Last week, outgoing House Speaker Joe Straus reportedly sent a letter to Gov. Greg Abbott to express “concern” over the use of one of the state’s prominent corporate handouts known as the Texas Enterprise Fund (TEF).
Created in 2003, the TEF exists “to help attract new jobs and investment to the state.” Businesses applying for TEF money agree to job creation targets and must maintain these jobs for the term of the agreement. State dollars are tacked on top of local tax abatements and sales tax rebates.
Since its inception, the fund has awarded over $600 million, leading to a reported 56,000 jobs. Often, incentives like the TEF dollars account for maybe two percent of a large company’s operating costs.
In the letter, Straus cites a “lack of geographic diversity” in program grants, along with the competitiveness of some projects.
To illustrate, the speaker cited a 2017 Dallas Morning News story analyzing grant rewards from the past three years. Since that story, he says that 10 of 21 project recommendations only benefit the North Texas region, continuing a trend identified in the DMN analysis.
Abbott’s deputy press secretary, Mac Walker, called the claims “bizarre,” pointing out that it was Straus who approved those projects alongside the lieutenant governor.
The fund has frequently been subject to controversy. A 2010 analysis by then-Texas Comptroller Susan Combs identified weaknesses in the program’s transparency and grant management. Then in 2014, a state auditor’s report revealed systemic issues with awards made outside proper channels and lapses in oversight.
With a much more diversified economy that’s less reliant on energy, the state’s low-tax and light-touch regulatory model have done far more to attract a skilled labor force and business. From startups to multinationals, Texas’ offer of a vibrant and reliable business climate is hard to ignore.
In 2015, right after a precipitous (and now sustained) fall in oil prices, and a resultant weak energy sector, the Texas economy added 166,900 new jobs. Fast forward two years and the state gained 306,900 new employment opportunities in 2017 while continuing to lead the nation in state GDP growth.
Back in 2013, then-candidate Abbott agreed that the Texas Model doesn’t rely on handouts, boldly proclaiming, “I don’t want to be involved in government picking between winners and losers,” and recognizing the state’s tax structure as a natural magnet for business.
In his first round of interim charges after being elected, Lt. Gov. Dan Patrick tasked the Senate Natural Resources and Economic Development Committee to evaluate programs like the TEF for reduction or elimination. On the campaign trail, he expressly supported ending the program.
The state’s Republican Party faithful have spoken as well. During the last state GOP convention, 88 percent of delegates voted in favor of platform plank 190, calling for “the Texas legislature to abolish … the Texas Enterprise Fund.”
Inroads were made during budget debate on the floor of the Texas House last session when lawmakers voted to defund the TEF. Those gains were short-lived, with funding being restored during conference committee negotiations following demands from Abbott’s office.
The idea of government using large sums of tax revenue in an effort to create jobs or prosperity contradicts free market values and the principles of open competition.
Instead of complaining about the way it’s operating, The Texas Enterprise Fund should be abolished. Everyone from grassroots conservatives all the way up to the governor (pre-election) seem to understand this. Whether our elected statewide leaders and lawmakers will act accordingly next session is the only question remaining.