Challenges and Opportunities for Local Communities in a Global Economy James R. Barth Lowder Eminent Scholar in Finance, Auburn University Senior Finance Fellow, Milken Institute Fellow, Wharton Financial Institutions Center Staying Ahead of the Game: Innovations for Increasing County Revenue 43rd Annual Alabama County Government Institute Auburn, Alabama June 6-7, 2013

U.S. (21.6%) China (10.1%) Japan (8.4%) Germany (5.1%) France (4.0%) Brazil (3.5%) U.K. (3.5%) Italy (3.1%) Russia (2.7%) India (2.6%) Today The World’s Top 10 Economies Percent of World GDP China (28.7%) India (16.0%) France (5.4%) England (5.2%) Prussia (4.9%) Japan (3.1%) Austria (1.9%) Spain (1.9%) U.S. (1.8%) Russia (1.7%) China (18.5%) U.S. (16.5%) India (12.0%) Brazil (4.8%) Indonesia (3.5%) Japan (3.1%) Mexico (3.0%) Russia (2.7%) Germany (2.4%) U.K. (2.2%)

Per Capita GDP: Europe and United States Europe$1,232$1,974$3,473$4,594$34,848 United States$1,257$2,445$5,301$9,561$48,442

Per Capita GDP by State, 2012 Per capita GDPRank Connecticut$58,9081 Massachusetts$54,6872 New Jersey$53,6283 New York$52,0954 Maryland$51,9715 Alabama$35,62546 Note: 2011 per capita GDP is $5,445 for China and $1,509 for India.

Total Employment of U.S. MNCs and Affiliates of Foreign MNCs

Percent of Population Employed by U.S. MNCs and Affiliates of Foreign MNCs

Public Debt in Advanced Economies Approached Another Record High Gross Public Debt As Percent of GDP

U.S. Debt and Deficits Historical Perspective

When Social Security was created in 1935, it was the definition of a solvent system – life expectancy at the time was 62 years old and the retirement age was 65. Most Americans died before they could retire! Government Policies Need to Adapt

Impacts of Sequestration on Alabama Education and Jobs,,

Impacts of Sequestration on Alabama Military and Law Enforcement $

Impacts of Sequestration on Alabama Public Health $,

$ $

Alabama Personal Income Per Capita By County Note: As of March, 2013

Alabama Unemployment Rate By County Note: As of March, 2013

Alabama Population Top 5 Counties vs. Rest of State Total Population: 4,802,740 Note: As of March, 2013

Alabama Total Employment Top 5 Counties vs. Rest of State Note: As of March, Total Employment: 2,010,669

Alabama Total Unemployment Top 5 Counties vs. Rest of State Note: As of March, 2013 Total Unemployment: 148,300

Alabama Unemployment Rate and Number Unemployed

Alabama Average Hourly Wage

Alabama Local Government Total Revenue 2002 vs US$ 13.9 Billion 2012P US$ 21 Billion

Alabama Local Government Spending 2002 vs P US$ 21.2 Billion 2002 US$ 14.6 Billion

Challenging Local Fiscal Conditions Alabama *: Projected

Sardinia, Italy Loma Linda, California, U.S.A. Large number of people over 100 years!  Physical activity  Strong social networks  Diet rich in antioxidant fruits and vegetables, healthy grains and proteins Extreme Longevity Areas of The World Where People Live Longer Okinawa, Japan

U.S. Aging Population is Growing Fast * * * Projected.

State and Local Pension Funded Ratios Slightly Lower

34 States Had Pensions Funded Under 80 Percent, 2010

Notes: Study is based on 61 key U.S. cities and fiscal year 2009 data. *Birmingham, AL is 20 th out of 61 at 81% funded ratio. A Widening Gap in Cities Pension Funding: Top and Bottom Cities *

Alabama Has Lagged National Recovery So Far

Alabama Is Supported by Reviving Motor Vehicle Industry

Alabama’s Recovery Lags National Rate Due To Housing Drags

Alabama Is Expected To Speed Up and Grow At a Moderate Pace

Job Losses Exceeded National Trends, And Hiring Recovery Is Slower

Recession Took a Bigger Toll on Alabama’s Economy

Employment Expanded More Than National Average, But Is Stagnant

Human Capital in United States 2012 Source: Derived from Kevin Murphy and Federal Reserve, Flow of Funds Q

Going to College Still a Smart Move Americans’ Lifetime Earnings by Highest Educational Attainment, 2011 Bachelor’s degree holders can earn 77% more than those with a high school diploma

Educational Achievement Less than 25% college graduates More than 25% college graduates

Increase education and practical skills Import people with skills Improve health and quality of life so that people are more productive Three Ways to Build Human Capital

Return Preschool Programs Age Job Training School Opportunity Cost of Funds Return on Human Capital Investment “ The rate of return to a dollar investment made while a person is young is higher than the rate of return to the same dollar made at a later age. ” Nobel Prize Economist James Heckman

“ Big gaps in educational attainment are present by age 5. Some children are bathed in an atmosphere that promotes human capital development, and, increasingly, more are not. ” “ By 5, it is possible to predict with depressing accuracy, who will complete high school and who won ’ t. ” James Heckman Nobel Prize in Economics

We need to strengthen the sector’s information infrastructure to enable a system in which information can be shared and used dynamically. Specifically, we need to build on current initiatives regarding data classifications (to create consistent definitions), technical standards (to facilitate data exchange), reporting protocols (to specify what data is reported when), knowledge platforms (to allow data to be productively captured), and governance (to ensure intellectual property rights and privacy concerns are managed, to build consensus, and to drive compliance). Building a Better Tomorrow Requires Structuring Our Fragmented Information Today STATE, COUNTIES & CITIES

This Will Help Information Flow Freely Structuring and organizing data will make information more accessible and useable, increasing the supply and use of information, just as it has in other markets.

Alabama Real Per Capita Personal Income Rank Rank