Texas, don't mess with transparency

December 17, 2021

Image of Texas flag and a city in the state behind it.

One of the nation’s biggest corporate welfare programs – known as Chapter 313 for its place in the Texas tax code – is finally on its way to out. As of Dec. 31, 2022, the state can approve no more new deals. 

That’s the good news. It was a bad program from the start, providing in some cases an incentive for school districts to approve costly, lengthy tax breaks for companies. Not only would taxpayers in the rest of the state cover schools’ losses, but sometimes the recipient companies would pile on extra kickbacks. Lawmakers were right to end a program draining billions in current and future state revenue.

But now, Texas Comptroller Glenn Hegar is proposing to slash the amount of information his office publishes on the costs and benefits of the deals, which have largely benefited oil and gas companies. That’s a huge problem, given that the deals on average last 13 years – deals approved in 2022 would go toward 2035 –if there are no extensions (and there often are). 

It’s the wrong move. Good Jobs First today joined a broad coalition across the political and ideological spectrum in calling on Hegar to drop the proposal and continue providing sunshine on this costly program. Here’s the letter we sent to the Manager collecting public comments on the proposed “lights out”:

Dear Mr. Villarreal:

Good Jobs first is a non-profit, non-partisan, research and policy organization that promotes transparency and accountability in economic development incentive programs. Our flagship research projects include evaluations of state and local incentive programs’ transparency practices, as well as Subsidy Tracker, a database of company-specific incentive awards from all states and many localities.

As users of, and secondary publishers of, Texas incentive data, we strongly oppose changes proposed by the Comptroller of Public Accounts that would significantly curtail the ability of the public to evaluate the effectiveness of the Texas Economic Development Act, known as Chapter 313.

Transparency is the cornerstone of effective, accountable economic development. It allows legislators to know if a program delivers on its goals, whether it has a good return on investment, and whether individual deals indicate program deficiencies. Transparency allows the public to assess if legislators and public administrators are good stewards of public funds.

Above all, transparency increases public trust in the government.

During our more two decades researching and publishing about incentives, we have never encountered any evidence that disclosure has impaired a state’s ability to land a deal, or when transparency harmed a state’s “business climate.” We also have never heard from public administrators that collecting incentive data is a cumbersome or expensive task. Indeed, it is a basic, necessary function of “watching the store.”

On the contrary, since the late 1990s, we have seen incentive transparency on the rise, and we are proud to have assisted numerous economic development officials as they improved public access to incentive data.

The Chapter 313 program is being phasing out by late 2022, but it will continue to have a significant impact on the state budget for decades to come. That impact needs to be understood and regularly evaluated. Incentivized companies have job creation and investment obligations to meet. And state leaders need to see Chapter 313’s outcomes over time in the event they debate a successor program.

The Comptroller’s office has proposed to eliminate from Chapter 313’s state-level disclosure page the future costs of deals, lists of past deals, company payments to school districts, and job and investment outcome data. In other words, everything necessary to perform basic cost-benefit analysis would be obliterated — for a program that will likely remain the state’s costliest incentive outlay for many years.

If the changes are implemented, it will be almost impossible, for example, to assess job creation outcomes of companies benefiting from Chapter 313 tax abatements. It is unrealistic to expect the public to try and obtain individual data from hundreds of school districts across Texas when the state can simply continue to collect that information as it has done for years.

The current reporting around Chapter 313 is an exemplary model of transparency. In fact, in our most recent 50-state “report card” study on transparency, Chapter 313 received the highest score out of some 250 programs across the nation we evaluated.

We are currently finishing an update to that study, and Chapter 313 is still among the best-disclosing programs in the nation. We urge you to ensure it remains that way. We would hate to announce that a Texas program fell from first to near-worst.

We strongly urge the Comptroller of Public Accounts to drop this proposal and keep Chapter 313 bathed in sunshine.

Sincerely,

Signature of Greg LeRoy

Greg LeRoy

Executive Director