Time Magazine 6/27/11The Cracks in Rick Perry’s Job-Growth Record(snip)
Perry’s biggest tool for job raiding is controversial. Beginning in 2003, he persuaded the Texas legislature to give him control over several massive, largely unsupervised funds that provide subsidies to businesses that move to Texas. His office proudly claims that the two biggest funds have created more than 54,000 jobs in the past eight years. “They’ve been immensely important to our state’s economic development,” says Catherine Frazier, Perry’s deputy press secretary. “This is about attracting jobs and making Texas a destination for companies to relocate and expand.”
The largest fund, the Texas Enterprise Fund, was created in 2003 and has awarded some $412 million in subsidies to companies nominally to create jobs. A December 2010 analysis by the Texas comptroller found that $119 million of that money went to companies that didn’t deliver on the jobs they promised. The governor’s office took back only $21 million from those underperformers, often choosing to define downward the job-creation requirements. GOP Senator Kay Bailey Hutchison, whom Perry beat in last year’s GOP gubernatorial primary, called revelations that taxpayer-funded contracts sent money overseas to create jobs “disturbing” and “unacceptable.”
The second major fund under Perry’s control, the Texas Emerging Technology Fund, has also proven controversial since its creation in 2005. It has spent some $320 million on tax credits and other subsidies for high-tech companies willing to move to Texas. An October 2010 investigation by the Dallas Morning News found that $16 million of that money was awarded to companies with investors or officers who are large campaign donors. Perry denied that politics influenced the awarding of money from the funds. He succeeded in fending off efforts to cut his massive subsidy fund budgets in the legislative session that ended last month, but the legislature did impose new controls and oversight on the funds.
Even those subsidy-chasing companies that do produce jobs don’t necessarily create long-lasting ones or increase a state’s overall prosperity. While 18% of all jobs in the U.S. failed to last the five years from 2001 to 2006, 26% of jobs created through interstate moves failed during the same period, according to researchers Jed Kolko of the Public Policy Institute of California and Donald Walls, a consultant and researcher.
Professor Michael Porter of Harvard Business School says tax-credit funds used to lure jobs from one state to another often “ultimately don’t support long-term prosperity” because companies that can move easily “are looking for the best deal, and when the deal runs out, they move,” taking their jobs with them. Anti-corporate-welfare advocates, like Greg LeRoy, executive director of the Washington-based group Good Jobs First, say the tax-credit game is worse than zero sum, because when a company gets a tax credit to move to a new state, the departed state loses jobs, while the destination state’s residents get stuck with higher taxes or worse services.
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