Accelerating Economic Opportunity Across the Country: Lessons from California
By Matt Horton, Director of State Policy & Initiatives, Accelerator for America
Before the COVID-19 pandemic further exacerbated the social and economic deficiencies throughout California – highlighting significant deficits in infrastructure, housing, and workforce development – the state’s economic landscape was falling short in facilitating an inclusive recovery from the Great Recession of 2007-2009. Further, the COVID-19 pandemic demonstrated how essential workers – predominately from minority, disadvantaged, and vulnerable communities – are increasingly priced out of housing and dependent on low-wage jobs whose earning power is increasingly diminished. To support a vibrant recovery, California must take bold action now – not to reproduce the pre-COVID economic landscape, but to build a new, coordinated, and place-based development framework. With public, philanthropic, and private entities seeking a recovery catalyst, we must embrace a new economic development model for California and, given the state’s size and demographic, geographic and economic diversity (California is both the nation’s leading manufacturing and agricultural state, for example), new models there can be relevant to communities across the country.
With the passage of the Infrastructure Investment and Jobs Act (IIJA)/Bipartisan Infrastructure Law (BIL), Inflation Reduction Act (IRA), and other COVID related recovery resources sources (e.g., State Small Business Credit Initiative, American Rescue Plan Act), California cities and local jurisdictions across the state are poised to access billions in funding that can make up for decades of underinvestment and disinvestment. Facilitating a more equitable recovery will require local and state leaders to collaborate to mitigate existing social inequities while recalibrating the state’s economic development framework from the ground up. This approach should:
Focus on aligning and accelerating investments in infrastructure (e.g., housing, transportation, and water)
Develop a reindustrialization strategy that captures, concentrates, and re-shores growth among various high-value industries (e.g., R&D, renewable energy production, biotech, manufacturing, industrial design, aerospace)
Design regional career pathways and skills-based learning initiatives that further cultivate upstream investments in the talent pipeline, while enhancing access to quality jobs for displaced and/or marginalized workers across several sectors.
Now is the time to move beyond sluggish planning and focus on deployment and implementation to harness generational funding to not only realize resilient growth but revitalize California’s economic landscape. A renewed state economic development strategy formed around enhancing regional competitiveness must be responsive to the differing needs and opportunities of rural, suburban, and metropolitan economies. The state should prioritize and fast-track projects that provide the greatest economic benefits to its residents, bolster climate resilience, and wrap more certainty around its business climate. Yet, funding alone will not be enough to catalyze more resilient growth. The state should leverage private-sector investment to supplement federal funding and to cultivate more sustainable, long-term economic growth. In devising a roadmap toward shaping a more equitable future in California, leaders will need to structure remedies toward the following challenges:
How can public and private sector leaders collaborate to finance and build more resilient infrastructure to support a growing population?
California is now the world’s fourth largest economy, and while during an unprecedented pandemic, its population declined from 2020 - 2022 for the first time recorded, the state expects its population to grow by 11 percent over the next 30 years. The nation’s most populous state will need to accelerate investment in resilient infrastructure to bolster its economic prosperity and provide a safe, high quality of life for a growing population.
The American Society of Civil Engineers graded California’s infrastructure a C- in its 2019 Infrastructure Report Card.
Source: American Society of Civil Engineers – California Infrastructure Report Card (2019)
How can the state and its higher education leaders build a talent pipeline that enhances access to the critical skills that students and workers need to compete for quality jobs in the 21st-century?
Less education doesn’t necessarily mean less pay – particularly in science, technology, engineering and mathematics (STEM) fields. In California, a bachelor’s degree in Computer Science and Mathematics pays $24,000 more per year than a graduate degree in Fine and Performing Arts, on average. Enhancing access, participation and career pathways in STEM education, particularly in underserved communities, can improve individuals’ economic mobility and further incentivize business formation among priority tech sectors.
Median Earnings by Field of Study and Degree Level Across California
Source: Milken Institute Analysis of American Community Survey 1-Year Public Use Microdata Sample (2019)
How can leaders work together to support regional competitiveness and rebuild the pathways toward achieving the California dream across the state?
California’s business climate varies substantially by region. Places with higher wages have traditionally harnessed technological ecosystems. For example, the Inland Empire has a vastly different business climate than other major metropolitan areas in California, and its high-tech employment lags behind other regions and continues to decline. To ensure a more resilient economic landscape, investment and place-based strategies are needed to increase the competitiveness of regions that have missed out on past cycles of tech field growth.
High-Tech Employment as a Percentage of Total Employment
Source: Analysis of Moody’s Analytics (2020)
Building an Accelerator for California
With the support of the James Irvine Foundation, Accelerator for America is building an Accelerator Hub for California to enhance the ability of state and local government to incubate resilient growth. The hub is working to direct potential investments to cities and regions that lack the necessary capacity and resources to scale up new opportunities that promote equity, economic resilience, entrepreneurship, and community infrastructure, while capturing the spillover effects resulting from local and regional economic growth. Provisions in the IIJA/BIL and the IRA make it possible to facilitate this unique opportunity for California to build a more resilient economy. To fully capitalize on these new funds and address the state’s pressing economic challenges, California should:
Establish regional deployment/TA centers for excellence: California’s economic future pivots now on its ability to harness increased federal funding and better distribute needed investments throughout the state. The state can enhance local governments’ ability to catalyze local economic growth by directing investments to communities that lack the necessary capacity and resources to harness funding opportunities to shape investments in infrastructure, climate and economic resilience. By coordinating technical assistance at the regional level, we can enhance an existing hub-and-spoke planning model to build further capacity toward shaping regional project readiness and preparing multi-jurisdictional applications for available funding opportunities. AFA’s current work providing TA and capacity building is proving the value of targeted assistance to historically underinvested places and the need to do more to equitably distribute resources.
Establish a predevelopment capital fund aligned to federal funding incentives: The creation of an infrastructure predevelopment fund will result in a pipeline of shovel-ready projects and accelerate critical infrastructure development (e.g., Community Economic Resilience Fund, Climate Catalyst Fund). Access to predevelopment capital funds, however, should require a commitment to resiliency and Justice40 priorities, streamlined review, permitting, and approval, as well as a plan to address lifecycle costs (e.g., P3s and community benefit agreements). State requirements should also include sufficient data tracking and accountability frameworks. Predevelopment capital will help spur the infrastructure developments and enhancements needed to vitalize – or revitalize – communities and support business growth, particularly in underserved areas.
Enhance place-based development tools to encourage industrialization, business formation, and regional competitiveness: The state should prioritize the attachment of CalCompetes or New Markets tax credits to attract priority sectors. These place-based incentives attached to prioritized sectors and/or other policies designed to encourage business formation and near shoring within priority industries and sectors (e.g., aerospace, advanced manufacturing & agriculture, biotechnology, life sciences and renewable energy production), could facilitate greater investment in these sectors, and generate additional local revenues while incentivizing growth of higher paying jobs in regions that have missed out on previous cycles of technology sector growth.
Moreover, public sector staffing was slow to recover from the Great Recession and from the loss of project financing capacity after the state dissolved Calfiornia’s more than 400 local redevelopment agencies. Now, at this critical funding moment, cities suffer from an inherent lack of capacity and gaps in technical assistance support. This not only delays project readiness, but further exacerbates longer term economic recovery and resilient infrastructure development. To overcome these barriers, state leaders should look to coordinate and incentivize philanthropy, NGOs, and other community based organizations to provide vital capacity building and technical assistance that aims – especially for grant writing – to ease these associated project readiness impediments and accelerate a vibrant and resilient economic development framework for California.
AFA’s work in California is applicable across the country; for every reference to California, you could substitute any state name. Every state has regions that need more equitable investment of resources to both repair generations of underinvestment and ensure opportunity for years to come. Our country is at an historic inflection point of new investment in our economic competitiveness. Will we fully capture this moment to ensure our global position and provide better pathways for more of our residents? The time is now to ensure that the trillions of new dollars flowing across our country can achieve our dreams and reach the edges of our vision. Core to AFA’s mission of finding and developing solutions and sharing them across our nation, we will continue to lift up what we learn through our California Accelerator to create a more inclusive recovery and greater opportunity for all.
Matt Horton is the director of state policy and initiatives for Accelerator for America. In this role he interacts with government officials, impact investment and other community leaders in building capacity toward shaping infrastructure, jobs creation, and equitable community development efforts. Over the past fifteen years, Matt has worked to direct research driven programs and initiatives to develop public policy that impacts housing production, infrastructure finance, enhance access to capital, create jobs and other economic development strategies. Previously, Matt was the director of the California Center at the Milken Institute.
Mary Ellen Wiederwohl
President & CEO
Accelerator for America