The report, entitled “Unify, Regionalize, Diversify: an Economic Development Agenda for Nevada,” said the state has “fundamental assets along with serious challenges as it seeks to build the next Nevada economy.”
“To be sure, the recent national recession and sluggish recovery has hit Nevada exceptionally hard,” the report said. “Most notably, the state’s heavy reliance on consumption-related sectors ... has left the state prone to extreme economic volatility and lingering malaise.”
“The recession in short exposed an economy dangerously out of balance,” it said.
But the report, prepared by the Metropolitan Policy Program at the Brookings Institution and SRI International, also said Nevada possesses “substantial strengths” that should be leveraged as it considers a renewed economic development approach.
The report, commissioned by the state, coincides with a sweeping bill Republican Gov. Brian Sandoval signed in June that refocuses the state’s economic development programs and efforts.
“Certainly these are problems that have been around a while,” said Mark Muro, the report’s author. “We do think there’s a special moment now where the state and stakeholders seem ready to try to address key issues to move forward.”
Sandoval made economic development a priority during his campaign and in his administration.
The bill he signed, AB 449, elevated the state’s economic development director to a cabinet level position and provides for a coordinated approach with regional agencies. It also provided for a $10 million “catalyst fund” to create economic growth.
The report identified seven major industries as having “plausible potential” for economic growth and diversification: tourism, health and medical services, business information technology, clean energy, mining and manufacturing, logistics, and aerospace and defense.
It said those sectors and offshoots could yield a collective 80,000 to 125,000 jobs in the next five years.
The report also said Nevada’s “friendly” regulatory climate, low taxes and proximity to West Coast population centers make it an attractive place for businesses to locate.
But those attributes “are not likely to be sufficient to support the kind of growth and investment Nevadans desire given the increasingly determinative role of knowledge, technology and workforce skills in today’s global economy.”
“At the end of the day, it’s about skilled labor,” Bruce Katz, with SRI International, told members of the state Board of Economic Development at a meeting Monday in Carson City.
Other obstacles outlined in the report include a low-skilled workforce, an underperforming K-12 system, high energy costs, underinvestment in higher education, water shortages, and federal land ownership that can hinder land usage.
The report recommended more be spent in research and development to spur innovation and position Nevada to compete on a global stage.
One of the biggest weaknesses to Nevada’s competitiveness and recovery is an economy “heavily oriented toward consumption-based industries.” The state’s general fund is highly reliant on sales taxes and taxes paid by casinos on winnings from gamblers.
But the report itself did not address the question of how Nevada should retool its tax base, a recurring issue during budget battles every two years.
The state’s three largest industries — construction and real estate, tourism and gambling, and retail — account for nearly half of all jobs in Nevada, compared with less than one-third of all jobs nationally, the report said.
From 2001 to 2007, those sectors accounted for half the state’s job growth — and 83 percent of job losses in the following three years.
Recovery, report researchers said, will come much more slowly than the demise.
The fastest-growing state in the nation over the last decade, Nevada lost 170,000 in the recession’s wake and still leads the nation in unemployment, bankruptcies and foreclosures.
Going forward, the success of economic development projects will be measured in baby steps.
“Victory is 15,000 jobs,” Katz said.