News: CJ Exclusives

Senate Panel Pulls Incentives Bill

Expansions of JDIG program runs into tough questions from Democrats, Republicans

A bill that would expand funding and the number of projects that North Carolina commits for economic development was tabled in a Senate Finance Committee meeting Tuesday.

Both Democrat and Republican senators doubted the worth of the Job Development Investment Grant program in what participants said was a lively debate. Some of the committee’s 34 members thought the legislation might have failed in a vote before its sponsor, Republican Sen. Fletcher Hartsell of Concord, asked that the bill be set aside.

“I think it was going to go down if it hadn’t been withdrawn,” said Sen. Richard Stevens, R-Wake.

The bill to “Extend and Expand JDIG” would authorize a committee of state officials to enter into more economic incentives agreements with businesses that move to, or expand in, North Carolina. The program is scheduled to end Jan. 1, 2005, but the proposed legislation would extend JDIG until the end of 2008.

Current JDIG law allows the state to provide tax-rebate incentives for 15 businesses per year, with up to $10 million per year for the entire program. The new legislation would increase the potential number of projects to 25, at a cost of up to $18 million annually.

Doubters included members of both parties who oppose incentives on principle, but also those who believed the program hadn’t been sufficiently evaluated to warrant an extension.

“I think we ought to be looking at the JDIG in a long session,” said Sen. Daniel Clodfelter, a Mecklenburg Democrat who is a vice chairman of the Finance Committee. “It’s still fairly new. We’ve got time on this.”

The General Assembly is engaged in its election-year “short session,” which usually lasts only about two months and is likely to adjourn around July 1. Lawmakers conduct longer sessions in odd-numbered years.

Some senators, though, would be just as happy to let the JDIG program fade away. “I think we’re just putting Band-Aids on our problems,” said Sen. Robert Pittenger, R-Mecklenburg. “We need to structurally change our tax system in the state.”

Pittenger recently introduced a bill that would cut corporate and individual income tax rates, which would correspond with cuts in Medicaid fraud and with the elimination of vacant state employment positions.

State Sen. Ellie Kinnaird, D-Orange, also questioned the value of JDIG in Tuesday’s committee meeting. She said she was told that only two projects were “on the ground” operating under the program — one each in Wake and in Mecklenburg counties, the state’s two largest and wealthiest counties.

She also said that incentives programs exist only as a pot of money for businesses to use to reduce their bottom-line expenses. She cited a recent presentation made by an Ernst & Young official and a former Boeing Co. official, posted on the Carolina Journal website, which teaches companies how to extract incentives from state governments.

“What [corporations are] doing is they’ve already decided where to go, and while we’re at it, (they say) ‘why don’t we take a few million (dollars) of taxpayer money?’” Kinnaird said.

She also cited a study on incentives published by the Kenan-Flagler Business School at the University of North Carolina at Chapel Hill, which said economic incentives were less important to businesses than education, a well-trained workforce, and cultural amenities.

“That’s why they don’t go to the Global TransPark,” Kinnaird said, referring to the industrial center in Kinston that has been heavily subsidized by the state, yet has no major business occupants. “And we have starved our community colleges.”

“I don’t think [incentives programs are] anything the state wants to be in the business of any more,” Kinnaird said. “It hurts the taxpayer.”

Stevens said the bill could show back up in committee with more modest changes, with perhaps an extension until mid-2005 so the legislature can re-assess the program during the long session. But he said JDIG remains in doubt because of the questions of so many committee members.

“It won’t come back until they’re answered, I’m sure,” Stevens said.

Paul Chesser is associate editor of Carolina Journal. Contact him at [email protected]