Business Climate and Economic Conditions

When it comes to a notably business-friendly environment, Kansas stands out, for many reasons.

But consider this when you ponder business conditions here: Kansans work. According to various federal statistical measures, 66.1 percent of the Kansas population is employed—an impressive 3.76 percentage points more than the national average of 62.4 percent. 

It’s part and parcel of a work ethic that pervades the state. But throw in other economic indicators, and you begin to get the full picture of the Kansas Difference and what it means to business operations in the state. Here are just a few:

• The state’s unemployment rate, even during the prolonged jobless down-turn that began in earnest in 2009, generally runs between 2 and 2.5 points below the national rate. 

• The cost of living index for the state is roughly 91 on a 100-point scale, is lower than most adjoining states and far lower than states like California and New York. With lower operational costs, businesses in the state have a competitive advantage compared to peer organizations around the country.

• The median household income of $64,521—roughly $3,000 more each year than in neighboring Missouri and $7,500 more than southern neighbor Oklahoma—provides a higher standard of living for residents than in higher-earning states like New York and California. That adds up to more satisfied—and loyal—workers.

Another key element of the Kansas business climate is that, as a right-to-work state, only 8.9 percent of the work force has members of a labor union. That’s well below the 10.8 national average and just a fraction of the rates in states like California and New York. 

Energy costs? Again, Kansas beats the averages. Under the vast expanse of farms and ranchlands in southwest Kansas sits the Hugoton fields, a massive geological formation that holds immense reserves of natural gas. Because it is easily extracted and need not be shipped long distances, it can be delivered to companies in the state at substantial savings—more than 40 percent less than customers pay in Missouri, Oklahoma, and Illinois. And electricity costs yield comparable savings relative to businesses in other states.

When you add in a targeted and focused set of state economic incentive programs—the Department of Commerce lists fewer than a dozen, while neighboring Missouri is struggling to streamline more than 60 separate initiatives—you have a built-in platform for business success. The legislative and regulatory environment combines with lower overall tax structures to draw innovation and investment to the region.

That continues to pay off with growth in the life sciences sector—for human health, animal health, plant research, and product development—as well as energy technology, aviation, advanced manufacturing, and agriculture, state officials say. The life sciences component is particularly significant in a changing economy; the manufacturing sector ceded its long-held position at the top of the state’s economic totem pole, and the biotech growth opportunities are unlimited, given that animal health and veterinary science interests present in the region account for two-thirds of a percent of global revenue in that sector.

The state’s tax structure has under-gone multiple transformations over the past decade, first under the tax-cutting banner of Republican Gov. Sam Brownback, followed by significant increases under his successor, Laura Kelly, a Democrat.

Each was working with a Republican legislative majority—and frequently a super-majority. Most significantly, though, the state has entered the first phase of a tiered plan to completely eliminate the sales tax on food.

It’ll take time to see if that change moves Kansas off dead-center in the Tax Foundation’s rankings of state-by-state business conditions; as of this year, it again came in at No. 25. 

The foundation noted Kansas for its graduated individual income tax, with rates from 3.10 percent to 5.70 percent and corporate rates from 4 percent to 7 percent. The state has a 6.50 percent state sales tax rate, a base upon which local taxing authorities often apply a levy of their own. 

Market Overview

From farm to table, from factory to showroom, Kansas producers are the key to a vibrant economy. And there’s much more of it on the way.

Most people would be surprised to learn that airplanes, not wheat stalks, form the backbone of the Kansas economy. In fact, the entire manufacturing sector has for decades been the biggest component of economic output in Kansas.

As big as manufacturing has been in the Sunflower State, it’s about to get bigger.

In just the past year, officials in Topeka have assembled incentive packages worth more than $1.5 billion to lure advanced manufacturing that will support the production of electric-vehicle batteries, computer chips to help protect electronics from electromagnetic pulse, and the testing and production of semiconductors. 

Those projects combined will generate nearly $7 billion in development costs and, when completed, will yield more than 7,200 jobs.

With two main manufacturing centers in Kansas City and Wichita, the state produces all manner of transportation equipment, whether it runs on highways or railways or takes to the skies. Kansas City manufactures passenger vehicles, while Wichita churns out light aircraft and military planes, as well as missiles and aircraft parts. Railroad cars and locomotives are also made here.

Feeding off the raw might of agricultural output, food processing is also a key component of the economy, with flour milling, animal feed production, and a thriving meat-packing sector. Much of that is directly linked to the production of cattle and calves, which accounts for roughly 60 percent of agricultural output—five times the economic impact of the wheat production for which the state is also famous. Kansas is the No. 1 wheat-producing state, pouring out 15 percent of U.S. wheat production, and most of it with the hard-red winter variety.

Farming was the staple of the U.S. economy in the 19th century; manufacturing took over in the 20th. For the 21st century, Kansas is positioning itself as a key player in the life-sciences realm. In 2004, it created a state funding authority for bioscience development and primed that pump with more than half a billion dollars to spur the creation of new companies that could broaden and diversify the economy.

As a result, the state has realized hundreds of start-up ventures, mainly clustered around the research assets of the University of Kansas Medical Center in Kansas City, the largest public university settings being in Lawrence, Manhattan, and Wichita. They deal in each strand of the life sciences triad: human health, animal health, and plant science. 

Perhaps the biggest plum in the life-sciences cornucopia is the National Bio and Agro-Defense Facility, scheduled to be fully operational this year after completion of the facility and certification of safety processes. The $1.5 billion facility in Manhattan, adjacent to the K-State campus, will be the nation’s premier defense against man-made and biological threats to the country’s food supply.

Underpinning all of that is a network of public and private universities with academic programming vital to those sectors and more, major research and acute-care hospitals, outstanding quality of life, and extreme affordability.