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Nebraska used to be a leader in creating jobs
OMAHA — Not long ago, Nebraska’s growth was a national cover story.
Gov. Pete Ricketts soared through the air wearing skis on the Olympic-themed March 2018 cover of Site Selection, an economic development industry magazine.
The cartoon image illustrated Nebraska’s highflying, three-year run as winner of the “Governor’s Cup,” given to the state landing the most economic development projects per capita.
But when Site Selection last month named the top development states for 2025, Nebraska didn’t crack the magazine’s top 10, the second straight year it missed the list.
It’s another indicator that formerly front-running Nebraska has lost its edge when it comes to competing for jobs and economic growth, seeding what state business leaders see as a cloud darkening the state’s future.
A Flatwater Free Press analysis comparing Nebraska job growth to six neighboring states illustrates the state’s decline — and suggests it has cost Nebraska 70,000 jobs in recent years.
Those vanishing jobs mean fewer families, less prosperity and lower tax collections to support vital services like education, said Dana Bradford, an Omaha businessman who has worked on employment as past chairman of the Greater Omaha Chamber and Aksarben Foundation.
“It’s a silent killer,” Bradford told Flatwater. “Somewhere along the line, companies just decided, ‘We are going somewhere else.’” Experts and business leaders cite a variety of challenges behind Nebraska’s slip in growing jobs, including the state’s worker shortage, a lack of affordable housing and child care, and the longtime “brain drain” of young college graduates to other states.
But some also cite a far simpler reason: state leaders no longer make growth a priority.
Blueprint Nebraska, statewide economic development strategy produced in 2019, was largely shelved, though policymakers did enact some tax recommendations — in a way that burdened the state with a deepening structural deficit.
Tens of millions of dollars have been sliced from economic development programs as Gov. Jim Pillen and the Legislature work to balance the budget. Lawmakers have capped tax incentive payments, creating uncertainty in the programs, and Pillen has slashed staffing inside the Nebraska Department of Economic Development by 27% in the past nine months.
Nebraska has “stepped back” from its focus on economic development at the same time that competing states are stepping up efforts, the Greater Omaha Chamber said in a recent report.
“I just don’t think we’ve really had a commitment to growth in the state,” said Eric Thompson, a University of Nebraska-Lincoln economist.
There are recent signs the state has begun to turn new attention to growing jobs.
A Pillen-sponsored tax bill enhancing state tax incentives passed this year, as did measures to expand child care support and spur housing construction.
The Nebraska Chamber of Commerce and Industry is preparing to dust off Blueprint Nebraska and give it new life, launching a growth-focused initiative it will soon roll out statewide.
“We have to use new thoughts and new energies and new directions to step up,” said Matt Williams, the state chamber’s interim president. “The trajectory we are on right now is not going to be healthy for us in the long term.”
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In 1987, economic anxiety engulfed Nebraska.
Omaha was reeling from the departure of an energy company — the not-yet-infamous Enron — to Houston. Food giant ConAgra was threatening to leave. The Farm Crisis threatened the entire state. There was a feeling Nebraska was being left behind.
“The sky could be falling,” recalled John Cederberg, a business accountant long active in state policy. “I don’t think it was psychological. It was real.”
In response, the Legislature for the first time enacted major business incentives, providing tax cuts for businesses that create jobs in the state.
The program was blasted as costly “corporate welfare.” But the results were hard to argue.
In the decade prior to the bill, Nebraska’s private sector job growth trailed the average for the other states in the north-central Great Plains — Iowa, Kansas, Missouri, South Dakota, North Dakota and Minnesota.
After, it shot to the top. A Flatwater analysis shows that by 2000, Nebraska had 90,000 more jobs than it would have had it continued to trail the region’s growth as before.
Nebraska remained a regional job growth leader into this century. But sometime around 2010, the narrative flipped.
Nebraska’s job growth had exceeded the regional average in 14 of 19 years prior to 2010. It has trailed the region in 11 of the 16 years since. Had its annual growth rate kept that previous pace, the state would boast 70,000 more jobs than it currently does.
Instead, it has trailed the region’s growth by 6% since 2010.
Nebraska has lost ground to every regional competitor except Iowa, which has recently posted even more dismal job growth.
The new analysis follows studies released last fall by the Omaha chamber and Aksarben Foundation that found job growth in Omaha and Lincoln is trailing regional peer cities.
But the Flatwater analysis offers a longer view and reveals the starkly different fortunes before and after 2010. That appears to suggest something fundamental has changed.
Josie Schafer, director of the University of Nebraska at Omaha’s Center for Public Affairs Research, said 2010 is meaningful, because that’s near when Nebraska and the nation hit a “demographic cliff.”
The oldest Baby Boomers were beginning to enter retirement, while the smaller millennial generation was moving into the workforce.
“The Baby Boom generation retiring is such a big deal because … we don’t have a replacement for it,” she said.
The resulting worker shortage changed the game, as states’ attention turned from chasing companies to chasing people. Nebraska, it appears, has not fared well in that competition.
That notion is also supported by data on the “brain drain” — the loss through migration of college-educated people — that Schafer tracks.
In 2010, Nebraska was annually losing a net of about 1,000 people with bachelor’s degrees or higher. By 2020: 4,000 per year.
Bryan Slone, former CEO of the state chamber, said 2010 also signaled the dawn of a technology boom. In 2010, Apple sold fewer than 40 million iPhones. In 2015, it sold 230 million.
Nebraska has a growing tech sector, Slone said, but it’s not growing like other states and has not been viewed as a technology state. That’s making it harder to attract tech jobs and young tech workers.
“It’s very easy in this era to go in a downward spiral … because there’s a chicken and egg,” he said. “You can’t grow your economy without young people, but you can’t attract young people without having a growing economy.“ In 2010, Nebraska and the nation were also emerging from the Great Recession brought on by a housing market collapse. Housing construction in Nebraska nosedived during the recession. It has never recovered.
That’s led to a shortage of affordable housing and caused housing prices to spike, making it harder to attract workers and families.
In the seven-state region, a Flatwater analysis of federal cost-of-living data suggests Nebraska’s housing costs since 2008 have risen from fourth highest to the second highest.
The need to build more housing. Attract young workers. Grow tech. All of those have a familiar ring. In fact, the state nearly seven years ago came out with a “blueprint” for tackling such issues.
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As CEO of Omaha-based Union Pacific railroad, 4.125' x 6'
Lance Fritz saw firsthand how ferociously Nebraska’s neighbors fight for jobs.
He remembers Arkansas’ then-governor had a war room next to his office, where maps on the wall with pins denoting new business targets. Iowa, Kansas and Utah aggressively pursued UP jobs — some even making bids to wrest the entire headquarters from the city it’s been based in since 1862.
“I would get calls all the time…seeing if they could make it attractive enough to locate there or relocate there — exit Nebraska entirely,” he said.
Some of the offers were tempting, he said, though never quite enough to justify the pain the company and its employees would endure by leaving.
Nebraska, Fritz said, needs to worry about that equation all the time.
“Whether we recognize it or not, Nebraska is in a fight for its economic survival, and the fact that we are not growing is very troublesome,” he said. “In my personal opinion, we’re not doing enough to make us look attractive to the vast population that could potentially be here.”
Around 2017, Fritz and other Omaha business leaders expressed their concerns to then-Gov. Ricketts. That helped prompt Ricketts, University of Nebraska leaders and others to launch Blueprint Nebraska, a statewide effort to produce an economic development strategy.
Fritz co-chaired the effort with Owen Palm, a major implement dealer in Nebraska’s Panhandle. Its steering committee featured leaders from across the state, and received input from thousands of Nebraskans.
In 2019, the panel’s report offered myriad ways to grow, including tax reform, stepped-up housing construction and growing key industries, including tech.
But full-scale efforts to make this plan a reality never got off the ground. COVID-19 hit, making it harder to move forward. Slone and Fritz noted progress was made in some areas, including taxes.
A Blueprint follow-up tax study called for cutting income taxes and property taxes to make the state more competitive while broadening the state sales tax to assure stable state finances.
The Legislature under governors Ricketts and Pillen moved to significantly cut both income and property taxes, but hasn’t broadened the sales tax.
And after federal COVID relief money vanished, the pain of simply cutting taxes, but not replacing the lost revenue, became obvious.
The income tax cuts are estimated by the Legislature to have reduced state revenues by more than $800 million in the current fiscal year. And dollars devoted to reducing property taxes have become an ever-growing share of the budget, now amounting to one-sixth of all state spending.
Those are big reasons the state is now making hundreds of millions of dollars in cuts to state spending — among them tens of millions in cuts to economic development programs intended to help grow Nebraska.
Such cuts have fallen on an internship program aimed at addressing the worker shortage, a national marketing campaign to attract workers, new housing support, business site development funds and a tax credit helping businesses pay for the cost of hiring out-of-state workers.
“If you look at the facts, you can easily see (economic development) is not a priority,” said Bradford, the former Omaha chamber chair.
Without a focus on growing the state, he said, Nebraskans’ tax burdens are only going to increase.
Fritz also noted that to attract workers, the Blueprint report had recommended Nebraska focus on becoming a more welcoming state. He said that has been undercut by controversial social issues lawmakers have prioritized in recent years.
Pillen has also been seen by some in the business community as not friendly to incentives. Last year, Pillen said all of Nebraska’s tax credit and relief programs “should be focused on working-class Nebraskans, not Fortune 500 companies.” And the Department of Revenue, under an anti-China bill he championed, sent letters seeking to retroactively deny businesses incentives they had earned.
