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State gets
low marks again
for economic
development

A nationwide survey
gives Hawaii two D's and
an F, surprising few observers

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By Tim Ruel
Star-Bulletin

Hawaii's grades got a little worse in a nationwide survey of economic development released today, and local observers said they aren't surprised.

The Corporation for Enterprise Development, a nonprofit organization based in Washington, D.C., gave the state a D in development capacity, which measures prospects for the future by looking at such factors as education, venture capital and infrastructure; another D in performance, which includes pay growth, unemployment, and home-ownership rates; and an F in business vitality, which measures such items as competitiveness, technology businesses and incorporations.

Last year, Hawaii received a C in development capacity. The other two grades are unchanged.

The organization grades all 50 states. Colorado, Utah and Massachusetts received straight As in the latest survey. Eleven states, including Hawaii, received at least one F.

"We do it to make people think," said Heather Sabrie, spokeswoman for the economic development research organization.

The group compiles the grades by ranking states in 70 separate statistical categories, running the gamut of business factors such as the number of initial public offerings of stock to quality of life issues such as the rate of teen pregnancy.

Hawaii's bright spots included employer health coverage, state tourism spending and urban mass transit, according to the report.

"Those are really fabulous. But you're also No. 50 in part-time employment," Sabrie said.

The state also lagged in long-term employment growth, layoffs and home ownership, and placed last in teacher's salaries.

"Surprise, surprise," said Bette Tatum, state director of the National Federation of Independent Business, when told of the latest report.

The economy, in a funk for much of the 1990s, still has a long way to go, she said.

Tatum blames unfair burdens on business, such as a state law that allows employees to file workers' compensation claims over the stress of being laid off.

Seiji Naya, director of the state Department of Business, Economic Development & Tourism, said he was not surprised by the report either, but for a different reason.

Many of the statistics come from 1997, 1998 and last year, when the state was still in the doldrums, he said. For example, the unemployment rate cited, 5.7 percent, is from last year. As of August, the rate was 4.5 percent.

"We would fall behind. We have been behind," Naya said yesterday. Hawaii particularly stumbled in the early 1990s by not catching the wave of technology right away, which could have improved productivity and created business opportunities.

But this year, Hawaii has seen signs of recovery, such as a projected 2 percent growth in jobs, Naya said. The state has also cut income taxes and reduced the pyramiding effect of the general excise tax. Naya said he hopes the state would do better in a few years.

"I always look at this report and see whether we are doing things right," he said.

Naya noted his surprise that Colorado and Utah got straight As. "I've got to study those states a bit more," he said.

Sabrie said the report clearly points out that some of the data are dated. But the organization stands by its grading system, she said. While Hawaii may have improved in some of the categories already, the bulk of the data simply brought the state down.

Hawaii needs to continue improving, Sabrie said. "You've had a B before."

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Full CFED report