2016 Regional Report: The Midwest

NO.26 KANSAS:
GETTING BACK ON TRACK

Gov. Sam Brownback’s highly touted 2012 tax reforms first delighted business leaders and then disappointed them. Last year, the Sunflower State’s economy essentially flatlined, losing ground to archrivals Nebraska and Missouri.

Overall, Gov. Brownback’s reform raised taxes slightly for the poor and working class, slashed taxes for the rich, and cut back on education funding. The result was stagnation. In June, Kansas’s GDP dipped below end-of-2011 levels.

“You’ve got policymakers at this point who are unable to embrace the fact that… a mistake was made,” Annie McKay, head of the Kansas Center for Economic Growth, told the Washington Post this spring. Others disagree, citing historic new-business formation rates and pointing to a 3.7 percent unemployment rate as proof of success. Historic aerospace, defense and food-processing clusters remain vital. Site selectors give thumbs up to state and local economic-development programs but note local community opposition can torpedo expansion and new-construction projects.

“The area where we see the greatest economic activity is metro Kansas City on the Kansas side,” said site selector Gingerich. “There’s been a build-up of telecom, fintech and insurance companies moving into the area.”


NO.27 NEBRASKA:
OPTIMISTIC ABOUT GROWTH

The strength of Nebraska’s services sector, largely concentrated in the Cornhusker State’s three most populous counties—Douglas, Lancaster and Sarpy—helps masks a more brackish rural economy.

On the surface, Nebraska’s labor market enjoys excellent health, boasting the nation’s third-lowest unemployment rate and its fourth-highest labor force participation rate (70 percent in the spring). Business leaders polled by the Greater Omaha Chamber feel optimistic about revenue growth, but worry where the new workers will come from. Another concern: most of the new crop of jobs are low-wage positions in hospitality, education and health services.

“Economic growth in Nebraska has become increasingly unbalanced,” said Nathan Kauffman, assistant vice president and Omaha branch executive of the Kansas City Fed. “Some industries are growing while others are less robust.”

Last year, job growth slipped 1 percent in rural areas and along the previously-vibrant Interstate 80 corridor. GDP has been hurt by slumping global agricultural markets. University of Nebraska economist Eric Thompson forecasts net farm income will drop about 11 percent this year, after a 39 percent plunge in 2015. The rebound, he said, comes next year.


NO.29 MISSOURI:
SHOW ME THE OOMPH

Is Missouri a hotbed of entrepreneurialism? Kansas City-based Kauffman Foundation says yes indeed. In fact, the Show Me State paces the nation in business startups.

Missouri business leaders applaud the entrepreneurial instinct; many also call for increased investment in education and infrastructure as well, hoping to bolster mediocre payroll expansion. “Job growth is lousy. The state economy is among the nation’s weakest,” complained the Kansas City Star in February. “Missouri is in a world of fiscal hurt in so many ways right now.”

Site selector Burkart likes Missouri’s business climate and its workforce and says their incentive programs are pretty good. Seeking to bolster efforts to retain home-grown companies from leaving the state, legislators are weighing a bill that would reduce capital gains taxes when a business owner sells to employees rather than out-of-state investors. Legislation could reach Gov. Nixon’s desk for signature this winter.

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