McALLEN, RGV – Those pushing to scrap the Texas Enterprise Fund should remember that it was money from this pot that helped entice SpaceX to South Texas, says the president of the Texas Association of Manufacturers.

Tony Bennett visited the Rio Grande Valley recently to speak at a luncheon hosted by the South Texas Manufacturers Association. He said TAM’s top legislative priority next session is to keep alive the Texas Enterprise Fund and the Emerging Technology Fund, both of which are administered by the Governor’s office.

“It is going to be an interesting legislative session because the economic development incentives that have done Texas so well are under attack now by the ultra-Right Wing element of principally the Republican Party,” Bennett told the Guardian.

“We are seeing it at the national level and we are seeing it in Austin. They want us to unilaterally disarm and get rid of many of our incentives. Those two programs (the TEF and the ETF) are at the top of the list for demolition, along with many others that they would want to take a hard and fast look at. How will we compete with other states?”

Bennett said Texas would have had “a hard time” luring SpaceX to the Valley if it were not for the funding available through the enterprise fund. Florida and Georgia were also trying hard to get the commercial rocket launch project and were offering attractive incentive packages.

Tony Bennett, president of the Texas Association of Manufacturers, spoke to reporters following a speech at a South Texas Manufacturers Association luncheon at the McAllen Country Club.
Tony Bennett, president of the Texas Association of Manufacturers, spoke to reporters following a speech at a South Texas Manufacturers Association luncheon at the McAllen Country Club.

In a news release, Gov. Rick Perry’s office said the Texas Enterprise Fund was “instrumental in bringing SpaceX to Texas, with a $2.3 million grant in August that will bring 300 jobs and create $85 million in capital investment in South Texas.” The news release also stated that the State of Texas is offering $13 million from the Spaceport Trust Fund to the Cameron County Spaceport Development Corp. Perry’s press release said the Spaceport Trust Fund was established to help develop the infrastructure necessary for developing a spaceport.

Bennett predicted Texas would lose out on a lot of projects without a strong incentives program.

“They say Texas has the No. 1 business climate in the nation if not the world. This is untested water where we just lay down our fishing bait, so to speak, and get out on the fishing pier and try to catch fish with our bare hands,” Bennett added.

Bennett made his remarks before a state audit came out that was highly critical of the way the TEF was administered. The audit said the TEF doled out hundreds of millions in taxpayer dollars to applicants who never formally applied for funding. The audit was so scathing that the San Antonio Express-News, among others, said the TEF should be abolished.

Here is the SAEN editorial in full:

The Texas Enterprise Fund has long been criticized as nothing more than a slush fund for Gov. Rick Perry. Now, that status is official.

With the Texas State Auditor’s Office issuing a scathing review of the fund’s handling, the most appropriate response from state lawmakers next biennium would be to abolish it.

The fund, which is under the control of the governor’s office, invites quid pro quo. The governor should not be in the business of picking winners and losers in a quest for photo ops.

The report outlines breathtaking sloppiness by the governor’s office as it dished out hundreds of millions of taxpayer dollars to companies.

It doled out $222 million over 10 years to organizations and companies that never submitted formal applications and were not required to create jobs.

This includes $40 million to Sematech, a nonprofit focused on semiconductor manufacturing, and $50 million for the University of Texas at Dallas.

Equally troubling, the governor’s office failed to provide House Speaker Joe Straus and Lt. Gov. David Dewhurst “with complete and accurate information” about potential funding awards, the report states.

While the governor’s office controls negotiations and the granting of funds, the House speaker and lieutenant governor must sign off on final deals.

In its 2013 biennial report, the governor’s office claimed 66,094 jobs created. In fact, this is the number of jobs that grant recipients are required to create, the audit notes. In reality, over the past decade the fund has provided grants of $505 million, generating 48,317 jobs.

Consider the case of Triumph Aerostructures, which received $35 million from the state via a company it acquired.

“Auditors could not determine the actual number of new jobs the recipient created because of weaknesses in the provisions of the award agreement,” the audit says.

Or consider the case of Scott & White Memorial Hospital in Bell County, which received $7.5 million in 2007.

The hospital met its job-creation requirements for the end of 2012, but there were errors that inflated its job numbers. And one requirement was that the hospital had to build a cancer research center. It had already built one in 2005.

At minimum, all of the state auditor’s recommendations need to be adopted for this fund to continue to exist.

A better option would be to simply abolish this slush fund.

Asked to respond to the findings of the state audit, TAM’s Bennett said:

“Each of the State’s incentive programs must be fully transparent and all applicants must follow the rules set by the Legislature, with proper oversight by the respective state agencies. Many of the programs’ rules and oversight requirements have continued to evolve in subsequent legislative sessions and are today much improved from when they first started many years ago. These programs remain a vital tool for Texas’ diverse economy and can provide a high rate of return for our local communities in terms of new jobs and infrastructure, tax revenue growth, and related economic stimulus. Other states and countries are attempting to emulate the Texas economic machine. Let’s fix the problems, not overreact and destroy a proven job-creating model.”

Mike Willis is president of the South Texas Manufacturers Association. Willis said he can understand the philosophical reason for abolishing the enterprise fund. However, he said Texas would lose out on landing big projects unless other states followed suit.

“Philosophically, I understand the argument. Philosophically, yes, I know some people say the Governor should not be picking winners and losers. Philosophically, if we are good we should attract them without giving them any goodies, right? But, as long as everyone is giving them goodies, we cannot just throw up our hands and say, well, maybe some of them will come our way,” Willis said.