With the Chinese coronavirus pandemic, local government ordinances, worldwide drops in demand, and an ongoing oil price war assailing the Texas economy, many families are looking at cutting back. And when Texans are cutting back on their own budgets, they should expect no less from the state’s elected leaders.
A great place to start would be abolishing the Texas Enterprise Fund.
Created by the Texas Legislature as a “business incentive” with the alleged purpose of enticing companies to move to Texas and provide more jobs in the Lone Star State, the Texas Enterprise Fund’s sole purpose is to take money collected from Texas taxpayers and give it to businesses favored by the state’s elected leaders.
“The fund serves as a financial incentive for those companies whose projects would contribute significant capital investment and new employment opportunities to the state’s economy,” reads the entity’s website.
The “deal-closing” entity has been shelling out cash (over $500 million thus far) and turning hypocrites of Texas Republicans who (rightly) claim government doesn’t create jobs since 2003.
But this fund is different, proponents argue; there are safeguards that prevent public funds from being wasted. That’s true, there are requirements.
Applicants must show that they are a well-established and financially sound enterprise, operating in a mature industry that could potentially relocate to another state or country. To narrow the net further, the final decision is left to the governor, lieutenant governor, and speaker of the Texas House, who must unanimously approve of a project before it secures funding.
But the Texas Public Policy Foundation’s “Policymaker’s Guide to Corporate Welfare” quickly dismantles the argument that these requirements are sufficient safeguards for the public:
“On a surface level assessment, the case in favor of the Texas Enterprise Fund seems to hit all the right notes. That melody, however, quickly turns discordant once all the talking points are pulled back. For example, in September 2014, the State Auditor’s Office released a report that raised numerous questions as to the Texas Enterprise Fund’s management and the standards used to determine awards. The report noted that many early recipients never submitted a formal application, but obtained sizeable grants nonetheless. The Texas Tribune reported that the unrequested amount tipped upwards of $170 million.
“Although time would allegedly smooth over these early examples of mismanagement, the Texas Enterprise Fund suffered from an inadequate control structure throughout its existence. The 2014 audit observed that because of insufficient documentation and monitoring, ‘it was not always possible to determine whether award decisions were supported, or to determine the number of jobs that . . . the Texas Enterprise Fund created.’”
They later add:
“Critics correctly argue that the procedural changes recommended by the State Auditor’s Office would not be enough to overcome the inefficiencies incumbent to the program. By its very nature, the Texas Enterprise Fund must pick winners and losers. It must decide who deserves public investment and who does not. Established companies will always have a step up in navigating that process. In addition, the size of the offered grants means that many companies will apply in the hopes of striking it rich despite knowing that they do not quite meet the standard.”
Their recommendation? Eliminate the Texas Enterprise Fund. And they’re not alone. A later study in 2019 by the Washington Center for Equitable Growth supports their findings.
So, the fund is ineffective and wasteful. How much money could taxpayers save if it were eliminated?
According to Abbott’s office, the fund currently has an available balance of $186,131,624. For reference, that’s more than the state has budgeted out of general revenue for the entire 2020-2021 biennium for the University of Texas at El Paso.
Shutting down the Texas Enterprise Fund would be a major win for taxpayers. And the good news? Texas has done something like it before.
Indeed, Texas has already shuttered one similar giveaway government agency. In 2014, Gov. Greg Abbott campaigned on eliminating the state’s beleaguered Emerging Technology Fund, which spent hundreds of millions and provided little in the way of jobs.
After taking office, he did just that—though he kept the total waste the same by redirecting funds to the Texas Enterprise Fund and the newly created University Research Initiative.
But that doesn’t mean he can’t get it right this time.
Abbott and the Texas Legislature should eliminate the Texas Enterprise Fund and use the savings to provide additional tax savings to everyday Texas families.
After all, this is their money, and in times when hardworking folks are suffering financial hardship, the least the State of Texas could do would be to return their hard-earned money to them.
This article is part of an ongoing series by Texans for Fiscal Responsibility to identify areas the Texas Legislature can to prioritize funding for public needs and property tax relief.
If you have ideas or suggestions of your own, please submit them to us, and we will explore their feasibility and financial effect. You can reach us at [email protected].