overnor Kim Reynolds is determined to make Iowa the go-to state for businesses reshoring their operations and for those seeking low taxes and fiscal predictability. In office since 2017, Governor Reynolds has taken numerous steps to make the Hawkeye State a competitive powerhouse not just in the Midwest, but nationally and internationally. Iowa already is a powerhouse in food processing, agricultural technology and related sectors. Governor Reynolds now is focused expanding Iowa’s industrial strengths in advanced manufacturing, biofuels and financial services among other industries. In an interview in late April with Site Selection, she explains how that will happen.
Site Selection: How has Iowa’s Manufacturing 4.0 plan helped Iowa companies emerge from the economic downturn caused by the pandemic?
Gov. Kim Reynolds: For a state that’s known and respected worldwide as a leader in agriculture, it may come as surprise to some that advanced manufacturing is Iowa’s largest industry by GDP at nearly 18%, and we have the third highest concentration of manufacturing workers nationwide. With the reality of a fourth industrial revolution underway and the transformational change occurring in manufacturing as a result, we knew how critical it was for the state to examine our manufacturers’ ability to adopt innovative technologies, ensure future growth and maintain our reputation as a globally competitive leader.
In 2020, Iowa launched an industry-led Manufacturing 4.0 initiative with the goal of creating a roadmap to navigate both the challenges and opportunities ahead. Released in February 2021, the plan offers strategic solutions for adopting technology, increasing productivity, competing for world-class talent and ongoing globalization.
Since the plan was introduced, we’ve been focused on its implementation. While innovation provides unique opportunities for manufacturing sector growth, it also disrupts long-standing business models, especially for Iowa’s small- and medium-sized manufacturers. This change also came amidst a workforce shortage that had a big impact on smaller manufacturers and only intensified during the pandemic. It was clear that investing in technology would not only support their existing workforce, but also ensure their future growth and sustain their businesses.
Over the past year Iowa has made unprecedented investments in manufacturing. Thirty million dollars in Manufacturing 4.0 grants were awarded to more than 80 manufacturers for projects that ranged from installing robots on production lines to modernizing Enterprise Resource Planning (ERP) systems to automate the flow of data across the value chain. We’re also helping our manufacturers take on persistent supply chain bottlenecks through a new portal that connects them directly with potential Iowa suppliers right in their back yards.
What should readers know about how manufacturing in Iowa is evolving?
Gov. Reynolds: Iowa is keeping pace with manufacturers nationwide that are harnessing technology to advance their production capabilities for the future. Our plant floors are rapidly becoming tech floors as everything from robotics to 3D printing, big data and cloud computing become integrated into standard operating procedures.
Once one of the highest in the nation at 12%, Iowa’s corporate tax rate is now going down to a highly competitive 5.5%.
Automation is on track to create an additional 15 million U.S. jobs by 2030. Manufacturers I’ve spoken with are realizing a positive return on their investment when it comes to automation. Rather than replacing people with technology, they’ve deployed machinery to handle mundane tasks while upskilling their workforce into new roles, creating opportunities to both recruit and retain workers. Some are even reporting three times the increase in productivity they had expected.
How will the recently passed tax reform bill make Iowa more competitive for business and industry?
Gov. Reynolds: When I took office, Iowa had the 6th highest income tax rate in the nation at almost 9%. Now, after three historic tax reform packages since 2018, it’s set to be fourth lowest at a flat and fair rate of 3.9%, and we’re eliminating tax on retirement income starting in 2023. This year, the tax bill which I proposed and the Legislature passed also reformed Iowa’s corporate tax rate. Once one of the highest in the nation at 12%, it’s now going down to a highly competitive 5.5%.
Additionally, through legislation, Iowa has empowered companies to make strategic investments in their workplaces by coupling with Federal Bonus Depreciation. Specifically, we’ve updated our tax code to conform with the federal government’s allowance for businesses to declare a bonus depreciation on equipment and capital assets in the first year. In just a few short years, we’ve remade our tax code from top to bottom and sent an unmistakable message: Iowa is open for business. These moves reinforce Iowa’s economy at a time when we’re seeing soaring inflation and energy prices, as well as supply chain and workforce challenges. We’re preparing Iowa to meet these headwinds and come out stronger on the other side.
Is Iowa competitive in the resources it makes available to existing companies and those moving to Iowa?
Gov. Reynolds: Recognized as the #1 state for opportunity (U.S. News & World Report), Iowa is committed to fostering an environment where businesses can succeed and achieve sustained growth. In addition to tax reform enacted earlier this year, we’re making transformative investments in state infrastructure, including one of the most significant broadband buildouts in the nation. Since 2018, Iowa has awarded seven rounds of grants, resulting in nearly $353 million in funding for new broadband development across the state. With additional private funds, the total investment is estimated at nearly $684 million.
Through our Commercial Aviation Infrastructure Fund, we recently announced a $100 million investment in Iowa’s eight commercial airports. Increased access to air transportation strengthens the foundation for long-term growth and vitality across Iowa by stimulating tourism, encouraging business growth and connecting the state to national and global markets.
Since 2020, we’ve invested more than $480 million in state and federal funds to expand access to quality, affordable childcare for Iowa’s working families, resulting in 9,000 new slots for children statewide. We’re also investing $330 million to increase housing options statewide so families who are attracted to Iowa’s economic growth, low cost of living and safe neighborhoods can live in the communities where they work.
Finally, we know business leaders don’t have the luxury of investing significant amounts of time into the site selection process, and scaling up quickly can be a game-changer for long-term profitability. Iowa’s Certified Sites program leverages nationally recognized standards and provides developers with shovel-ready sites that are well-suited for fast-tracked projects.
As reshoring and onshoring accelerates, how is Iowa distinguishing itself from other states in the region as a location for that investment?
Gov. Reynolds: Iowa’s history of supplying global markets with an array of goods – from food products to aerospace electronics – has positioned the state as a national leader in advanced manufacturing, generating more than $16 billion worth of exported goods and accounting for nearly 18% of the state’s GDP.
Our economic development pipeline for manufacturing is more robust than we’ve seen in years, with companies looking to reshore their operations in the U.S. to stabilize their supply chains. Also, Tier 1 manufacturers are reaching out to our smaller manufacturers about creating parallel supply channels and diversifying their product lines to meet supply chain constraints.
"Our plant floors are rapidly becoming tech floors as everything from robotics to 3D printing, big data and cloud computing become integrated into standard operating procedures.”
Centrally located in the United States, Iowa sits at the intersection of two major interstates that allow convenient cross-country transport of goods to domestic markets and to international shipping hubs.
Not only do we boast a low cost of doing business, but Iowa’s low cost of living also helps attract and retain employees for businesses that choose to locate or grow here.
How is the Reemployment Office working to benefit both employees and employers?
Gov. Reynolds: Iowa’s increased focus on reemployment is a recognition that unemployment benefits were always designed to be short term and to fill the financial gap between jobs. Recently passed legislation reduces the number of weeks Iowans are eligible for unemployment benefits from 26 weeks to 16 weeks. During times when there is an urgent need for more workers to keep our economy moving, it is imperative that we help the unemployed find their next job as quickly as possible.
Iowa Workforce Development’s reemployment offices across the state are a critical pipeline that links Iowans seeking employment and local businesses. Specially trained career coaches work one-to-one with unemployed Iowans beginning the first week a claim is filed, using new technology to match skillsets to open jobs and to connect available workers to the training programs they need to land high-demand jobs. They also coach job seekers on improving their resumes, expanding their job searches and polishing interview skills.
The state of Iowa is also investing in the expansion of childcare options for working parents, helping to address barriers that may prevent some from returning to work. Last year alone, 9,000 new childcare slots were created in the state.
What new workforce development initiatives should out-of-state companies know about?
Gov. Reynolds: Iowa recognizes that to remain competitive, we must have a future-ready workforce available in the state. Future Ready Iowa, an aggressive workforce policy initiative already underway, aims to have 70% of Iowans with education and training beyond high school by 2025 to insure we have the number of skilled workers necessary to match our projected job skill levels in coming years.
Iowa is a national leader in Registered Apprenticeship Programs (RAPs), with opportunities available in nearly every sector, and provides state funding to employers that utilize this proven workforce development program. Most recently, Iowa is investing in increasing the number of RAPs in high schools across the state, introducing young Iowans even earlier to career opportunities with businesses and providing an opportunity for students to earn while they learn.
Record investments in Iowa’s PreK-12 public education system include a wide variety of work-based learning programs, STEM education and computer science as early as preschool. In Iowa, all high school students will be required to participate in at least one work-based learning experience by 2024. Iowa consistently leads the nation in its high school graduation rate and the number of high school students dual enrolled for college credit.
Which emerging sectors in Iowa have the best chance of establishing an industry cluster?
Gov. Reynolds: Due to our status as an agricultural powerhouse, Iowa is a natural place for precision and digital ag platform development. Our existing agricultural machinery cluster is engaged in significant research and commercialization activities which, coupled with our top-ranked research institutions, provide the right environment for this industry.
Thanks to a responsive regulatory environment and one of the lowest insurance premium tax rates in the country, Iowa stands as one of the nation’s leading headquarters for finance and insurance. Iowa is also number one in the U.S. for insurance in terms of GDP – 11% of Iowa’s economy can be attributed to insurance output. Strong industry leadership has yielded more than 50% growth in the state over the last decade, and even more innovations are on the horizon through Iowa’s work in insurance technology and fintech. Iowa’s Global Insurance Accelerator, Brokertech Ventures, the Global Insurance Symposium, and the Iowa Insurance Division provide unique opportunities for innovators and carriers to work together to improve the insurance ecosystem.
"Since 2020, we’ve invested more than $480 million in state and federal funds to expand access to quality, affordable childcare for Iowa’s working families.”
Global Insurance Accelerator, the world’s first business accelerator focused on insurtech, is a mentor-driven program designed to foster innovation by supporting startups targeting the global insurance industry. Since established, the GIA has attracted participation from burgeoning companies from across the U.S., as well as Canada, Mexico, United Kingdom, Ireland, Germany, Serbia, Brazil and Australia.
How is Iowa staying ahead of the curve in the biofuels industry as demand for that commodity grows?
Gov. Reynolds: The resiliency, innovation, and strength of our agriculture and biofuels industry is unmatched. Since 2002, Iowa has grown into the number one producer of both ethanol and biodiesel. We have enacted numerous innovative policies, including a public-private cost-share grant program known as the Renewable Fuel Infrastructure Program, to assist Iowa retailers in offering higher biofuel blends to their customers. We also have numerous market-based fuel retailer and production tax credits to further incentivize biofuels.
Beyond this, I proposed, and the legislature passed a bill this session that will further expand access to biofuels at Iowa gas stations and truck stops, which will provide consumers with more affordable, cleaner-burning fuel options at the pump. This bill makes Iowa the first state in the nation to adopt an E15 fuel standard.
Iowa’s biofuels industry stands ready to increase American energy independence and lower consumer price at the pump. I am also proud to lead a push by several Midwest governors to request the EPA grant a permanent waiver for year-round E15 sales. I will continue to fight for our agriculture and renewable fuels industry because Iowans, and all Americans, deserve less expensive, cleaner-burning fuels.
Additionally, Iowa already has developed a significant base of assets for biobased chemical platform advancement. Petrochemicals have been so well studied, and their inherent chemistry so well exploited, that there is little new to discover of commercial value. The same cannot be said of biobased feedstocks and chemistry. The future of innovation in the chemicals industry is likely to come from the discovery and exploitation of new molecules generated from biomass and in the advanced process technologies needed to generate them.
Investing businesses seek fiscal stability and predictability in the locations they are considering. What can Iowa offer in this area?
Gov. Reynolds: Iowa is in a remarkable economic position today, thanks to years of fiscal responsibility and the spirit of innovation. Unlike so many other states, Iowa’s budget was in a position of great strength prior to the pandemic and throughout, our businesses and schools remained open, resulting in our strong economic recovery.
Iowa ranks #1 in the nation for lowest risk of pandemic-related impact to the economy and for highest resiliency to repair the economy after the pandemic, according to the Council on State Governments and KPMG.
Today, our GDP is well above pre-pandemic levels. The state has a budget surplus over $1 billion dollars, and our financial outlook continues to be positive. In the past year alone, we saw significant state investments in housing, water quality, childcare, broadband, tourism, and other infrastructure that is critical to Iowa’s future.
We are creating conditions for manufacturers of all sizes to prosper amid a technology revolution.
Mark Arend has been editor in chief of Site Selection magazine since 2001. Prior to joining the editorial staff in 1997, he worked for 10 years in New York City at Wall Street Computer Review, ABA Banking Journal and Global Investment Technology. Mark graduated from the University of Hartford (Conn.) in 1985 and lives near Atlanta, Georgia.