In a previous column, I commented on the Maine Economic Growth Council’s latest report on the Maine economy. It was, in a word, disappointing. Maine’s economy showed no job growth and little growth in personal income, falling on a relative basis from 33 rd to 37th in the ranking of the 50 states.

Maine should be doing better, I thought, and went in search of a good economic development story from which we might learn. I found one in a most unlikely place, North Dakota. My recent sense of North Dakota had been informed only by a New York Times article lamenting the closing of many small churches that used to dot the North Dakota prairie.

Over the past ten years North Dakota quietly has become the little state that could. Several years ago, the North Dakota developed a strategic plan with six overarching goals including, for example, creating quality jobs, strengthening the linkage between higher education, economic development, and private businesses, and improving the business climate to increase global competitiveness.

For each of these goals, the state established annual targets and has been tracking results. The results are quite impressive. Over the period from 2000 to 2005 (last census data available), North Dakota has added net new job growth each year, exceeding targets every year except 2002. Per capita personal income has increased steadily. Ten years ago, North Dakota and Maine were nearly identical on this measure, but largely due to North Dakota’s higher growth over the last three years (2002-2005), they are now 32nd where Maine is 37th.

While North Dakota’s overall economic performance is only a little better than Maine’s, what is impressive is that North Dakota is not nearly as well positioned as Maine. It is a remote prairie land with half the population of Maine and with none of its natural advantages of quality of life or proximity to large Eastern markets.  

How did North Dakota achieve these results? Its approach was a focused one, based on a specific strategic plan coordinated closely between the governor and legislature, higher education, and business.  It has targeted its development efforts on five specific industries.

On the tourism front, a surprisingly large part of its economy, the state invested in a North Dakota “legendary” brand. The governor also empowered a North Dakota Roundtable on Higher Education to improve the quality and focus on the public university system. In recent bulletin of the Chicago Fed, this program was credited with increasing the university’s impact on the state’s economy from $14 million to $105 million in five years.

The state also is willing to try new ideas. Just this month, the governor signed legislation making North Dakota’s research and development tax credits the best in the nation, increasing the state’s R&D tax credit to 25 % on the first $100,000 of qualified research. Last month, North Dakota made headlines by passing legislation to make it attractive for corporations to register there, challenging Delaware as the state of choice for incorporation.

The good news here is that much of the North Dakota formula is similar to the approach recommended for Maine by the Brookings-Growsmart report: build on the Maine brand and focus development on a few industry clusters. The difference is that where Brookings recommends significant cost savings initiatives to address the economic drag of Maine’s high tax burden, North Dakota already has a low tax burden. Maine’s tax burden ranks 2nd highest in the nation, North Dakota’s is 39th, and this is a state with just as high a proportion of older people as Maine. Further, North Dakota is 36th in Medicaid spending where Maine is 2nd and 37th in per pupil K-12 costs (with similarly good national results) where Maine is 8th.

The lesson of North Dakota then is not just focusing on development investment, it is also the importance of having a low tax burden. While both parties in Augusta say they buy into lowering the tax burden, many Republicans seem reluctant to support school consolidation with its significant cost savings and Democratic leadership, at least in the Senate, seems reluctant to endorse Growsmart’s recommendation for a study of the efficiency of state government. Actions speak louder than words.