I recently drove down U.S. 65 to Gillett by way of Pine Bluff, Moscow, Tamo and Grady. I took the back way through Gould, then over to the Pendleton bridge. Parts of eastern Arkansas look like pictures I have seen of war-torn developing nations. I mean no offense here to people in either place. I think they all want more for themselves than they are able to manage.
I know a lot of folks with deep roots all over this state, and we live here because we love it here. But many of us are not doing well at all. We have major problems with respect to rural health care, education and economic growth. We rank poorly in all those categories. The cumulative result is de-evolutionary.
When things are going badly, they often go gradually until the cataclysm occurs. Lincoln likened this to the failure of a wooden washtub. The tub leaks a bit, but if it is not repaired, the bottom suddenly drops out all at once. In most of Arkansas, the bottom of the tub is about to drop out.
So it’s odd that our statewide leaders are telling us that we are doing just fine. They make noise about all sorts of hot-button issues, like building monuments to the unborn, promoting universal school vouchers, banning library books and vilifying some amorphous group generally described as the “woke mob.”
I think there is method in all of this. Arkansans struggling in almost every measurable way have bought into the idea that things are pretty good and getting better, as the soothing warmth of divisive political hyperbole rains gently down on them, and diverts their attention from their poor health, lack of education and economic malaise.
Hard numbers, hard truths
Despite pomp from the state, the hard numbers tell us things are really not good.
The U.S. Bureau of Economic Analysis (“BEA”) provides data on the state of the U.S. economy. It is an independent arm of the U.S. Department of Commerce. According to their December numbers, in the third quarter of 2023, personal income rose in 49 out of 50 states. Guess which state was left out? Yes, Arkansas. Personal income in Arkansas was flat, which put us dead last in personal income growth.
Real gross domestic product, known as GDP, increased dramatically in most states in the third quarter of 2023. GDP is a good measurement of wealth creation through economic output and productivity. Growth ranged from 9.7% in Kansas to 0.7% in Arkansas. Again, we proud Arkansans were dead last.
Northwest Arkansas remains robust. But the growth there is more than offset by the depression settled over the rest of the state.
Lagging behind the neighbors
While our governor pushes bills through the Legislature to subsidize private and church schools, shortchange higher education and kill the solar power industry, other states are running circles around us.
Take a look at Alabama’s fiscal 2025 budget. Alabama is spending tens of millions on economic development projects and human resource development. For 2024-2025, Alabama appropriated $18 million for a rural workforce development center, $30 million for an electric vehicle workforce training center and $40 million to create and fund the Alabama Site Development Fund to assess and develop future industrial and manufacturing sites. On Feb. 26, Alabama allocated more than $30 million to start development of a number of sites totaling about 8,400 acres.
How does Arkansas compare? Our 2024 budget is not easy to decipher. The Arkansas budget for economic development reminds me of the budget of a struggling church. There is just enough money to support the staff, pay the utilities, continue some worthy programs and maintain the building, but there is not much left over for new mission work.
Economic development is a long game. In 2021, Ford decided to locate a $5.6 billion investment at the Memphis Regional Megasite, a 4,200-acre, state-owned site that had been under development for 15 years, long before electric vehicles were being produced in any commercial quantities. The new assembly plant will bring about 5,600 jobs to a site 45 miles east of Memphis. Imagine such a project somewhere east of Little Rock.
In Arkansas we rely in part on the Governor’s Quick Action Closing Fund to woo companies to set up major projects in our state. Essentially a slush fund that can be used at the governor’s discretion, the Quick Action Closing Fund allows “the Governor to act quickly and decisively … to finalize an agreement with a company to locate an economic development project in the state.”
In fiscal 2022, the total expenditure from this fund was about $52 million; $50 million of that went to Big River Steel. Most of the rest went as rebates to movie production companies.
Having some money available at the tail end makes some sense, but by then it’s often too late. We are seldom making the final cut because we aren’t ready with the trained or trainable workforce and basic infrastructure needed to get a project off the ground.
Hope is not a plan
In February, several energy companies hosted a Lithium Innovation Conference extolling Arkansas’s lithium resources. Found in the deep groundwater in south Arkansas, lithium is used in the batteries of electric vehicles.
Technologies are being developed to extract the lithium from this brine, although the feasibility of that process is very much unsettled. One company, Standard Lithium, has a pilot project which seems to be moving slowly. If the stock price of Standard Lithium is any indication of the economic viability of its extraction process, things look bleak. The stock is trading near a 52-week low.
Sometimes the markets get things wrong, and we can hope this is one of those cases. But hope is not an economic development strategy.
The lithium conference is a perfect example of a big event without a purpose. I didn’t see anything that made it easier or more attractive for companies to come here and build anything. Arkansas’s subterranean lithium stores are not an economic plan, but a quirk of nature.
Lithium mining, if it proves feasible, could be a good thing for Arkansas, but the big payoffs come from adding value to raw materials. Lithium production, if done in a way that does no damage to the environment, is fine. But producing lithium batteries and assembling the vehicles that use those batteries are far more important than mining the raw material. So far those value-added projects are going elsewhere.
Gov. Sarah Sanders spoke at the lithium conference. Less than a month earlier she and 15 other governors sent President Biden a letter telling him to roll back the mandate for electric vehicle use. On one hand she seems to be in favor of battery powered vehicles, but on the other hand she doesn’t want government getting involved. That is understandable, I guess, but it is contradictory to make political hay and then argue that it should not be fed to the cattle. After all of the “speechifyin,” there was no action planned or taken that would make life much different here for the vast majority of the folks who are poor, unhealthy, undernourished and falling further behind.
Even Mississippi is beating us
The State of Mississippi just announced a joint venture among Daimler Trucks, Cummins, and truck maker PACCAR to produce lithium-iron-phosphate batteries for large trucks. It will be a $2-$3 billion investment to build a factory in north Mississippi. That is a game-changer in Mississippi. In Arkansas, we’ve had a conference and so far, not much more.
During our last session, the Arkansas Legislature essentially stopped the development of large-scale solar energy facilities for anyone other than the politically powerful traditional utility companies. Large industrial users want to own solar facilities, both for the savings they can achieve and the “green” image projected when a large facility is powered by on-site renewable energy. Our governor and Legislature gave the traditional electric utilities what they wanted, a monopoly on large-scale projects. That decision will hurt our state when we are trying to compete for major manufacturing and assembly plants.
In the meantime, I keep reading the press releases from our governor telling us that we Arkansans need lower taxes, more school choice, bigger prisons, fewer library book options, and less government transparency, especially when it comes to her spending on family travel.
We have a state surplus, so our governor promises more tax cuts, mostly for folks who don’t need the money. If anyone criticizes what is happening, we get the usual talking points about how “woke” liberals are trying to corrupt our morals, ruin our schools, indoctrinate our children and take away our guns.
Are those really the issues we need to address? Or is our attention being diverted from the fact that the state of Arkansas is dead-last in income growth?
Hugh McDonald, the former Entergy executive and always a strong community leader, was appointed by Sanders to lead our state’s Department of Commerce. I give the governor a lot of credit for making a great appointment.
But our Department of Commerce has no real money for long-range planning and actual development of large commercial/industrial/manufacturing sites. The total annual state allocation is $52,210,729. More than half of that is for adult education and rehabilitation services. These are worthy programs, but they are not specifically targeted toward major economic development.
States like Tennessee, Alabama, Mississippi and Texas are investing much more than Arkansas, and it is paying off for them.
If we had taken some of our huge surpluses and invested the money in infrastructure for large-scale employers, we might be in the running for similar transformative economic development in our state.
Instead, the governor wants to spend around $450 million on a new 3,000-bed prison. I consider that to be akin to funeral pre-arrangement. Let’s plan to have a lot of crime, a lot of prison space, and a lot of people locked up doing nothing to help our state grow.
There is a better path. If you want the dividends, you have to make the investments.
I suggest we build a smaller new prison and spend $200 million a year for the next five years, or a smooth $1,000,000,000, on education and economic development. Invest in the state, rather than cut taxes. Cut taxes later, when we have more people employed, and more tax revenue coming in.
Initiate universal pre-K education for every child in Arkansas. And please don’t give private and church school vouchers for this.
Create several new business parks, with associated solar facilities and workforce development programs. Maximize connectivity with rail and interstate highway access. Build a workforce training center for emerging manufacturing technologies in eastern Arkansas along I-40, and get several supersites ready for use.
Double the size of the engineering programs in our state universities.
Once growth begins, cities can finance infrastructure with bonds funded by growing sales tax receipts. (See the bond offerings from cities in Northwest Arkansas). Schools can build and grow with the revenue from the expanding real estate tax bases. That is what growth can do for communities.
If we don’t up our game, we better get used to finishing dead last.
