9Implementation Roadmap

For the state ready to assemble a comprehensive employee ownership strategy that pairs targeted financing and credit enhancements with technical assistance, outreach, and education, it need not enact everything at once, nor wait for the perfect legislative moment to begin. As described below, there are several components that can be established administratively using authority that agencies already hold.

These can serve as proof points for future legislative asks that deepen the program’s reach.

Statutory and legislative pathways

The clearest administrative pathway for a development finance agency to begin quickly designing its employee ownership strategy are the SSBCI employee ownership use cases. Treasury already permits states to use their SSBCI tranches for majority employee ownership transitions, so the agency administering a state’s SSBCI allocation can adopt the use case within its existing collateral support, participation, or guarantee programs with no action by the legislature. At most, these decisions may require executive or board action.

Several other steps are similarly administrable, including:

• Making employee ownership eligible under existing credit enhancement programs,
• Applying for an EDA grant to capitalize an existing RLF for the purpose of financing employee ownership transitions,
• Redeploying released legacy federal capital for the above purpose, and
• Establishing an office or director by executive order, as Colorado did before codifying them.⁹⁶

The capital-intensive programs (i.e., those that require appropriations or novel investment authority) and tax incentives generally require a bill, and many of the above pathways can also be legislatively authorized if the opportunity arises. Table 13 summarizes the various administrative and legislative pathways for enacting parts of an employee ownership strategy.

The above categorizations represent generalized pathways to implementation, though, of course, these authorities are state-specific: one state may be able to institute a tool administratively where another would require legislative authorization. Administrative approaches to implementation are the fastest avenue to standing up a program, but are often the least durable across administrations, which means they should usually be sequenced towards legislative codification.

Sequencing a comprehensive employee ownership strategy

As with a state’s administrative and legislative authorities to implement pieces of a comprehensive employee ownership strategy, the sequencing of standing up that strategy is entirely state-specific in that it hinges on what a state already has. The practical starting point for any development finance agency or Governor’s office is to map the existing institutions and authorities against the toolkit and identify where certain programs (or elements of programs) may or may not already exist. From there, a state could follow three phases (this is illustrative and not rigid guidance):

1. On-ramp with administrative authorities: Begin with what a state can do administratively, usually the SSBCI carve-in and employee ownership eligibility in existing credit enhancement programs, and occasionally an office/director by executive action and feasibility study/outreach/technical assistance programs. These can happen within a year, generally cost little, and generate a pipeline for states to prove the concept and a constituency of employee-owned businesses, employee owners, lenders, and advisors who become the program’s advocates.
2. Programmatic core with legislative authorities: Once all or some of the above elements are established, legislators should author and introduce comprehensive legislation that achieves some combination of establishing a revolving loan fund, a fund-of-funds, tax incentives, and the permanent codification of governance. This is far easier to do after a state has already provided credit enhancements or technical assistance to employee-owned businesses, as it will have already preserved companies and jobs in legislative districts and built political support in the process.
3. Durability: Once both the administrative on-ramp and legislative avenues have been pursued, the task of the development finance agency and its government partners is to ensure the program is largely self-sustaining through some combination of the sources identified in Chapter 6.

Impact measurement

A state employee ownership program should adopt an impact measurement framework that forces accountability, durability, and storytelling. In making the case for such a program, a state must first understand its total addressable market; that is, the number of firms undergoing business succession over a fixed interval that are candidates to become employee-owned. From there, it should model how each tool may penetrate that addressable market; in the case of an RLF or loan participation, this would include modeling (and later measuring, once implemented) capital deployed, deals financed, and private capital mobilized/crowded into transactions. After several years of program administration, a state can then measure itself against its outcomes, including employee owners created, jobs created or retained, and wealth built, among other metrics. The state will also be able to compare the effectiveness of its toolkit against counterfactual economic development tools (e.g., business attraction incentives) by measuring cost per job, default rate, and loss rate. Table 14 distills the measurement framework and each metric’s purpose.

These metrics should be built into program evaluation from the start and should be calibrated to how states already measure the effectiveness and efficiency of other economic development and development finance programs.

Sources

Source numbering follows the full playbook.

96. Stüven and Helmer, How the Centennial State Is Leading on Employee Ownership (Governor Polis’s 2019 executive order establishing the Colorado Employee Ownership Commission within the Office of Economic Development and International Trade, later codified in statute).