Breakfast with Randy Zook will leave anyone hungry for statistics on Arkansas feeling as if they had eaten the whole hog of state politics, taxes and education performance.
Zook, president and chief executive officer of the Arkansas State Chamber of Commerce/Associated Industries of Arkansas, gave attendees of the monthly Fort Smith Regional Chamber of Commerce’s First Friday Breakfast plenty of food for thought on the state’s tax rankings, political climate and education budget in a coming “global war for good jobs.”
Taking the theme of his presentation from the Jim Clifton book “The Coming Jobs War,” Zook used those three topics to frame the state’s current status among the nation and the “touch states” bordering Arkansas.
“If only you get a chance to read one business-related book this year, I really recommend that one,” Zook said of Clifton’s book about job creation and entrepreneurship. “It’s a terrific read about the importance of the deliberate, careful, concerted effort across the country to focus our public policy conversations and decisions on the creation of good jobs.”
The nature, size and quality of Arkansas’ workforce is deteriorating, Zook said. The past 18 months has seen a decline of about 38,000 people who are actively seeking employment. At the same time, the number of people working has declined from 1.265 million people to 1.234 million. Arkansas has about 98,000 who are officially unemployed and 100,000 who are under-employed, not working 40 hours a week.
“That’s unprecedented in a so-called recovery,” Zook said.
The United States needs to create about 20 million jobs, and Arkansas needs about 200,000 jobs “to get the economy closer to its potential,” Zook added.
On a more positive note, Zook said Arkansas has picked up about 82,000 people since April 2000 in domestic migration. This is 16th best in the country.
“That’s a very positive expression that people are coming to Arkansas. They see opportunity here. They see a reasonable place to live and raise a family,” he said. “They see a place where they can thrive and it’s attractive. This is a case of people voting with their feet.”
Arkansas is ranked the 34th economy in the nation with a gross domestic product output of $109.5 billion. It is also 34th in population size. Oklahoma’s economy is ranked 29th in the nation. And Arkansas has risen from the last few years from 49th to 44th in per capita income, with the average state income being $34,723. The national average is $42,700.
“We sell ourselves as individuals at about a 19 percent discount to the rest of the country,” Zook said. “What would it mean if we could just get that up to the national average, if every person in Sebastian County had another $8,000 a year worth of income. It would have a profound impact on quality of life.”
The state’s economic performance, according to the American Legislative Exchange Council, was ranked 22nd best in the nation in 2012. However, the year before it was ranked 11th, which drives the point, Zook said, that all of the measures — domestic migration, per capita income and non-farm payroll — are “moving targets” needing adjustment in policies and practices to improve conditions and allow growth acceleration.
Most of state’s revenue, about $2.9 billion, or 42 percent, comes from individual income tax. The sales and use tax, at the state level, in 2012 raised $2.128 billion, which is 31 percent. And 14 percent, or $1.008 billion, comes from the property tax. Because more than half of the businesses in Arkansas are taxed on individual basis, and not as corporations, the corporate income tax is just 6 percent of the tax base at $455 million. The state sales and use tax is at the ideal one-third of the tax base, Zook added.
How that money is spent was addressed to show places for improvement and that just 4 percent of the state’s revenue is usually viewed as the most vulnerable to criticism and media attention.
Health and human services makes up 23 percent of the spending at $1.114 billion. The state’s criminal justice system uses about 9 percent, or $435 million. The rest of the state’s money, $194 million, or 4 percent, that is used to run the state government is what Zook said attracts the most headlines.
“But like everything else, the big chunk is the stuff we tend to ignore or sort of just assume there’s not much you can do about it,” Zook said. “But one of our points today is that we have to drive a much higher level of accountability in this general education slice as well as higher ed. We have got to get better results without a lot of extra money, because frankly we don’t have a lot of extra money.”
Zook pointed to the Main Street Fairness Act, which is championed by breakfast attendee U.S. Rep. Steve Womack, R-Rogers, as being a prime candidate for raising money without adding new taxes or increasing existing taxes. The act would close the online sales tax loophole.
“It would tune up the revenue wheel,” Zook said. “This is a way to generate a lot of revenue, at least a couple hundred million dollars a year just for Arkansas.”
With 47 percent of the state’s budget, $2.277 billion, dedicated to K-12 general education, and 37 percent of Arkansas’ third-graders not reading at the third-grade level, Zook looks to schools as the area with “the biggest opportunity to improve” and shore up the odds Arkansas’ youths won’t end up as “economic road kill.”
Nearly half of the state’s college freshmen, 48.7 percent, require remediation in writing, reading or math, he said. About $42 million a year is spent on remediation of those students. If remediation in any two of the three subjects is needed, the student has a 1 in 5 chance of not obtaining a degree.
“Maybe we should be spending that $42 million on third-graders instead,” Zook said.
With such a demand for industrial mechanics and workers in the manufacturing segment, Zook said more attention needs to be paid to vocational and technical colleges. The state chamber is working on this with its Dream It. Do It program.
The state chamber president serves on the boards of KIPP Schools in Helena-West Helena. He said that despite 93 percent of the students being on reduced-price or free lunch, the students perform well when they are expected to perform and the time and energy is put into helping them learn.
“It ain’t the kids, it’s the system,” Zook said. “You got to have a longer school day, and longer school year. We simply are not doing enough to get enough kids up the curve on time. The fact is, the system is just not doing what it needs to do.”
He recommended a business community-controlled school board to set standards, raise the expectations, and provide the right resources and time to the teachers.
“There are no short cuts or magic bullet,” Zook said. “You can get all the technology in the world, but somebody has to sit down with the kid one on one and get that stuff in that kid’s head.”