M E M O R A N D U M

 TO:                  Lew Ebert, President & CEO
                        Kansas Chamber of Commerce

FROM:            Pat McFerron, Director of Survey Research
                        Cole Hargrave Snodgrass & Associates

RE:                   A Survey of 300 Business Owners/Operators in Kansas
                         Conducted November 29 – December 1, 2004
                         Margin of error: +/- 5.6%

DATE:             December 21, 2004

Cole Hargrave Snodgrass & Associates is pleased to present this summary of findings of its recent study of Kansas business leaders. This is the second survey of business owners and operators that we have conducted on behalf of the Chamber. The previous study, conducted in February 2004, utilized identical methodology and is referenced throughout this summary in order to demonstrate changes in the opinions business owners and operators in Kansas.

When it comes to their business, Kansans are primarily concerned about the costs associated with conducting business. When asked to name their top concern, a third (33%) of those offering a response mentioned taxation. An additional 21% of those answering mention other costs of doing business such as health care and insurance costs, government regulations and mandates and the general cost of doing business. The only other category to reach double digits was concern about the quality of employees – and it barely achieved that status (10%).

The concern over taxation and healthcare is also seen when business people were asked to select from a list their top two concerns. The following table reveals those results.
 

  Today Feb.
Managing health care costs 42% 61%
Lower taxes on business  38% 40%
Stop frivolous lawsuits/Tort reform 21% 20%
Economic incentives for business 15% 10%
Decrease regulation/mandates 13% 19%
Workers’ Compensation 11% 21%
Funding education 11% NA
Limit growth of state government   8%   6%
Unemployment Compensation   5%   7%

As one can readily see, three issues: taxation, health care and tort reform separate themselves from other issues as the top concerns. These issues transcend all geographic regions of the state and penetrate all sectors of the economy.

While it comes as no surprise that business leaders want to lower the cost of doing business, it is somewhat startling that reducing these costs is the preferred economic development strategy – even when compared to government-provided economic incentives or increasing funding for education. When tasked with selecting from three economic development models (reducing the government-driven costs of doing business; providing economic incentives for expansion/location; increasing funding for education), a majority of Kansas businesses select reducing the cost of doing business (52%), while just over a quarter (28%) prefer economic incentives and less than one in eight would rather increase education funding. This represents a statistically significant change from February as the percentage opting for “cutting the cost of doing business” has increased by 7%, indicating that businesses are becoming more and more focused on reducing these costs.

One of the most significant changes in the survey from February is that business leaders are now more optimistic about the direction of the state’s economy than they were at the start of 2004. While still far from a ringing endorsement of the direction of the state’s economy, the fact that 50% believe the economy is moving in the right direction is a significant improvement from the 38% recorded in February. This optimism is strongest in the manufacturing sector (64%) and in the Kansas City area (58%).

While business leaders are more optimistic about the direction of the state, their attitudes toward adding new positions has remained stagnant. The percentage of companies who expect to expand their workforce is virtually no different today (21% increase vs. 4% decrease) than in February (20% increase vs. 7% decrease) indicating fragility in business attitudes toward the economy.

Similarly, Kansas’ business leaders have not changed their attitudes when it comes to comparing the business climate in Kansas to those of other states. While 43% see no difference, almost a quarter (24% -- down from 29% in February) rate Kansas’ business climate as worse than other states, while only one in five (20% -- up from 19% in February) see it as being better. Once again, a distinct difference exists between the Johnson County area and the rest of the state. In Johnson County, 37% see Kansas’ business climate as better than other states – in no other region of the state does this percentage exceed 17%.

While down from 30% in February, more than one in five (21%) Kansas businesses say they would consider relocating to another state because of their dissatisfaction with the business climate in Kansas. Willingness to relocate is particularly high among those in wholesale (33%), professional services (24%) and manufacturing (23%) sectors.