Hey Governor, Can You Spare $14 Billion?

Jul 12, 2012 by

When debating the proper role of government, many fiscal conservatives say government should collect fewer taxes and provide limited services. What those functions are is a matter of great divergence.

It’s also often said that government doesn’t create jobs that people do. But government does, indeed, create jobs such as teachers, police officers, corrections officers, firemen and other public employees who provide valuable public services to taxpayers.

The point, really, is about generating jobs in the private sector. Fiscal conservatives, like me, believe government should be limited and private-sector jobs should be created by individuals and companies. Neither should government pick winners and losers in the free market by redistributing your tax dollars to favored businesses.

But in their zeal to improve the economy, Florida’s elected leaders are violating the principles of less spending, limited government and redistribution of wealth by offering tax breaks and cash incentives for the promise of jobs.

Florida has at least seven job-incentive programs that offer tax refunds, tax credits or tax exemptions. The state also has at least six programs that offer cash grants to spur investment and create or retain jobs.

Before examining the results of these incentives, the first question should be, is this a legitimate use of tax dollars? Personally, I don’t believe it is. If Florida offers a well-trained workforce, a wonderful quality of life, and a safe and affordable place to live with a balanced regulatory environment, people should want to live, work and create opportunities here. In survey after survey, businesses put these qualities first in determining whether to relocate to Florida.

Besides, Florida’s track record with these incentives has been a mystery for many years. Recently, legislators have begun to demand accountability for outcomes. In other words, are we getting the bang for our buck?

Getting the straight scoop has proved challenging. Information can and has been manipulated to show desired results. As Vice Chair of the Senate Commerce Committee, I had several chances to question top officials in the Department of Economic Opportunity and Enterprise Florida, the agency that keeps the data and produces reports. While fascinating to delve into the numbers, it’s important to understand that a report can be skewed by using a different date as a baseline or by excluding some information. For example, in its 2011 annual report, Enterprise Florida excluded at least 10 companies that had failed to meet performance targets. The devil is in the details.

The Tampa Tribune conducted a three-month investigation of the state’s economic-incentive programs with an emphasis on the cash-grant incentives. It found Florida takes big risks to lure jobs and four of 10 times, it’s a losing bet.

The report found 36 of the 82 corporate-expansion projects in Enterprise Florida’s database — 44 percent — failed to create the promised jobs, spend the agreed-upon capital or hit their timetables.

A few examples:
* Piper Aircraft was given $6.6 million in incentives to deliver 454 jobs. In reality, we lost 200 jobs
* Redpine received $400,000 in tax incentives to create 410 jobs and created zero jobs
* Dayjet received $2 million in incentives to create 595 jobs and initially created 142, but later went bankrupt for the end result of zero jobs

Over the past five years, the largest of the state’s six cash-grant incentive programs, the Quick Action Closing Fund, “invested” $200 million to create 10,176 jobs, falling short of the 17,059 promised. At that rate, it would take $14 billion to create the 700,000 jobs Gov. Rick Scott promised during his campaign. Since taking office a year and a half ago, the governor has tapped the fund 41 times, pledging $45 million to companies.

Of the 10,176 jobs created, another question arises, would these businesses have done the project anyway?

I believe companies invest when there is a need or demand, and build or expand to capitalize on that demand. Critics have pointed to deals that would have happened anyway as “photo opportunities” that allow elected officials to take credit for projects already in the works. Why, then, should they be given dwindling tax dollars needed elsewhere?

And if the state enters into a bidding war to attract companies to Florida, are those tax dollars creating net new jobs or just transferring them from one community to another?

There seems to be a destructive and vicious cycle of escalating tax incentives with no net benefit — like family members bidding against each other at an auction. The winning bidders are the companies; the losers, the taxpayers and those whose jobs disappeared in the other community.

While some success stories exist, history shows that when promises are not kept, the state does not always hold companies responsible for their contractual obligations.

And while important to improve the state’s record-keeping, transparency, accountability and enforcement of contracts, I keep going back to my original nagging thought.

Is it really the function of government to spend your tax dollars to pick winners and losers in the free market? Investing in our workforce, infrastructure and quality of life would be a stronger magnet for job growth.

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