In the wake of Hurricanes Katrina and Rita, the state of Louisiana has taken steps to make asset building a priority. The Louisiana Department of Social Services has embraced the concept of asset building, and is implementing programs that offer opportunities for asset building to low- and moderate-income residents.
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Frequently Asked Questions About the DRC
- Where does CFED get its funding?
- How is the DRC funded?
- Why does CFED produce the DRC?
- What do the indexes mean? What do they measure?
- Why have you added trend indicators?
- Why doesn't the DRC issue a single overall grade?
- What data sources are used?
- Does the DRC possess any limitations?
- Isn't the DRC unfair? Doesn't it unduly punish states that are starting out behind?
- Why doesn't the DRC reflect the fact that states are implementing policies that will help?
- Why are quality of life and resource efficiency included when state Departments of Commerce/Development are unaccountable for these outcomes?
- Doesn't the DRC favor some regions and not others?
- Isn't the DRC pro-union and out to get the right-to-work states?
- Who uses the DRC?
- Why do states with the same value have different ranks?
If your question is not answered here, please email us.
Where does CFED get its funding?
CFED is financed by grants from foundations and gifts from private individuals. It also contracts with federal, state, and local government agencies and nonprofit organizations. For more information see CFED's Annual Report.
top of pageHow is the DRC funded?
In 2007, the DRC was supported by CFED operating funds and general support.
Why does CFED produce the DRC?
The goal of the DRC is to ask the right questions about state economies. How well does the state's economy generate a more widely shared and sustainable standard of living? How vital are its large and small businesses? What is the state's capacity for future development? Each major index tries to answer one of these questions.
The data analysis provided in the DRC is designed to be among the first (and easiest) places for policymakers to go when they wish to examine any given state's economy. There is so much data and there are so many information resources to review when one is looking for economic analysis. The DRC provides an annual snapshot that compiles and sifts through the surplus data to provide a clear picture of how things stand.
Finally, the DRC provides policymakers, development professionals, and the citizenry with a tool that views economic development from multiple perspectives. After all, the ultimate purpose of economic development is promoting a better life for all citizenry.
What do the indexes mean? What do they measure?
The Performance index looks at whether, in the race toward increased global competitiveness, a state economy is delivering a better life for its citizenry.
- Is the economy providing jobs for all those who want them?
- How well do these jobs compensate the workforce?
- How widely shared is a state's growth?
- Is its economy becoming more efficient in terms of its resource use?
- Does this state have a decent quality of life?
The Business Vitality index gauges a state's dynamism. The standing of each state in the economic race for the future depends-to a significant degree-on the vitality of the businesses in that state. Businesses create jobs. Businesses create income. And, often, businesses spawn and attract other businesses.
- Are the state's businesses bringing income from outside the state?
- Are the state's entrepreneurs reacting to rapid change by creating new businesses?
- Are these businesses likely to grow in jobs and income in the future?
- Is the state's economy diverse enough to withstand downturns in dominant industries?
The Development Capacity index assesses a state's building blocks for future development. In the race for the economic future, some competitors have a distinct advantage-they are simply in better condition.
- How is the state investing in the capacity-building investments in which states are principally involved: building an educated and skilled workforce; supporting technological innovation; assuring available financial resources; creating and maintaining physical infrastructure, natural capital, and amenity resources?
This year, the report card continues to offer more depth and historical perspective by providing five-year snapshots of a number of individual measures. Of the existing 67 measures which indicate relative progress between the states, 15 have been carefully selected to assess how the states measure up to their own past performance. These 15 trend indicators gauge the direction and magnitude of the states' economic development efforts in the context of their own political and economic environment. In addition to measuring the absolute or percent change over a five-year period, the trend indicators track change from year to year. Each of the 12 graded subindexes is represented by one or more trend indicator.
Why have you included trend indicators?
Starting in 1999, the DRC added graphs tracking the grades of each of the three indexes over a five-year period. The response was positive and significant. The report card offers depth and historical perspective by providing five-year snapshots of a number of individual measures. Of the existing 67 measures which indicate relative progress between the states, 15 have been carefully selected to assess how the states measure up to their own past performance. Each of the 12 graded subindexes is represented by one or more trend indicator selected to be representative of that subindex. These 15 trend indicators gauge the direction and magnitude of the states' economic development efforts in the context of their own political and economic environment. In addition to measuring the absolute or percent change over a five-year period, the trend indicators track change from year to year.
Why doesn't the DRC issue a single overall grade?
Each of the indexes is like a separate subject on a school report card -adding them together would be meaningless. If any given student is a grammar whiz but had significant trouble with math, a report card that indicates only "B" quality work overall would not give an accurate picture of the child's strengths and weaknesses. Absent more significant review, the school would not be able to provide tutoring in math and accolades in grammar.
Further, each grade presented in the DRC condenses a great deal of information. Creating overall grades would collapse too many dimensions of economic development and performance into abstraction.
Finally, there is a relationship between the three graded indexes that should be kept in mind-that Development Capacity shapes Business Vitality, which, in turn, affects Performance.
What data sources are used?
Data used in the DRC come from the best government and private sector sources available to ensure that data are objective, consistent, and timely. For specific citations, go to the measures section of the DRC. However, because CFED does not collect the data itself, accuracy of the original source material cannot be guaranteed. There may, occasionally, be mistakes in data collection and inputting, for example, that only come to light after publication.
Does the DRC possess any limitations?
It is easier to ask the right questions than to find clear answers. Often the data needed to answer these questions are not available. In these cases, the best proxies are used in lieu of precise information.
There may be a time lag in obtaining certain data for the DRC. Researchers are often not able to access reliable data in the calendar year that the DRC is being released. But in most cases, because economies do not change rapidly, the relative picture of a given state should only change marginally.
The DRC is the place to start the assessment of a state's economy; it is not, however, where such assessment should end. CFED does not regard the DRC as the definitive study of state economies. Additional analysis and data will be needed before embarking on policy change.
Isn't the DRC unfair? Doesn't it unduly punish states that are starting out behind?
Grades provided in the DRC are relative; grades earned by any individual state depend on the overall performance of all the other states.
The 67 measures that comprise the index grades allow a state to assess its standing against its peers at a single point in time. The rank and grade it earns depends on where it falls relative to the other 49 states. Because so many aspects of economic development yield results over periods of 10 or more years, states that pursue policies or implement programs that address weaknesses are unlikely to improve enough in any measure to advance its ranking by surpassing other states in the short term. The trend indicators (that do not contribute to the grades) allow a state to assess the movement of key measures over time, providing a gauge of its individual progress. Policymakers should pay attention to trends and highlight where progress is being made. Even if the state's average annual pay or per capita income is at a historical high, if it is still ranked 50th improvements are necessary.
Why doesn't the DRC reflect the fact that states are implementing policies that will help?
In its earlier years, the DRC included a Policy index that consisted of a checklist of helpful policies. What would be most helpful now, however, would be if the DRC could evaluate the effectiveness of state economic development policies, relative to each other. Unfortunately, this is a difficult task, since it would require collecting reliable and comparable data on scores of programs and evaluating each state's development "system" compared to its peers. For this reason, the Policy index was dropped.
It is important for states to share with their constituents what they are doing to deal with the issues raised by the DRC and to present reliable data about the progress they are making, either relative to their own past performance or to their current competitor states.
The inclusion of trend indicators is designed to reflect the movements of 15 key measures that may reflect policies. Because so many of the building blocks of economic development require several years to yield results, it may be quite some time before a rank improves or a state gets a better grade, even with policies that target weakness. Though not included in the grading scheme, the trend indicators gauge the direction and magnitude of the states' economic development efforts in the context of their own political and economic environment, independent of their standing among the other 49 states.
Why are quality of life and resource efficiency included when state Departments of Commerce/Development are unaccountable for these outcomes?
Commerce and Development Departments are often associated with "growth," but as such, they are only one of a number of agencies that affect a state's quality of life. Economic development policymakers and professionals must think beyond the next business cycle and the next election. They need to collaborate with other government agencies whose main mission is more focused on the environment, quality of life, and amenities.
No amount of growth is desirable if it does not positively affect the populace. The measures included in the quality of life subindex reflect the degree to which economic development reaches the general population.
The health of residents, their participation in their communities, and commitment to the area are indicators of how well a state takes care of its people. Growth that enhances or preserves a state's natural resources rather than depletes them is desirable and sustainable. Many players are involved in economic development. For example, Departments of Education, Human Services, and Environmental Protection all shape future productivity, income growth, and job creation.
Doesn't the DRC favor some regions and not others?
No, honor roll states are from all regions. Recent top states include Virginia, Colorado, Connecticut, Delaware, Massachusetts, Minnesota, New Hampshire, Oregon, and Wisconsin.
Isn't the DRC pro-union and out to get the right-to-work states?
The DRC and CFED are not beholden to any particular constituency or funder. The DRC simply presents what the numbers say. Further, many right-to-work states have performed well on the DRC.
Keep in mind that the DRC is pro-worker in a certain respect. Data presented in the DRC support CFED's assertion that economic development should deliver benefits for the average employee and for the poorest members of our society. If it is not, then it is failing its mission.
Who uses the DRC?
Lots of people use the DRC-state officials, policy analysts, academics, utilities, community leaders, chambers of commerce, site location consultants, management consultants, business persons, labor leaders and others. Its principal use, however, is as a policymaking tool. The DRC permits governors and legislators to see clearly where they stand on a wide range of factors that affect the state's economic future. Economic development officials and local recruitment specialists can see more clearly their competitive advantages and disadvantages, and craft both investment and development strategies accordingly. Individual entrepreneurs and corporate facility planners have a more comprehensive set of development factors available in one place than is the case with other economic climate indexes.
Why do states with the same value have different ranks?
The number of decimal places is limited for presentation purposes. State ranks are based on the full number (available in a downloadable Excel file).
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