With days left in the state legislative session, the Texas Senate has passed an expansive corporate welfare scheme to replace a similar program that expired at the end of last year.

House Bill 5 by State Rep. Todd Hunter (R–Corpus Christi) would create a new statewide economic incentive program to replace the state’s controversial Chapter 313 program, which ended after lawmakers declined to renew it during the 2021 legislative session.

Earlier this year, Texas Scorecard published an extensive investigation examining the widespread corruption associated with the Chapter 313 program.

Although both the Republican Party of Texas and the Democrat Party of Texas oppose corporate handouts in their platforms, the bill’s Senate sponsor, Charles Schwertner (R–Georgetown), has said “the majority of the Legislature does see value in a job-creating, economy-growing incentive program.”

A priority of House Speaker Dade Phelan (R–Beaumont), HB 5 was approved by a vote of 120-24 in the House and 27-4 in the Senate.

Like Chapter 313, HB 5 allows businesses to apply for a 10-year abatement—or reduction—of school district property taxes, which the state pays instead. To receive an abatement, the business would have to show it plans to hire a certain number of employees earning above-average wages for its particular industry.

Unlike the previous incentive program, however, HB 5—which Schwertner has titled the Texas Jobs, Energy, Technology, and Innovation Act—requires not just the applicant and school district to agree to the abatement, but also the comptroller, governor, and a seven-member legislative oversight committee composed of lawmakers from the state House and Senate.

This committee would have the final say on approving proposed projects and would provide periodic recommendations to the Legislature regarding which types of projects should be considered.

During discussion of the bill on the Senate floor, Schwertner acknowledged “there were abuses of the prior 313 agreement,” specifically regarding “kickbacks” to school districts from businesses that didn’t meet jobs and wages requirements. He added, however, that “there are more teeth regarding the enforcement of those provisions” in the new program.

He insisted that although critics on both sides of the aisle have called HB 5 “corporate welfare” or a “taxpayer giveaway,” it would “allow for Texas to continue to have the economic miracle that we’ve enjoyed over the last 20-plus years.”

State Sen. Drew Springer (R–Muenster) agreed, arguing that “we do have to compete” since “we live in Texas, not Utopia.”

State Sen. Paul Bettencourt (R–Houston), however, suggested that the state’s high property tax rates are more of a turnoff to investment in the state than the current lack of an economic incentive program.

A number of Democrats objected to provisions of the bill that excluded renewable energy projects from program eligibility while exempting “dispatchable electric generation” projects—like natural gas power plants—from the jobs and wages requirements.

Schwertner explained that renewable energy projects have been “part of the abuse,” arguing they “added to the unreliability and variability that we have in our electric grid,” especially during severe weather events.

Schwertner also said exempting the oil and gas industry from some of the program’s requirements would spur the development of more reliable energy production and is ultimately for “the greater good.”

“The oil and gas industry in the state of Texas has been an economic miracle for Texas,” he said. “I think it should be nurtured and defended and protected.”

State Sen. Nathan Johnson (D–Dallas) said a lot of companies that took advantage of Chapter 313 would have gone forward with their projects even if the incentive wasn’t available, and he expressed concern about continuing to facilitate wasteful spending with the new program.

“We gave away a lot of money that we didn’t need to,” he said.

To address this issue, he offered an amendment stipulating that project approval is contingent on the applicant showing that the abatement is “the determining factor” in deciding whether to make the investment.

Despite the criticism, several senators said the “bill is in good shape,” and State Sen. José Menéndez (D–San Antonio) argued it has the “appropriate guardrails” to protect taxpayers’ money.

Schwertner said he tried to “thread the needle regarding what is the right incentive program” while admitting “there is no perfect program.”

“People that want this tool in the toolbox will be happy,” he explained, contending that “people that are completely against any sort of program will recognize this is a far better economic incentive program [than] the old 313 project was.”

Schwertner said HB 5 would likely be further refined in a conference committee of lawmakers from both the House and Senate.

Sunday, May 28, is the last day for either chamber to approve legislation negotiated in a conference committee.

Darrell Frost

Since graduating from Hillsdale College, Darrell has held key roles in winning political campaigns, managed a state legislator's Capitol office, and taught at a classical charter school. He enjoys participating in outdoor activities, playing the harmonica, and learning about the latest scientific developments.