THE NATIONAL GOVERNORS ASSOCIATION (NGA), founded in 1908, is the instrument through which the nation s governors collectively influence the development and implementation of national policy and apply creative leadership to state issues. Its members are the governors of the 55 states, three territories and two commonwealths. The NGA Center for Best Practices is the nation s only dedicated consulting firm for governors and their key policy staff. The NGA Center s mission is to develop and implement innovative solutions to public policy challenges. Through the staff of the NGA Center, governors and their policy advisors can: Quickly learn about what works, what doesn t and what lessons can be learned from other governors grappling with the same problems; Obtain specialized assistance in designing and implementing new programs or improving the effectiveness of current programs; Receive up-to-date, comprehensive information about what is happening in other state capitals and in Washington, D.C., so governors are aware of cutting-edge policies; and Learn about emerging national trends and their implications for states, so governors can prepare to meet future demands. For more information about NGA and the Center for Best Practices, please visit www.nga.org. ACKNOWLEDGEMENTS This report was prepared by Erin Sparks and Mary Jo Waits at the NGA Center for Best Practices, in collaboration with Bill Fulton of Solomar Research Group. The National Assembly of State Arts Agencies contributed significant background research to this project. The NGA Center for Best Practices wishes to thank the National Endowment for the Arts (NEA) for its generous support of this report. Laura Scanlan, Andi Mathis, and Jennifer Lindow Eskin, along with other colleagues at NEA, provided invaluable feedback during their review of report drafts. The report was edited by Nancy Geltman and designed by Middour & Nolan Design Group. May 2012

3 Contents EXECUTIVE SUMMARY................................................................. 1 INTRODUCTION....................................................................... 3 Economic Challenges Facing States.................................................. 3 Overcoming Challenges Using Arts, Culture, and Design.............................. 4 PROVIDING A FAST-GROWTH, DYNAMIC INDUSTRY CLUSTER............................. 7 Targeting Creative Industries for Economic Development............................. 8 Supporting Artists and Designers as Entrepreneurs.................................. 10 HELPING MATURE INDUSTRIES BECOME MORE COMPETITIVE........................... 15 Using Arts and Design to Strengthen Manufacturing................................ 16 Using Arts, Culture, and Design to Strengthen Tourism............................... 18 PROVIDING CRITICAL INGREDIENTS FOR INNOVATIVE PLACES........................... 23 Launching Cultural Districts and Arts Enterprise Zones.............................. 24 Creating Spaces for Artists and other Creative Talent to Cluster, Interact, and Thrive... 26 Establishing Innovation Hubs that Encourage Collaboration......................... 27 CATALYZING COMMUNITY REVITALIZATION............................................ 31 Using the Arts and Historic Preservation to Restore Distressed Communities and Reclaim Abandoned Spaces.................................................... 31 Improving Livability and Quality of Life through Creative Public Spaces.............. 34 DELIVERING A BETTER-PREPARED WORKFORCE........................................ 37 Incorporating Arts and Creativity in K 12 Education Standards...................... 37 Integrating Arts into K 12 Cross-Curricular Learning................................. 38 Engaging At-Risk Youth in Art and Sustainability Activities........................... 39 Including the Arts and Design in Adult Education and Workforce Training............ 40 CONCLUSION........................................................................ 43 Notes..................................................................................... 45

4 New Engines of Growth Five Roles for Arts, Culture and Design

5 Executive Summary With concerns over job creation and business growth holding a prominent and persistent position on policy agendas today, governors are increasingly calling on state agencies to support economic growth. It s not just economic and workforce development agencies that governors want on the case. Some governors are including state arts agencies in this all-hands-on-deck approach and are putting in place policies and programs using arts, culture, and design as a means to enhance economic growth. This report focuses on the role that arts, culture, and design can play in assisting states as they seek to create jobs and boost their economies in the short run and transition to an innovationbased economy in the long run. In particular, arts, culture, and design can assist states with economic growth because they can: 1. Provide a fast-growth, dynamic industry cluster; 2. Help mature industries become more competitive; 3. Provide the critical ingredients for innovative places; 4. Catalyze community revitalization; and 5. Deliver a better-prepared workforce. Globalization and the changing economy have affected individual states differently, but all are searching for ways to support high-growth industries, accelerate innovation, foster entrepreneurial activity, address unemployment, build human capital, and revive distressed areas. Using the five roles as a framework, state leaders governors, economic development officials, and state arts agencies have a way to intentionally and strategically make arts, culture, and design an important part of an economic growth agenda. States have already undertaken initiatives that are highly relevant to that agenda. Grouping them by the five roles listed above, this report explores some of their most promising efforts. NEW ENGINES OF GROW TH: ARTS, CULTURE, AND DESIGN 1

6 Framed by blast furnaces, a crowd gathers for Musikfest at the Levitt Pavilion at SteelStacks, an arts and cultural campus developed on the site of the former Bethlehem (PA) Steel plant. Bethlehem and other towns like it have used the arts to reinvent and revitalize their communities following the loss of major manufacturing. Photo courtesy of ArtsQuest, photo by Keith Huylerbroeck.

7 Introduction W ith concerns over job creation and business growth holding a prominent and persistent position on policy agendas today, governors are increasingly calling on all state agencies to support economic growth. It s not just economic and workforce development agencies that governors want on the case. Governors are asking research universities, community colleges, transportation departments, and health care agencies to sharpen their strategies and capacities for generating long-term economic prosperity. They are asking energy offices, budget offices, and procurement offices to be more attuned to the success or failure of local businesses, technology ventures, or job training programs. More and more governors are including state arts agencies in this all-hands-ondeck approach, putting in place policies and programs to use arts, culture, and design as a means to enhance economic growth. This report shows how states are making and can make arts, culture, and design a compelling part of their economic solutions. It focuses on five ways for state leaders including governors, economic development officials, and state arts agencies to strategically incorporate arts, culture, and design into an agenda to boost growth in both the short and the long term. Economic Challenges Facing States Since the recession began in 2007, the United States has undergone a major economic contraction, with the loss of over 7 million jobs and a 23-percent drop in new business creation. 1 One of the most worrisome aspects of the current economic situation is that it combines both long- and short-term problems. Growth will need to accelerate sharply for the United States to undo the damage caused by one of the worst recessions in modern times. At the same time, the country faces long-term trends that include the following: The rest of the world, and in particular leading economies in Asia, is gaining in the innovation race, creating the capacity to compete for knowledge-intensive industries. Current economic predictions, with few dissenters, are that in the next 30 years, China s gross domestic product (GDP) will grow to a total far larger than that of the United States. 2 Technological innovation and global markets are volatile, creating new and unpredictable opportunities as well as threats to individual businesses and entire industries. Entrepreneurs and competitors can now come from almost anywhere, including economies such as India and China that once were closed. Many of them can reach global markets from the day they open their doors, thanks to the falling cost of communications. More and more governors are including state arts agencies in this all-hands-on-deck approach, putting in place policies and programs to use arts, culture, and design as a means to enhance economic growth. NEW ENGINES OF GROW TH: ARTS, CULTURE, AND DESIGN 3

8 The most talented individuals are migrating to a small number of cities that are most likely to maximize innovation and entrepreneurial talents and skills. The columnist Thomas Friedman has observed that the world is flattening, with more countries able to participate in the global economy thanks to improvements in communications, advances in education, and other factors. The world is flattening, but it is also becoming spiky with innovation hubs, as companies, universities, workers, policymakers, and sources of capital seek close and frequent contact to enhance opportunities for innovation and lower the costs of starting businesses, and be where they have better access to a diverse range of inputs, including worker skills. Employment is changing, with work divided into specialized tasks in ways that have driven demand for flexible partnerships, as well as part-time, contingent, and remotely accessed labor. Today s knowledge work is done collaboratively in teams, with team members often spread across multiple locations, but also with team members clustered geographically to facilitate the face-to-face interactions among people, firms, and organizations that are required to innovate and to compete in a global economy. The United States is not keeping up with the rising demand for advanced skills. The need for knowledge workers, to innovate and create new products and services that solve real problems, is a major force driving the world economy. The U.S. workforce will continue to grow until 2020, but under current trends, workers will not have the right skills for the available jobs. 3 Although the combination of short-term and long-term challenges is affecting individual states differently, all are taking strong and thoughtful steps to restore job creation and build new bases for growth. Their steps range from the practically urgent to the strategically profound, and they seem to be gravitating toward five areas: Identifying and then supporting high-growth, entrepreneurial firms and globally-oriented industry clusters; Creating new growth opportunities for mature industries; Building places that will attract and foster innovation and businesses; Finding new uses for old properties, new functions for declining districts, and new economic opportunities for growing cities and regions; and Constantly updating workforce skills. Governors have correctly called on their economic development leaders, workforce agencies, and education institutions for much of the response, both short term and long term. But even if economic-oriented agencies and policies must do the heavy lifting, states are finding that, with economic woes at the center of the public s concerns, all state agencies must ask themselves these questions: What is our role in confronting the economic challenges facing our state? What is our role in creating jobs, catalyzing innovation, and building new paths for growth? How do we engage with the state s economic development and workforce systems not just to pull out of the recession but to promote the strong growth that is critical to provide good jobs? State economic development officials and education leaders can in turn ask themselves: How do we mobilize parts of government that may have remained on the sidelines of previous economic development discussions? Overcoming Challenges Using Arts, Culture, and Design The merit of an all-hands-on-deck approach becomes readily apparent when one considers the case of arts, culture, and design. Not traditionally in the domain of economic development, this trio has many potential benefits for boosting the economy. As described in the following sections, governors and states are finding that arts, culture, and design can be important components of a comprehensive strategy for growth. They touch the economy at crucial leverage points, including innovation, entrepreneurship, employment, and revitalization. An arts, culture, and design strategy, coupled with other strategies, can provide states a competitive edge in five important ways: 1. It can provide a high-growth, dynamic industry cluster; 2. It can help mature industries become more competitive; 3. It can provide critical ingredients for innovative places; 4. It can catalyze community revitalization and civic enrichment; and 5. It can deliver a better-prepared workforce. 4 Introduc tion

9 New Engines of Growth Five Roles for Arts, Culture and Design

10 Photo courtesy of David Shopper, Essential Photo courtesy of David Shopper, Essential Photo courtesy of David Shopper, Essential Photo courtesy of Liz Linder Design by Adam Simha for MKS Design Cambridge, Massachusetts Pictured here are a variety of innovative products originated by Massachusetts designers. The Design Industry Group of Massachusetts (DIGMA) promotes the state s varied design industries. Photo courtesy of Vessel Photo courtesy of Edward Krent of KrentDESIGN

11 Providing a Fast-Growth, Dynamic Industry Cluster T he concept of the business cluster has become increasingly important in state economic development strategies. More than 20 years ago, Michael Porter, of Harvard Business School, highlighted the importance of clusters in his book The Competitive Advantage of Nations. Porter s findings and subsequent studies have important implications for both corporate and government strategy. 4 Some of the key findings: Firms concentrated in regional clusters supported by institutions providing education, training, and finance and marketing services experience higher rates of job and wage growth than comparable firms not embedded in such clusters. In such places firms compete, but also work together and with other organizations, to make the region a repository of specialized expertise, technology, institutions, and talent in the given field. The ability to rapidly mobilize resources such as talent, research and development capabilities (R&D), venture capital, and a wide range of relationships, from the tight proximity of great universities, large companies, start-ups, and the ecosystem that connects them, is a tremendous advantage. Clusters are important to states and regions because strong clusters are associated with higher growth in both employment and wages, ideal conditions for innovation and entrepreneurship, and strong survival rates among startup firms. A good strategy to drive economic growth, then, is to pursue the development of clusters, especially in high-wage, high-growth industries. 5 Because creating a new cluster can take decades, states must try to speed up the process by identifying existing and emerging clusters in the economy and helping them improve their competitive strengths. One way to help clusters with competitive advantage is to figure out which of the ingredients necessary for success are missing locally and how they can be supplied. Another way is to help all the potential participants in a cluster connect with one another. Ultimately, supporting a cluster is about cultivating a well-developed ecosystem, or habitat, of the type that Silicon Valley embodies and that Austin and San Diego have created over the last two decades or so. It means helping with anything that creates a benefit that is captured not just by a single company, but by an entire community, to help the cluster grow and compete globally. Republican and Democratic governors alike have supported the development of clusters in their states. Their initiatives pay a great deal of attention to science and technology industry clusters (e.g., information technology, biotechnology) because they tend to have high potential to fuel economic growth and global competitiveness. Other areas of emphasis are clean energy, nanotechnology, and computer The creative cluster includes not only the traditional visual artists, cultural performances, and nonprofit institutions, but also such large economic sectors as entertainment, fashion, publishing, and broadcasting, which are among the fastestgrowing and most export-oriented sectors of the American economy. NEW ENGINES OF GROW TH: ARTS, CULTURE, AND DESIGN 7

12 STATE STRATEGIES ACROSS THE U.S. The number of states that include creative industries and the arts in their economic policy portfolio has increased dramatically in the last decade. Systematic data tracking, integrated planning and legislation are three strategies that have grown significantly in recent years. Using index systems or other uniform data collection systems to monitor cultural employment, participation, revenues and other key metrics over time. Adopting statewide economic development plans that designate and integrate the arts, culture or design as strategies for spurring economic growth. Enacting legislation or other formal policies designed to foster cultural enterprise zones or creative districts. gaming. Increasingly, states also are treating creative individuals, institutions, and businesses as a creative industry cluster. The creative cluster includes not only the traditional visual artists, cultural performances, and nonprofit institutions, but also such large economic sectors as entertainment, fashion, publishing, and broadcasting, which are among the fastest-growing and most exportoriented sectors of the American economy. Targeting Creative Industries for Economic Development States that are treating arts, culture, and design as a cluster are finding an important source of growth. Arkansas, Colorado, and Mississippi are among them. Recent analysis in these three states found the creative industry the third-largest cluster in Arkansas, the fifth-largest in Colorado, and among the fastest-growing clusters in Mississippi. Those states now consider their creative industry cluster a vital part of their economic development strategy. Their initiatives are being jointly or collaboratively developed and implemented by state arts councils, economic development agencies, and community colleges and universities. Accordingly they show how such agency collaborations could work in other states that want to identify and support high-growth industry clusters. Arkansas s 2009 strategy to increase creative capacity and competitive advantage is the combined work of the Arkansas Arts Council, Arkansas Science and Technology Authority, and Arkansas Association of FIGURE 1. The Breadth of the Creative Economy in Arkansas Originators, Producers, Distributors, and Beyond Equipment Supplies Capital Services ORIGINATORS PRODUCTION DISTRIBUTION Artists Artisans Designers Games Architects Interior decorators Chefs Printers Foundries Builders Reproducers Publishers Ad agencies Agents Websites MARKETS & DISTRIBUTION Galleries Co-ops Shows Theaters Boutiques Exhibits Museums Education & Training: Associations, Guilds, & Other Nonprofits SOURCE: Regional Technology Strategies, Unveiling the Creative Economy in Arkansas, 2009. 8 Providing a Fast-Growth, D ynamic Industr y Cluster

13 Two-Year Colleges. The creative economy, which includes the arts and businesses that produce and distribute designintensive goods, is the third-largest industry cluster in the state (illustrated in Figure 1). The 2009 strategy report, Creativity in the Natural State, established five goals for growing and enhancing the state s creative economy: Strengthening recognition of and support for the creative economy within the state s economic development community; Nurturing the development of creative talent and the pipeline of creative workers; Promoting the growth and profitability of creative enterprises; Using creative talent and assets to increase the competitiveness of other key clusters in Arkansas; Supporting and expanding the state s creative infrastructure. To implement those goals, the report recommends a variety of activities: Creating a statewide creative economy leadership council; Creating an annual grants fund for innovative arts, culture, or design-based projects; Mapping career paths in creative occupations and enterprises; Expanding the place of art and design in higher education; Assisting creative companies with market development; Providing artists and artisans with technical and financial assistance; Promoting and encouraging creative entrepreneurs; Further developing cultural tourism; Linking creative enterprises with traditional industries to help the traditional industries become more competitive; and Supporting and expanding the specialized infrastructure that underpins the creative industries. The initiative has sparked action all over the state. State university extension services have become involved in marketing their areas cultural amenities. A Creative Economy Consortium has formed. Several local creative skills training programs have emerged. Governor Mike Beebe released a $500,000 appropriation in 2011 and an additional $1.3 million in 2012 to fund grant projects managed by the Arkansas Arts Council that use culture and heritage collaborations to complement the state s goals for its creative economy. 6 Colorado s 2008 cluster analysis found more than 186,000 jobs directly associated with creative enterprises and creative occupations, about 4 percent of the total jobs in the state. Of significance for economic development efforts, the creative sector was Colorado s fifthlargest employment cluster in 2007, nearly as large as biotechnology/biomedical, information technology, and telecommunications. Colorado s creative base extends to new media technologies, outdoor clothing and equipment design, green products, and craft food and beverages. And above all, between 2002 and 2007 the creative cluster grew faster than most other clusters. 7 Seeing the need to articulate plans for nurturing those creative industries, in 2009 former Governor Bill Ritter created an advisory panel of more than 60 creative industry leaders to recommend strategies. The panel cochairs were the lieutenant governor, the director of the Colorado has adopted a statewide plan to foster economic growth through the arts, culture, and creativity. The plan identifies five policy priorities and 29 specific strategies for strengthening the state s creative industries and workforce. Photo courtesy of Colorado Creative Industries, State of Colorado. NEW ENGINES OF GROW TH: ARTS, CULTURE, AND DESIGN 9

14 Colorado Office of Economic Development, and the director of the Denver Botanic Gardens. The panel recommended, for example, making existing business financing and support systems more accessible to creative businesses to help them start up or grow, recruiting new creative businesses, and developing networking and professional development opportunities to encourage and support creative enterprises and creative workers. 8 In response to the panel s recommendations, Governor Ritter introduced, and the legislature passed, four pieces of legislation to help make the creative sector a driver of economic growth. One created the Creative Industries Division within the Colorado Office of Economic Development and International Trade, by merging the Office of Film, Television and Media; the Colorado Council on the Arts; and the Art in Public Places Program. It renamed the arts council as Colorado Creative Industries. Two more bills clarified existing laws to make incentives for film production in Colorado more usable and to apply a 1-percent set-aside for public art to all capital construction projects funded with state dollars, regardless of funding mechanism. The fourth change encourages all public schools to provide education in the visual and performing arts and directs the state board of education to recognize the importance of the arts in future graduation guidelines. Economic development planning in Colorado has further integrated the arts into its overall strategy for state advancement during Governor John Hickenlooper s administration. The Governor s 2011 Colorado Blueprint plan for economic development includes the arts, culture, and creative industries in the state s vision for the future and in the strategies the state will pursue to foster economic growth. Encouraging localities to draw on the arts, the plan articulates, as an outcome measure, that Colorado municipalities will specify growth of creative industries and arts and cultural activities in their longterm economic development strategic plans. 9 With this new plan, the creative industries have joined aerospace, renewable energy, biotech, and tourism as industries targeted in the budget and planning documents of the Office of Economic Development. In 2011, Mississippi released a strategy titled Realizing the Economic Potential of Creativity in Mississippi, following a joint effort that included the Mississippi Development Authority, the state s lead economic development agency, and the Mississippi Arts Commission. The goals and strategies recommended in the 2011 report range from promoting entrepreneurship and small business growth among creative firms, to promoting cross-disciplinary creative networking and using creative career programs to increase school retention rates. 10 Supporting Artists and Designers as Entrepreneurs States are recognizing artists and designers as entrepreneurs and innovators. Artists, designers, entertainers, and other creatives are likely to be self-employed, and they are constantly creating new products and delivering them to market. 11 Armed with start-up funding, business training, and professional development support resources that states regularly provide to entrepreneurs and small businesses in other sectors artists can expand their markets and add greater value to the economy. To that end, states have changed small business assistance programs to make them more accessible to artists and offered training programs to artists to improve their business and marketing skills. For instance, the South Carolina Arts Commission has created a program to fund new arts-based businesses started by South Carolina artists. As part of the state s Artists Ventures Initiative, artists can apply for grants of up to $5,000 to launch a new venture or significantly alter an existing business. Proposals are reviewed by an advisory committee that includes businesspeople as well as experienced artist entrepreneurs. The projects selected become part of a virtual incubator that brings grantees together for professional development and expert advice. 12 In 2011, seven artists received grants through the Artists Ventures Institute for a total state investment of $35,000. 13 The arts commission also connects artists to a state-supported business training pro- Armed with start-up funding, business training, and professional development support resources that states regularly provide to entrepreneurs and small businesses in other sectors artists can expand their markets and add greater value to the economy. 1 0 Providing a Fast-Growth, D ynamic Industr y Cluster

15 Artist Ventures grants from the South Carolina Arts Commission encourage sustainable business development by entrepreneurs such as printmaker Jim Creal, who launched a new product line using a faster lithography process to yield higher profits. Photo courtesy of the artist and the South Carolina Arts Commission. gram FastTracSC that uses a nationally recognized curriculum to teach aspiring entrepreneurs how to create, manage, and grow a successful business. Artists learn from seasoned entrepreneurs and work alongside aspiring entrepreneurs from other sectors. 14 The Montana Arts Council helps individual artists and small arts organizations develop their microenterprises through the Business Preparation Initiative, which includes services to build skills and knowledge in marketing, finance, fundraising, audience development, and legal and leadership or governance issues. The Montana Artrepreneurs Preparation (MAP) program provides networking, business planning, and market development services to support the employment and sales success of artists and artisans in Native American communities and rural areas. The Montana Arts Council recently collaborated with the Ravalli County Economic Development Authority to deepen this program in four Ravalli County communities, using funds from the U.S. Department of Agriculture s Rural Community Development Initiative (RCDI). A total of $175,105 in RCDI funds will support training and networking for creative entrepreneurs in Ravalli County and develop a cadre of trainers to extend the business development services to the rest of the state. 15 Assets for Artists, a program funded in part by the Massachusetts Cultural Council, is an innovative matched savings grant program to support financial and business training opportunities for low- to moderateincome artists. This program uses classic low-income support systems, such as Individual Development Accounts and small business training, but targets the programs to artists and creative sole proprietors. By meeting savings goals and by completing the required training, participating artists can receive grant funds as a savings match for working capital to invest in their work as an artistic microenterprise, or receive down payment assistance for the purchase of a home. 16 NEW ENGINES OF GROW TH: ARTS, CULTURE, AND DESIGN 1 1