Arkansas Business’ Sarah Campbell-Miller reported on a meeting at the Capitol yesterday worth a broader audience — a debate on the value of taxpayer-financed economic development incentives, or corporate welfare.
The hearing was arranged by Sen. Bryan King,
a lame duck Republican who doesn’t enjoy broad support in the legislature. He has questions, as some conservatives do, about handing out taxpayer money to anyone — poor folks for medical care or rich folks to subsidize private investment. UPDATE: King said Thursday he’s running for re-election after all. He’ll face Republican Rep. Bullet Bob Ballinger in the primary.
Mike Preston, the governor’s first-class-flying economic development commissioner, naturally defended the handouts. Friends of the governor in the Senate, his nephew Jim Hendren and Dave Wallace, also defended the handouts. They credit them for good jobs in their districts. They, of course, mistake correlation and causation. Most studies show that, while corporations happily take any handouts on offer, the incentives are rarely the core reason for industrial location. Cheap labor, land, transportation, cheap energy and other factors are more important.
That was the case made by UCA economist Jacob Bundrick.
Jacob Bundrick, a policy analyst at the University of Central Arkansas’ Center for Research Economics, testified during the hearing. He said research by his team showed that incentives aren’t effective in Arkansas or other states.
Bundrick said the money could be better spent on steps that have been proven to enhance competitiveness, like reforming taxes, licensure requirements and infrastructure.
Preston argued that Bundrick’s team is funded by special interests slanted against incentives and, even if the funds were used for other things that improve competitiveness, it wouldn’t be enough. Incentives are the first thing companies ask about when they meet with him, Preston said.
“Even if everything was perfect — we had no state income tax, no corporate income tax — we still have competitive disadvantages we have to overcome,” Preston said. “This is a drop in the bucket for
us to still be competitive.”
Ah, yes, special interests. Like those that slopped down the legislature on the Arkansas State Chamber of Commerce parking lot at its “Big Tent” event for invited guests Tuesday night. They LIKE handouts. Wouldn’t you?
And, yes, Bundrick is tied to a very special interest, billionaire Koch money. They spend plenty on the political system but, to their credit, their political organization, Americans for Prosperity, claims to oppose corporate welfare payments. (A reader contends the Kochs WILL take state handouts, but not federal handouts. I do know what the AFP espouses at least.) The Kochs underwrote the beginnings of this outfit at UCA and its ongoing support is a secret closely guarded by UCA, funneled through the secret offices of the UCA Foundation (much like UA shields athletic money through the Razorback Foundation.) Still, it’s nice to have some corporate policy debate hat features money on both sides, not just the corporate fatcats versus poor folks, as is generally the case at the Capitol.
The topic of Tuesday’s meeting was King’s proposal to put a constitutional amendment on the ballot in 2018 that would abolish the governor’s economic development slush fund, a $30 million “quick action closing fund” solely under his control, not the legislature. I don’t think the Big Tent boys (and they ARE nearly all boys) would go for that, but it’s at least fun to see King make them hop a bit.