March 4, 2024

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Commerce Committees hear about barriers in Kansas economy

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The Kansas Senate and House Commerce Committee held hearings in Topeka this week on barriers to economic growth in the state, hoping to separate underlying causes from symptoms.  Workforce development was mentioned multiple times as a barrier to growth, but it was also shown to be symptomatic of a deeper problem with low student achievement.

In testimony, Dan Murray, the Kansas Representative for the National Federation of Independent Business (NFIB) said that according to an NFIB study from 2016, “finding a qualified workforce is our number one problem right now for small businesses.”

Nationwide, the economy is at a 10-year high; couple this is low unemployment numbers in the state, small businesses are struggling to find the people to fill positions.

“33% of all small business owners cannot find qualified workers and it is particularly acute in Kansas because we are not growing,” said Murray.

Dave Trabert, CEO of Sentinel’s parent company, Kansas Policy Institute, said graduating students from high school who are below grade level is part of the reason for workforce shortages.

“With 41% of 10th-graders below grade-level in math on the state assessment, school administrators across Kansas and in Johnson County know they are graduating students who are below grade level.  Even in Johnson County, 30% of 10th-graders are below grade level,” Trabert said.

Trabert relayed a discussion at the Overland Park Chamber of Commerce where he made the same statement in front of the superintendents of USD 233 Olathe and USD 512 Shawnee Mission, and neither superintendent said a word in response.

Trabert’s testimony also noted that only 27% of Kansas seniors taking the ACT were considered college-ready in English, Reading, Math, and Science last year, and only 33% of 4th-graders and 8th-graders read proficiently, according to the National Assessment of Educational Progress.

Kansas is entering a fifth consecutive decade with stagnant growth and in the last three years has fallen farther behind the nation. Private-sector GDP growth is ranked #45 among the states and average annual private-sector job growth in Kansas is ranked #43. The Sentinel reported in early January that Kansas fell 7 spots to 34th in the nation in a study by the Tax Foundation for state business tax climate index. According to the study, the reason for the drop was Kansas’ aggressive tax increases in the past year.

More testimony from Michael Austin Director, Director of the Center for Entrepreneurial Government at KPI, noted that small business growth is vital for the economic development in the state. Businesses under 50 employees created double the number of jobs in the state versus larger firms between 1977 and 2014.

“It’s not just small businesses that dictate a strong economy; both the nation and Kansas are dependent upon jobs from new establishments for net job growth. If not for jobs from new establishments – such as someone opening a new business or an existing business opening a new location – Kansas would only have had two years of private-sector job gains since 1977,” said Austin.

Austin also noted that most state and local economic development programs benefit large existing companies rather than entrepreneurial companies that are most critical to job growth in Kansas.

Other economic growth barriers mentioned include excessive regulations, occupational licensing, taxes in general and especially property tax, and agricultural water rights.

Rep. Sean Tarwater (R-Stillwell), chair of the House Commerce, Labor, and Economic Development Committee, said the hearings raised awareness on several important issues facing the state.

“We certainly have a lot of work to do to make Kansas attractive to businesses. We heard two bills on Thursday in house Commerce that will help address workforce shortages for skilled technical jobs.  The house tax committee has several bills to address the punitively high property taxes and I hope something good comes out of that committee. I think we need to set up some sort of task force with businesses to tackle the regulation nightmare. That doesn’t mean that we need to wait to take action we should be able to identify several regulations, right off the bat, that we can knock out this year,” said Tarwater.

Senator Julia Lynn (R-Olathe) chairs the Senate Commerce Committee.  She thinks community colleges are best positioned to assist with workforce issues.

“Community colleges are poised to drive this new, 21st-century workforce. Because their professors, their instructors, and their programs are uniquely placed to teach and train for an immediate result. They make these people job-ready. And these students in our community colleges, guess what? They stay in the community.”

The Department of Commerce is currently undertaking an economic development study to come up with ways to grow the Kansas economy, but testimony highlighted a concern among some groups in the state that McKinsey & Company, the contractor hired to develop the state’s economic development plan, has not sought insight from all interested parties regarding what is holding Kansas back and that that will result in more of the same in past years – more subsidies for a relatively few large companies and more government spending programs.

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