Montana's economic report card.

• Author: Moseman, Gary
• Position: Economic Development

Every April, the optimism that typically accompanies spring receives a setback in Montana. That's when the Washington, D.C.-based Corporation for Enterprise Development releases its annual "Report Card for the States," a comprehensive look at the climate for economic development in every state. The report has been issued for five years, and for five years Montanans have been told how bleak their economic situation is.

This year, Montana's "grades" were the lowest ever. It was fourth consecutive year in which they declined, and the first time and state received a failing grade in one of the four primary categories.

Although the corporation has discouraged using its report to rank the states (instead issuing school-like grades from "A" to "F" on a host of subjects), ranking is just too tempting for the popular media to resist.

So, in case you missed the news story carried nationwide by the Associated Press, the only states faring worse than Montana in the 1991 CfED Report Card were Louisiana and West Virginia.

Local news coverage around the state went into a little more detail, but not enough to tell the story of how Montana, with three D's and an F, has gone from bad to worse to almost the worst. That's what this article will attempt to do.

If there is a bright side, it might be that there is a significant data lag - some of the information on which DfED's report is based is more than a year old (much older, in some cases). And some indicators of the state's economy in the final months of 1991 suggest a little more optimism than warranted by the CfED report.

The report's four main categories - indexes, actually - and Montana's grades, are: * Economic Performance . . F * Business Vitality . . . . . . . . D * Capacity . . . . . . . . . . . . D * Policy . . . . . . . . . . . . . .D

Each index is made up of three to seven similarly graded subindexes, each of which, in turn, is composed of a variety of data and rankings - more than 150 separate measurements.

The awarding of letter grades in the indexes and subindexes is done on a top-weighted curve, so that about ten states receive A's in each category, ten receive B's, fifteen receive C's, ten receive D's and five receive F's. That means if one state does not improve its situation and the rest of the field does, that state is not likely to maintain its grade. The overall index grade is reached by ranking the subindex ranking totals and applying them to the curve to obtain a letter grade for the overall index.

What follows is a detailed summary of the components of the report's four major indexes. It will be followed by the grades Montana received and brief discussions of them. (When I use words like "rate" or "level" in the following descriptions, it means the numbers have been adjusted to take population differences into account. Unattributed quotations are from the 1991 CfED report.)

Performance Index

The CfED report opens with the Performance Index, which comprises seventeen economic performance measurements clustered in four general subindexes. They are:

Employment: The extent to which the economy provides jobs for those who seek them. The most basic measurements are used in this subindex - long-term employment (growth over a five-year period ending September 30, 1990), short-term employment (growth in the past year), the unemployment rate and average unemployment duration.

Earnings/job quality: How workers are compensated. Measurements in this subindex include average annual earnings, growth in average annual earnings in the past year, and the percentage of the workforce with employer-sponsored health coverage, which the CfED says provides an important clue of job quality.

Equity: How widely a state economic opportunities are shared. Included are measurements of the poverty rate, the distribution of income among people in the state, change in that distribution, and a combination of factors designed to assess gaps between urban and rural economics.

Environmental, social and health conditions: A hodge-podge of measurements which try to describe quality of life in the state. Measurements range from incidence of various diseases to the level of hazardous waste generation. Because of the amorphous nature of the data, as well as intangibles that sometimes are critical in quality-of-life considerations, this subindex is not...