Indiana Government Reform

Many corporate and community leaders have noticed a disturbing tendency lately from Indiana’s education establishment – an inclination to make excuses rather than aim higher when it comes to student achievement.

Earlier this year, a simple but compelling reform was proposed in the Indiana General Assembly – Hoosier schools should focus more resources and attention on early reading education, and be required to teach every student to read by the end of third grade. 

Volumes of academic research showed that if students aren’t reading proficiently by the end of third grade, their chances of ever catching up to their peers plummet.  The odds of graduating high school, much less going on to college, drop dramatically as well – their futures are put in jeopardy.

The premise of reform was simple: Make reading education the top priority of the early grades, and if students aren’t reading at grade level at the end of third grade, get them special help and make sure they can read before promoting them to the fourth. 

We were dismayed by the reaction from the teachers unions and many administrators.  Some protested, incredibly, that holding students back hurt them more than being illiterate.  They demanded more funding, arguing that it was unfair to expect schools to teach kids to read within their existing budgets (more than $10,000 per pupil on average, statewide).

Eventually, the Indiana Department of Education was authorized to study the need for reading reform, and is crafting a plan to end social promotion without reading proficiency.  But the reflexive opposition against such a common-sense approach to improving accountability and learning was disturbing.

We had a similar feeling reading the reactions to the Indiana Department of Education’s recently-expressed goal that at least 25% of Hoosier high schoolers should pass at least one Advanced Placement exam, better preparing them for college studies.  The DOE asserts that the 25% goal, while ambitious, is based on PSAT tests that show at least a third of students have the ability to excel in AP coursework if they apply themselves. 

Instead of embracing the goal, some educators again turned to excuses.  Editorials arguing that AP curricula would have to be watered down in order to allow one of every four students to pass were published by the Indianapolis Star.  Others said that only higher-income students in suburban schools could hope to pass AP exams in such numbers – an especially unconscionable message, since education is the surest route out of poverty for underprivileged students.  (CICP Board member Steve Burns responded to these arguments with his own editorial.)

Taking in these arguments while recalling the third grade reading debate could evoke only one response – “Here we go again.”

In business, you motivate employees by setting high standards and challenging them to succeed.  You don’t embrace a philosophy of pessimism by setting the bar continually lower.  Schools aren’t businesses, but the same principle applies:  Students will live up to – or down to – the expectations we set for them.

Indiana ranks among the least-educated states in the nation, with fewer college graduates per capita than most states and a high school graduate rate mired in the middle of the pack.  In today’s knowledge-based economy, this is the most daunting challenge faced by Hoosiers.

To confront it, we first need a common understanding between educators, policymakers, families, civic and corporate leaders alike – we have to set our sights higher if we want to inspire real progress.  On issues like reading and Advanced Placement exams, we have a choice between making excuses and demanding excellence .  We must speak with one voice for the latter.

There is the occasional sign of progress.  The Indiana State Teachers Association recently embraced performance-based teacher compensation as part of the Department of Education’s application for a federal Teacher Incentive Fund grant.

But it still seems as if we have a long way to go towards making Indiana’s educational culture one that embraces accountability, higher standards and student learning above all.  Good teachers embrace this approach – we need more of them speaking out, and policies that empower them.

The jobs keep coming, but we need qualified workers

Steve Dwyer, Conexus Indiana

Indiana’s manufacturing sector has gotten better at churning out an important product recently – new jobs for Hoosiers.

Last week, the Wall Street Journal reported that Indiana leads the nation in job creation this year, buoyed by  industrial growth.  A closer look at data provided by the state’s Department of Workforce Development shows that we’ve added nearly 12,000 new manufacturing jobs in 2010 (only the broad ‘professional business services’ category has added more positions).

This trend is consistent with the economic forecast released by Conexus Indiana as part of our annual Manufacturing and Logistics Report Card – economists from the Ball State Bureau of Business and Economic Research predicted a sharp manufacturing recovery during the second half of 2010 and 2011.  The state’s total manufacturing compensation is projected to grow by nearly $2.5 billion during this period, after falling or staying flat since mid-2007.

Once again, reports of manufacturing’s demise were greatly exaggerated:  The recession took its toll, but every downturn brings a recovery.  The domestic auto industry suffered plummeting sales, bankruptcies and bailouts – but Indiana has attracted international auto plants and seized high-tech opportunities in electric vehicles.  Global competition has challenged U.S. manufacturers – but Indiana has led the nation in attracting foreign manufacturing jobs.  Traditional jobs have disappeared – but high-skill manufacturing careers have emerged.

In short, every challenge is also an opportunity, and Indiana’s heritage of manufacturing strength and innovation prepared us to take advantage.

Recent positive stories like Chrysler’s $300 million investment in its Kokomo plants, EnerDel’s plans to double job creation in Central Indiana, and the recent acquisition of the vacant Delco Remy factory in Anderson by S&S Steel aren’t just isolated announcements, but part of a broader growth trend.  And it’s even more remarkable because we’re starting from a higher plateau – Indiana already has the most manufacturing jobs per capita of any state in the union.

But we can’t afford to be lulled into complacency by good news.  Long-term prosperity is achievable only if we’re willing to outwork and outthink the global competitors eager to challenge our success.

This means making the most of this recovery, maintaining a competitive tax climate and continuing an aggressive economic development effort to make Indiana an attractive destination for manufacturing investment.  We also have to look beyond the next business cycle and concentrate on the strategic issues that will determine our competitiveness for the long-term.

Human capital is clearly one of these issues.  Indiana’s high school graduation rate ranks in the middle of the pack, and we’re among the least-educated states in terms of college graduates in our workforce.  In all, just a third of Hoosier adults hold at least a two-year degree.   At a time when new manufacturing jobs demand high-tech skills and problem-solving capabilities, workers with a high school diploma (or less) just can’t make the grade.  And with Baby Boomer workers retiring in greater numbers (and the average age of the Indiana manufacturing worker hovering around 50), the state faces a looming shortage of qualified employees.

We can’t have sustainable job growth without a parallel focus on education.  Ultimately, trying to grow our economy without training our workforce only frustrates the ambitions of both the companies that can’t find skilled workers and the Hoosiers who continue to find themselves unqualified for better jobs.

Conexus Indiana is working with our industry and educational partners to create new training programs appropriate to emerging careers in manufacturing and logistics, while encouraging young Hoosiers to enroll in these programs through the ‘Dream It. Do It.’ marketing outreach campaign – learn more at dreamitdoitindiana.com. 

In any business you’re always either gaining or losing momentum – for the moment, Indiana is moving forward.  But to keep it up, we still need to make the education connection:  Filling manufacturing jobs doesn’t mean just matching workers with empty spots on an assembly line.  It means sending our workforce back to school – that’s how Indiana will keep our manufacturing edge. 

Steve Dwyer is President & CEO of the Conexus Indiana advanced manufacturing and logistics initiative.

Recent reports seem to indicate that Indiana has weathered the recession and is near the vanguard of the economic recovery – while too many Hoosiers are still unemployed or underemployed, and facing other financial hardships, we’re further along than many of our neighbors.

Most recently, the Wall Street Journal reports that Indiana leads the nation in private sector job creation in 2010.  Department of Workforce Development data confirms that the state has added nearly 50,000 new jobs since December – one of every ten positions created in the U.S. happened here, with manufacturing and ‘professional services’ leading the way.

At the regional level, the Brookings Institute places the Indianapolis metropolitan area in its “second-strongest” tier in its ongoing measurement of the economic performance of the 100 largest metros in the U.S.  Our relatively low unemployment, stable housing prices and strong Gross Metropolitan Product growth put us in good stead, ahead of most of Midwestern areas.  While St. Louis and Columbus (OH) joined Indianapolis in the ‘second strongest’ category, Louisville, Cincinnati, Milwaukee and Nashville found themselves in the middle tier.  Chicago, Detroit and Dayton slipped into the bottom levels.

The numbers are heartening, and there’s also cause for optimism ahead.  Indiana continues to boast the most business-friendly tax climate in the Midwest – as the recovery gathers steam, we’ll be among the most attractive destinations for new investment.  Indiana also made an impressive jump in venture capital investment over the past year, climbing from 41^st to 20^th in VC investment per capita.  This says great things about our ability to grow our own new companies and diversify our economy moving forward. 

Clearly, Indiana still has many hurdles to overcome – strengthening our workforce and closing the income gap that continues to plague Hoosiers, to name just two – but we seem to have positioned ourselves to take advantage of the economic comeback that’s starting to take hold across the country.

Conexus Indiana released its 2010 annual Manufacturing and Logistics Report Card last week, concluding that the state remains strong in two of our largest industries but must make significant progress in areas like human capital to preserve future competitiveness.  The Report Card also predicts a strong manufacturing recovery in Indiana for 2010-11.  Here’s how Conexus describes the report in on its new blog:

Everyone knows that Indiana’s economy is heavily focused on manufacturing, and that our location makes us a natural logistics hub as well. 

But how do we really stack up against other states in these industries in terms of jobs and economic output?  What’s the outlook for Indiana manufacturing and logistics in 2010-2011 as the economy continues to recover?  And how can the state better position itself to take advantage of high-tech manufacturing and supply chain opportunities?

All of these answers can be found in Conexus Indiana’s annual Manufacturing and Logistics Report Card, which ‘grades’ the state in areas like global competitiveness, human capital, tax climate, productivity/innovation and more.  The Report Card is created by Dr. Michael Hicks and a team of economists at the Ball State Center for Business and Economic Research; the 2010 edition is being released by Conexus this morning.

Manufacturing and logistics combined employ more than one of every five working Hoosiers – Conexus believes it’s critical to monitor the health of these industries and anticipate the challenges we need to tackle to keep them as growing cornerstones of our economy.

Download the Report Card here, and see the accompanying press release here.

Inside Indiana Business reported this morning that Smart USA has chosen Indianapolis as a test market for its new Smart fortwo electric drive vehicle.  Executives from Smart say the Indianapolis region is an ideal test market for the new electric model because of plans for investment in charging infrastructure for plug-in vehicles, part of the Project Plug-IN effort being coordinated by CICP’s Energy Systems Network (ESN) initiative.

Project Plug-IN will place more than 100 plug-in vehicles in service with commuters as well as government and corporate fleets across the Indianapolis metropolitan area with the goal of anticipating and solving the challenges that come with the use of plug-in cars and trucks.  These include the deployment of residential and public charging stations, enabling off-peak charging, and resolving billing issues.

In addition to EnerDel, Project Plug-IN partners include Duke Energy, Indianapolis Power & Light, Think Global, Nissan, Smart USA, Navistar, Cummins, Delphi Corporation, Bright Automotive, ITOCHU Corporation, IBM, Simon Property Group, Midwest ISO, Purdue University, the City of Indianapolis, the State of Indiana, and the Rocky Mountain Institute.  Collectively, these partners have received nearly half a billion dollars ($490.4 million) in federal stimulus grant funding.

Through milestones like the recent U.S.-China Advanced Technology Vehicle Summit and commercialization activities like Project Plug-IN and the Hoosier Heavy Hybrid Partnership (a partnership geared towards the production of medium- and heavy-duty electric trucks), ESN has made real progress in its first year towards making Indiana a recognized leader in vehicle electrification – we’re proud of their efforts.

Francesca Jarosz’s feature in today’s Indianapolis Star ("Caps cut services along with taxes") details the budgetary struggles being faced by Indianapolis/Marion County as property tax caps place new limits on revenues, exacerbated by the lingering effects of the national recession.

Communities across Indiana are facing similar issues, as the ‘perfect storm’ created by the economic downturn and the implementation of the caps have left local governments hundreds of millions of dollars in the red.  It’s led to police and firefighter layoffs, roadwork deferred, hikes in local taxes and user fees, libraries and parks closed.  (The American Library Association says that Indiana reported more library branches closed last year than any other state.)  Cuts in public education have been well-chronicled.

However, it’s important that Indiana protect homeowners from skyrocketing property taxes, and ensure a fair and predictable tax system for business.  And economic downturns are inevitable – no economic strategy has yet conquered the business cycle.

The real culprit here is our stubborn resistance of local government reform, fixing a broken system that supports thousands of township governments, turns administrative offices into political fiefdoms and codifies a patchwork of overlapping bureaucracies that breeds inefficiency and ineffectiveness.  Until we are willing to restructure local government to allow it to do more with less, knee-jerk austerity measures or higher taxes are our only two options.

(Get a refresher on the common-sense government reforms recommended by the Kernan-Shepard Commission here.)

First U.S.-China Advanced Vehicle Summit pays off in productive dialogue, new deals between Chinese and Indiana companies

ESN hosts delegation of Chinese officials and auto executives, sharing the state’s expertise in electric vehicle technology development and manufacturing

(INDIANAPOLIS, Ind., May 28, 2010) Nearly 100 Chinese government officials, trade association leaders and auto executives visited Indiana on Thursday and Friday for the first U.S.-China Advanced Technology Vehicle Summit, organized by the Energy Systems Network (ESN) on behalf of Indiana’s leading manufacturers of components and technologies for hybrid electric vehicles.  The event featured several signed deals, substantive dialogue between the two groups, and the promise of more business opportunities for Hoosier companies in the world’s fastest-growing automotive market.

“It’s appropriate that we hold the Advanced Vehicle Summit on the eve of the Indy 500 here in the racing capitol of the world,” noted Joe Loughrey, ESN chairman and retired president of Cummins.  “Indiana is also in a race to attract new jobs and investment in the electric vehicle industry, and this Summit presents us with a historic opportunity.”

Indiana participants in the Summit included Allison Transmission, Cummins, Delphi, EnerDel, and Remy International.  The lengthy list of Chinese companies included BYD, Chery, Dongfeng Electric Vehicle, Shanghai GM, FAW Group, Geely and others.  All of China’s major state-owned, joint venture and private auto manufacturers are producing or have announced plans for hybrid and electric models; the country is projected to grow its global share of the electric vehicle market from 3% to 35% over the next decade.

“This is the largest delegation of Chinese automotive company executives and officials to travel to the United States to visit with American automotive parts manufacturers,” noted Assistant Minister of Commerce Wang Chao. “We are confident the visit will result in stronger business relationships between the Chinese and American automotive companies, especially for hybrid and electric vehicles.”

Assistant Minister Wang Chao’s confidence was shared by Indiana officials, and quickly proved to be well-founded.  On Thursday, Indianapolis-based EnerDel signed a joint venture agreement with Wanxiang Group, the largest auto parts producer in China, to provide advanced lithium-ion battery systems.   The deal between the two Summit participants could more than double EnerDel’s job creation plans for Central Indiana, to 3,000 new green jobs.

“We’re excited about our new partnership with Wanxiang and we look forward to the many other opportunities for collaboration this ESN summit has presented,” said Charles Gassenheimer, Chairman of Ener1, the corporate parent of EnerDel, and a Board member of ESN.  “Meetings like this one set the stage for companies like EnerDel to build new mutually beneficial relationships with Chinese businesses looking west for strategic partners.”

Along with the EnerDel-Wanxiang deal, the China Investment Promotion Agency and the Indiana Economic Development Corporation signed a Memorandum of Understanding to strengthen future trade and economic development opportunities on Friday morning.  Strategic cooperation agreements between Cummins and two Chinese companies, Guangxi Liugong Machinery and Zhengzhou Yutong Group, were also signed. 

Finally, an agreement between the Energy Systems Network, the China Chamber of Commerce for Import and Export of Machinery and Electronics, and the China Association of Automotive Manufacturers set the stage for future meetings.  “We’re pleased to announce that our organizations have agreed to explore another Summit, this time in Beijing, focused on the broader new energy technologies market,” said ESN President Paul Mitchell.

“The Summit is paying off in new jobs and investment,” Mitchell continued.  “These Indiana manufacturers have attracted more than $300 million in federal stimulus grants for advanced batteries and vehicle electrification, and we’re pleased to help them leverage these investments into global business opportunities.”

The U.S.-China Advanced Technology Vehicle Summit was co-presented by the Energy Systems Network, the China Chamber of Commerce for Import and Export of Machinery and Electronics, and the China Association of Automotive Manufacturers.  In addition to presentations by U.S. and Chinese companies during the day-long Summit, events included a welcome dinner hosted by Indiana Governor Mitch Daniels and a Friday evening dinner reception hosted by Indianapolis Mayor Gregory Ballard featuring keynote remarks by David Sandalow, Assistant Secretary for Policy and International Affairs for the U.S. Department of Energy.

Last Wednesday’s Indianapolis Star printed a version of this excellent editorial by Central Indiana Transit Task Force co-chair John Neighbours, reacting to news of the fiscal uncertainties swirling around the IndyGo bus system.  The dismal state of IndyGo burdens both its users, who find it difficult to get to work or other daily errands due to long delays and inconvenient routes, and also local companies that depend on the bus to bring employees and customers to their places of business.

A more secure source of local funding for the system is certainly necessary;  the best solution is a more comprehensive regional system that provides reliable service across the metro area, and is financed and governed accordingly.  We believe the Central Indiana Transit Task Force has presented such a plan, summarized here.

(As a side note, I’ll be addressing the need for regional mass transit in my remarks to the Economic Club of Indiana this afternoon.)

Lack of reliable transit impedes economic growth

Erika Smith’s recent reporting on the fiscal plight of IndyGo paints a picture of a woefully under-funded public transit system in crisis.  It’s a picture that’s all-too familiar for those who rely on IndyGo on a daily basis.

IndyGo ranks 100^th among the top 100 U.S. metropolitan areas in transit funding, to serve the 26^th-largest metro population, leading to inconvenience and delay.  Let’s say you live near 10^th and Rural, and want to get to work near the Pyramids (96^th Street and Michigan Road) by 8:00am – you’d need to walk to the bus stop around 6am, to begin a one-and-a-half hour trip.  The employee of a company at Park 100 on the northwest side who has the misfortunate to live near 46^th Street and Arlington would suffer through a two-and-a-half hour commute (each way). 

These aren’t unusual scenarios.  For those who are dependent on transit, the current system effectively shuts the door on job opportunities and turns simple trips to the grocery store or doctor’s office into painfully-long  journeys.  For businesses dependent on public transit to connect them to a reliable workforce, IndyGo is a barrier to growth, a drag on economic competitiveness.

There is a better way.  In February, the private sector-led Central Indiana Transit Task Force released a comprehensive regional transportation plan that includes a light and commuter rail network, new highway investment and an expanded regional bus system. 

While the rail lines capture much of the public attention, it’s the bus system that actually receives the majority of new operating funds in the plan.  We don’t just envision fixing IndyGo, but transforming it into a regional system that allows commuters to move easily around Indianapolis and the surrounding counties.  The bus network would include more cross-town routes and higher levels of service, cutting wait times and connecting with rail to provide more transportation options for all.

The urgent need to provide adequate bus service is also reflected in the Task Force’s recommendations for public consideration.  While rail infrastructure is built over several years, bus improvements would begin immediately – offering tangible benefits right away.

A comprehensive and convenient bus system is the backbone of any successful transit system, and the private sector blueprint prioritizes and invests accordingly.  The plan is currently on the table for public comment through the ‘Indy Connect’ campaign of the Metropolitan Planning Organization (offer your own feedback at www.indyconnect.org).  Because buses are the closest and most relevant form of transit to much of the region’s population, we expect the agency to receive a large amount of input on how to better serve their riders.

The other major issue is funding.  Financing IndyGo through property taxes is a recipe for failure.  No one wants higher property taxes; indeed, we believe that mass transit investments can help keep property taxes under control by spurring more residential and commercial development. 

The transportation system should be funded by other local options, like small increases in sales or income taxes – funding the entire proposed regional rail and bus system would cost the average family between $10 and $20 a month in new sales taxes, for example.  That’s the price of a large pizza in exchange for greater mobility, a more convenient commute, and the other economic and environmental benefits of transit.

The sorry state of IndyGo lends urgency to the broader issue:  We need a regional, comprehensive transportation system that includes new mass transit options, like the plan envisioned by the Central Indiana Transit Task Force.  It’s time to agree on the approach, find the best way to pay for it, and make it happen.

John Neighbours

Neighbours is a partner at Baker & Daniels, serves on the Board of the Greater Indianapolis Chamber of Commerce, and was co-chair of the Central Indiana Transit Task Force.

Another local call for consolidation, this time from Madison County-Anderson in the Herald Bulletin.  Local communities, facing the realities of declining revenues and property tax caps, are actively exploring government reform options, while media like the Indianapolis Star and Herald Bulletin editorialize in favor of these common sense reforms.

They are helping fill a vacuum of leadership demonstrated by many state lawmakers, who would prefer to remain complicit in a system of inefficiency and cronyism that’s wasting taxpayer dollars when we can least afford to do so.

Read the full Herald Bulletin editorial here:

As detailed previously in this space, Indiana’s township offices have hoarded large surpluses, overtaxing homeowners and diverting revenues from city and county governments that face increasingly dire budget conditions.  Townships provide haphazard poor relief assistance, while in some cases administering fire protection and maintaining public cemeteries – duties that can be provided more effectively and efficiently at the municipal or county levels.

Today’s editorial from the Indianapolis Star confirms that Indiana townships continue to pad their coffers at taxpayer expense, as surpluses have actually grown.  Juxtapose this with another article in today’s Star assessing the fiscal impact of property tax caps on local governments (slashing $79 million from city-county budgets in Marion County alone) – can the state truly afford a Civil War-era layer of bureaucracy given today’s economic climate?

An excellent editorial in the Indianapolis Star (reprinted below) making the case for a truly regional, integrated mass transit system along the lines of what’s been proposed by the Central Indiana Transit Task Force.  (The plan is discussed on this blog here and here, specific details on the plan and the Indy Connect public input campaign can be found here.)

The key to moving on mass transit

It's easy to be cynical about yet another proposal to construct a mass transit system in Central Indiana. As The Star's Erika Smith documented on Tuesday, plans to build rail lines or improve the city's abysmal bus service have arrived one after another, and then quietly departed, for three decades.

Now, however, a new pitch -- the most comprehensive one to date -- to build not only rail and bus lines but also expand roads and bike trails appears to have a better chance for success than any of the earlier proposals.

That's because residents appear ready to embrace mass transit in sufficient numbers to make it feasible and because powerful business leaders, rather than bureaucrats, are helping to push the idea.

Both factors are key to persuading legislators in the General Assembly and members of local city and county councils to approve a funding mechanism, whether it's through a sales tax increase or another method to raise money.

Central Indiana is far behind most metropolitan areas when it comes to public transportation. Indianapolis' bus system is the worst in the nation, not only in regard to size but also service. It's simply not possible for most residents in the region to use IndyGo, the only form of mass transit now available, to commute to work, school or play.

Central Indiana's elected leaders and the residents they represent have repeatedly refused to face up to the need for mass transit. As a result, while Charlotte, Minneapolis, Portland, Salt Lake City and St. Louis moved forward by building attractive and practical transportation systems, Indianapolis stood still.

Some residents may believe they've been frugal in avoiding the expense of rail and bus lines, but the lack of public transportation comes with multiple costs. It's one of the reasons why Indianapolis' air quality is among the worst in the nation. An inability to commute to and from work separates potential employees, especially those with few resources, from prospective employers. And young urban professionals are less likely to live and work in Indianapolis given the lack of transportation options.

The region has one more chance -- perhaps its last in decades if this new effort fails -- to build an asset it should have acquired years ago. Central Indiana can't afford to miss this train.

Today’s Indianapolis Star includes an interesting article on the latest antics from the world of township government – the Washington Township (Marion County) trustee racking up $20,000 in legal bills in a dispute over $758 in poor relief aid sought by a township resident for help with her rent and water bills.

Of the many troubling issues this story raises, two stand out.  First, the idea that these sorts of fiscally imprudent decisions are being made with little or no oversight by 1,008 separately-elected township officials is disheartening given the dire financial straits of state and local governments. 

Across Indiana, local officials are debating cuts in education, infrastructure, public safety and more.  Counties and municipalities are making tough choices.  Our legislature has made these choices even tougher by not stepping to the plate and making its own difficult political decision to reform local government, at least by demanding more oversight and streamlining of township offices.  And so we continue to be burdened by another layer of government bureaucracy that consumes and squanders tax dollars.

As to the circumstances of the Washington Township case itself, it’s difficult to argue the merits of either side on the basis of any statewide or even countywide guidelines.  That’s the second issue – there are no common rules for the provision of poor relief in Indiana.  Each township sets its own, leading to a patchwork approach that’s unfair and inefficient.  More than half the state’s townships provide relief to 20 households or less, and spend three dollars in overhead for every one that actually reaches a disadvantaged family.   It’s no surprise that disputes such as the one in Washington Township arise.

While the General Assembly again failed to take action on local government reform this session, more and more communities are exploring consolidation themselves out of financial necessity.  As these efforts multiply across the state and the fiscal climate continues to worsen, let’s hope that common sense reform – starting with township government – begins to gain more converts among lawmakers.

Plotting a post-Rust Belt future for the Midwest

Carol D’Amico

What is the future of Midwest cities that have been heavily dependent on the automotive industry?  That was the issue we discussed at a White House symposium last week held at the U.S. Department of Labor in conjunction with the Brookings Institution, a Washington DC think tank.  Representatives from Ohio, Michigan and Indiana attended to discuss our common challenges as we seek to revitalize an economic base that’s traditionally reliant on automotive manufacturing.

A few observations from the day:  First of all, we should be very proud that our region still makes things for a living.  As one participant remarked, we have been and still are innovators.  Things we can't live without were invented in the Midwest - cars, refrigeration, air conditioning, and the bar code among countless others.  The Midwestern work ethic combined with our propensity to “tinker” and seek continuous improvement have helped us build a rich manufacturing heritage.  These traits can  continue to serve us well if we are smart about it.

What also struck me is we have common aspirations to diversify our dependence on the automotive industry and to be the leader in life sciences, alternative energy, logistics and bio agriculture.  We discussed common problems like difficulty in funding of start-up companies and the bias lenders have against manufacturing (too often dismissed as an industry stuck in the past, even as it invests more than any other U.S. economic sector in R&D innovation).  And perhaps the biggest issue of all, the challenge of up-skilling an older, entrenched workforce and shaking off our “rust belt” image to attract young talent to our landlocked states.

For that day we were in solidarity, confronting these common challenges and brainstorming solutions.  But outside the DC conference room,  we are fierce competitors when it comes to attracting new jobs and investment to our states.  It isn’t realistic to think that each of us can  be the leader of the new industries.  One of us is going to be better at it than the others.  So what will it take to stand out in this crowded field and how competitive is Indiana in the race?

First, the basics.  Indiana boasts a pro-growth tax climate.  Central geography and strong infrastructure.  Aggressive and well thought-out economic development efforts.  Enlightened and energized leadership.  All areas in which we excel.

We’ve also already made significant progress towards diversifying our manufacturing sector.  According to an analysis by Ball State University’s Bureau of Business Research, Indiana’s automotive and auto parts manufacturing industry employs more than 110,000 Hoosiers.  This is a tremendous number, but it represents just 16% of the state’s total manufacturing jobs.  Indiana also boasts strength in high-growth areas like pharma and medical device manufacturing, aerospace, HVAC and others.  And even within the automotive sector, we’re positioning ourselves as leaders in more cutting-edge areas like vehicle electrification.

Our Achilles heel in this race is the quality of our workforce.  A recent report that was done showed that we have 108,812 adults of workforce age who have less than a ninth grade education; another 273, 086 have less than a high school diploma.  This year over half the recipients of unemployment insurance lacked a high school diploma.  Unlike the old days, there are no good paying jobs for those adults.  Another 1,125,166 adults have only a high school diploma and no college.  These adults too have limited opportunities in the new economy we aspire to build. 

Until we get serious about addressing this issue our ability as a state to be the economic development leader among the Midwest states is problematic.  And it isn’t just the Midwest states that we compete with – it is all other states and the industrialized world. 

There are no easy fixes – this was the primary takeaway from  our event last week.  We need a more robust adult education system; a more effective K-12 system; colleges focused on graduating more adults within a reasonable period of time; and a modern, government-supported workforce development system instead of the antique we operate under today built in 1945 for a very different economy and era.  Indiana’s progress towards these goals will define our competitive advantage in manufacturing for generations to come. 

D’Amico is Senior Advisor to Conexus Indiana, the state’s advanced manufacturing and logistics initiative.

Featured today on Inside Indiana Business:

Hoosier students must graduate high school ready to succeed

Mark Miles

Last week, the Indiana Commission for Higher Education began providing a valuable new tool for Indiana high schools – specific reports that show how many of each school’s graduating class went on to college, where they enrolled, and how many required remedial math or English classes once they made it to campus.

I’m guessing that many, if not most, school districts are in for a rude awakening when they receive these reports.  Statewide data show that more than a quarter of all recent Hoosier high school graduates needed at least one remedial class as college freshmen.  Two-thirds of all community college students needed remediation.  We aren’t preparing our students at the K-12 level to succeed in higher education.

This creates a domino effect that eventually takes a steep toll on our economic competitiveness.  It places another burden on our higher education system, forcing these institutions to teach material that should have been mastered in high school.  The students who receive remediation start out behind and struggle to catch up – less than ten percent graduate from a four-year college program in six years or achieve a two-year degree within three.

These trends contribute to our generally dismal educational track record.  Just a third of Hoosier adults hold at least a two-year degree.  Indiana is mired in the middle of the pack in associates degrees awarded per capita, and we’re one of the least-educated states in the nation as measured by four-year college graduates in our adult population.

 In today’s economy, failing to complete some education beyond high school is tantamount to surrendering to a life of low wages, high unemployment and missed opportunities.  The days when a high school diploma served as a ticket to a good job at the local factory are long gone.  Indiana’s fastest-growing industries, like the life sciences and technology fields, demand a highly-skilled workforce.  In manufacturing, traditional assembly line jobs have disappeared at a dizzying pace, while new jobs (in areas like electric vehicles and aerospace) require advanced training.

At the macro level, a weakening workforce discourages new business investment in Indiana, as growing companies look to states and regions with strong human capital to locate and expand.

So what are some ways that can better prepare our young people to carry on their education after high school?

Many of our strategic economic initiatives are already working to address this issue.  BioCrossroads’ I-STEM initiative provides resources for K-12 teachers to better educate their students in the STEM disciplines – science, technology, engineering and math. 

Conexus Indiana is working to develop a high school curriculum that will prepare students to take advantage of high-tech careers in advanced manufacturing and logistics, leading them seamlessly into technical training and associate’s degree programs.  Conexus is also working with ‘champions’ (teachers and counselors) in 28 area high schools to promote careers in these industries to students, emphasizing technical education and the need for training beyond high school.

TechPoint has focused on alternative school models, sponsoring the New Tech High program at Arsenal Tech through its Foundation.  The New Tech program integrates technology and 21^st century learning strategies into the state curriculum, and is getting results.  Currently, the New Tech students’ passing rate for the Indiana Graduation Qualifying Exam is twice that of any other open-entry program on Arsenal’s Tech’s campus of 2,700 students.

We also have to recognize that the issues that hinder students from graduating from high school ready for college begin long before ninth grade.  During the legislative session, CICP was part of an effort to refocus our schools on early reading education, including a policy ending social promotion from 3^rd to 4^th grade unless students can read at grade level.  This is consistent with the Indiana Department of Education and State Board of Education, both of which have made reading education the top priority. 

It’s clear that students who have serious problems with reading early on continue to struggle throughout their academic careers – many drop out before graduating from high school, and their chances of completing a college degree are nearly nonexistent.  Making sure that these students get the extra attention they need starting in the critical K-3 years is an approach that will eventually lead to graduating classes more prepared to tackle post-secondary coursework.  Ultimately, the General Assembly empowered the Indiana Department of Education to enact this critical reform as part of a broader strategy for improving reading achievement.

There’s no ‘silver bullet’ strategy that will make every high school graduate ready for college or post-secondary training on day one.  But the data being generated by the Commission for Higher Education show that this is a challenge that demands our attention, part of the ‘big picture’ effort to raise our educational attainment and build a stronger workforce.  Being ready to continue one’s education after high school means being ready to succeed in our knowledge-based economy, and to be a valuable contributor to Indiana’s economic success.

Mark Miles is the President & CEO of the Central Indiana Corporate Partnership.

On the heels of the state’s success attracting federal grants in the vehicle electrification arena, more good news – this time in health information technology.  Indiana Health Information Technology, Inc., a newly-formed statewide organization that includes BioCrossroads’ Indiana Health Information Exchange (IHIE) initiative, has received a $10.3 million stimulus grant designed to help link electronic medical records across the state.

Information technology has the potential to transform the U.S. healthcare system, reducing medical errors, improving care and cutting waste and red tape.  Indiana has been on the cutting-edge of this trend through efforts like IHIE, which has pioneered a unique collaboration among healthcare providers, insurers and others in the process to share clinical data through an electronic network to enhance the quality of care while improving efficiency. 

Governor Daniels wisely observed towards the beginning of his first term that “Government does not create jobs; it only creates the conditions that make jobs more or less likely.”  Opinions vary on the effectiveness of economic stimulus, but it is fair to say that federal grants like these do help advance Indiana’s efforts in areas where the private sector and state-level collaborations have already generated momentum.  Health IT is clearly one of these areas.

As the legislative session comes to a close, hopes are high that lawmakers will advance the cause of reading education by allowing the Indiana Department of Education to end social promotion from 3^rd to 4^th grade if students aren’t reading at grade level.  Reading is the basic skill that makes all other learning possible – it’s common sense that if students are falling behind, schools should be obligated to get them the help they need to catch up rather than simply passing them along and compounding their struggles.

Unfortunately, some defenders of the current system would rather pay lip service to reading reform than accept the core responsibility of teaching our kids.  For example, John Ellis, executive director of the Indiana Association of Public School Superintendents, recently penned an editorial in the Indianapolis Star that rejects the idea of retaining students who can’t read at the end of third grade.

The Indiana Department of Education and State Board of Education have made early reading education a top priority.  They’ve endorsed a policy framework that includes increased classroom time allocated to reading, intensive professional development for teachers on research-based reading instruction, and tools for assessing student reading proficiency on an ongoing basis in grades K-3, to catch problems early and devote more existing resources to struggling readers.

Under this model, retention is a last resort – a final opportunity to get students back on track with more intensive instruction on reading (not just holding back students in the same classroom with the same approach).

Mr. Ellis conveniently ignores this broader strategy and issues dire predictions of ‘mass retention.’  But if reading is the most important activity in our classrooms, and schools have 3,500+ hours of instruction from kindergarten to 3^rd grade within which to teach kids to read, how little confidence must Ellis have in our public schools – his constituents – to fulfill their fundamental duties? 

He also attempts to undermine the progress made in Florida, which ended social promotion as part of an approach similar to what Indiana envisions.  Florida actually climbed from 31^st to 21^st in 4^th grade public school reading scores from 2002-2007, cutting failure rates by a third.  (During the same time, Indiana slid from 15^th to 27^th in national reading scores.)  He implies that minority students were left behind by the Florida reforms – in fact, African-American, Latino, and low-income students all improved their reading performance in Florida from 2003-2007 while closing the ‘achievement gap’ with the general student population (Gauging the Gaps: A Deeper Look at Student Performance – The Education Sector).

Questionable statistics are a poor answer to inarguable logic:  Our schools must teach their students to read. Absent new instructional strategies and measures holding them accountable, the job won’t be done.

Ellis reaches a rhetorical low when he says that the retention policy would ‘label our children as failures.’  No one is calling children failures.  It’s our schools that are failing too many of their students, and this has to change.

Mr. Ellis closes with an excerpt that cites more questionable studies and asserts that “…learning is difficult when leaders or anyone else is driven by ideology.”  I’d submit that the issue here isn’t ideological, but it does involve two competing philosophies:  Ours embraces accountability, his seems wedded to the status quo.  When it comes to preparing future generations of Hoosiers to succeed in school and in life, we can’t afford the latter.

I’ve written about CICP’s strong support for ending social promotion from 3^rd to 4^th grade unless Hoosier students are reading at grade level – the cornerstone policy of an overall emphasis on reading education that will refocus resources, implement new teaching strategies, and leverage community programs to ensure that every child learn to read.

This policy still has life in the waning days of the legislative session, and we’re pleased that Indiana’s senior Senator, Richard Lugar, has weighed in on behalf of this critical education reform.  Read Senator Lugar’s excellent statement here.

CICP director and State Board of Education member David Shane also penned this editorial on the effectiveness of retention policies for the Indianapolis Star; ending social promotion was a key drver behind the remarkable turnaround in reading achievement in Florida over the last decade.

As the legislative session draws to a close, lawmakers have a choice:  Will they demand that Indiana’s schools teach every child to read, or will they continue to allow tens of thousands of students every year to fall through the cracks, relegated by poor reading skills to a life of likely poverty and lost opportunities? 

Last week, our Central Indiana Transit Task Force publicly released its final report, presenting its recommendations to policymakers and the citizens of the region.  This report lays out a regional multi-modal transportation system with financing and governance recommendations, backed up with a rigorous cost-benefit analysis.  Now that the Task Force findings are in the public domain, we’re kicking off a year-long input campaign  – Indy Connect – that will invite a dialogue about Central Indiana’s transportation future, using our plan as a starting point.

I’d like to again thank co-chairs Al Hubbard, Bob Palmer and John Neighbours for their leadership, and all of the Task Force members – including CICP co-chair Jo Ann Gora – for their energy and insight in crafting this impressive study.

Their work will serve the region well.  We’ve lacked an integrated, forward-looking plan for regional transportation, and have paid the cost in terms of economic competitiveness, workforce connectivity, the vitality of our urban core and the potential for new investment and neighborhood redevelopment.  Our blueprint addresses all of these issues; now it’s up to elected officials and the public across the region to make the plan their own and decide if they’re willing to invest in it.  Please offer your two cents at indyconnect.org.

As the public thinks about transit, it’s important to understand the tremendous economic development impact that transit can have – I hope you’ll take a moment to read this excellent editorial from this weekend’s Star from Chuck Cagann of Mansur Real Estate, a Transit Task Force member, that addresses this issue:

Transit investments mean economic payoffs

When we think about economic development, we're likely to focus on tax breaks and other incentives for growing companies, competing against other regions for business opportunities.

That's true, but it's only one part of a bigger picture.  I'd argue that economic development has to be tied to what kind of community we want to build for ourselves and our families:  Do our citizens have access to diverse job opportunities?  Is our region growing?  Do we have great housing options, with thriving retail establishments and other amenities to serve our neighborhoods?

If we embrace this broader definition of economic development, then it's clear to me that a strong regional mass transit system is an important catalyst.

I was proud to serve on the Central Indiana Transit Task Force, a private sector-led group that last week unveiled a comprehensive transportation plan that includes strategic highway investments and an expanded regional bus system connected with light rail to serve the metropolitan area.

As business leaders, we understand a good investment when we see it – regional mass transit is an investment that will pay off in a healthier economy for employers, for taxpayers, for all of us.

Mass transit has been shown to create significant economic investment, as dense commercial and residential development grows along the transit lines.  For example, the Portland streetcar system has generated $1.4 billion along its 4.7 mile loop since 2001, a handsome return on its $300 million cost.  In Cleveland, more than $4 billion in private development is planned or in progress along the Euclid Avenue light rail corridor.  In Dallas, another $4.2 billion in business and new housing sprang up along the DART (Dallas Area Rapid Transit) system between 1999 and 2007.

This transit-oriented development boom can lead to higher property values and a broader tax base, easing the burden for other homeowners and businesses.  In Dallas, for example, high-value development along the DART lines is generating an estimated $127 million in additional tax revenues every year.  In Arlington, Virginia, half of all county property tax revenues are generated from its METRO transit corridors – allowing the county to maintain the lowest property tax rates in the region.

The right system will help our region attract and retain talented people, the skilled workforce that is a magnet for new business opportunities in our knowledge-based economy.  The regions of choice for educated workers provide diversity, arts and culture, an array of recreational amenities.  These regions also offer transit options – the ability to walk or bike to a rail or rapid bus station, to work on your laptop or chat with friends on the way to work.

By allowing employees to get to work more efficiently and affordably, a truly comprehensive regional system also allows local businesses to access a broader workforce, while giving commuters more disposable income to reinvest in the local economy rather than at the gas pump.

The Task Force strategy for mass transit is based on thoughtful planning and a rigorous cost-benefit analysis – but it’s only the beginning.  Now that this plan has been turned over to the public sector for action, every citizen will have an opportunity to weigh in during a series of public meetings and online at www.indyconnect.org. 

The dividends from investing in transit are many and far-reaching: Cutting commutes and putting more job opportunities within reach.  Connecting local businesses with more customers.  Spurring development that creates new jobs and tax revenues while rebuilding our neighborhoods.  The proposed transportation system may evolve over the next year, but it’s certain to be a winning economic development proposition  for all of us – please take part in the conversation and encourage your local elected officials to help turn this vision into reality.

Chuck Cagann is President of Mansur Real Estate Services; he serves on the Central Indiana Transit Task Force, which recently unveiled a strategy for a comprehensive regional transportation system.

The New Year has brought new opportunities for Indiana’s growing green manufacturing sector – the first few weeks of 2010 have seen several announcements that, collectively, show the momentum behind Hoosier manufacturing’s effort to electrify vehicles, make renewable energy sources a practical reality and more.

First, there was the news that Think North America had chosen Elkhart as the site of its first U.S. factory for its line of electric cars, joining Electric Motors Corp and NaviStar as the hub of a growing green vehicle cluster along Indiana’s northern border.

In Central Indiana, EnerDel – the only U.S. manufacturer of the cutting-edge lithium ion batteries that power hybrid and plug-in electric vehicles – announced a major manufacturing facility in Greenfield, Indiana, expanding a footprint that already includes its northeast Indianapolis headquarters and facilities in Hamilton County.  The Greenfield site will ultimately employ nearly 1,100.

Elsewhere, Brevini Wind (in Muncie) has earned $12.8 million in federal tax credits for its work manufacturing the gear boxes and other technologies for the turbines that generate electricity from wind.  Just two weeks ago, Secretary of Energy Chu visited Columbus to announce $54 million in federal stimulus grants to Cummins to increase engine efficiency.

Just like any technology-intensive, innovation-driven industry, a skilled workforce is a critical need for green manufacturing.  Here too, Indiana is moving forward – the state’s Department of Workforce Development recently earned a $6 million grant from the U.S. Department of Labor to create new curricula and retrain industrial workers from other sectors to take advantage of new green job opportunities.

Look for more announcements ahead from Indiana’s green manufacturing and clean technologies industries, as well as CICP’s Energy Systems Network initiative, as the state continues to solidify its position as a crossroads of energy innovation. 

Please take a moment to read the Indianapolis Star’s excellent editorial on Senate Bill 258, a measure which the Central Indiana Corporate Partnership strongly supports.

It’s perhaps obvious that reading is the defining skill on which all other education – and life success – depends.  The statistics are startling:  Only 2% of students who experience serious problems with reading go on to complete a 4-year college program.  Over 50% of people with the lowest literacy skills already live in poverty and over 70% are unemployed or have only a part-time job.  Nearly 70% of prison inmates nationally score below a fourth grade level of reading; 19% are illiterate.

In Indiana, approximately one of every four 3^rd graders fail the language arts I-STEP exam; we rank among the bottom half of states in National Assessment of Educational Performance (NAEP) reading tests as well.  There’s a clear connection between these failures in early reading and the fact that Indiana’s adult population is among the least-educated in the nation – a major economic handicap in our knowledge-based economy. 

The Indiana Department of Education is making reading education its top priority, exploring new resources and tools for educators to teach reading more effectively and measure student progress.  Private and charitable organizations support a network of extracurricular programs that support these goals – for example, the United Way’s “Success by Six” and “Early Reader’s Club” initiatives.

We also need public policy that supports reading success.  In reading education, 3^rd grade is considered the gateway year – as stated in the Star’s editorial, the last year that students learn to read, before lesson plans demand that they begin reading to learn.  According to the National Reading Panel, “Academic success, as defined by high school graduation, can be predicted with reasonable accuracy by knowing someone’s reading skill at the end of 3rd grade. A person who is not at least a modestly skilled reader by that time is unlikely to graduate from high school.” (emphasis added)

That’s why SB258 puts an end to social promotion from 3^rd grade to 4^th grade without demonstrating reading proficiency on the I-STEP exam.  This policy demands that schools teach every student to read, monitoring progress and allowing for special instruction from kindergarten on to make sure that the 3^rd-to-4^th grade threshold can be passed.

This policy has worked wonders in Florida, providing us a blueprint to emulate.  In 2002, the Sunshine State implemented a policy ending promotion of third graders who couldn’t read at grade level, implementing intensive reading instruction for retained students and other reforms; the results have been dramatic:

–      In 2001, 43% of Florida 3^rd graders failed to read at grade level or above as measured by FCAT (the Florida standardized test, akin to our I-STEP); in 2009 only 29% failed;

–      From 2002 to 2007, Florida climbed from 31^st in 4^th grade public school NAEP reading scores to 21^st, achieving the second highest positive change in NAEP scores in the nation; during the same time, Indiana slid from 15^th to 27^th in NAEP 4^th grade reading;

–      Using the non-promotion policy and focused intensive instruction, Florida cut is failure rates by one-third (FCAT 33%, NAEP 36%) in less than 10 years.

Florida’s path is clear – will Indiana follow? By requiring that schools meet their commitment to teach every student to read, SB258 is an important legislative component to our broader goal of giving future generations the best opportunity to succeed, academically and in life, by emphasizing what has been the called ‘the new civil right’ – the ability to read.