Push to Reform Incentive Programs Gains Strength

The Texas approach to doling out financial incentives to businesses faced fire on multiple fronts Tuesday, adding momentum to calls for broad reform of the state’s economic development programs.

In the Capitol, the Senate Economic Development Committee discussed adding more transparency and accountability to the state’s patchwork of incentive programs and heard support from attendees for such reforms.

“Obviously things have come up that we need to look into as we’re authorizing the money and all that,” committee chairman Bob Deuell, R-Greenville, said after the hearing. "We need to be satisfied that it’s being spent wisely."

Outside the Capitol, a coalition of Tea Party activists called for eliminating several tax incentive programs, including the Texas Enterprise Fund, the Emerging Technology Fund and the event “trust fund” accounts used to lure sporting events and business conferences to Texas.

“It is time to end this type of corporate welfare in the state of Texas,” coalition leader JoAnn Fleming said.

Meanwhile, Bill Gimson, executive director of the Cancer Prevention and Research Institute of Texas, resigned this week as the agency is set to be investigated for a $11 million grant given in 2010 to a Dallas biotechnology firm without the typical review procedures.

“There seems to be more scandals generally in the subsidies program, and scandals bring change,” said Craig McDonald, executive director of Texans for Public Justice, a left-leaning group that has been loudly critical of those programs.

Supporters of reform say they are hearing more interest in changing how the programs work than they did last session, when several members of the Legislature pushed for zeroing out the state’s film incentives program, the Texas Enterprise Fund and the Emerging Technology Fund in the face of a multibillion-dollar budget shortfall. In the end, the programs received millions in funding.

Deuell said various allegations of cronyism and a recent New York Times series on subsidies that focused largely on Texas have brought more attention to the issue. According to the Times report and a related online database, Texas is the largest purveyor of financial incentives to businesses, and the fourth-largest on a per-capita basis. (Disclosure: The Texas Tribune has a content partnership with The New York Times.) 

“I don’t buy everything that’s out there, but I think we need to look into it,” Deuell said. “Put all those questions on the table, see if there’s any validity or not.”

Bill Hammond, president of the Texas Association of Business, told the Senate committee that his organization would be supportive of a mechanism that added more accountability into the programs but was quick to take issue with the Times series. He echoed concerns made by the state comptroller’s office and others that the article exaggerated the level of Texas’ subsidies in relation to other states.

“The whole premise of the article to me doesn’t make any sense and was an unfair criticism of Texas,” Hammond told the committee.

Times reporter Louise Story told the Tribune that she stood by the series and noted that the Times' calculations did not include some property tax abatements that were not publicly available and would have pushed the Texas tally even higher.

Sen. Kirk Watson, D-Austin, said at Tuesday's hearing that he has long supported incentive programs but that the programs need accountability measures to ensure that companies receiving financial incentives are following through on their commitments and that nepotism isn’t playing a role in the awards.

“My position is that those of us who believe in those programs need to make sure that they work,” Watson said.

Patrick Hogan, executive director of the Texas Technology Consortium, a group that lobbies on behalf of technology companies, testified to the committee about creating incentives to persuade technology companies to build more data centers in the state. Upon questioning from Watson, he agreed that the current programs could use more oversight.

“I think it’s a matter of establishing the requirements whether it’s how much spent, how many folks are employed and over what periods of times,” Hogan told the committee. “In the past, we haven’t always tracked that as well as we could have, but I think we could come up with some opportunities to manage to the expectations.”

A second legislative committee that includes members of the House and Senate and members of the public will meet Wednesday to hear testimony on economic development programs. The committee's members include George Brint Ryan, a Dallas-based tax consultant who was featured prominently in the Times series.