From this week's column, some thoughts about incentivising folks
The General Assembly is contemplating a return engagement in Raleigh next week with the intent of taking up Gov. Mike Easley’s veto of an incentives bill for the Goodyear Tire & Rubber Company.
Easley’s objection, which reportedly came as a shocking twist to legislators after a two-year negotiation over the package, was that the threshold for the number of jobs the bill would protect was reduced.
Easley points out that Goodyear could lay off 25 percent of its workforce — 700 or more jobs – and still pocket the cash. In his succinct veto message, the governor does not mince words.
He opens with: “House Bill 1761 would set a dangerous precedent for North Carolina’s economic development policy and is not fair to her taxpayers.”
Backers of the bill, which passed 98-11 in the House and 41-5 in the Senate, dispute the governor’s premise and say the number of jobs was a compromise reached after advocates for a Bridgestone Firestone plant in Wilson raised concerns about the job threshold.
In raising his objection and then offering an alternative plan for helping businesses, the governor has not only inspired the return of the Legislature, he’s also touched off another debate on the value and repercussions of incentives.
“Never in the history of the state,” Easley says in his veto message, “has anyone given a company up to $40 million and allowed them to lay off hundreds of workers.”
Not yet, anyway. But it’s easy to see that in the current (ahem) “pro-business” climate, expanding criteria for payouts to corporations could be a hard trend to stop. It’s also rife with pitfalls, not the least of which is the fact that PAC donations are the mother’s milk of politics.
The intersection of corporate incentives and corporate donations is not a pretty place and can lead to a distorted sense of what constitutes an “incentive” and a need for one.
Goodyear, for instance, just recently announced that it’s paying down nearly $1 billion in debt and planning new plants overseas. The Wall Street Journal’s headline on the story after its latest quarterly report in early August is “Goodyear profit surges on cost-cutting, global sales.”
Still, they apparently would like an average of $5 each from every man, woman and child in North Carolina to help modernize their plant here. They’ll likely get something close to what they want, and in doing so could set in motion efforts by scores of others seeking similar dispensation.
Before we go down that road, though, bring on another debate over the consequences.
If you look at the latest Forbes survey of best places for business, this state ranks very favorably in the business-cost category (we’re 6th), which takes into account taxes and labor and energy costs, and in regulatory environment (we’re 2nd), which measures regulatory and tort climate, incentives, transportation and bond ratings. Where we rank lowest (30th) is in the quality-of-life category, which is an index of schools, health, crime, cost of living and poverty rates.
When the state really ramped up its incentive efforts about ten years ago, they were sold as a necessary evil to preserve jobs and recruit new industries to replace the ones we were losing. A better business climate, we were told, would benefit us all. Since then, incentives have certainly improved the bottom line for corporations in North Carolina, but the ripple effect has yet to reach us all.