The Ownership Imperative: Why States Can’t Afford to Wait

An emerging risk is building in communities across America, as millions of baby boomer business owners approach retirement, and most have no succession plan. What happens to those businesses, their employees, and the communities that depend on them is one of the most consequential and least discussed economic development questions of our time.

The Clinton Policy Institute (CPI) has convened working roundtables bringing together state treasurers, economic development leaders, members of Congress, capital allocators, philanthropic funders, academics, and policy champions to confront this challenge head-on. Real progress is underway, but the goal is to accelerate what must come next.

The Scale of What Is at Stake

McKinsey & Company’s recent report, The Great Ownership Transfer: A New Era of Business Stewardship, puts hard numbers behind what many have long suspected: the United States is entering the largest business transition in modern American history. The businesses at risk include manufacturers, contractors, service firms, and family enterprises that anchor local economies, employ millions of workers, and generate the tax revenue that funds public services.

When these businesses close rather than transition, communities lose not just jobs, but also wealth, anchor institutions, and often their economic identity. The retirement wave of baby boomer owners will not stop at state borders. The downstream consequences, including depleted tax bases, hollowed-out main streets, and workers left with nothing to show for decades of contribution, are avoidable if the right choices are made now.

Employee ownership, through Employee Stock Ownership Plans (ESOPs), worker cooperatives, and employee ownership trusts, offers business owners a viable succession path while giving workers a stake in the companies they helped build. The evidence is compelling: employee-owned firms tend to be more resilient, more productive, and better for workers’ long-term financial security. But the pathway from compelling evidence to standard practice requires capital, policy, and coordination—all three of which are underdeveloped.

Capital Access Is Among the Largest Barriers

The financing needed to support ownership transitions does not yet flow reliably or at the volume the opportunity demands, and the infrastructure to move institutional capital into this market remains nascent. Sellers often need liquidity upfront, and mezzanine financing is especially scarce. Closing the gap requires mapping the full financing continuum, from feasibility and technical assistance through acquisition and post-transition capital, along with innovation in capital design. Philanthropy also has a distinctive role using pooled funding to prove what works and to supplement public and private investment.

What States Are Doing and Why It Matters

States are enacting innovative policies to advance employee ownership. Colorado has built one of the most established state employee ownership offices in the country. Michigan is running a pioneering state-center partnership grant program. New Jersey operates an employee ownership assistance program and has recently passed new financing legislation. Massachusetts has authorized a revolving loan fund dedicated to ownership transitions. Illinois has introduced legislation that would direct up to five percent of the state’s non-pension investment portfolio into an Employee Ownership Development Account, potentially the largest dedicated public investment fund for employee ownership in the country.

These examples serve as proof points for a common insight: when states treat business succession as an economic development imperative rather than a private transaction, they create the conditions for employee ownership to scale.

State treasurers are emerging as an unexpected but powerful lever. With long investment horizons, fiduciary obligations to their states, and existing infrastructure for in-state investment, treasurers in Illinois, Vermont, and New Mexico are exploring how their portfolios can support the capital needs of ownership transitions. This is new territory, but the logic is sound, and the models are taking shape.

Federal Momentum is Building But Uneven

Several bipartisan Senate bills would expand employee ownership. The WORK Act, passed within SECURE 2.0 in 2022, created the first federal Employee Ownership Initiative at the Department of Labor, which Congress has since funded. The challenge is implementation: ensuring those resources reach the intermediaries, owners, and workers who need them, and resolving regulatory impediments that slow ESOP formation. A recent federal report found that only nine states run active employee ownership programs, underscoring how many still need tools and guidance to begin.

Why AI Makes This More Urgent

The convergence of the business succession challenge and the AI transition cannot be ignored. As AI accelerates productivity gains and concentrates economic value, the question of who owns productive assets becomes increasingly central to who benefits from economic growth. Workers who lack ownership stakes risk being left further behind, not just in this succession wave but in every wave that follows.

The AI Workforce PREPARE Act and the AI Horizon Fund both signal that Congress is beginning to grapple with this issue. But the deeper point is structural: if the economy is shifting from labor income to capital income, then the policy response cannot be limited to job retraining. Workers need a voice through ownership. Profit-sharing, equity stakes, and cooperative structures are mechanisms for ensuring that the value workers create returns to the workers who create it.

Ongoing Work

CPI is developing a state implementation guide to help governors, economic development agencies, treasurers, and legislators understand the opportunity in their own states, including the number of businesses at risk, the jobs and tax base that could be lost, and the specific policy and capital tools available to act. This guide is intended to expand the conversation, elevating employee ownership beyond the handful of states currently testing these ideas to a national economic development opportunity.