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Business Community Releases Annual Benchmarking Report, Break Away South Carolina

(Columbia, S.C.) – An annual benchmarking report, Break Away South Carolina, released this week by the South Carolina Chamber of Commerce, again concludes that, while South Carolina is making some improvements, for the state to achieve per capita income on par with the U.S. average by 2020 or sooner, transformational initiatives are called for. The Break Away report measures South Carolina’s performance in six distinct driver areas: Education and Work Force Preparedness; Business Costs; Government Efficiency and Regulatory Environment; Infrastructure and Connectivity; Dynamism and Entrepreneurialism; and Quality of Life.

“We know that growing individual wealth for all South Carolinians is a long-term commitment. It will not happen overnight. South Carolina’s current rankings exemplify the need for continued aggressive change to make the state more globally competitive and productive. It is imperative that the General Assembly adopt issues outlined in the Chamber’s 2008 Competitiveness Agenda that will help move us forward,” said S. Hunter Howard Jr., president and chief executive officer of the South Carolina Chamber of Commerce.

The Education & Work Force Preparedness driver remains an area of vulnerability, as South Carolina holds a national ranking of 44. North Carolina ranks 25th, and Georgia ranks 35th. Over the last five years, the state has lost ground because scores between the best and worst performing states have widened. Specifically, in SAT performance, South Carolina improved from rank 48 in 2000 to rank 45 in 2006. Break Away finds that overall South Carolina is experiencing a depletion of talent because of high school dropouts and the loss of college-educated citizens, especially 18-34 year olds.

“Education improvement continues to be a top priority in growing the per capita income. We need to continue to fund and support programs like Personal Pathways (formerly known as the Education and Economic Development Act),” Howard said. “It is also critical that the business community continues to communicate the importance of 4-year-old kindergarten, especially for at-risk youngsters. Too many of our students are entering first grade unable to read.”

South Carolina’s performance in Business Costs has been continuously above the majority of U.S. states, but just below the regional average of 14th. The state’s 16th place score declined from last year because of downward ranking slips in health care costs, workers’ compensation costs, and business tax costs. Workers’ compensation reform was achieved in 2007, so improvements may be on the horizon. The report predicts that a 10 percent improvement would put South Carolina safely among the lead states.

“Badly needed workers’ compensation reform was achieved in 2007, and it, along with other improvements, will likely move South Carolina forward in Business Cost rankings,” said Howard. “North Carolina, Tennessee, and Georgia are each ranked in the top 10. South Carolina must reach that milestone in the coming years in order to compete on a global scale with our neighbors.”

A state must find a balance of size, taxes, programs, and expenditures to provide a higher return on investment in public assets and services. Next to tax policy, regulatory policy is the most important aspect of a state’s business climate. South Carolina receives a ranking of 34 in this driver, while North Carolina receives a ranking of 20, Georgia ranks 30th, and Tennessee ranks well above all at 10th.

Howard stated, “South Carolina businesses currently pay the second highest tax rate in the nation for industrial property and the 16th highest rate in the nation for commercial property. And, as a result of the 2006-passed homeowner property tax reform, by 2010 the state will have increased the sales tax while effecting redistribution in property tax burdens from homeowners to businesses. This will undoubtedly have a negative effect on our competitiveness relative to other states.”

Howard continued. “The long-term solution is for the state to comprehensively reform our entire tax structure.”

South Carolina’s ranking dropped significantly in Infrastructure and Connectivity to 40th in 2006, meaning that the state’s traditional physical infrastructure (roads, ports, water) and virtual infrastructure (digital) are below average, compared with the rest of the nation. The state’s Bridge Safety ranking has again declined, with a slight increase in the number of deficient bridges in the state. Highway quality has improved to a rank of 15th.

“South Carolina’s physical infrastructure is vital to the safety of our citizens, the delivery of goods and services, and the growth of tourism. Increased funding for roads and bridges is an initiative that the business community has supported for many years. We strongly encourage the legislature to act in 2008 to address our underfunded roadways,” Howard said.

The Infrastructure and Connectivity driver also takes into account a state’s “virtual infrastructure” or digital connectivity. Broadband use in South Carolina has slipped from 32nd in 2001 to 33rd using the most current data. Technology in schools is ranked right in the middle, at 26th in the nation.

A dynamic economy creates jobs but also realizes that it must lose some, too. This fact, called “churning,” is common in innovation states. Unfortunately, South Carolina’s performance in Dynamism and Entrepreneurialism is far below the regional average of 28th, ranking 50th in the nation. Venture capital performance fell from rank 23 to rank 42. Aggressive entrepreneurship focus and a better understanding of what makes the state’s growth companies tick is needed.

South Carolina’s Quality of Life has slipped significantly over the past five years and now ranks 43rd in the nation, but has improved in the area of urban cost of living. Quality of Life is a key determinant of economic performance in a globalizing economy where attracting the “right” kind of employers and employees is an important factor in competitiveness. South Carolina lost ground in voter turnout, homeownership rates, and health insurance coverage rates.

Break Away South Carolina is the result of a committed partnership between the South Carolina Chamber of Commerce, the Palmetto Institute, New Carolina, and the Palmetto Business Forum, to gauge how well the state is performing year by year and comprehensively evaluate South Carolina’s economic standing compared with other states. The first Break Away report was produced in 2006. The full 2008 report, Break Away South Carolina, can be viewed at http://www.scchamber.net/docs/Publications/BreakAway_2008_FinalSm.pdf or at www.scchamber.net under Publications.