Missouri Tax Credit News
Governor NIxon's remarks for Tax Credit Review Commission - September 10, 2010
Gov. Nixon's remarks for Tax Credit Review Commission Kick-off September 8, 2010
Good morning. Thank you for being here today, and for devoting your energy to this time-intensive effort. We are operating on a tight timeline, in a challenging environment.
First, I'd like to acknowledge the diversity of the talent in this room. The Missouri Tax Credit Review Commission is not a homogeneous group, and that's by design.
Each one of you was chosen to serve on this commission because you are an expert in your field, whether you are a legislator or a banker, an educator or a developer. You also were selected so that the collective wisdom of this tax credit commission could be applied to an urgent charge: helping the state of Missouri make wise use of taxpayers' dollars to create jobs, spur economic development and build strong communities.
Specifically, I am calling on you to do three things: determine which of our 61 tax credit programs are generating a good return on investments for taxpayers; determine which tax credit programs are not generating a good return on investment; and provide me with fact-based recommendations for change.
It should be noted here, that I am not asking you to cut off tax credits that have already been approved.
As you may know, we are looking at a budget gap in Fiscal Year 2012 that could exceed $400 million. In addition, nearly $900 million of federal stabilization funds for Missouri will run out at the end of this fiscal year. That means that the next several years will be challenging for Missouri, as we work to overcome the lingering effects of the economic downturn.
Meanwhile, tax-credit spending has continued to climb. It has increased from about 5.6 percent of revenue collections in 2006, to about 8 percent of revenue collections in 2010. That put us in the position of having to cut $125 million in critical services, including education and public safety.
In the 21 months that I have been Governor, I've had to make across-the-board cuts in order to balance the budget, and maintain our spotless Triple A credit rating. Among those cuts were:
- $1.2 billion in spending across state government;
- 2,500 positions on the state payroll;
- Parents as Teachers;
- K-12 education; and
- Higher education.
We also merged the Highway Patrol and the Water Patrol, we renegotiated state leases and contracts to wring out costs, and we consolidated state labs and sold off state vehicles.
In addition, I had to veto or restrict spending approved by the legislature nine times. I took these actions because they were necessary to keep our fiscal house in order. That Triple A credit rating isn't window dressing. It allows school districts, fire protection districts and water districts to save millions of dollars in interest when they need to borrow money for improvements.
And yet, during a time when austerity measures were the order of the day throughout state government, tax credits continued to grow. In fiscal year 2011, we're projected to spend almost five hundred million dollars on tax credits. That's nearly four times the amount we're spending on the 79 sites where our two-year community colleges are offering programs.
In fiscal 2011, we are projected to spend more than twice as much on tax credits as we are projected to spend on all programs through the Department of Health and Senior Services. If the current trend continues, in three to four years tax credit spending will exceed state support for all of our public four-year colleges and universities - including the University of Missouri.
In times like these, everything must be on the table; anything less would be irresponsible.
It's a cliché that we can't cut our way to prosperity. But like most clichés, it also happens to be true. We need sharp, well-honed economic development tools that will allow us to take immediate advantage of opportunities to grow our economy in the short-term, and that will position us for long-term prosperity.
We must use all of the resources that we do have - including tax credits - in a smart, focused and strategic fashion that maximizes the return on investment for taxpayers.
It is my charge to you to produce a report containing a clear reading of the strengths and weaknesses of our current tax credit programs, and an evaluation of their return on investments. Which ones are actually creating jobs, spurring economic development and building communities, and which are falling short of their goals?
I want your fact-based recommendations for changes we all know are long overdue.
This is not the first time I've convened a group of outside experts to advise me on issues of vital importance to the future of Missouri, nor will it be the last.
In August, I convened a summit on higher education. I invited the top brass at all our two- and four-year public colleges and universities to come to Jefferson City to get a thorough briefing on the budget, and to hear from some innovators in their field.
I charged them with carrying out a comprehensive review of all their academic programs. I asked them to make recommendations for increased consolidation and collaboration. And I asked them to develop a new funding model for higher education in Missouri.
I ask you to begin a similar process this morning - with open minds and bold ideas. Complete your review, present me with clear, fact-based recommendations, and I will work with the legislature to implement them.
Missouri is seriously committed to competing, and we will back that up with serious investment. But we need to use our tax credit programs in ways that will create long-term economic development and that will put Missourians to work for many years.
A good example of this type of investment is the one Missouri is making in Sabreliner Corporation. Sabreliner is building a new hangar at the Perryville airport for aircraft maintenance and repair. The company plans to invest $6.7 million in the local economy, and create more than 400 new local jobs over the next five years.
Missouri awarded more than $5 million in potential economic incentives to support the Sabreliner project. That included $3.7 million in Quality Jobs tax credits, which companies can use if they create a predetermined number of jobs that pay good wages, provide health benefits, and meet other criteria. The state's incentive package also includes a $1 million community development block grant. This is a far cry from a give-away or a bail-out: the state is offering incentives to create lasting jobs, boost economic development, and build community.
Some of you here are strong supporters of one type of tax credit program, or strong opponents of others. As you move forward with this review, we can't afford to be reactive. Gather the facts, and let the facts - not personal preference or local pressure - guide your recommendations.
Tax credits work best when they deliver on what they were intended for: putting people to work, boosting development and building strong communities. Clearly, not all 61 of our tax credit programs are delivering on these goals. Some programs will need to be scaled back. Those that are failing outright must be eliminated.
This commission's report will give us the best chance to sharpen our economic tools and effect rational reform now, rather than risk facing irrational reform in January. The stakes are high, and the clock is ticking. Missouri's economy needs your help now. The hard-working taxpayers of our state need your help now. I need your help, now.
Because we're not only competing with Kentucky and Kansas for jobs and economic development. We're competing in a global marketplace. We've shown the world that Missouri is open for business, and we must continue our momentum as we build a 21st Century economy.
We need to be smart, sharp and agile, and make strategic use of all our resources. We need to remain a low-tax state that makes the best investments it can. Investments that make good economic sense in the short-term, and that deliver a solid return for taxpayers in the long-term. I am calling you to begin this vital work today.
Gather the facts on tax credits. Determine which ones are delivering a good return on investment for taxpayers, and which are not. Make recommendations backed up by facts.
I look forward to receiving your report by Thanksgiving. That will give me time to prepare as we begin to finalize our budget for next year and gear up for the next legislative session.
As I look around this room, I see some of the brightest, most successful investors in the state. Each one of you brings a lifetime of experience and knowledge that are essential to this critical endeavor.
True reform will only come with thoughtful, bipartisan effort. We can support public education, protect public safety and create jobs. Quite frankly, we must.
We cannot let the mindless gridlock that has captured so much of public policy invade our state. Now is the time to begin the process that will pay dividends for generations to come. Thank you.
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