LOUISVILLE, Ky. (WDRB) – A bill that could result in Kentucky giving hundreds of millions in additional taxpayer dollars to companies for creating jobs – or even for keeping jobs they’ve already created – is sailing through the state legislature with bipartisan support and little scrutiny.
Senate Bill 246 passed the Senate 37-0 on Feb. 27 with no floor discussion and now awaits action in the House, where it has been assigned to the economic development committee.
“It’s an extremely broad expansion (of job incentives) that deserves more attention and more focus before it passes,” said Pam Thomas, a former legislative staff member who is now a senior fellow at the progressive Kentucky Center for Economic Policy.
Officials with Gov. Matt Bevin’s economic development cabinet say the beefed-up incentives will help Kentucky edge-out neighboring states for “mega” job projects and are predicated on the companies investing at least $200 million in the commonwealth.
“This will put Kentucky in a more competitive position for new investment whether that’s an expansion of an existing employer or landing a new-to-the-state company,” said Jessica Burke, general counsel for the state Cabinet for Economic Development, in an interview Tuesday. “We are competing with not only other states, but other countries, for these projects.”
But skeptics such as Thomas worry about the “direct erosion” of state income taxes, the primary source of payments for the company incentives, and the long-term effect on Kentucky’s ability to fund education and other public services.
The bill would offer more public dollars to companies who invest at least $200 million in a job-creating factory, corporate headquarters or other Kentucky project.
The Kentucky Business Investment program, which is the main way the state offers incentives for new jobs, currently includes “enhanced” benefits for projects in economically depressed counties.
But for projects valued at least $200 million, the bill would make those “enhanced” county benefits available regardless of the location of the factory, warehouse or company office.
The bill would also expand a little-used program under which Kentucky offers tens or hundreds of millions of dollars at a time to companies that already have a large employment base and who don’t necessarily have to create jobs to get the public money.
The Kentucky Jobs Retention Act is currently available only to automobile or household appliance manufacturers, but the bill would open the program to a broader set of recipients, including corporate headquarters, agribusiness and nonretail service or technology companies.
The jobs retention program was created in 2007 to encourage Ford Motor Co. not to shutter its two Louisville assembly plants, and it was expanded in 2012 to include GE Appliance Park in Louisville.
In addition to Ford – which could collect up to $315 million under the program – the only other recipients of “retention” incentives have been Toyota’s auto plant in Georgetown (up to $190 million) and General Electric Co. (now Quindao Haier), which could collect up to $40 million.
The program requires the companies to spend at least $200 million upgrading their factories, and the public incentives are meant to offset a portion of the private investment.
Ford, Toyota and GE told the state they would invest $4.4 billion collectively in their factories, for which the state awarded a collective $545 million.
Under the bill, a broader set of companies would be eligible for those retention incentives, but they must have already been in Kentucky for five years and employ at least 1,000.
UPS, Amazon, Humana, Fruit of the Loom and Lexmark are examples of the roughly 30 companies that would meet the criteria, economic development cabinet official Katie Smith told a Senate committee on Feb. 26.
Burke said Tuesday that no specific case involving a big employer prompted the bill, but a general effort to make the state’s incentives more competitive.
There are no estimates of how much money the bill would cost the state, nor any caps on the incentive programs. The awards are typically paid out not right away, but over at least 10 years.
Economic development officials say every one of the deals is a net positive for the state because the assumption is that the Kentucky would not have the jobs, tax revenue and other economic spin-off benefits but for the incentives.
“The state always comes out far ahead versus not having landed that project,” cabinet spokesman Jack Mazurak said in an email.
But critics say economic incentives are often wasted rewarding companies for what they would have done anyway.
Thomas said the bill is part of a “constant creep” of incremental sweeteners to economic development programs that result in “fewer resources for the commonwealth” in the long run.
“It’s really hard to get people to focus on the long-term impact of these things,” she said.