"Texas would seem to be an unlikely state to be second-guessing its use of economic incentives, given its leadership role in creating jobs and exporting goods....But state lawmakers on Wednesday raised the curtain on the topic, hearing witnesses describe incentives as everything from “political pork” to a key difference-maker in recruiting companies and encouraging business expansions."
Click read more for the entire article
Texas would seem to be an unlikely state to be second-guessing its use of economic incentives, given its leadership role in creating jobs and exporting goods.
But state lawmakers on Wednesday raised the curtain on the topic, hearing witnesses describe incentives as everything from “political pork” to a key difference-maker in recruiting companies and encouraging business expansions.
“I don’t think this committee was established to politicize these (incentive) funds,” said Rep. Eddie Rodriguez, D-Austin. “It’s to understand the value to Texas and the actual cost.”
Politics, however, was the subtext of the first meeting of the House Select Committee on Economic Incentives, a 12-member body that will host at least six hearings in Austin, Dallas and Houston prior to the 2015 legislative session.
Kelley Rendziperis, who helps companies select sites in Texas, warned that “political uncertainty” in the Lone Star State already is affecting decisions by companies because of the perception that “some frontrunners don’t like it.”
Gov. Rick Perry, who has championed economic incentives during his 14 years as governor, is leaving office in January, and Lt. Gov. David Dewhurst was defeated in the GOP primary.
There are questions about whether Greg Abbott and Dan Patrick, the GOP nominees for governor and lieutenant governor, will fully embrace economic incentives.
Austin has a significant stake in the debate. The state used the Texas Enterprise Fund to close deals that brought Apple, eBay, Visa and Facebook to Central Texas, as well as to help persuade Samsung to expand its Austin operations. Likewise, since 2005, a quarter of the Emerging Technology Fund’s $200 million has gone to Central Texas startups.
Bill Peacock with Texas Public Policy Foundation, a free-market think tank, and Greg LeRoy with Good Jobs First, a Washington D.C.-based research firm, made the case for rethinking incentives.
Peacock argued that Texas’ good business climate is because of low taxes and fewer regulations than other states. He said Texas would be better off reducing or eliminating taxes for businesses than favoring a few companies with incentives.
“Texas still devotes too much money to economic development spending and corporate welfare, especially at the local level,” he testified. “If we spent less, we’d get more economic growth.”
LeRoy testified that tax rates and tax breaks “almost never determine where a company locates,” and he dismissed competition between states as “interstate piracy” of a minuscule number of jobs.
“Governors should tune that out,” he said.
That would be a 180-degree turn in state policy and — given the reaction of the committee — perhaps unlikely.
Rep. Angie Chen Button, R-Dallas, who leads the committee, disagreed with the piracy analogy.
“I think it’s all about competition,” she said.
Rep. Jason Villalba, R-Dallas, said he might agree with Peacock in principle but reality is different.
“I have to go back to my district and bring jobs,” he said. “We’re competing with states willing to put their money on the table.”
Peacock countered: “Can you imagine how Texas would look to businesses with no business tax?”
LeRoy testified that Texas should invest in training programs that would benefit more employers — not just to recruit one company — in case that company later fails or moves.
But Rendziperis said many of her clients prefer cash grants to pay for in-house training as opposed to sending employees to training at community colleges because they want to protect proprietary information.
She suggested Texas could do a better job of helping companies navigate the confusing process for getting incentives, especially smaller companies.
“We get really excited about Toyota and companies from California” coming to Texas, she said. “I’m not sure we do the best job with smaller companies.”
Austin economist Jon Hockenyos echoed the testimony of several busi ness groups.
“Absolutely do not kill these programs,” he said. “The effect of killing or restricting these programs would send a very negative message.”
CONTACT LAYLAN COPELIN AT 512-445-3617.
Schedule for Select Committee on Economic Incentives:
Aug. 12 in Dallas Enterprise Fund, Emerging Technology Fund
Aug. 27 in Austin Film, gaming, music, special events
Sept. 24 in Houston Energy-related and commercial space incentives
Oct. 15 in Austin Tax incentives, small business
Nov. 6 in Austin Draft of recommendations for 2015 Legislature
Dec. 1 Final Report
Rep. Angie Chen Button leads the House Select Committee on Economic Incentives.