National View: Enterprise Florida is a bad investment.
The battle over the future of Enterprise Florida is, in microcosm, the battle over the role of government – what should it be doing, and who should it be doing it for?
Republican Gov. Rick Scott wants $85 million this year to fund Enterprise Florida, the state’s primary provider of incentives intended to lure new business to the state and keep existing ones.
But Enterprise Florida and other state economic development programs are not producing enough jobs or return on investment to justify the expense.
A review of Enterprise Florida Inc. and the Department of Economic Opportunity — the state’s major incentive providers – by the Office of Program Policy Analysis and Government Accountability looked at a decade of data on those two criteria, the most-often cited justifications for giving taxpayer money to private businesses, judging Florida against seven other states.
Florida didn’t fare so well, trailing in overall job growth as well as high-wage job creation.
The agencies are also failing as producers of revenue for the state government.
According to Amy Baker, Florida’s chief economist and legislative coordinator for the Office of Economic and Demographic Research, of the state’s 26 incentive programs, 18 failed to produce enough tax revenue to break even.
The story of Sanford Burnham Prebys Medical Discovery Institute serves to illustrate just about every problem with using taxpayer incentives to lure businesses to the state.
The California medical research institute was given $350 million in taxpayer-funded incentives, in return for a promise to create 303 jobs over 10 years.
Sanford Burnham got the money, but Florida didn’t get the jobs. Only about 240 were created.
Now the state wants some of the money back.
Meanwhile, Sanford Burnham’s faculty are planning to bolt. Predictably — incredibly — supporters of taxpayer-funded incentives are citing the potential loss of those jobs as justification for more subsidies.
This sort of story is indicative of the problem faced by anybody opposing crony capitalism.
Spending state money to entice an enterprise provides a tangible, visible, measurable result supporters can point to — here are the 240 jobs created, the facilities built, the collateral businesses.
It’s much harder for the opponents of cronyism.
Letting markets decide where capital is best invested is a messy affair, with dispersed benefits. The winners are there, but they blend into the background.
The best solution is to get the state out of the subsidy business.
Short of that, state Sen. Jose Javier Rodriguez, a Miami Democrat, is proposing to put some limits on how much taxpayers will be on the hook for statesponsored corporate welfare.
When Enterprise Florida was created, the promise was that private money would follow state money to create a steady revenue stream to fund incentives.
It hasn’t happened. The Office of Program and Policy Analysis and Government Accountability says private-sector money was supposed to account for 50 percent of the budget by 2001. The real number is closer to 15 percent.
Rodriguez proposes writing a 50-50 split into law. If the private sector doesn’t pony up, the state appropriation would be cut by half, or to an amount equal to the private-sector portion, whichever is greater.
Scott has also promised to come up with his own reform proposal, but none has been released yet.
Any reform, though, would continue the practice of allowing the state to allocate capital for private purposes while keeping in place a reprehensible system of privatized profits and socialized losses.
Better to be done with the whole thing.
When Florida’s six-year, $296 million entertainment incentive program expired on June 30, 2016, the howls could be heard across the peninsula.
The Miami Herald editorialized: “Here’s how things have changed. In 2006, Florida ranked as the third-largest film-making state in the United States, behind California and New York. Now, it’s unlikely Florida would even be in the Top 10 since production spending has plummeted from $366 million in 2011 to $175 million in 2015. And that’s in Miami-Dade alone.”
Yes, Herald editorial writers: When you stop transferring money from ordinary taxpayers to billionaires, even billionaires will spend less money (or find another sucker, like California, to con).
That’s a feature, not a bug, and is how allocation of resources should be made: By people choosing to invest their capital as they see fit, without government incentives skewing the decisionmaking process.