Enterprising States: Virginia Profile

ENTERPRISING STATES CREATING JOBS, ECONOMIC DEVELOPMENT, AND PROSPERITY IN CHALLENGING TIMES

VIRGINIA PROFILE

A Project of the U.S. Chamber of Commerce and the National Chamber Foundation

VIRGINIA

The Commonwealth of Virginia’s standing as one of America’s premier enterprise-friendly states is firmly established. Forbes.com has ranked Virginia the “Best State for Business” four years in a row. The Pollina Corporate 2010 rankings recently named Virginia as the “most pro-business state” in America, also the fourth time Virginia has held that distinction. CNBC’s latest ranking of the best states for business placed Virginia at No. 2.

The twin pillars of economic opportunity and free enterprise form the bedrock of job creation and prosperity in the commonwealth. Virginia’s efforts to foster an enterprise-friendly climate include a streamlined permitting process, recruitment training programs to help new businesses become operational faster, and right-to-work laws allowing individuals the right to work regardless of membership in a labor union or organization.

Virginia’s economic development team is highly praised for its accessibility to business leaders and its handson approach to all aspects of business development and growth.

In a tough and uncertain economic climate, state leadership exercised fiscal discipline to rein in spending and increase savings in the commonwealth that resulted in a modest surplus at the end of the past fiscal year.

Job Creation Is Job #1 in Virginia Virginia’s commitment to job creation in an increasingly competitive global economy was galvanized in early 2010 by the creation of the Governor’s Economic Development and Job Creation Commission led by the newly created position of Chief Job Creation Officer (CJCO) within the Office of the Governor.

The CJCO, a position held by the lieutenant governor, has the primary responsibility to help coordinate all economic and workforce development and job creation initiatives across the cabinet secretariats and their respective agencies. The CJCO actively helps recruit new industries and job creation opportunities in the commonwealth and is responsible for overseeing and ensuring that all agencies are working together in a coordinated, focused and efficient manner to attract new business, expand existing businesses, and create jobs across the commonwealth.

The CJCO works with the secretary of commerce and trade who oversees the 13 agencies whose primary directive is economic, community, and workforce development in the commonwealth.

The commission is organized by subgroups to reflect key economic development priorities for the commonwealth, including business recruitment and retention; assistance to economically challenged regions and localities; energy research, exploration, and production; small business; tourism and film marketing; technology; and manufacturing.

To ensure that economic development efforts extend to rural areas of Virginia, which have been hit particularly hard in the economic downturn, a deputy secretary of commerce and trade for rural economic development was appointed to work with community leaders to bring more good-paying jobs to rural Virginia.

The Virginia Jobs Investment Program (VJIP), established in 1965, is an economic development incentive program that supports the creation of new jobs throughout the commonwealth. The program offsets a company’s recruitment and training costs and connects with all available resources to help with workforce development.

In the last five years, the program has assisted 2,439 companies with their recruitment and training and

Job Growth 2000-2010 3.7%

0.4%

-1.1%

Virginia

South Atlantic States

Nation

Figure 1: Source: U.S. Department of Labor Current Employment Statistics. Second quarter 2000 - second quarter 2010.

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Table 1: Fastest Growing High-Value Sectors, 2002-2010

New Jobs Since 2002

% Change

Earnings per Worker

Computer systems design services

45,621

87%

$107,538

Federal government, civilian, except postal service

30,732

23

$124,033

Administrative management and general management consulting services

19,608

7

$94,684

General medical and surgical hospitals

15,141

18

$56,196

Offices of physicians (except mental health specialists)

13,336

27

$90,467

Process, physical distribution, and logistics consulting services

8,510

96

$113,120

Engineering services

8,328

18

$98,502

Other scientific and technical consulting services

8,316

197

$84,810

Research & development in the physical, engineering, and life sciences (except biotechnology)

8,169

59

$109,530

Wholesale trade agents and brokers

7,368

60

$103,134

Corporate, subsidiary, and regional managing offices

4,517

7

$110,520

4,040

53

$63,215

Sector

Facilities support services

Source: EMSI Complete Employment, Second Quarter 2010.

has supported the recruitment and training of 75,660 Virginians. As a result of its flexibility and ease of use, the program was recently ranked as the 5th best workforce training program in the nation by Expansion Management magazine. Virginia receives a positive return on its investment in this program within an average of 3 months.

Virginia’s resolve to create jobs has yielded impressive results. Since January of this year, 145 projects have been announced. These projects have helped create nearly 8,000 jobs with a capital investment of $1.18 billion. The U.S. Chamber of Commerce’s 2010 study Enterprising States ranked Virginia 2nd for overall growth among the 50 states.

Job Growth in Professional and Technical Services 2002- 2010 40% 35%

Virginia, 35%

Job Growth

30% 25% 20%

Nation, 18% 15% 10%

An Epicenter of International Business Virginia was founded as a business venture in 1607 because of its accessible location on the Atlantic seaboard.

Today, due in part to its proximity to Washington, D.C., Virginia remains a highly attractive location for businesses from around the world. Many companies with either parents or divisions overseas have established sales and service offices or headquarters in Virginia. Today in Virginia foreign-owned firms are present from more than 45 countries, account for more than 150,000 Virginia jobs, and represent more than $18 billion dollars in investment in the commonwealth.

Virginia’s total exports grew by 6.3% from 2006 to 2009 totaling $15 billion; for just the top 25 product categories, exports grew 91% from a value of $3.4 billion to $6.6 billion. Although total exports from Virginia dropped from 2008 to 2009 due to distressed economic conditions worldwide, several new and emerging export product categories, many in electronics, showed dramatic growth. 1 The commonwealth has initiated several programs to accelerate exports, including the AIM program, which helps Virginia companies that are new to exporting and eager to expand their businesses abroad. During this yearlong program, participants learn a systematic approach to the export process that minimizes risk and maximizes return.

5% 0% 2002

2003

2004

2005

2006

2007

2008

2009

2010

Figure 2: Source: EMSI Complete Employment, Second Quarter 2010.

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Another key program is Export 3.0, which focuses on the early stages of the international business development process – the face-to-face meetings with potential agents, distributors, and customers in a target market. The Virginia

global marketing efforts through this program. Companies have graduated from this comprehensive, two-year business acceleration program with greater focus on the potential of export trade profits. Participants in the program report an 88% increase in international sales during and immediately following the program.

Growth Powered by High-End Services Economy The expanding economy in Virginia has been powered by aggressive growth in one key group of industries: professional, scientific, and technical services. The state has added more than 132,000 jobs in these sectors since 2002, with average earnings per worker of more than $85,000. This group of high-end services in Virginia weathered the recession well, finishing the past eight years at a growth rate nearly twice the national rate.

Virginia exported a record $2.3 billion in agricultural products in 2009, a 28% increase over the previous two years. This increase comes despite an overall national decrease in agricultural exports. In just two years, Virginia’s agricultural exports grew by half a billion dollars. While overall agricultural exports from the United States are down 14%, Virginia agricultural exports grew by $100 million in 2009.

Fastest-growing sectors include more than 40,000 new jobs in computer systems design and another 40,000 in management, scientific, and technical consulting along with more than 9,000 new jobs in scientific research and development.

Recent estimates put Virginia’s share of service exports at just under $12 billion. Virginia’s Service Export Network promotes Virginia companies that provide services throughout the global marketplace. Participation in this network is free to Virginia companies.

Similar to agricultural commodities or manufactured products, these high-end services sectors are increasingly exported to other regions, bringing “new money” into the state economy. A strong base of specialized, exportable services positions the state well for the future.

International investment managers representing the Commonwealth of Virginia are stationed in Europe and Asia. According to the Virginia Economic Development Partnership, nearly 700 Virginia corporations now have overseas operations.

Economic Development Partnership provides funds and assistance to organize these meetings.

The State Council for Higher Education in Virginia recently released a report that highlights current successful economic development projects that are aligned with higher education. The report takes the lessons learned from these projects and makes recommendations for Virginia’s higher education and economic development leaders.

The VALET program (Virginia Leaders in Export Trade) helps companies expand their international business opportunities. VALET offers a powerful combination of capital resources provided by the state along with professional services from expert private-sector partners.

Each year, 25 companies are selected to ramp up their

Fastest Growing Professional and Technical Services Sectors, Employment Growth 2002-2010 Computer systems design and related services

44,822

Management, scientif ic, and technical consulting services

42,410

Other prof essional, scientif ic, and technical services

15,413

Scientif ic research and development services

9,042

Architectural, engineering, and related services Accounting, tax preparation, bookkeeping, and payroll services

8,623 4,353

Specialized design services

2,812

Legal services

2,621

Figure 3: Source: EMSI Complete Employment, Second Quarter 2010.

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Advancing a Vibrant Science and Technology-Based Economy Virginia is home to many internationally recognized research and development (R&D) facilities. Federally funded R&D facilities, coupled with the research from Virginia’s universities, provide Virginia businesses with access to leading researchers and cutting-edge technology.

From the automotive industry to medical research to the next generation of high technology, these research facilities offer support and technology access to businesses.

Virginia boasts the largest concentration of federal R&D establishments in the nation, including 25% of the total number of federally funded R&D centers (FFRDCs). This R&D concentration also includes more than 20 defenserelated labs and R&D centers and 19 federal civilian research centers, including the new Homeland Security Institute, NASA’s Langley Research Center, and DOE’s unique Thomas Jefferson National Accelerator Facility.

Half of the 228 private-sector R&D establishments in Virginia focus on bioscience research, followed by a high concentration of information technology research establishments.

The Virginia Innovation and Entrepreneurship Investment Authority (IEIA) is charged with developing a comprehensive research and development strategy roadmap to help guide institutions of higher education in establishing research and development priorities. The plan, to be periodically updated, is aimed at looking for and identifying common themes and recommendations for alignment of research areas to ensure that the Virginia economy remains at the forefront of science and technology.

The Commonwealth Research Commercialization Fund (previously the Commonwealth Technology Research Fund) is used to encourage advanced research, development, and commercialization. Money in the fund can be used for three programs: (1) a matching fund program for federal Small Business Innovation Research or Science Technology Transfer Research grants; (2) a matching fund program for state universities to leverage federal or private funds for qualified research; and (3) a loan program to facilitate the construction of wet lab facilities.

The Virginia Innovation Partnership (VIP) accelerates the commercialization of promising technologies. The goal is to build value for the commonwealth by creating Virginia-based start-up companies, attracting established corporations to invest in Virginia, and enhancing the licensing potential for technologies. The innovation fund is open to all public universities in the commonwealth and will be administrated jointly by the University of Virginia, Virginia Tech and SRI International in the Shenandoah Valley.

The VIP represents a $2 million innovation program launched by the Commonwealth of Virginia to fund translational research. The commonwealth will provide $1 million in funding with the additional $1 million representing the funds or assets each institution commits to each specific project in a 1-1 match. The intention is for every public institution in the commonwealth to embrace this funding opportunity as a means to advance their early-stage technologies with the potential for commercial application. Ultimately, each institution’s support through in-kind or cash matches will increase licensing opportunities, help encourage corporate partnerships and

Table 2: Fastest Growing Sectors for STEM Occupations, 2002-2010 Sector

New STEM Jobs

Industry % Growth in STEM Jobs

Computer systems design services

30,249

91%

Federal government, civilian, except postal service

5,619

23

Engineering services

4,806

20

Research & development in the physical, engineering, & life sciences (except biotechnology)

4,505

61

Administrative management and general management consulting services

3,249

67

Process, physical distribution, and logistics consulting services

1,750

100

Corporate, subsidiary, and regional managing offices

1,115

11

Offices of all other miscellaneous health practitioners

931

59

All other professional, scientific, and technical services

852

75

Local government

851

9

Jobs listed are growth in STEM occupations only. Source: EMSI Complete Employment, Second Quarter 2010.

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sponsored research opportunities, and create jobs and internships.

Transforming Government

Ten regional technology councils formed the Virginia Technology Alliance (VTA) in 1998. VTA’s mission is to champion the success of Virginia’s technology sector.

VTA works to communicate the economic importance of technology to Virginia’s state and local policymakers and education, civic, and business leaders. It also develops STEM programs that inform and encourage students to pursue higher education in areas critical to the continued growth of Virginia’s technology industry. VTA provides financial and other incentives for students entering degree programs in math, science, and engineering.

A commission on Government Reform and Restructuring has been established to ensure that duplicative, outdated, unnecessary and ineffective services and service delivery methods are eliminated and that state revenues are dedicated to the core functions of government.

Efforts are paying off as the state has added more than 50,000 new jobs in STEM categories since 2002.

According to the Enterprising States report, Virginia has the highest concentration of STEM jobs of any state, and its 20% gain in STEM jobs from 2002 to 2009 ranked fifth of all states. Virginia has added STEM jobs at more than three times the national growth rate since 2002.

A public-private partnership between the Virginia Information Technology Agency (VITA) and Northrop Grumman is transforming state government's IT infrastructure technology and providing the expertise and resources to support improved delivery of government services. Believed to be the first and the largest of its kind in the nation, the IT Infrastructure Partnership will deliver state-of-the-art technologies with significant resources for the benefit of citizens and consumers.

Emerging Initiatives Designed to Bolster Investment, Business Growth and Job Creation A new Green Jobs Tax Credit provides for a tax credit of $2,500 for each qualifying new job in the renewable and alternative energy sector. This credit is claimed over five years ($500 per year) and an individual company may claim credits for up to 350 jobs—worth a total of $875,000.

This initiative is part of a long-term vision to make Virginia the energy capital of the east coast and is one of many investments that the commonwealth is making in companies in the clean energy sector.

The commonwealth established a Commission on Higher Education Reform, Innovation and Investment. The commission, consisting of up to 30 members appointed by the governor, is charged with developing a comprehensive strategy for increased educational attainment and skills development.

The VITA-Northrop Grumman partnership will transform the states IT infrastructure from more than 80 different agency systems to an integrated enterprise-wide and a more cohesive, secure and efficient infrastructure.

in FY12, grants of up to $22 million will be awarded in $5.5 million increments to organizations entering into a performance-based memorandum of understanding with the commonwealth.

A new Small Business Jobs Grant program to support Qualified investments in a technology, biotechnology, or science-based startup company Table 3: Growth in STEM Occupations in the commonwealth with Job Growth, Median Hourly less than $3 million in annual Occupation 2002-2010 Earnings revenues are now exempt from Computer specialists 32,300 $39.27 capital gains tax. Investments Social scientists & related occupations 7,023 $29.47 must be made between July 1, Engineers 5,136 $40.99 2010, and June 30, 2013.

The commonwealth has created a Specialized Biotechnology Research Performance Grant Program for nonprofit entities engaged in R&D related to molecular diagnostics and drug development. Beginning

Physical scientists

1,910

$38.07

Mathematical science occupations

1,155

$44.67

Life scientists

1,119

$31.80

Life, physical, & social science technicians

846

$20.58

Drafters, engineering, & mapping technicians

666

$24.83

50,155

$37.11

Total

Figure 3: Source: EMSI Complete Employment, Second Quarter 2010.

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small businesses growing in Virginia targets businesses with fewer than 250 employees and provides grants ranging from $500 to $2,000 for each qualifying new full-time job created. Companies must create at least five new jobs and can receive grants under this program for up to 50 new jobs.

to create a network of suppliers and customers. Mega site pre-certification offers a competitive advantage over other sites that may require months of preparation prior to construction. A Greensville-Emporia Mega Site, also known as the Mid-Atlantic Advanced Manufacturing Center, is Virginia’s first “certified” mega site.

The Major Business Facility Jobs Tax Credit was enhanced this year to allow more companies to qualify for it and to make the credit more useful. Now, this tax credit allows any company that creates at least 50 new jobs (or 25 if the jobs are located in a high unemployment area or an enterprise zone) to claim a $1,000 tax credit. The credit can be claimed over two years ($500 per year) through 2012.

Entrepreneurship and Small Business Development

New funding for the Virginia Small Business Financing Authority’s loan guarantee program, additional funding for the Governor’s Opportunity Fund, and pilot funds for new wet labs have been added to the economic development toolkit in Virginia to expedite business growth and job creation in the commonwealth.

Infrastructure The Virginia Resources Authority (VRA) was created in 1984 to help municipalities and other public entities secure funding for important infrastructure projects. In 25 years, the VRA has helped create more than $3.1 billion of infrastructure improvements in communities around the state. The VRA offers expertise to smaller communities that may not have experience going into capital markets to finance projects. Additionally, by aggregating multiple projects, smaller projects are able to secure better financing terms.

The Virginia Broadband Infrastructure Loan Fund is used exclusively for the financing of broadband infrastructure projects undertaken by a local government.

Priority for loans is given to projects that utilize private industry for operations and maintenance when it can provide cost savings, to projects that serve two or more local governments, and to projects in underserved areas.

Virginia has dedicated $5 million to Mega Site development. Mega sites are pre-certified as ready for large-scale manufacturing, having already been subjected to rigorous due diligence to meet standards of size, availability for land, easy utility access, and lack of easements or other land encumbrances. A mega site must be capable of attracting a high impact project. Involving a large investment, perhaps hundreds of millions of dollars by a single user, these large projects have the potential 6

Virginia ranks 10th among the states in terms of its favorable policy environment for entrepreneurship according the Small Business & Entrepreneurship Council’s 2009 Small Business Survival Index. The National Science Foundation’s Science and Engineering Indicators 2010 places the commonwealth in the top ten with regard to high-tech startups as a percentage of all business establishments.

The Virginia Department of Business Assistance (VDBA) provides a one-stop-service for technical assistance related to business formation, access to capital, and workforce development. VDBA works with existing businesses as they grow their workforce and mentors entrepreneurs, helping them turn ideas into business ventures. The VDBA has provided $1.37 billion in financing for Virginia businesses, provided technical assistance to over 16,250 businesses and will host over 60 entrepreneurial workshops statewide this year.

The Virginia Enterprise Initiative provides an opportunity for underserved entrepreneurs to start and expand businesses through increased access to microbusiness training and credit. VEI promotes “economic gardening” as a strategy for community economic development that focuses on fostering growth from within the community. This strategy to foster entrepreneurship is meant as a complement to larger industrial and business development, as it is not possible for all localities to attract industry. VEI supports nonprofit organizations that specialize in providing this direct service to these entrepreneurial Virginians.

The Entrepreneur Center at Northern Virginia Technology Council (NVTC) is a resource hub for technology-focused start-ups and entrepreneurs at every stage of their lifecycle. The Entrepreneur Center fosters entrepreneurship in students, mentors the firsttime entrepreneur, advises and supports the experienced entrepreneur, and facilitates strategic business relationships in the technology community. The NVTC is the membership association for the technology community in Northern Virginia, serving about 1,000 members.

The Virginia Business Incubation Association (VBIA) promotes, encourages, and supports the successful establishment and operation of small business incubation programs to stimulate economic development activity in Virginia through the creation of new jobs, new investment and new business formation. More than two dozen VBIA member incubators are located at universities, colleges and community locations across Virginia.

NOTES

Endnotes 1. United States Census Bureau. State Exports for Virginia. U.S. Exports by Origin State (Origin of Movement Series).

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September 2010 FreeEnterprise.com