Making Up Our Minds About The Texas Enterprise and Emerging Technology Funds
by Bud Schauerte

There’s taxpayer uncertainty about the Texas Enterprise Fund (TEF) in just about every nook and cranny of the state. Almost everybody wants to attract economic development and the jobs which could be created by it. But voters are leery about Governor Rick Perry’s idea of giving $600 million in taxpayer dollars to the private sector during the state’s budget crunch.

What is more, the number and quality of the anticipated new jobs are more prospective than they are a commitment.

The fall back position almost all legislators assume in crucial, difficult-to-decide votes like this, is to reflect the sentiments of their constituents. “Vote your district” is the popular idiom. So taxpayer uncertainty on the issue likely will result in votes based upon a legislator’s conscience rather then a district’s consensus.
Reauthorizing the $300 million TEF, and giving birth to a twin $300 million program—the Emerging Technology Fund (ETF)—would retain the state’s leadership as the richest cash-based economic development incentive program in the nation, according to the Austin-based Center for Public Policies Priorities (CPPP).

The proposed transfer of millions of taxpayer funds from public to private use arouses fundamental biases. Expect to see some unusual alliances among legislators when voting begins in the next few weeks.
Conservative and liberal legislators could speak with one voice . . . for or against the plan to make direct cash payments to business corporations. Votes from cost cutters and budget busters could coalesce in support, or be in opposition, to the subsidies.

State and municipal governments, by the hundreds, compete with each other in attracting private sector jobs by doling out financial incentives such as tax abatements, real estate, and cold cash, so says the CPPP.

Critics of the TEF complain that Texas lags far behind other states in requiring proper reporting from grantees on how they used the money, according to the CPPP. Governor Perry, whose office administers the TEF fund, favors voluntary reporting limited mainly to annual salary information.

But now legislation has been filed in the Texas Senate which would change all that. Senate Bills 105 and 277 would mandate broad corporate reporting requirements, jobs with health care benefits, special attention to job creation in high unemployment and low income areas, job training, and small business participation.

Below are extracts from the facts, calculations, and conjectures raised in support of and in opposition to the TEF and ETF. Read and decide.

SUPPORTERS OF THE ENTERPRISE FUNDS BELIEVE….

— that Texas cannot fully compete with other states and municipal governments in attracting jobs without direct financial support of private sector business,
— that Texans will derive more benefits by creating jobs through business grants than from expenditures on, say, education, health care, and other programs,
— that grant recipients who fail to generate high quality new jobs, as expected, will return the grant money, with interest, to the state,
— that providing grant money to attract new businesses is not unfair competition to business interests already established in Texas,
— that the Office of the Governor is fully capable of handling the administrative duties of the $600 million in funds without establishing a new state agency.

OPPONENTS OF THE ENTERPRISE FUNDS BELIEVE…

— that the enterprise funds lack necessary accountability and safeguards, both of which would result in greater public trust and confidence,
— that it is not feasible to project specific numbers of jobs to be created, since the grants may be used for employee bonuses and high tech equipment not directly related to job creation,
— that the state’s necessary spending on vital government functions, including humanitarian programs, already exceeds the funds available,
— that the enterprise fund concept is a violation of Sec.1 of the Fourteenth Amendment to the U.S. Constitution forbidding any state to deprive citizens (Texas taxpayers) of their property without “due process of law.”
— that the current and new enterprise funds will continue to grow and be renewed indefinitely at the expense of other, and more urgent needs.

The most effective way to attract business investment is one seldom mentioned. And that is to create a highly trained workforce through superior education, reform and correction of the out-of-control Texas workers’ compensation program, and making peace with the property insurance industry.

A famous recipe for rabbit stew begins: “Catch rabbit.” Sometime we overlook the obvious.

Bud Schauerte is a surplus lines insurance agent in Austin.

–From the March 2005 Austin Review