Saturday, January 30, 2010

Handing Corporations Free Money Doesn't Work? Imagine That!

Texans for Public Justice reports that Rick Perry's "Texas Enterprise Fund" is not holding corporations receiving job grants accountable for failing to meet pledges of jobs created.

Brace yourself for a LOT of quoting:

Run out of the Governor’s Office, TEF has been a centerpiece of Perry’s administration, with the governor often convening media events to unveil TEF awards... As a brutal economic downturn coincides with Perry’s reelection campaign, the governor has not publicly addressed his job program’s mounting woes. Instead, his office has quietly redefined success. When the 2008 recession struck, the Governor’s Office increasingly amended TEF deals to ease the contractual requirements of what a recipient must do to hold onto its public funds... While the governor, House speaker and lieutenant governor all approve TEF grants, the Governor’s Office said it acts alone when amending the deals.

TEF contracts typically permit the state to terminate an agreement—and recover public funds—when a TEF recipient falls woefully short of its initial job target. The Governor’s Office has enforced the death penalty on just two TEF recipients—though many more companies have qualified for it under the terms of their contracts.

Most TEF agreements contain “clawback” provisions that allow the state to impose financial penalties on recipients who fail to meet job commitments... As of October 2009, however, it had imposed $647,100 in penalties on 11 other TEF projects studied here. These penalties recovered just 1 percent of the $61.4 million that TEF has disbursed to these penalized grant recipients.

Even as the U.S. economy tanked in October 2008, Perry convened a meeting on Texas’ economy where he boasted that:

* The state added 252,000 jobs in 12 months; and
* Texas’ 5 percent unemployment rate remained below its level during the high-tech bubble burst five years earlier.

...Texas’ employment growth rate turned negative starting in February of 2009, according to Texas Workforce Commission data... Texas’ unemployment rate has since surpassed its peak during the, hitting 8 percent in November 2009... As the recession took hold, the Governor's Office had to massage data to keep projecting an image of economic vibrancy. A media release it issued in January 2009 claims, "Approximately 70 percent of the jobs created in the U.S. from November 2007-2008 were in Texas." To cook these numbers the Austin American-Statesman revealed, the Texas Workforce Commission ignored all the jobs created by the 36 states that had negative job growth in that period. In fact, if you throw out just 13 more incovenient states, Texas accounted for 100 percent of all new U.S. jobs.

Governor Perry claimed in February 2009 that TEF has created 54,000 jobs since the program’s creation in 2003. Yet more than one-third of the jobs that Perry was counting were job pledges that had yet to materialize. While TEF touts job creation, it awarded $51 million to three recipients to maintain pre-existing jobs. Nor are all TEF-subsidized jobs reserved for Texans. TEF’s $7 million contract with Tyson Foods expresses the “goal (but not requirement)” that 90 percent of the hourly workers at Tyson’s Sherman plant be “Texas residents.” Portugal-based Martifer Energy Systems reported in May that 11 of the 21 workers that it lined up for its TEF-subsidized plant in San Angelo were awaiting U.S. work visas.

. . .

Twelve of the 45 projects reviewed failed to meet their contractual employment commitments, with TEF terminating two failed deals outright. More recipients would have defaulted if TEF had not amended eight contracts to ease their terms of compliance. Nine more TEF recipients are struggling with their job pledges... A $50 million TEF contract suggests that Texas Instruments will create 1,000 new jobs, for example, but imposes no deadlines or penalties for this amorphous target.

. . .

Texas’ Unemployment Compensation Trust Fund is running out of money to pay benefits to all the state’s laid-off workers, including those laid off by companies subsidized by the Texas Enterprise Fund. The irony here is that the state unemployment fund has transferred $161.5 million to Governor Perry’s job fund since the legislature authorized such funding in 2005. The Texas Workforce Commission recently announced that the unemployment-insurance taxes... will almost triple in 2010 to cover shortfalls.

. . .

TEF promised in November 2004 to give (Cabela) from $400,000 to $600,000 to sink $120 million into two superstores in Buda and Fort Worth. The TEF agreement... says that the two new stores will spur “new hotels, entertainment parks, restaurants and complimentary retail stores... expected to total over $250 million and create an additional 2,000 Texas jobs.” Instead, the two stores have yet to provide the 400 relatively low-paying jobs for which they have been contractually responsible since 2005. TEF first forced Cabela’s to repay some of its incentives in 2006, the first such repayment in the program’s history... Cabela’s reported in 2008 that the hyped stores had 241 full-time jobs—159 jobs short of its pledge. To date, the state has recovered $177,288 from Cabela’s. This amounts to 44 percent of the TEF funds disbursed to the company... Due to the economic crisis, the report says, a hotel and two apartment projects slated to be built near the stores have been put on hold.

. . .

Ten months after California hit Hilmar Cheese Co. with a record environmental fine (see “California’s Big Cheese”), TEF awarded the same company $7.5 million in late 2005 to invest $190 million to build a new cheese factory in the Panhandle town of Dalhart. Hilmar officials said they were attracted to Texas by its “common-sense approach to regulation.”

. . .

EF awarded $50 million in July 2005 to ... Lexicon Pharmaceuticals to establish the non-profit Texas Institute for Genomic Medicine... Soon after the Governor’s Office unveiled this deal, the Houston Chronicle reported that three families that controlled 17 percent of Lexicon’s stock had contributed more than $325,000 to Governor Perry. The Institute pledged to create 5,000 jobs by 2015 and maintain them through 2027 ((Texas A&M University) was responsible for 3,384 jobs and Lexicon for 1,616). A&M’s jobs need not be direct hires. It can count any new job for which the Institute is “significantly responsible” through its efforts to attract or create biotechnology and drug-related positions in Texas.

In practice, A&M directed the Texas Workforce Commission to count any new Texas jobs in industries encompassed by the “Governor’s Biotech Cluster.” Data provided by the Workforce Commission indicate that the A&M’s job claims covered two dozen diverse industries from soybean processing to diagnostic imaging centers.” ... A&M ... almost certainly is taking credit for many of the same jobs that the University of Texas’ TEF-subsidized Center for Advanced Biomedical Imaging also claims to have generated.

. . .

TEF awarded $15 million in mid 2005 To Washington Mutual Bank (WaMu) to invest $50 million in a new operations center in San Antonio. The deal calls for the creation of 4,200 new jobs by 2011, including 2,250 at the new facility... During the following year, WaMu cut almost 10,000 jobs... federal regulators seized the $300 billion WaMu in September 2008. Even as this ship was going down, WaMu’s political committee contributed $2,500 to Governor Perry’s campaign in March 2008. Federal regulators immediately sold WaMu to JPMorgan Chase... within six months of this acquisition, JPMorgan announced the elimination of 12,000 more WaMu jobs nationwide...

...WaMu missed its first job target in 2005, when it reported creating 356 jobs instead of the requisite 600. The Governor’s Office wrote WaMu in March 2006, seeking to recover $207,400 for the company’s shortfall of 244 jobs... the Governor’s Office appears to have informally granted WaMu a three-month extension to make up this job shortfall. By 2008 WaMu’s contractual TEF target increased to 2,400 new Texas jobs. The bank reported that it created 2,208 of them—192 jobs short of its target. To derive this number, WaMu reported that it aggregated together its part-time employees’ hours to calculate an unspecified number of full-time-equivalent jobs... WaMu’s TEF agreement specifically applies to “full-time employment positions in Texas.”

And so on, so on, so on, and so forth so on.

So, what have we learned? First and foremost, that the Texas Enterprise Fund is giving free taxpayer money to people who donated to Rick Perry's re-election campaign.

Second, that Rick Perry is deliberately protecting better than half of these companies from being forced to pay back the grants when they fail.

Third, that in most cases the Texas Enterprise Fund payments are being made to corporations which would have done what they would have WITHOUT the payments.

And finally, that a major portion of the current bankruptcy of Texas's unemployment fund can be laid at the feet of looting that money for the Texas Enterprise Fund.

And all of this, mind you, is entirely unaccountable to the people of Texas- the Fund is, for all practical purposes, run solely by the office of the governor. To quote the Dallas Morning News:

"The governor's office has been very deliberate in obscuring the actual jobs that have been created," said Rep. Jim Dunnam of Waco, the House Democratic leader. "It's definitely not lived up to the propaganda."

. . .

Dunnam said the state needs an "independent audit" of the Texas Enterprise Fund, possibly by state Auditor John Keel.

"We need someone with fiscal responsibility to tell us what has worked and what hasn't," Dunnam said.

Keel, who became state auditor in late 2004, didn't return a message seeking comment. An aide said the office has not audited the Texas Enterprise Fund and doing so would "depend on legislative interest."

Bear in mind, though, that Rick Perry is not unique by any means. He's just an example of the fundamental Republican belief that if you cut funding for the poor and helpless and give it to the rich and powerful, then everything will be made better.

And it is made better- for the rich and powerful. For the poor, for the "little people" who pay taxes in Texas, and for the over 8% of Texans now unemployed and with no effective safety net in the state... not so much.

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