of our economy relative to the other 49 states. Lean and mean seems to put us in a better relative position in the current crisis, but after reading the report, I fear we are lean, mean and stupid.

Tom Clark, MDEDC executive vice president, and his organization don’t pull punches. The second paragraph of the executive summary sets the stage:

After five years of compiling data for this report, we have reached some firm conclusions. While Colorado’s short-term future remains bright, our long-term vision of our state will have to change.

The full report runs 314 pages, but don’t let that deter you. Tables and graphs, both skimmable and occasionally shocking, on 186 indicators of economic vitality make up the majority of it. Bookending the data are the executive summary and the compelling “Stories Behind the Graphs” to put five years of analysis into perspective:

Our citizens are becoming poorer, less educated, and less productive; our long-term economic prospects are certainly dimming.

But we really are lean. Colorado has the lowest obesity rates in the country, and we are also lean in the business sense, too. Our tax burden on business is the 4th lowest in the nation. Overall state taxes and state expenditures are likewise low, but local taxes are relatively high, resulting in a dumbbell-shaped tax structure putting us 24th for total tax burden.

Mean, in the sense of the cliché, equates to aggressive, and there is data to support our achievements there. Colorado ranks 3rd in both venture capital investments relative to GDP and the federal government’s Small Business Innovation Research Grants, 4th in initial public offerings, and 7th in overall entrepreneurial activity.

Mean, in the unkind sense, is also apparent. Instead of taking pride in our rankings for the most college-educated adults (2nd), ACT and SAT scores for above average students (1st), and advance placement exams for high school juniors and seniors (8th), we need to come to grips with the incongruity of relatively poor rankings for adults with high school diplomas (17th), 9th graders with the greatest chance for college (23rd), high school graduation rates (29th), and state and local per-student support of higher education (48th).

This is the Colorado Paradox: many residents value college for themselves, but we import most of our university degrees and are unwilling to tax ourselves for higher education for the state’s children. Business leaders in Colorado disagree on whether the Paradox is a problem. Dan Pilcher, senior vice president and chief operating officer of the Colorado Association of Commerce and Industry, quoted in last week’s Denver Business Journal is unconcerned: “People migrate into Colorado with the education and skills that we need.” John Brackney, president of the South Metro Denver Chamber of Commerce, wants to be practical. Quoted in the Denver Post, Brackney says:

Let's worry first about outcomes and what we're able to accomplish, and if we're able to accomplish it for less money but the outcomes are superior, that's actually a great business model.

Clark, of the MDEDC, in both newspapers cautions against complacency and warns of Colorado’s “soft underbelly,” and through the report asks:

If we are striving to build an economy based on intelligence, can we sustain ourselves by relying on other states to send us smart parents with smart kids while we continue to increase the price of obtaining the training needed to compete in an intelligence-based economy?

I’ll take it a step further, assuming the influx of the college-educated continues. Smart parents with smart kids will likely find a way to get their kids to college, but what about the rest of Colorado’s children? What does their future look like? How can they hope to better their situations when college is quickly growing out of reach? Ranked by the percentage of family income needed to pay for public college, we fell from 15th to 33rd in only four years.

High school graduation rates that are poor statewide become abysmal in Denver. The Donnell-Kay Foundation’s October 2009 report, A Call to Action, leads with the statement that over half of Denver’s 9th graders will not finish high school in four years. Solving our K-12 problems won’t be enough, however, if there are few jobs for those lacking post-secondary education and diminishing hope for affording that education. From the MDEDC report:

Poorly prepared students in the education pipeline continue to drop out of school, relegating themselves to a life of low income and dependency on state support.

Colorado’s ranking for gross domestic product is down three years in a row. Our per capita personal income relative to other states is down three years in a row. If we don’t have the political will to turn these negative trends around, then surely we are lean, mean and stupid.

I wrote this post for a general Colorado audience in the Huffington Post, but it has particular relevance to our state’s human-owned business. A declining Colorado will strike us particularly hard. You and I, unlike larger regional or national businesses, live here and have limited abilities to mitigate the impacts the downturn will have on our companies. We have more riding on the success or failure of our state than most citizens. That is why you should know read and then act on the MDEDC study.