States Spending More to Lure New Business

Gov. George Deukmejian’s program to promote California through wider advertising and marketing appears to reflect a growing sophistication among the 50 states in using public dollars to attract new investment.

“State strategies in the ‘80s are more elaborate and complex than their predecessors in the 1960s and 1970s,” says a report from the Council of State Governments, made up of elected and appointed state leaders throughout the country.

Despite growing demands on state revenues, the states are continuing to spend “considerable resources” to attract vacationers and new business, said the report released last week at a four-day council convention at Lake Tahoe.

Up to $30.8 Million Spent

Money spent by states to promote economic development varied in 1981-82 from a high of $30.8 million to a low of $511,400.

Deukmejian this year sought $1.9 million to continue a marketing program begun last year to attract new businesses to California and another $5.2 million to continue a second advertising effort aimed at promoting California as a haven for tourists.

“The commitment of state funds is substantial, and even states at the lower end of the expenditure scale tend to make economic development a high priority, as measured by the proportion of available resources committed to this purpose,” reported the National Assn. of State Development Agencies.

It said that, “even more significantly,” business investment produced through state promotions in 1981 was nearly $20 billion.

An emphasis during the 1960s and 1970s on attracting out-of-state industry has given way to emphasizing the development of new industries and the expansion of existing ones during the 1980s, the council’s report said.

“In the past, states used tax concessions, limited zoning and other government regulations to lure industry into a state,” it said.

‘Positive Environment’

“In contrast, current state strategies emphasize the need to create a positive environment in which new businesses can grow and existing businesses can expand.”

It said the Illinois Department of Commerce stated in a “Sell Illinois” report that it is unlikely a firm will move to a new location if “there is even one factor seriously out of balance.”

“A community with a second-rate public school system would not be an attractive location for a new firm, no matter how superior its transportation system, energy resources, local industrial parks and other resources may be,” the Illinois report said.

Deukmejian has insisted the state’s new promotion program is needed to discourage businesses from locating new facilities in other parts of the country, despite his Administration’s assertion that California is attracting more new business investment than any other state.

While his predecessor, Gov. Edmund G. Brown Jr., eliminated the state’s business promotion agency at one time, Deukmejian has instigated a slick advertising campaign to sell the “Californias,” highlighting attributes of regions within the state.