During the last legislative session, the Texas Enterprise Fund was created. The purpose of the Fund was to give the state the flexibility and “deal closing” capability in economic development that had long been lacking. It was the cornerstone of a broad package, part of a series of measures to make Texas more competitive in the intense global race for long-term prosperity. Although the session was certainly contentious on many fronts, this measure passed with broad bipartisan support. It was not about politics—it was about economic opportunity for generations to come.
At the moment, the Enterprise Fund seems to be facing the ultimate irony: it is both incredibly successful and subject to extensive criticism. In fact, it seems as if the more “wins” the Fund chalks up, the more vociferous the outcries become in editorial pages across the state. Let me offer a bit of perspective.
For most of the early 1990s, Texas consistently ranked first or second in the country in new manufacturing locations. Our totals fell precipitously thereafter, as we dropped to an embarrassing 37th by 2000. In the early 1990s, Texas also landed a dozen new locations with investments in excess of $500 million. Between 1996 and the Toyota plant in early 2003, we didn’t land any. The reason was quite simple. Other states had become very aggressive in economic development efforts and incentives; Texas had not.
As growth began to slow and our inability to compete became obvious, the Legislature in 2001 passed a bill requiring the state to conduct a comprehensive economic development study, but appropriated no money for the task. At the request of state officials, my firm performed a very extensive analysis on a pro bono basis. One of the key elements of that study was a benchmarking relative to other states; we discovered that the major difference (among many) between Texas and the “winner” in many location decisions was a deal closing fund. The Governor’s Task Force on Economic Growth reached exactly the same conclusion.
Armed with this information, the Governor and the Legislature created the Texas Enterprise Fund. In its short life of less than eight months, the Fund has already (1) secured a multi-billion dollar investment in a state-of-the-art microelectronics facility (Texas Instruments) with a corresponding commitment to a world-class nanotechnology program at the University of Texas at Dallas, (2) brought thousands of new aerospace jobs from Voight in a consolidation that, without these resources, could well have resulted in the loss of several thousand jobs, and (3) ensured that Sematech would do the prototyping for the next generation of technology products in Austin, rather than New York. There have been several others as well, and there will be more.
These “wins” are important not only for the high paying jobs they bring to Texas, but also for assuring that we will be at the forefront of the next generation of products. If we are going to achieve sustainable prosperity, we have to be a player in emerging industries. There is no other way.
Critics say that we shouldn’t be giving incentives at a time of pressing needs in other areas. If this were a debating society or a scientific laboratory, I would be in total agreement. In the “real world,” however, such incentives are critical. Our seven-year drought while others prospered is compelling evidence on that score. To abandon this effort would be to eat our seed corn. A stagnating economy would certainly compound problems such as unemployment, underinsurance, and inadequate funds for schools.
They also say that maybe we should dribble the money out over time in small doses (which is not competitive) or conduct all of the negotiations in public (which is impossible in the site selection process). We should certainly spend scarce public resources wisely, and the Fund is doing just that. Every outlay has to be approved by the top three statewide officials (not exactly a bunch of spendthrifts), and they have established an extensive set of parameters. In fact, those in the economic development community will tell you that the Fund needs more flexibility, not less.
In short, the Texas Enterprise Fund is working and needs to be maintained, expanded, and renewed. It is the primary catalyst in moving Texas once again to the head of the pack in economic development and job creation. Most important of all, “it ain’t broke—so don’t fix it.”