"It's an instinct. It's not something you can learn. You've either got it or not, said Commerce Lexington president and CEO Bob Quick about the key trait of an effective state economic development chief. Quick is among business leaders statewide now wondering who will have the right stuff to succeed the man who has lead Kentucky's economic development efforts since 1993. Marvin E. "Gene" Strong, Jr. will soon depart Frankfort after service under three governors as Kentucky's Economic Development Cabinet Secretary. "He was very effective in getting into the company's mind and connecting with them, understanding their needs and providing them what they needed to make a deal. The guy is a deal maker," Quick said.
Searching for a rare talent
Offering a sense of the demands of economic development, Kentucky Chamber of Commerce President David Adkisson said the job requires a rare blend of highly professional skills. "You need a sales person. You need a marketer. You need an administrator, a communicator, and you need someone who is politically savvy. And I would suggest that if a person is weak in any of those categories, he or she probably will fail."
According to a cabinet press release announcing Strong's retirement, those traits have contributed to the creation of more than 274,500 jobs in manufacturing and supportive industry jobs under his tenure, with total estimated capital investment in Kentucky increasing by more than $34.5 billion during Strong's years in Frankfort. Under Strong's oversight, according to the release, "Kentucky has been ranked as high as second in the United States in the number of new and expanded facilities, and consistently as one of the top ten states in new job creation, investment, and business retention. Exports from the state have increased 253.7 percent since 1993, moving the commonwealth into the top 10 among all states in total per capita exports," it said.
When the former executive VP for marketing and leasing for the Webb Group of Lexington was appointed cabinet secretary in 1993 by then-Gov. Brereton Jones, the General Assembly placed the position under the control of a 13-member, quasi-public Kentucky Economic Development Partnership, chaired by the governor.
The board moved to bring the position more in line with competitive private sector positions and protect its essential continuity over successive administrations. Central Bank president Luther Deaton is the board's vice chairman. "I took a lot of heat because I raised Gene Strong's salary up to about $250,000 a year," Deaton said. "But I didn't do that for Gene Strong. I did this so when Gene Strong ever left, then we have something. When we do a national search, that says we believe in what we're doing, and with what we're paying, we can get some good applicants to come in here. That's why I did it."
Some have been critical of Strong's emphasis on manufacturing and view his departure as an opportunity to expand that job description for Strong's successor. "It's clear that some of our programs have worked well," said House Appropriations and Revenue Committee Chairman Harry Moberly, D-Richmond. "We need a person who, of course, understands manufacturing recruitment, but they also have to understand the workforce education issues. They have to understand what's necessary to build a new economy environment - somebody who understands that the jobs of the future are going to come from small- and medium-sized businesses more than large manufacturing companies; somebody that has a good grasp of economics and understands the global economy; somebody who is creative and innovative enough to understand and take advantage of Kentucky's strengths and possibly new areas that we have not yet explored. It will have to be a very talented individual."
Professor Kenneth Troske, director of UK's Center for Business and Economic Research, agreed with Moberly, cautioning, however, that Kentucky's workforce is not yet prepared to meet the demands of an expanded economic base. "Whoever the new secretary is is somewhat handicapped by the situation he faces on the ground, and that is a state that ranks 47th out of 50 in terms of the percent of adults with a high school diploma and 42nd out of 50 in terms of adults with a college diploma."
The Kentucky Association of Manufacturers offered a different perspective. In a letter-to-the-editor provided to Business Lexington, the association said, "Secretary Strong has improved Kentucky's prosperity by helping build the manufacturing foundation on which we now stand." Noting that Strong's successor will find the environment for Kentucky manufacturers in 2007 increasingly hostile and competitive, the KAM letter states, "Because Kentucky's entire economy depends heavily on manufacturing, which represents 20 percent of our state gross product, Gov. Fletcher's decision on who will succeed Mr. Strong is critically important. the new Cabinet Secretary must be a global strategist and recognize the delicate balance between free trade and protecting Kentucky manufacturing jobs.
Mr. Strong's successor must also be a good listener to assist Kentucky manufacturers who are out there every day slugging it out and competing to win in the global marketplace."
Strong indeed singled out education as Kentucky's No. 1 economic development obstacle. "The one challenge, going forward, that we just have to recognize here in Kentucky is that we're still not close to where we need to be on an education attainment level, particularly at the post-secondary level," he said. "To take it to the next level in the next 10 to 20 years, Kentucky has to solve that problem. If we don't, I think we're going to have a very hard time competing in the next 20 years for the kinds of jobs that we'd like to have in Kentucky."
Value of tax breaks questioned
The state's tax incentives to lure companies to Kentucky came under fire last year when the Lexington Herald-Leader published an analysis purporting that the state spent $1.8 billion in the last 25 years on economic development programs with little to show for the investments in the way of improvements in key employment and economic categories.
The Kentucky Chamber's Adkisson, a former mayor of Owensboro, was not dissuaded by the report. "I'm very much a proponent of competing with incentives. In my hometown of Owensboro, I personally put together incentive packages with Gene's assistance to recruit companies, and I'm absolutely convinced it made the difference."
Adkisson stressed that there was a definite return on the investments. "That's a major litmus test for incentives. They have to be cost effective. They have to be tied to actual results - jobs or investment. And I think that's been lost in the debate, that these incentives do have what are called 'clawback provisions.' If a company says they'll create a thousand jobs and they only create 500, they get only half of the state's commitment."
Commerce Lexington's Quick, recalling his days with the Evansville, Ind., chamber, offered another view. "Gene Strong clobbered us. The Kentucky Cabinet for Economic Development would clobber us. As hard as we tried, they clobbered us. Because it didn't make any difference what kind of company we were dealing with, whether it was high-tech or a traditional manufacturing company, a small business, large business, medium-sized - what Kentucky was always a master at doing, during Gene's tenure, was getting inside the deal and figuring it out."
The University of Kentucky is scheduled to produce the results of a study of the state's economic development tax incentives in January, in time to present to the 2007 General Assembly. "That's why we commissioned this study," said Deaton, "to see if any of the programs are not working, and if they're not working, why they're not working and what we need to do to make them do what's best for the state."
Future trends
From the perspective of his years in economic development Strong anticipates some significant changes in the way Kentucky does business. "We're seeing economic development groups throughout the state go more toward the regional approach," he said. He cited Greater Louisville, Inc., the Triad Region of Northern Kentucky, and the Northwest Forward Group based in Henderson. "You can see results where communities are all pulling in the same direction and where they clearly have a vision and a goal that they're trying to accomplish, and they do that by working together. Where you see that happening, you generally see success."
In Kentucky, broad progress in developing regional collaborations faces a traditional and intractable obstacle. "I personally think we have way too many counties in Kentucky," Strong observed. "It probably won't happen in my lifetime, but I think that we should reduce the number of counties and local jurisdictions that are out there. It's a tough political ball to balance, but it's pretty clear that 120 counties is just an enormous number for a state the size of ours."
The Economic Development Partnership Board will hire a national search firm to scour the country for Strong's successor, a process characterized by tension between the need to fill the position as quickly as possible versus careful selection of an individual who will oversee the direction of Kentucky's economic future for years to come. A short list of candidates will be developed with the finalists presented to Gov. Fletcher.