Innovations in State Employee Ownership Policy

good morning everybody I'm Matt Helmer I'm the managing director of the economic opportunities program at the Aspen Institute uh just a few quick notes uh one if you have questions or need anything if you can find people with a blue lanyard uh those are Aspen and Rucker staff and they can help you with with anything you need uh two there is Wi-Fi available uh at the Senate guest uh link uh the password is 118 lowercase Congress um I had a bunch of really inspirational and funny stuff I was going to say today in my head at least but uh part of my part of my job here is to kind of keep things moving and make sure we're on time so I want to invite our next panel to come up and start taking their seats our first panel here um but I also do want to welcome you to the C the capital you know this is a special place to be having this event I think on its best days uh the capital shows that we can unite for a common purpose a shared vision um and luckily we see that a lot in employee ownership right we see people coming together to unite around a common vision for where they want to take their company a common agenda for how they take care of one another and as we're going to hear a lot about today it's often more than that it's about taking care of their community and making sure that they live in thriving communities and places um so there's been a lot of progress at the federal level uh on employee ownership over the past five or six years as you all know uh a lot of legislation introduced a good number of it passed uh but there's also been just a tremendous amount of activity at the state level um and I think that's really important and great because often times when we think about the federal government and its role and congress's role um sometimes there are things they can't do sometimes there are things that they aren't well positioned to do and sometimes there are things that maybe they need inspired to do right and that's why we have uh these great Laboratories of democracy uh to provide that inspiration so let's dive into some of that and I'm going to introduce our first panel on state innovation in employee ownership policy I'm going start right here on my left with Carrie sigin uh car's the CEO of Stone Age the chair of the Colorado employee ownership commission and if you're looking for your next great read uh she recently released a book called the ownership mindset a handbook for transforming your life and Leadership uh to the left of carry is uh state Senator Mike padon uh from my home state the most beautiful State uh at least in the lower 48 of Washington uh to the left of uh Senator Paddon is congresswoman Netta Ricks uh she's a state representative of District 40 from the Colorado House of Representatives uh to congresswoman Rick's left is Paul Kinghorn he's the director of the center for business growth and Innovation and advanced Iowa out of the University of Northern Iowa and moderating today's conversation is Zach warb the financial services editor at Politico we had Zach last year kick off the Forum he did a pretty decent job so we thought we'd have him back to give it another try I'm I'm just kidding uh it's great to have Zach back uh he did an excellent job yester uh last year and he was at the top of our mind when we thought about uh this year's Forum as well so Zach I'll turn it over to you thank you and thank you so much for having me back um so uh just a quick introduction on on what I do um I write our daily uh morning money newsletter uh which really tries to capture kind of the the policy and pol political back and forth over finan policy it's kind of like the Nexus of Wall Street meets meet meets Washington and the business Community um and so you can imagine at the federal level there's a lot of friction over that but I think what's really interesting about this topic is there's clearly bipartisan interest in uh Employee Stock ownership and uh it's uh you know as everything's happening at the federal level with the election it's a great time to kind of look at what the states are getting done um so before we kind of dive into the the the weeds of the policy Carrie could you talk a little bit about yourself and your company and your employee stock ownership Journey so I'm going to stand because I can see everybody kind of trying to look over people's heads so I hope you don't mind does that make it easier for people in the back okay perfect all right so Carrie sigin CEO of Stone Age stone age is a small manufacturing company based in Durango Colorado we make industrial cleaning equipment think high-tech squirt guns on steroids so our tools uh and robots are used to clean industrial manufacturing facilities like refineries pem plant plants food processing plants anything that's really dirty that needs to be cleaned so everything that you use on a daily basis the gas in your car the rubber in your tires the plastic in your water bottle that all comes from an industrial manufacturing facility that has to be cleaned and our products um are the ones that clean it we're the leader in what we do and we've been employee owned since the '90s our Founders created a skin in the game stock ownership plan where employees could invest in the company and get a quarterly dividend and it was a really successful program and then uh in 2014 I really push them to consider who actually owns this company you two are in your 60s and you know when something happens to you is it going to be The Machinist who has been here for 20 years who has bought a lot of stock and is the majority owner who loves the feeling of ownership but doesn't really want the responsibility of being the owner and it it forced us to look at a more sustainable model and because we believe in Broad ownership and selling to a strategic buyer or private Equity was not on the table I get I get probably 15 calls a week from private Equity looking to buy stone age uh we're really committed to being in Colorado which sorry Matt Colorado is the best state in the lower 48 uh we are really committed to staying in our community and because we serve we serve heavy industry anybody else wouldn't keep us there they would move us off to Houston Texas and not that there's anything wrong with Houston Texas but part of what makes Stone Age amazing is that we're in Durango it's this beautiful place that just Fosters creativity and and well-being and we didn't want to leave so we formed an ESOP in 2015 uh partial ESOP uh we became 100% ESOP in 2022 when we bought out the rest of our founder shares plus all of our non-founder non- ESOP shareholders and we're really proud of that now our goal is to create a thousand millionaires through our employee ownership program and we're well on our way to doing that the ESOP just in the first 8 years of existence has already provided $15 million worth of wealth um to participants we've paid out over 3 million for departing uh employee owners and in 5 years we expect that to be about $30 million in wealth and we're a small company we have 200 employees we do about $80 million we'll do about $80 million in Revenue this year we're not some big company but that is a tremendous amount of wealth that we are creating for every single person every individual in our company so that's a little bit about Stone Age I'm also the commissioner for the uh Colorado employee um office for I'm sorry the commission for employe ownership and we'll talk a little bit about that later great thank that was a really good illustration of uh what we're going to be talking about here um so uh Senator padon and and and representative Ricks um you know you're you're you're showing that there's bipartisan support for these ideas um so uh representative Ricks could you talk a little bit about yourself and how you came to this topic am I okay yeah so I'm state representative Nita Ricks and I've been serving in the Colorado State Legislature for 40 um 40 years four for four years um I serve on the employee um ownership commission which is something that was started by um our governor Jared pus um in 2019 uh my interest in this is I I also am the founder and the president of the African Chamber of Commerce but it's all about creating wealth for for employees for people creating opportunity better uh benefits um loyalty uh it's you know so there's a lot of good things that can happen when employees feel like they are part of a company that they're owners they are Mo motivated they are more competitive so there's so many different benefits and wherever there's Economic Opportunity I'm there so that's why I'm interested in this topic thank you Senator padon yes uh I'm state Senator Mike padon I represent the fourth legislative district which is uh Spokan Valley right up against the Idaho border and uh very pleased to be here today certainly want to thank ruter and the Aspen in Institute for organizing this and The more I've gotten into it the more I've become a proponent of of esops and employee ownership I really think it is transformative what it can do to our society uh and uh the more esops that we have the more opportunities I mean so many businesses don't even know what an ESOP is or that they have an opportunity or uh especially where you have family run businesses uh and and the Next Generation doesn't want to continue the business I mean this is such a wonderful opportunity so uh we had and thanks to Colorado too for kind of leading the way for us uh so I sponsored cill 5096 uh with um I don't know how how to put this but maybe the two most liberal members of the Senate and the two most conservatives members of the Senate and and the bill amazingly uh passed unanimously and all four committees it was in and off the floor of the House and Senate so that's been great people have different reasons for supporting esops uh a lot of my friends on the other side of the aisle like the ideas of workers being in control we had one that was an organizer uh and negotiator for for Union was one of the sponsors and some of us on the other side like some of the other benefits uh with the research has shown and in the bill itself we mention Rutter's University and the research they did on how these esops outperformed other companies during the pandemic uh so but also uh the impact on the individuals is so fantastic I'm familiar and one of our key uh sponsors uh or supporters of the legislation with schwitzer engineering uh out of pman Washington and uh and they've been a 100% ESOP since 2009 uh and and and you look at at the number of people that have retired as millionaires but you look at the family life of the people that work there and I mean on campus they they have daycare they they have all healthc care you can get right on campus doctors and nurses anyway it's a it's a tremendous story I want to also thank very much Jack moer you kind of honcho this uh uh I didn't really know till today his connection with ruter I thought he was with employment uh ownership America now the Lafayette Institute but we had support from all sorts of different groups the greater Seattle Business Association us Federation of workers cooperatives uh some unions co-ops uh and uh the United Transportation Union the Catholic conference and so they're able to build a consensus and now uh the bill actually uh uh passed in uh 2023 uh and is taking as taken effect part of it the most important part will take effect July 1st which will be the tax credits for those companies uh that are trying to transition to esops and uh there's been approximately $2 million allocated so you could get up to half of your transition costs uh if it's a co-op or a trust that's $25,000 if it's an ESOP it's $100,000 and uh they've hired a a fulltime employee in the State Department of Commerce uh Lena LOL and we're just about ready to get our commission finalized uh like you have in Colorado so uh all that is uh is moving forward and and one of the things we want to uh uh work on uh is a revolving Loan program and our state there's a constitutional prohibition against loaning uh funds so we are uh looking to a couple people including my my congresswoman Kathy McMorris Rogers who chairs the Energy and Commerce Committee here on perhaps uh having a program where where through the federal government there could be a revolving Loan program that would help again we have about 93 I think it's growing all the time people call me they hear the bill and got a call from an organic Landscaping Company up in Redmond Washington and only have 55 employees which I always thought was a little on the low side to get started but they got started and in ESOP and what I found out is folks that do this they want to promote it they're they're kind of kind of like the pastor at church you know they're evangelizing all the time and uh so that's been very exciting well I could go on and on but I we've got a lot of people here to speak and uh be happy to participate further in the panel thank thank you definitely come back on on what's happening in Washington but first I wanted to go to Iowa uh Paul can you tell us a little bit about yourself in your organization sure uh first of all thanks for having me uh and letting us share our story uh so I I direct a center that's specifically uh geared towards supporting small to medium businesses um we use a pretty loose definition of small medium businesses we talk about companies in around 20 employees up to 200 plus employees um as a public in uh institution we're keenly aware that that there are um resources that we have at our disposal that that uh we can bring to bear and and uh we should as a public entity do that but we also recognize that the private sector plays a vital role and we're not trying to um compete with or take away from but rather enhance what they do and so our U Mission and purpose is to work collaboratively uh with the private sector with the economic development uh entities the legislative uh bodies to try and help and support um these small businesses so I come to the program uh wearing multiple hats I've been a small business owner I've managed several firms um so I know what it's like to be in the trenches uh the um what I'd like to refer to as the operational Vortex where you're getting hit every day from multiple directions and and in spite of the fact that you might have had a list the night before what you're going to tackle as soon as you came in uh that list almost never is what you end up doing because you're responding and reacting and uh and a lot of people take great pride and and satisfaction in doing that however the reality that we know um is that those that are always in firefighter mode rarely are the most productive businesses and so a lot of what we do is try to work with these owners to to think more uh strategically about their business about 10 years ago we back up a little bit um about 12 13 years ago our our state legislature uh wanted to be proactive with regard to some of the um resources that they made available to the the ESOP community and so they passed some legislation specifically um earmarking dollars to help support that and I talk about that a little bit more more in detail um my Center uh wasn't focused on that we were focused on ownership transition we knew that the silver sonomi was coming we knew that there was a problem because the vast majority of these business owners had not properly prepared for that transition and they were leaving their companies their employees and especially their communities uh at risk when they um put it off till the end and so uh we tell people the role that we serve predominantly has to do with supporting the economy in doing that we want to make sure that everybody's boat gets lifted hence why the idea of employee ownership empowering employees and their communities keeping those jobs in their Community like Durango just happened to pass through Dango this past summer what a beautiful place up in the mountains there it is um but that's our our focus is to keep them there and keep these um economies vibrant to the extent that they can and then to grow them thank you okay now we're going to dig into the the policy that's taking shape in your States and how you got there so I want to stay with you Paul um you referenced uh some of the legislation that was passed I think about a decade ago but but could you give us an overview of Iowa's Evolution and journey on this on this what what's the narrative what's the arc sure so uh we had a governor uh then Governor Branson who was proactive in thinking about how employee ownership might benefit the states in particular the uh employees and Building Wealth then we had um A legislature that was uh interested in how the state might take a leadership role uh in that respect um it wasn't a slam dunk it took some discussion debate back and forth but eventually uh in kind of a nonpartisan way they came together and they passed legislation that um had a tax benefit um so waved uh the state um capital gains tax and then also set aside a fund of dollars um $50,000 total to $25,000 tranches up to anybody who is looking at the feasibility of uh converting to an ESOP would get a 55 uh $25,000 um offset to that cost and then those that actually went through the process would get another $25,000 um here's the interesting fact that we found out prior to that legislation getting passed there was about 12 or 15 esops a year that were converting to or companies that were converting to an ESOP after the legislation passed there was about 12 to 15 companies a year converting to ESOP legislation and that's where my Center got involved working with our state Economic Development Authority the governor's office and others how can we actually move this in a way way that's productive and and helps with the intent what they're trying to pass thank you um and and Senator Patton I wanted to go back to you and you touched on this a little bit but but could you kind of tell us how you know you know the mo one of the most comprehensive laws on on um you know employee ownership came together recently I mean who's I who who prompted this how how did you negotiate it and and you can you tell us a little bit more about everything it would do yeah it was very unique and I've been in the uh Senate since 2011 so i' never kind of had a bill that all of a sudden all these people come to me supporting the bill you know but uh so it had a momentum uh of its own actually a constituent of mine uh by the name of gerer dor had taken a 400 person mortgage company to an ESOP he'd recently moved to this vcan area from Western Washington and he was very excited about it so he he came to me and then got in touch with Mr Moyer and uh and talk to the other uh sponsors uh the majority leader and in the Senate Cinder Peterson uh was a very accomplished attorney he he even went to Yale you know so uh H but he had he had actually converted a business in into an ESOP he was very supportive Cinder hasagawa was the union organizer and uh a great guy but but really far to the left in our in our Senate and myself and uh uh Senator Chesler who represents the area that uh schwitzer engineering as headquarters so we were the the four but then like I said these other groups the Seattle business uh uh Association which is uh um you know uh has has a unique uh role in Seattle these co-ops from all over the state and it it just kind of grew um and and we had the uh hearings which were were all very uh very positive there were a few little changes on who was going to be on the commission uh but it went through uh we were a little concerned just with the flow of legislation you can have a great idea and they never quite get to it right at the end so uh we did uh or I should say uh employment uh ownership America did at the end hire a contract lobbyist who did a great job getting it over the uh over the finish line but uh the benefits I think sold itself uh to some degree uh and uh and that was that was kind of how it uh all came together we had chamers and and then we had the main business organization of the state found out about it Association Wasing business they they supported it and uh you know it got to the point where we just really didn't have any opposition so were there any challenges I mean is there any major challenges you would flag if other policy makers are looking at this political or policy wise yeah I think a great job was done kind of before the session started with the state agencies too I mean obviously you need the state agencies you're going to make a recommendation to the governor to sign the bill or not or veto parts of it so he worked uh uh with the Department of Commerce they've worked with the financial institutions and uh like I say we're just about ready for the uh blast off and then um uh the different uh different businesses that were uh co-ops or employee ownerships would come everybody had a story and and how that business model how it worked how it was so beneficial for the workers for the company how the money was going to stay local not going to be bought out and moved like you said to to Texas from Colorado so all those things uh uh kind of uh uh came came together and it was you know just a real U pleasure to to have a bill like that you know the whole system really is designed more to kill bills than the pass and I I guess just briefly I mean what are kind of the bullet points so people know like exactly like what it would do I mean any highlights you want to flag for people yeah I I mean I think uh number one that that the workers were going to be better off financially um not only while they were working there but also uh uh in retirement and and schwitzer was probably the prime example they have 6,500 employees engineers and and a lot of other people that work in the manufacturing part of the company um so so they were they were going to be uh better off people like the idea of the money uh the companies staying local they like the idea of building generational wealth of of also uh uh well I I I mean there are just so so many positive uh uh things about the the model and and people realize that a lot of people didn't know about it so I mean our our Department of Commerce will be a clearing house they can offer technical uh advice uh legal or or refer people to where they can get that and learn uh how how to move forward so all all those things were POS but I mean basically it just they thought the lives of our our constituents were going to be better thank you and um so representative Ricks I mean Colorado has been a a Pioneer in this area and passed a few laws so could could you walk us through those and the impact they've had absolutely Colorado is a trailblazer in this space and in 2019 our governor governor Jared pulis um started with a commission to EXP explore the possibilities of employee ownership and pursue employee owned business structures in 2020 he uh commissioned an office and then in 2021 we did a $50 million program which was a tax credit um to help for people who were converting into employee ownership uh businesses and this is open for five years uh it gives you know up to 20% uh at least 20% ownership conversion to access the tax credit and the awards are up to $150,000 for an employee um stock ownership plan the governor then uh also has an appointed Commission in partnership with the governor's office and it works with our office of Economic Development and international trade in 2023 there was more uh legislation which expanded the eligibility of how you qualified so we increased the cap from 100,000 at that time to $150,000 uh for Employee Stock ownership and then for applications that uh came due January 21st um TW January 1st of this year it expands the tax credit to include 50% of the cost of a qualified employee owned business expanding his employee ownership by at least 20% and not to exceed 25,000 then in 2024 this year there's a new bill that codifies the office and makes it permanent it also institutes a new tax credit which will help with keeping up so there's a lot of record keeping that comes with um Employee Stock ownership uh companies and so you have to do these reporting and the companies now can apply for this credit to offset the cost from their bookkeeping and all the recordkeeping that has to be done with the feds one of the biggest things uh with Employee Stock ownership is capital how do these employees find the money to purchase and buy out an uh an owner and so that is been done in Colorado through our collateral business office there's some treasury money that is out there and the treasury I guess is a serves as a collateral for the the loan that these employees take and so that is how we're doing some of that work in Colorado thank you that was a really helpful uh breakdown and I guess you know along the way after all those steps I mean what kind of impacts has Colorado seen from all those policies so so there's over 200 um employee owned companies now in Colorado since the Inception of the commission and the uh employee ownership office we have over 63 conversions that have happened um most of them are in our rural areas we've had some really great stories um and where people who didn't think about this structure before are now looking for the opportunity to offer it to their employees so I'll talk about some of of the great uh stories one of them is Bojo P Pizza I don't know if anybody has eaten Bojo Pizza is a mounting kind of cult thing but it's a great uh story no but it's great um you know beautiful pizza with lots of stuffings and great cheese anyhow um but you have to try it if you're in Colorado but Bojo has been around for over 50 years and so the owner was looking to sell I mean finally and he had been like you know the he's held down the whole town in many many down times and up times and so the idea that he is now selling to and converting into Employee Stock owner plan is amazing because they're retaining employees employees are very very happy to be considered owners and uh it's created a lot of loyalty and the town is thrilled Bojo has expanded not only in Idaho Springs but they're in several different Colorado towns uh in five or six different towns so that is a big deal for them to stay and be still have that Colorado tradition but then also create the wealth for the employees that have helped to grow this company over the 50 years thanks um Carrie just to to stick with Colorado and and and representative Rick's touched on this a little bit so after a company goes through the transition there's obviously various responsibilities can you talk about like what what happens next after you make the move and what policies should be in people's heads on that front absolutely so I'm going to stand up again so you can all hear uh so a lot of focus is put on getting companies over the line which is really important it's very complex uh especially For esops Less so with with co-ops and and employee owned trusts but then a lot of companies are what do I do with this next and to get the true power um and benefit of employee ownership you really have to work on teaching people how to think and act like owners and let's face it most of us don't know how to do that we are taught you know keep your head down get your work done don't speak up your job could be at risk so ownership thinking is not something that is prevalent in most of corporate America and so something that I think is really important that we look at both at a policy level and supporting employee own ownership and and how we fund it uh and in supporting the companies who are who've made that conversion it's what do you do next and that's something that we're really proud of that we've done in Colorado we've created two peer networking groups uh one for executives of of ESOP companies and then we have a a group for co-ops as well and then the same thing for the company's uh Communications committee so individual contributors or managers who are responsible for educating um the employees about employee ownership about their their employee ownership plan and getting people excited about about it and really bought into it and I think this is really important because a lot of companies don't know what to do founders haven't ever had to share the wealth with anybody and haven't had to encourage people to think and act like owners so the support that we're providing at the state level for that experience share this is how we're doing it you know here's here's some cultural things you need to think about some educational things that you can think about both at the executive level and at the at the communications committee that individual contributor level is really really powerful because you want your employees to think and act like owners to take responsibility for taking care of your customers and growing the value in the company it matters to them it's their bottom line too but unless you teach people and you support that it's very difficult to get that type of thinking within your organization so so we started these two groups both within ESOP community and then the co-op community and it's been really really positive at our uh at our I run our um our executive uh uh peer networking group and we have anywhere from 10 to 50 50 uh people every single quarter coming together to share ideas and and to talk about you know what they're doing and and I think that's really powerful the communications committee group they sometimes have you know a hundred people because it's teams that are coming in and who are really trying to figure out how do we make this employee ownership plan meaningful to our employees not just from a wealth creation standpoint but from a I have purpose and meaning in my work because I get to share in the success of the company and that creates happier employees which create happier companies uh which create happier families happier communities it really does have a big ripple effect so those are some of the things that we're doing to support after the transaction and and and and one thing that representative Rick's flagged is is the um the credit for recordkeeping yeah I mean how impactful could that be I mean how big of a cost is that for businesses once they so ongoing so to set up an ESOP it's about three between 300 and half a mill 300,000 to half a million dollars I think there's some people trying to to do it for less but I say you pay for what you get and you do not want to mess up your ESOP uh it can be uh I I know because we did and it's painful to undo some of these things um so it's a significant upfront cost we actually did it twice because we did a partially ESOP and then 100% so we spent a lot of money to make this happen but that's there's the ongoing C so that alone can be a turnoff for people uh and we're really that's why we put these tax credits in place not just for ESOP companies but for any employee owned model uh is to help make that uh easier to access but then there's ongoing costs that are probably anywhere between 25 and $100,000 a year depending on your plan and how many changes you're making and you have to have somebody administer your plan so that they're making sure that the stock is distributed toy employees accurately and so this new bill that hopefully um that hopefully gets passed here in the next few weeks I think a few months at the very least will help um so it will help businesses with those ongoing costs every single year now I think it's only up to esops or employee owned companies uh seven years and younger so like my company wouldn't be able to to benefit from it but that's okay we've got it down but that is a big incentive so you can get the tax credit on the front end and then you can get some of your ongoing cost credited back to you whether it's part of a uh part of a tax break or if you're Subs Corporation and and you don't pay theat doesn't pay taxes that goes back to you as basically a rebate and that's really really powerful that can help some people who are saying I don't know if I can afford this nudge them over the line so thank you yep um and and Paul um you know how should we think about policy to support you know the range of employee ownership models um do you have any thoughts on that uh yeah so I'm glad that that um Carrie brought up uh co-ops and and employee ownership trusts uh when we first went into uh helping and supporting business ownership and the ESOP we realized that not every company out there would be a good candidate right that financially um the owners looking to get out of it a number of factors wasn't a favor a favor able so uh we thought co-ops would bump right up next to it not big enough then then look at a co-op what we've come to discover is it doesn't look like adjacent right next to it but it looks more like a barbell um that there's this in in between space where traditional um ownership transition lives and is very healthy and it's hard to incent an owner um to to go into uh an employee ownership route unless a couple of things uh are are prevalent first one is uh they have a strong desire to protect their legacy right if they want to keep it and then by extension the belief is that employees are more likely to keep the operation similar to what it was before um care about their community so they don't want to move it out of the community and so that does a good job of helping to Anchor it and then uh and then additionally that kind of gets overlaid and sometimes nothing you can do about it there's not a known good third party you know buyer that's out there so they're kind of stuck they don't have a good buyer had a hard time trying to sell the community particularly in rural areas why some much should want to come there so we found that that the co-op model is an attractive model now I want to I gota be careful how I say this because these are very esteemed panelists but I'm not sure that the incentive that the that the um um current owners need is necessarily solely comes down to um either an offset like what we've done in our state to help offset the cost or I I think a tax credit is certainly a better way to go with it here's my point the the fact is not a one of us I doubt would stop and bend over and pick up $225,000 if it was given to us right but that by itself is not really what's driving these people for their consideration um we're not doing the feasibility for them they get outs scop free they have to contribute 50% towards that cost we're not doing the conversion for them they have to contribute towards that cost we're only paying up to $25,000 um so they're going to either do it or not do it based on that what they need more from uh organizations like ours and and others out there um a they need an advocate somebody who can be that that P Piper that's going around sharing educ ating uh helping them to understand what employee ownership is we see it all the time I'm sure the rest of you to some degree of seen this the the concept that we're all going to hold hands sing Kum by a everybody gets a vote the the shipping clerk gets to tell the CEO what to do when to do it and all that stuff that's not how it works well you you could do it that way if you wanted to but I'll tell you that that's not a good way to do it um so so we educate them on what structure looks like we demystify some of these things and these Notions um and so part of it is is helping them to see what the possibility is uh and then working with them as they conceive of because the problem that that's out there right now especially in the co-op world is when they ask what does it look like the answer always comes back depends because it really depends on what they want to do based on their uh um their needs the the passions of the owner the employees what have you the second piece that that is super critical the first one is advocating getting the word out for these resources second one is um there is an educational component um the senior leadership who are now taking over an employee owned operation might be really good at business but they don't necessarily know employee ownership from that perspective and so whether it's um peer groups that are out there whether it's other training now keep in mind these are very profession can be very professional individuals that don't want to be uh uh seen as being dummies when it comes to this so you've got to do it in a way that that um leverages their knowledge their learning from each other so peer groups are an excellent way to do that and then and then secondarily um the own the employees have to learn what it's like to be an employee owner we heard that before um and it's not just get together in a group and let's have these Trust building exercises I mean it could be that but it's got to be more than that right what programs are these companies putting in place so that the employees rise to the top and are willing to uh take on that new mantle you we're working with uh one firm uh that that has u a group that that is their employee um representative I can't remember they have a term that they use for it but but they know that they're not getting the penetration within their uh firm that they need to and so what we've done is we're building a program around those individuals to go back into their respective departments into their respective teams and then take leadership and then bring others forward so it's not just the top down approach from the Senior Management but it's got to come from the ground as well and everybody's got to understand the benefit of employee ownership if you hold out especially in an ESOP that it's this uh future retirement plan for many people that's too far in the future they they cannot connect to that that I mean don't get me wrong no one's going to turn away you know that when it get to that time but but that's not what's driving them so we've got to get it down uh to the Grassroots down to the to the fundamentals and get these people engaged and then do programs that help support as we work around that and then and then again when I say the funding isn't just giving people money away it does have to connect to um how do they go about financing these conversions right because somebody has to pay for it the owner is going to probably take a little bit of the paperb to make the deal work but there's still going to be a gap and so we've got to have funding out there that can support that transition and and drisk it for the lenders yeah and and Paul I want to stick with you and maybe on that last note what what is the role for private sector investors or philanthropy to support employee ownership do you anything you want to flag there um so without getting uh two in the weeds here for some time I've struggled with the the concept of access to Capital especially at the marginalized um communities and when we talk about um the uh the co-op population especially in rural communities it's often very difficult to get uh the funding necessary they don't have the skill they don't have the um you know often the collateral um you know capital needed to to launch it um so as I went down that pathway looking at how do we get better access to Capital I first and foremost um dismiss the uh Equity Market because it's their money they're going to do whatever they want with it we and the private sect or public sector cannot force them to do something with their money we can incent them you know but we can't force them so that's not really a good place to focus on the second place I looked was uh traditional lending and uh I I met met with um our local representative of the small business administration I was talking him through this model and about how you know there's a a um a default rate that's pretty high and how do we de drisk that and and help improve it and and he looked at me he said Paul you're missing something fundamental like I thought this through I thought he said not a single lender out there is writing a a a a loan that they think is going to not pay back if they thought that they were going to get paid back on it they wouldn't write it they wouldn't they wouldn't go through with it right so right from the get-go every single deal that goes across their table they're convinced is going to make them money turns out that that's not the case right and so they're not going to change their risk um profiles they've got shareholders they've got Regulators in the government they're they're going to be hesitant the one group that we can touch the one group of people in that whole equation that we can help out are the business owners and their employees we can teach them what financial literacy is and how to be responsible with their financial uh statements in the operation we can teach them the skills that's necessary to be strategic thinking and and differentiate themselves in the market and all those things that make any company regardless employee ownership A Better Sound operation and the leaders that are leading it and now armed with evidence that their operations are performing that they've got the skills that then the capital flows to them thank you Paul um so I think we've entered our takeaways and and forward-looking section of the discussion so um I wanted to go back to Colorado um and and throw this question out to to Carrie and uh representative Ricks um and maybe I'll start with you Carrie it it what what do you think other states can take away with what's worked or what hasn't worked in Colorado and is there anything more Colorado should do policy-wise yes I think that I think that that following our journey is is is a really good one I think lots of states are doing it and and it's proven effective uh creating the commission having that that support from our governor is huge um Governor polus has sold two of his businesses to his employees so he really understands it and that has allowed the commission I think to do some pretty creative things we don't have much of a budget but I'm trying to change that uh trying to get us a little bit of money to do more events and more education uh but but having this commission where we have such a broad range of people involved in the employee ownership Community across Colorado has been really powerful we've been able to uh partner with um our state agencies to develop these bills uh along with the governor's office and we with having you know businesses on the commission as well as policy makers uh attorneys who know what they're doing Jason I see you over there uh and and uh people who are really passionate about it has made it very successful so having that commission I think is something um that that states can do and then I highly recommend the peer networking groups it's hard you have to have a person who leads it um I I'm in a organization called YPO Young Presidents organization and I get so much out of it and I wanted to recreate that model that they do to do experience share within the state and so you have to have some structure and and someone who's passion passionate around creating that but it really has moved the needle we've had some amazing events that have really solidified Colorado as the leader in what we do not just from a policy standpoint but also from a how are we supporting businesses afterwards so I think creating that you know looking at that legislation that you can pass like if we get this passed where we're where we can support ongoing costs for employee owner ownership programs that's going to be huge um so uh looking at doing things like that with in within uh your States so it's not just about the conversion but it's about what do you do after and and creating that commission or you know some sort of group where you have multiple stakeholders who are bringing their expertise and their passion to the table I think it's what's what's really SE uh separated us from everyone else thank you and representative Ricks any any takeaways for other states or or what do you want to do next sure uh I I would also say that this is a great bipartisan um type initiative you know people can agree on on both sides that business and the benefit of employee ownership is something that we want to push um in Colorado it's been a bipartisan thing um the house building 2023 was 2024 isn't uh carried by you know bipartisan but is had support on both sides of the house um I would also say that you know 60% of our applications come out of the rural areas so for places that are like small towns and the rural um areas is a is a great thing um and also anywhere because you're you're creating wealth um krie me mentioned the peer networking groups um that is some is a working group that looks at collaboration sharing best practices offering Solutions and looking for uh you know solutions for for challenges so that's that's something as well and the funding Colorado right now is looking at the US Treasury funds through the sbci which is the state small credit business commission and so we're we're just testing that out it's going to be activated through our cash collateral support program and we're looking to see if this could be maybe that piece of funding because like it's been said up here most of this uh work starts with the owner carrying a note uh for part of it but then you also have to find some money to buy him out as well and this is a way of collateralizing um through the U US Treasury funds um and federal if there's more Federal funding that could be done U that's something I would push out here for that for these types of uh activities that would really also help um to push this initiative further thank you um so similar question for you Paul um if you were counseling other policy makers in other states I mean what's worked in Iowa what hasn't what do you think Iowa should do next sure um so it turns out there's a little over 20 employee ownership centers of some kind across the country in each of the states in 20 of the states 21 of of the states or something to that effect um I know we were the 21st one to actually formally say we're going to be a center even though we'd been acting like one for for quite some time before that um with the exception of a handful of us the vast majority of them are single person operations some of them are even like part-time you know halftime type roles and if you want to make a splash you cannot just put a toe in the water and then hope and pray that that's good so there needs to be an a concerted effort across the board in the state states to find a partner who has um the connection and the reach within their state you know it's already involved in some deg uh degree doing that and working with that with that audience the the types of small businesses um and then you've got to fund them you got to you got to give them the resource we're not talking about poor tons and tons of money but there's got to be enough there that that can support the Staffing can support the the marketing efforts can support you know the events and networking that's required to make this thing a reality I know that there's some consideration here at the federal level uh in the works act that's got people pretty excited about it um don't want to get into the politics of where it is and why it's where it is but but things like that can really be helpful to kind of Kickstart it and then what we are finding much the same way that the U ESOP Community is very passionate and promoting uh the word out themselves um amongst centers we need to be sharing resources and that's why we think uh organizations like Rutgers does a wonderful job sharing their resources with the community as do other states Colorado certainly is has taken a lead as well and so being there to answer questions guide leverage one another so that it it's not a heavy lift on any one person or one organization but but collectively uh made easier for everybody so getting the word out I told you at the beginning that we had this fundamental funding that was set aside to help change the number of esops and it didn't and the one thing that they missed and didn't take into account is they didn't put the funding behind any program to get the word out and to support the businesses and in the absence of that just dollars or tax credits on a on a page AR aren't sufficient to make the kind of impact that we're hoping to make well thank you that that was really helpful um and and and Senator padon what what's so you've taken this really huge step in Washington state and I want to ask you what should federal policy makers be doing or learning from what you've recently done well um we would be very happy if we could get a revolving uh Loan program started and and like I said that's something we're working on to be supportive uh but also I mean forums like this uh we had a uh Forum with our Spokan Valley Chamber of Commerce where we had a couple of ESOP CEOs speak and and let other folks know about it especially now that we have part of the infrastructure but I think if we can get the revolving loan on the federal side uh that that's kind of one other piece of the puzzle that'll greatly increase the number uh of esops in in our state and if I might just make one comment what Paul had earlier on on employee education uh one of the CEOs of a grocery chain uh he would go to the various stores I think they have 17 stores and he said some of the Senior Management would be a little upset with him because he would be talking to all the employees and he said well that's my constituency those are the people that keep me in my position you know so that was good and then on the another I was shopping once at wico which is an ESOP and going through the line and the Checker uh I you know asked her I said hey how do you like being an owner and she said well I don't know it's only been a year or so I I think it's going to work out and the person right behind me said oh if you're the owner can you take tomorrow off you know but uh of course it doesn't work that way but the education is there and it it it's such a tremendous uh model I I I'm very excited that I think it's going to grow and grow uh not only in our state but across the country and I guess I'll throw uh the same question out to the rest of the panel Carrie representative Ricks Paul anything else that you would like to see happening at a federal level that could support this so I want to give a shout out to um the employee ownership exchange Network and and Steve Thoren the work he's doing and others like that so having a strong um Association at that level that kind of brings people together I know that that's not public sector but but that's essential to getting the word out and then again so that not everybody has to start at Ground Zero there's resources we don't have to have everybody creating their own videos on what employee ownership is and what co-ops are and through that Network we're able to tap into white papers videos other content and now Carrie is known to me we might invite her to be on a on a webinar with with some of our guests that that um can hear the stories firsthand from people like that that are passionate they lived it and and and if somebody has a question about what to do or what to avoid that's where you get the best answers right and and the other thing too um and I'm not sure how we how we do this at a federal level but but we've got to get the professional service providers the accounts the attorne attorneys Consultants wealth advisers the people that are in a position to influence the business owners when they're thinking about that transition to understand what ownership uh employee ownership is elsewise it's too easy for them and too often they take the easy route out which is you don't want to do that it's too complicated it doesn't meet your needs and dismiss it they do it in great part because they don't understand it and if they were to pursue it they'd have to explain to their client that that that's not an area of expertise for them so somehow we've got to get them up to speed uh understanding that uh so that it's not just a public sector pushing it but everybody is trying to to get that tide to rise so there's kind of a whole ecosystem education issue um so on that note I think we're ready to open it up for questions from the audience um um I have a question um about the state of Washington but first I wanted to share I wanted to share first at Dillo in Chicago they started an initiative called manufacturing Renaissance and it's exactly what you were talking about to try and provide all that support services for a business to these small businesses to to be able to um perform better and then and then so on a question about incentives that you've been asking thank you um would be tax incentives and specifically to the state of Washington because we have some clients there uh there was a new tax that was going in in place uh sort of a luxury tax of an extra 7% on uh capital gains so to what extent when you're looking at this is sort of the the tax a motivator or being able to avoid taxes to the selling shareholder um important in their decision yeah and in our state the way it's going to work is the uh it's a B&O tax so it's on Gross so they get a credit against the B&O tax that they pay so they have a reduction in that tax it really won't have anything to do with the Capal gains which by the way that's going to be voted on this fall there's an initiative that got the signature so we'll see if that stays there or not but uh being an O tax which of course you pay whether you're making any money or not on just your volume so uh that that was what was chosen to give the tax credit I can just also I think in in this I mean it's a mechanism to be able to help offset that so for me you know I I didn't get to to participate in the this because we became an ESOP after uh the legislation was passed but to me it's more of a way a mechanism to be able to help off offset the cost so I know everybody looks at taxes differently the way that I would have looked at it as okay this helps drisk uh it rather than it being a motivator to pay less taxes it's it's really okay good this is how I can help fund this ESOP so personally when I talk about the legislation that we've passed in Colorado that's what I talk about it as it's not a reduction in taxes it's a way for you to help fund setting up your ESOP hi I'm Cory Rosen and I'm with the national Center for employee ownership thank you for the work you're doing and there's a lot of people in this audience who I hope are thinking our state should do that so I'm hoping that you will do something to get your state to do that so what I'm looking for from the panel is if somebody here wants to say oh I'd like my state to do what Washington or Colorado did how do you do that what do you do as a citizen to make that happen I would say maybe you start with your Governor or your office of Economic Development and international trade or maybe a state legislator I mean we love to run bills right and looking for ideas so you might take that up to your state legislature and suggest this and talk about the impact that Colorado and Washington and other places have had and why that would be beneficial to your state but it's a really great like I said a great part bipartisan Bill and it does impact and improve the the outlook for workers generational wealth is built there's so many many benefits and I don't think you can go wrong by doing this and there's many many companies uh we did like uh some looked at some data a lot of owners are going to be selling off their companies within the next 10 years A lot of them are in their senior years and they don't know what they're going to do are they passing it on to an employee maybe employee base that would probably be a great thing or are they selling it off to a private individual or if they want it to be a a going concern and continue they might want to do that so I think you know more States need to really look into this policy because it it could change the lives of so many people there in their states yeah that's a great advice representative rcks gave I I think the other thing you might want to do if you're interested in more than one state and some of these uh some of these esops of course operate way more than one state has worked through some of the national legislative organizations or the national Governor's conference but for the legislators there's ncsl the council state government Alec and I'm sure others that uh have task forces to get all the legislators together at their annual meetings and and uh would be a good opportunity there to push the whole concept of esops and employee ownership or your State Chamber of Commerce a lot of State Chamber I mean they're affecting legislation all the time and so if if you don't have uh employee ownership programming within your state I would go to the State uh State Chamber of Commerce and and see I think that's an easy place they're connected they understand they're usually impacting legislation uh they have the contexts that's that's a place for an average citizen to be able to start hey uh so my question's actually um for you Zachary uh I um come from comms I'm I'm the hack in my company I uh one of your uh colleagues are response today actually and my question is a little bit about The Newsroom and how it thinks about these sorts of stories we've heard a lot about how uh you know awareness is really important um and one thing that I stumble upon is that sometimes you know these stories seem maybe worthy but dull they're wonderful stories but are they are they really new so I'd love toar a little bit from you about how you and your colleagues think about the newsworthiness of employee ownership stories in in the states these days yeah I mean for for Politico in in particular I mean uh I mean we have a kind of a niche right it's covering policy and politics so we're really focused on um you know what what policy ideas are percolating who's lobbying behind that kind of what's the debate what's the tension what's the Outlook and but we also do try to talk to the Business Leaders and people on the ground to to learn what it all means um so I think from a political perspective and we have we we not only cover Washington but we have people in States across the country including Florida and California New York and some others and so we kind of have multiple layers and so if if if I guess if you're if you're asking you know how do you get coverage or or you know what is the pitch like it's it's kind of like identifying like who is who is the reporter on that beat and with this it could be you know someone who's covering a state house or is covering tax policy or financial policy um and then but then there's like a whole you know ecosystem of of of media Outlets you know I think of like local business journals for example you know who I I used to work for one of those in in Austin and we're in in that case you're always looking for like you know what is a a great profile of a a business or you know uh uh or or a story like that so hope I answered your question but that's kind of the landscape yeah um thank you for uh this session it's been very interesting my name is Chris Mack and I actually ran a a center like this in Massachusetts some years ago um and I'm curious about whether and Steve storin who's been mentioned uh should have some thoughts about this a stretch goal might be to look at how States um can use their procurement purchasing power to support employee ownership um and it's it's it's wonderful to hear this kind of state government uh level interest it would be great to get states to actually put their money where their mouth is on this there's obviously there's issues about wanting to protect the women owned and minority owned and and different different kinds of special categories that exist right now but is that something that is of interest to you and should we talk about it at the break I know that in our state we work closely with our governor's office um Governor Reynolds and her lieutenant governor Adam Greg had uh launched an initiative called the empowering rural Iowa initiative and they approached us in addition to helping with this this space with employee ownership um to help them think through what kinds of legislation what kinds of uh um policy do they need to put in place going forward I'd not heard that one before and I think it's excellent although I will say that some of the the federal set aside programs that are out there that sound better than in reality don't want to take a mean swipe but but but that is an interesting way to to uh try to to your point put your money where your mouth is uh can I say one other thing here real quick um you asked about federal agencies um we need to get the Small Business Development or I'm sorry the small business administration um to open up and consider co-ops for funding because they will not and do not and and I'm sure they have good reasons but unfortunately when we talk about drisking if we don't have their backing behind it it makes it difficult for some of these loans to go through and then the uh the economic development Administration also can play a significant role they frequently will fund some of the revolving loan programs but if we got more Capital into those programs then then the sky the limit say co-ops can't get 7 loans is that what you mean or correct they're excluded um I would just like so I I I've thought about this a lot I think that including employee owned businesses uh the same as as minority owned uh or women women-owned business should absolutely be considered uh I know it's complicated I think it's something that can happen at the federal level uh but the dod is actually has a pilot program for employee owned companies right now and it's really clunky clunky and they didn't go far enough so it's hard to actually utilize it but they're I think they're being really Innovative in in some of the things that they're trying to do to um to bring employee ownership into DOD contracts so there's lots of information out there you can go read about what the dod is doing if there's businesses in your state who work with the dod who are employee owned you should make sure that they understand this program but we're we're trying to utilize it it's it's not easy it definitely wasn't done right they clearly didn't talk to anybody who runs an ESOP on how this this actually works but uh so hopefully we can influence that but there are some things out uh uh programs out there that are are looking uh at how you can use the the federal procurement process to to look at employee ownership so I think it should be explored certainly at the federal level um I know it would be really complicated to do but you know what isn't in government