DARLA MOORE
SPEECH TO THE MYRTLE BEACH CHAMBER OF COMMERCE ANNUAL MEETING
October 25, 2005
Thank you Wayne for such a kind introduction. As I look around the audience this morning at such an outstanding group of business leaders who contribute so much to South Carolina, I have to say – Myrtle Beach and the Grand Strand are doing a great job.
In a state where tourism is king, the Grand Strand attracts over 44% of South Carolina’s total visitor base. It collects over 37% of the state’s accommodations tax, and 11% of the state’s total sales tax, even though the Grand Strand only has 6% of the state’s permanent residents. You are undeniably an engine of our statewide economy. At the same time, you are a microcosm of the state’s economy. In some of your enterprises, you are competitive at the very highest level; in others, you barely hit the threshold of competition. On an overall basis, the data would suggest that you are not in the first tier of competition! These observations, of course, are based on current conditions and we wonder about the question, “How do we maintain our most competitive activities over time and add more enterprises to the mix?” More importantly, “What do we do if everything we depend on, changes?” In essence, these are the questions that drive the Palmetto Institute’s efforts on a daily basis and the answers lead to the fulfillment of our single, critical mission – wealth creation for ALL South Carolinians.
In attempting to achieve our mission, we have identified a number of things South Carolina does extremely well, but our research also tells us that we are not making the progress necessary to be competitive. Bottom-line is: You cannot create wealth unless you are competitive in today’s global, knowledge-based economy. While we know that we must continue to support and improve in the areas we do extremely well, our challenge is to make rapid, dramatic and sustained improvement in those areas where our efforts are not now competitive.
So, what can we share with you from our work at the Palmetto Institute? Well, our model is straightforward and incredibly simple. We build a body of the most current, reported research on the most competitive strategies and best practices and attempt to construct guideposts for a path to positive change and progress.
According to the study by Dr. Michael Porter and the Monitor Group, the contribution to South Carolina’s gross state product created per tourism visitor to the state is well below the national average --- $418 per visitor/per day nationally vs. $278 per visitor/per day in South Carolina. The study also found that capital expenditures per visitor and transaction taxes per visitor were below the national average. Basically, this means South Carolina is not competitive with other states in its commitment to infrastructure and destination marketing for the tourism cluster. In other words, for every tourist who comes to South Carolina, the state brings in less revenue and invests less capital than the United States on average. Bottom-line: It is tough staying competitive with those numbersThe report also found that relative to the larger tourism states, South Carolina had slightly above average employment growth but below average wages, wage growth, and establishment growth. In Myrtle Beach, the average weekly earnings per employed worker in 2004 were $539 vs. the statewide average of $651. That is 17% below the state average which, by the way, trails the national average.
While Brad believes Myrtle Beach this year will see for the first time in several years substantial growth in the number of tourists, the level of occupancy is around 53 to 54%, which does not bode well for productivity.
So, while the Grand Strand and Myrtle Beach represent a major economic engine to South Carolina, our research tells us we need to improve to be more competitive. If this area fails as one of our key economic engines, the states fails, and that is not acceptable.
To no one’s surprise, I would like to give you a few thoughts on how to address these issues:
Let me start by reflecting upon one of your most impressive successes. Not too many years ago, you were facing a crisis with your highway system. The traffic had far exceeded capacity and it was actually having an effect on the number of visitors to the Grand Strand. Even though you were an economic engine, the state had basically ignored your funding requirements for highway improvement. In the same time period that saw the state spend hundreds of millions on the three big metropolitan areas of the state, they had only spent $20 million on the Grand Strand. A referendum for a local sales tax increase to support highway construction had failed, and you had no chance for the state to directly appropriate any money to help with your transportation crisis. But, rather than just trying to do the same things you had done in the past, you put together a plan creating a state transportation infrastructure bank to leverage funding through the issuance of bonds, you built coalitions with other parts of the state with similar needs for this legislation, and you used local funds to match state funds to gain the necessary support and funding to build the roads critical to your growth. For me, there are lessons in such an effort.
First and foremost, you cannot achieve success in isolation. There must be collaboration both regionally and statewide. Just because you generate 11% of the state’s total sales tax revenue, do not think the state will return such dollars proportionally. For you to have a real chance to succeed, you must build partnerships between communities, between counties, between regions, between organizations, between the private and public sectors, and between all segments of our diverse population. The fight is not over dividing the pie; the fight is working together to make the pie bigger. Think about your success with the infrastructure bank. You saw that the traditional approach to obtaining funding for the Grand Strand had not worked. You recognized that political clout alone would not solve your problem. So, you developed a plan outside the traditional approach that was driven by the business community and not the public sector. You collaborated with other regions to build coalitions to grow the pie rather than fighting to divide it. You then used your economic power to match the necessary funds. Think about those key points. If you believe your battle is with the hotel across the street or with Charleston and Hilton Head rather than with other tourism states and countries; I promise you, in 10 years, you will still be fighting over a dwindling piece of the pie. Use the lessons learned with the infrastructure bank to work with other regions to support stronger infrastructure and marketing programs for tourism statewide. Build coalitions to look for new and more innovative ways to support your industry.
Second, demand more from your leaders. I am not talking about just political leaders but also faith leaders, leaders of civic organizations, and community and local leaders. Everyone must take responsibility for improving our economic wellbeing, and if they don’t, replace them. Please understand -- political power is fleeting at best. How many times do you think your political leaders made passionate pleas for equitable treatment for Myrtle Beach? Tell me what such pleas achieved until a private-sector-developed plan built coalitions and used its economic power to help the policymakers find ways to fund your highway needs. Promises and excuses will not make you competitive, and fighting over who takes credit for the successes will not make you competitive. Public and private partnerships working together to find more innovative and collaborative ways to overcome your problems - will.
Third, we have to invest and support our human capital. The road to competitiveness runs by the school house, the tech schools and our colleges and universities. Without a properly educated, well-trained workforce, we will never reach the level of productivity necessary to compete globally. That fact is true from the board room to the boiler room. We simply have to improve our workforce quality to succeed. And just as your collaboration with others helped you to achieve your goals, I ask you to use your strengths to help train workforces in surrounding counties that do not have your economic power. If you draw your workforce regionally, then you must look for regional solutions to help improve the quality of such workforce. We simply cannot ignore issues that affect us because of political boundaries. Understand -- powerless children need powerful friends because they will become our leaders, our workforce, and our future only if we provide them the foundation today. In that vein, I ask you to support two critical issues affecting education this session.
Last session, the General Assembly adopted the Education and Economic Development Act. The legislation gives South Carolina the opportunity to fundamentally change the framework of our education system. For the first time, we can realistically connect our young people to the education pathway that will prepare them to find and fill higher wage jobs all across the state. This legislation integrates academic and career-technical education into a unified system that helps students connect education to careers of their choice -- a choice made with appropriate counseling and parental involvement with the student.
Early in their education, students will be given the tools and encouragement to develop a vision of how to achieve the successful career of their choice. The legislation also increases the number of guidance and career counselors to achieve a 300 students to 1 counselor ratio. Today the state average is closer to 600 to 1. I truly believe the legislation is a new framework for success, particularly when you add it to our recent successes in improving our student’s basic math and reading skills.
But, the passage of this legislation is just the beginning. The tough part is to make sure it is properly implemented and appropriately funded. That is why I ask your support tonight in strongly communicating to the General Assembly the need to provide the appropriate funding necessary to make the new system a reality.
A second critical need for our education system is to strengthen our four-year old kindergarten program. The studies and statistics are simply too compelling to ignore. We must do everything possible to make sure children, particularly children at risk, enter the first grade at a readiness level necessary to succeed and progress. It is an issue the Palmetto Institute will be discussing in more detail in the near future. Presently, there are approximately 17,000 at-risk 4K children being served by the state’s public schools, only about 63% of the entire 4K at-risk children. The existing budget is $20.8 million for half-day 4-year-old kindergarten. It is estimated by the Department of Education that it would cost an additional $22.5 million to serve all at-risk 4-year-olds in half-day programs. They estimate it would cost approximately $101 million to serve all 4-year-olds in half-day programs and $216 million to serve all 4-year-olds in full day programs.
So, as we work to find ways to increase the number of 4-year-old children attending kindergarten -- and increase the number we must -- it is imperative that we find the most cost-efficient means to support this program. I believe through the same lessons mentioned earlier of public-private partnerships and collaboration, and thinking outside of the box, we can provide early childhood education at a lesser cost than the estimates we have today, and we must begin now -- not later.
These two issues we can address now. They are solutions that sound research tells us will help our children be better prepared for the competition we face globally. We must give our young people hope. We must do everything we can to prevent them from becoming disconnected. If a student makes the effort to graduate from high school and then seek additional education and training, South Carolina should have an economy strong enough to offer them good job opportunities with solid wages, the chance for advancement and, most important, a chance for participation. That is our role – it is our calling – it is what our efforts are all about.
Now, allow me to use my few remaining moments to emphasize the urgency of our task. Our effort to find ways to become more competitive is not like a Carolina/Clemson football game where the loser says “wait until next year.” If you recall my opening comments, I raised the question of what we do when conditions change so dramatically that even doing what you do great may not be enough. I am afraid we may be facing such a time in our history. I commend to you a book entitled “The Long Emergency” by Robert Kuntzler. It is not a feel good book. Kuntzler talks about a convergence of elements that has the potential of changing the very basis of our economic foundations in America. These elements are centered on the diminishing production of petroleum products coupled with a growing demand for such products by countries such as China and India. Due to the success of capitalism in these and other countries and the ever increasing world population, the demands on limited energy supplies is increasing almost exponentially. Our economy is supported by access to an abundant supply of energy. Think about it – our industries – our interstate highway system – the ability to provide inexpensive air conditioning and heating – our use of automobiles as a basic means of transportation are all supported by abundant, inexpensive gasoline and electricity and natural gas. What if the days of plentiful petroleum products to fuel our cars and make our energy are gone and there is nothing on the horizon to replace petroleum in the quantities and at the cost we now enjoy? What will you do if you are faced with a substantial reduction in the number of tourists because of the lack of abundant, inexpensive petroleum products? What will you do if you are faced with substantial increases in your energy costs that dramatically decrease your profit margin? I implore you to think about these issues today rather than tomorrow. Competition is already fierce, as you know, but it will become even more intense if we have to face these shortfalls.
That is why we must take action today to become more competitive – to be more innovative – to diversity our industries and clusters – to improve our workforce quality. It is going to be the regions and states that are the most productive and diversified that succeed, but that will require a private-public partnership willing to work together to address our competitive weak spots I assure you the Palmetto Institute and Council on Competitiveness are doing everything we can do to tackle some of these problems, but we need your help. Join us – we have the capabilities to confront these problems. We just need the effort and sense of urgency to do it now rather than later.
Thank you.