April 10, 2014

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Rise to the Challenge

Examining the Threats and Weaknesses in Utah’s Economy

By Spencer Sutherland

April 10, 2014

Utah is a great place to live and do business. Its mountains and red rocks have drawn outdoor enthusiasts to the state for decades, and its business-friendly climate continues to both foster new startups and incentivize established organizations to relocate here.

Despite a strong, diversified economy, Utah is not without its weaknesses. In order to continue to thrive, the state will need to address and overcome some major challenges in the coming years.

Finding Funding for Education

The biggest threat to the business community may be a lack of skilled workers. Utah has long prided itself on its highly educated workforce. In recent years, however, Utah’s rankings in key education indicators have plummeted.

“A state like ours needs to be very careful to keep education—both investment and innovation—front and center,” says Natalie Gochnour, chief economist and senior advisor to the Salt Lake Chamber. “In an economy that’s information-based and tech-oriented, [education] is more important now than it’s ever been. You need the skills of the future.”

When it comes to the future, the state has a lot of work to do. One in four Utah students doesn’t graduate from high school, ranking the state 32nd in the nation. Gochnour says the low graduation rate isn’t the only problem the state needs to worry about.

Throughout the early ‘90s, Utah consistently ranked in the top 10 for education spending, in relation to percent of personal income. In recent years, however, the state has dropped as low as 33rd in the same category.

When spending declines, test scores fall. When compared to states with similar income, ethnicity and parental-education level, Utah came in dead last in both reading and math scores.

Why such a drop in education spending? “There have been a lot of competing priorities. We took our eye off the ball a little bit,” Gochnour says. “More importantly, [it’s the result of] the changing nature of Utah.”

The biggest change is a more diverse student base. There are currently more than 120 languages spoken in the homes of Utah public school students. “That diversity does lots of wonderful things for Utah,” Gochnour says. “But when you have so many families in Utah that are speaking a language other than English at home, it affects the ability of educators to teach and makes our education more expensive.”

Cleaning up our Air

 It’s not uncommon, especially during the winter months, for counties in Utah to have the worst air quality in the country. Thanks to regular inversions, Utahns can actually see the thick layer of pollution they’re breathing in. While this has always been a health concern, it’s now becoming a growing business concern as well.

“Air quality is first and foremost a health concern. It’s not just unpleasant to look at; it’s not good for us,” Gochnour says. “But those health impacts also have negative business consequences. If you have unhealthy air, it hurts your workforce, it hurts your tourism sector, and it’s an impediment to recruitment.”

While the state wrestles with how to deal with air quality issues—from encouraging residents to reduce emissions to creating stricter regulations for industry—there’s a growing concern that businesses will head elsewhere. 

“In this day and age, people can start a business anywhere they want,” Gochnour says. “Because they don’t need to be by a seaport or a rail line or in a central city, life quality is paramount. When we have dirty air, it impairs our life quality and therefore impairs our economy.”

Tackling Infrastructure Demands

The Wasatch Front is one of the most rapidly growing areas in the country. Along with that growth, however, comes an increased strain on the area’s physical infrastructure.

“If you add up the demands on all of the major infrastructure categories—water, energy, transportation—the projected cost is incredibly dramatic,” says Ted Knowlton, deputy director of the Wasatch Front Regional Council (WFRC). “There is a need to increase our infrastructure and a need to focus on making the most of the infrastructure we have.”

To minimize the impact of more people and more businesses located throughout the state, the WFRC and other agencies are working to maximize existing resources. As a result, new housing and retail space is being developed around Trax stations, rather than in areas further removed from where people shop and work. Areas like the Fireclay district in Murray are being retrofitted from light-industrial to residential to make use of existing infrastructure, and downtown Salt Lake is adding more mixed-used development.

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