Lawmakers in Connecticut and a half-dozen other states are considering legislation that would end subsidies, loans and other incentives to lure companies across state lines.
The proposed interstate compact would halt the sort of poaching that has left Connecticut battling neighboring states for businesses and jobs. Connecticut has spent millions of dollars in loans and subsidies to attract new business in recent years, but it has also seen the departure of General Electric to Boston.
Rep. Jason Rojas, D-East Hartford, said halting costly and sometimes fruitless competition among states could open new routes to attract business “rather than just giving away significant amounts of money.” Businesses would prefer the state spend money on transportation, education and workforce training, he said.
Rojas and other lawmakers will introduce legislation that would join Connecticut to an interstate compact when the General Assembly convenes Feb. 5. They outlined their plan at a press conference Tuesday.
Rep. Josh Elliott, D-Hamden, cited the nationwide competition among states in 2017 to bring Amazon’s second headquarters as an example of a highly profitable company seeking government subsidies, low-interest loans and other inducements in return for well-paid professional jobs and a headquarters. Connecticut unsuccessfully pitched the Hartford-East Hartford region and Stamford area.
“Amazon was making states bid against each other and upwards of $1 billion was going to go to subsidies,” Elliott said. “We know these subsidies aren’t necessary. They’re a race to the bottom.”
In grants and loans, Connecticut made available $1.3 billion from 2009 to 2018 through programs supporting manufacturing, small businesses and other “specialized funding sources,” according to the Department of Economic and Community Development. An additional $5.1 billion in leveraged funds were invested in Connecticut’s economy as a result, the agency said.
David Lehman, commissioner of economic development, said incentives are not “key to growing the economy.” Transportation, a strong education system, attractive cities and other factors do more to promote economic growth, he said.
Gov. Ned Lamont has frequently said the incentive policy used by his predecessor, Gov. Dannel P. Malloy, is not his way of doing business. Lehman said bonding for DECD programs is down nearly 70% in the past year.
“We already are reducing the cost and risk to the taxpayers,” he said.
Economic development policy has been a fierce topic of debate since General Electric Co., Alexion Pharmaceuticals Inc. and other high-profile companies left Connecticut. Although other issues, such as GE’s search for software designers and engineers in Boston, were major factors for the conglomerate’s exit, Republicans criticized tax policies of Democrats in control of the legislature as the culprit.
A multi-state agreement would not necessarily bar future deals such as the one negotiated by the Malloy administration allowing United Technologies Corp. to use tax credits to update its research center and expand Pratt & Whitney, both in East Hartford, and a $220 million state aid package committing Sikorsky Aircraft to build heavy-lift helicopters in Stratford and broadening its supplier base.
Rojas and Elliott said exceptions would apply, such as limiting deals to out-of-state companies rather than those already operating in state.
Florida, Hawaii, Illinois, New Hampshire, New York and West Virginia are considering proposals ending what critics call “business poaching,” according to the two legislators.
“The compact would outlaw the worst form of corporate welfare: poaching an existing business in another state with taxpayer money,” according to the Coalition to Phase Out Corporate Giveaways. Legislation would forbid states from offering taxpayer dollars to induce a business in another state that has joined the agreement to move to the “offering state,” the group said.
When companies say they will move, “states are kind of stuck,” Rojas said. The compact would provide an alternative to competition with other states to keep or attract business or act unilaterally against inducements, making states vulnerable to poaching by states that have not agreed to the no-poaching policy, he said.
Nathan Jensen, a professor in the Department of Government at the University of Texas-Austin, said it’s difficult to judge the success of anti-poaching agreements because few are in force. And he said defining poaching isn’t easy, questioning if it would apply to a business expansion and not just a new business relocation.
“The claim is we give these incentives because we have to,” Jensen said. “They could unravel with a single defection.”
Stephen Singer can be reached at ssinger@courant.com.
