Delay on incentives worries former commerce leaders

| April 28, 2015
Sharon Decker

Sharon Decker

by Tyler Dukes, WRAL, April 28, 2015.

Former leaders of the state’s commerce agency warn that the uncertainty over North Carolina’s job incentives programs is affecting the state’s ability to compete with the rest of the Southeast.

Gov. Pat McCrory and current Department of Commerce leaders have for months expressed their concerns over the expiration of North Carolina’s largest incentives program at the end of the year. After last year’s measure to extend it stalled, McCrory said in January that he wanted quick action from the legislature to restore the Job Development Investment Grant program “in literally a matter of weeks.”

Past Commerce officials – even those who served under McCrory’s Democratic predecessors – are noting similar concerns over the delay.

“It raises questions in the eyes of those who make those investments as to whether North Carolina is the kind of place they want to look,” said Jim Fain, who from 2001 to 2008 served as commerce secretary for then-Gov. Mike Easley and oversaw the creation of JDIG.

That anxiety, however, may be overblown.

On the scale of the state’s economy, uncertainty over the future of North Carolina’s incentives will have no measurable impact, says Brent Lane, who directs the Center for Competitive Economies at the University of North Carolina at Chapel Hill.

But acting too quickly, he warns, can mean a waste of resources and a failure to help workers.

“Just the idea that the legislature should act in haste on an issue like this of such profound public policy significance, I think that’s poor poker,” Lane said.

A ‘sense of urgency’

For the second time in as many weeks, a state Senate committee on Tuesday plans to discuss a suite of competing bills to extend and alter the JDIG program as well as modify a handful of tax laws.

Although the proposals have a number of differences, the details are less important than the timeline, says former Commerce Secretary Sharon Decker. Now the president of Nuray Media, Decker left in January after serving McCrory for two years and led a push in 2014 for renewed JDIG funding.

“It’s the uncertainty that’s hurting us. As companies are looking at expansion and relocation, uncertainty’s not good for any business,” Decker said. “The sooner they can reach a conclusion on this, the better for everyone.”

Since its high of 11.3 percent in March 2010, North Carolina’s unemployment rate has fallen to 5.4 percent in five years. Decker said the state’s progress toward digging out of the recession may be one reason why lawmakers haven’t acted as quickly as Commerce leaders – both current and former – would like.

“It’s hard to get that sense of urgency when the economy is picking up and jobs are being created,” Decker said. “But it’s easy to see when you’re talking to companies every day.”

But Lane said he doesn’t buy the uncertainty argument for rushing more incentives through.

He said Commerce leaders are probably right that JDIG’s pending expiration is affecting the state’s ability to recruit. But in any year – no matter how many new jobs the Commerce Department has been able to claim were created with the help of incentives – Lane said it’s never been enough to move the needle on the state’s almost $500 billion economy.

“This is a stalking horse,” he said. “The idea that we need to provide certainty to the market so companies we can’t identify – and wouldn’t if we could – can locate here is a poor basis for the legislature’s decision to use and on how to use incentives.”

Lane said the broader discussions he’s heard so far in the Senate are a “small triumph.” But he’d like to see the incentives more closely tied with economic goals, such as fixing the state’s stagnant income growth. Better outcome measurement, he said, would mean more intelligent use of programs that, according to one legislative proposal, would mean a potential $900 million liability for JDIG over 15 years.

“What are we supposed to get for that? What are we buying, and how does that fit into the larger economic strategy?” he said. “You can measure effects of an economic incentive program, but you have to put it in context of the larger economic challenges.”

Decker said there’s already been plenty of discussion of both incentives and the larger effort of how to market the state to businesses. With one flavor of JDIG extension legislation already passed by the state House, she said it’s time for lawmakers to reconcile differences between the handful of bills on the table and move forward.

“I don’t think they’re very far apart, so I don’t see what’s gained by continuing to look,” she said.

As they stand, Fain said he’s wary of some of the Senate measures to change how incentive dollars are divided between rural and urban counties and reduce corporate tax rates. But, he said, without incentives programs, the state won’t be able to compete as effectively with other states for jobs.

The bottom line, he said, is that JDIG must see renewal – and soon.

“Hopefully they’ll get off the pot and do something,” Fain said.

Category: Economy, SPIN Blog

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  1. Richard L Bunce says:

    Government bureaucrats looking out for the government bureaucracy. Just reduce the State and Local tax rates and regulation and new and existing business in NC will be plenty incentivized.