THE BLOG
02/10/2011 03:13 pm ET | Updated May 25, 2011

How the State of Colorado Could Increase Jobs, But Won't

Jobs, jobs, jobs! Every politician in Colorado is claiming they are totally focused on jobs. But then in so many (not all) cases, they fall back on the same tired proposals they present for any problem. So let's look as what's really needed.

First off, increasing the number of jobs in this state comes primarily from one source -- new companies. (The theory used to be all small companies, but further investigation showed that it is small companies less than 10 years old that provide most jobs.) And of those startups, we need companies that sell outside the state. A new coffee shop is a new company, but it's a zero-sum game because it does not increase the money coming into the state and therefore is offset by a job loss at another coffee shop.

What we're talking about is companies like mine. Most of our employees are in Colorado, but 98% of our sales are to companies outside of Colorado. Over half are outside the United States. We have customers worldwide, including in PRC and India. Oh, and as a software company we provide jobs that pay well, have a great work environment, and have minimal negative impact on the environment. What's not to love?

Ok, so what we need to focus on is encouraging more successful startups and helping the existing startups. These startups do not need to be exclusively high-tech, but they do need to be focused on selling worldwide. This is not to say we tell all other business to take a hike. Anything that helps any businesses increase jobs is a good thing. But the focus should be where the new jobs are -- and that's startups.

So what to do? There are actually a number of actions the state can take that will have a significant impact. And while I have split them up by time, I don't mean to wait on some; I mean some will take time to have their impact felt. But we need to start on all of the below immediately.

Immediately

  1. Place quality people in charge of the state agencies. A benchwarmer like Roxy Huber at Department of Revenue negatively impacts every business in the state. And the smaller the business, the greater the impact. An impact that puts resources to extra effort required by the state rather than hiring additional employees.
  2. Require state agencies to give businesses clear, specific answers when they ask what they need to do to meet the rules, what tax/fee has to be paid, etc. And make the agency live with that answer for a year. In most cases businesses just want to know what to do, and telling them to guess creates an antagonistic relationship that costs money. And again, that is money that would be better used to hire additional employees.
  3. Have state agencies look to Colorado businesses for goods and services. Some agencies are good about this. But others, like OIT, have an ABC (Anywhere But Colorado) policy when they look to make purchases. If a local company has the best product or solution -- aren't they at least worth a look? I have had 3 companies tell me they have a product that provides the functionality needed for CBMS -- but OIT refuses to even look. I don't think high prices, an out-of-state address, and lobbyists should be required to do business with the state.
  4. Boulder has a phenomenal program with Tech Stars. It does more than just find 10 companies, too; all of the applicants learn a lot from the process. Some of those others also go on to success. It has also built an infrastructure of advisors and consultants that are key to a vibrant startup community. But we need more. We need this for industries other than software (starting with green energy). And we need these groups throughout the state -- at a minimum in every city in which we have a University.
  5. Don't do stupid shit. High-tech workers tend to be libertarian on social issues. Disallowing civil unions sends a message of intolerance which turns people off. Opposing immigration when 1/3 of the people starting high-tech companies are immigrants is a giant flashing Go Away! message to the people we want here creating new companies. Talking about reduced taxes in the present economy is telling people that the quality of life here will continue to degrade.

Medium Term

  1. Quality high-speed broadband everywhere. If three people can create a company and run it out of their house, with a server in their basement to be their face to the world, you've dropped the barrier to entry to nil. But for that to work the line has to stay up (Qwest tends to drop connections for a couple of days once a year), it has to be fast (we're talking 40 mbps bi-directional, not 1.5mbps down/364kbps up), and fast everywhere (not just downtown).
  2. Handle sales tax statewide -- with a single rate. The present mishmash of taxing jurisdictions, each with their own laws as to what is taxed and different authorities to report to (yes, over 80) is not workable in a global economy. At present I would advise any company selling online to not locate in Colorado. Or, if they do locate here, to not sell to anyone in the state. Get the top 7 cities together, hammer out an agreement on how the state can handle this for all of them, and then invite the other home rule cities to join. If a little town like Ft. Logan opts out -- fine, they can be a do-not-sell zone for the world economy and the rest does fine. And by having a single tax rate state-wide, you eliminate the use tax case of buying in one city to use in another.
  3. Eliminate the high overhead taxes. The business personal-property tax is the worst -- at my company we spend as much calculating it as the amount we pay. If all companies paid the same amount but didn't have that overhead, then the state is equally well-off, and the private sector would have had money to hire another thousand people or so. Replace these taxes with a carbon tax fee.

Long Term

  1. Fully fund SB-191. We have spent months trying to fill four full-time and three paid internship positions. Last week we finally filled one of them. We have high unemployment, and yet there is a severe shortage of qualified people to hire. Why? Lack of education. If you had twice as many computer science students at CU, every outstanding student would have an internship offer today and multiple job offers upon graduation. To create this workforce requires first that we fix K-12 so that most children graduate prepared to excel at a good university. SB-191 gives us a means, but we have to implement it and implement it well.
  2. Adequately fund higher ed, and double its capacity over the next 10 years. This will require a significant investment as we flip from a state contribution headed toward zero to one that makes college very inexpensive for in-state students. And either adds or grows campuses to increase the capacity. But without this, Colorado's high-tech business community is already limited due to the lack of qualified people to hire. We can't grow to be a leading economy of tomorrow if we don't make the investment in higher ed -- starting now.
  3. Address our crumbling infrastructure. People who work for high-tech companies can work anywhere and are well paid. If their goal was low taxes they would move to Mississippi or Somalia. What they want is to live in a nice place with a quality infrastructure. I'm not saying go overboard like Boulder does, but if we have unsafe bridges, un-inspected restaurants, etc. -- well, a 2nd-world infrastructure will get a 2nd-world workforce. And pretty mountains don't make up for being robbed monthly due to reduced police protection.
  4. Address TABOR, Gallagher, Amendment 23, etc. This is such a giant interrelated mess that it requires a constitutional convention to clean it up. Take a deep breath and set that in motion. By definition any new constitution will require strong bipartisan support to pass, so the worries about the final product being a left- or right-wing wet dream are overblown.
  5. Get rid of sales tax. First off, it's counter-productive because jobs come from people buying stuff. The more they save the lower the demand and the fewer the jobs. Second, it's got a high overhead for companies that sell services and digital goods worldwide. What you want are taxes that get the state their money with minimal additional cost to the business. Increase income and/or property taxes to compensate.

Governor Ritter put it well in our final interview -- we need to have an adult conversation about the fact that providing services requires taxes. And that the economy and quality of jobs we will have in five, 10, 20 years is directly dependent on the money we invest now. This is not to say that there is only one reasonable conclusion from that conversation -- if you're 60 years old and have no children, then letting the state degrade so with your lower tax rate you can afford an upgrade on your vacations is a logical choice. And for those that do want Colorado to be a leader in the new global economy, while I think the above goals will be uncontroversial, how to accomplish each is a gigantic question where multiple viewpoints should make for a better approach.

But any politician who repeats "jobs, jobs, jobs" but is not focusing on items like the above is either duplicitous or does not understand the economy of today (and tomorrow). And to the (hopefully small) GOP component who is saying the answer is lower taxes and reduced regulation: trying to fit your preferences to the situation shows an utter lack of intellectual rigor. The wise person is one who is willing to let the facts trump his or her beliefs.