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Brinkmanship with jobs
Hutchinson News ^ | 2/05/11 | H. Edward Flentje

Posted on 02/07/2011 8:00:31 PM PST by kathsua

Most Wichita-area residents breathed a sigh of relief last December when former Gov. Mark Parkinson, along with city and county officials, inked a $45 million deal for aviation manufacturer Hawker Beechcraft to maintain 4,000 jobs in Wichita.

The deal was cut after months of community drama in which company officials threatened to uproot the 75-year-old Wichita company and move it, lock, stock and barrel, to Louisiana. The company had also demanded that union contracts be set aside and vowed to send pieces of the company to Mexico. These threats came after Hawker Beechcraft had cut its Kansas workforce by one-third over the prior two years in response to the economic downturn.

Welcome to the new world of economic development - laying brinkmanship with jobs. This tactic is led by a new breed of hired guns, mostly outsiders and consultants who have little or no attachment to the targeted community. On behalf of corporate clients, they specialize in playing states and communities off against each other - reatening state and local officials with plant closures or moves to another state.

In the process, taxpayers, employees and anyone else available are squeezed for all they are worth.

The work of economic development used to be simpler: applying a limited set of incentives to attract new businesses and new jobs or encourage existing businesses to add jobs. In my short stint as Wichita's interim city manager in 2008, I had no difficulty recommending to the city council and state officials a substantial package of incentives for Cessna to build a complete new airplane in Wichita and create 1,000 new jobs. The joint initiative of the State of Kansas, Hutchinson, Reno County and South Hutchinson to land global giant Siemens in Hutchinson with 400 new jobs in a completely new industry of wind energy applied this approach.

But the Hawker Beechcraft deal is different, focused on saving existing jobs, not creating new jobs, and the result diverts millions in limited taxpayer funds, primarily state income tax revenues, from state coffers to a company's benefit, simply to have an existing business stay put.

State lawmakers first opened the door for applying income tax revenues to "job retention" in 2000 under a program called IMPACT (an acronym for "investment in major projects and comprehensive training" act) set a high threshold for eligibility and placed strict limitations on the use of funds.

Since then, lawmakers have repeatedly loosened requirements and given more encouragement to this game of brinkmanship. Originally, the law required an eligible company to make a capital investment of at least $250 million and maintain 1,000 jobs in the state. Today, no capital investment is required, and the job bar has been slashed to 250 jobs in metropolitan areas and 100 in nonmetropolitan areas.

The Kansas Secretary of Commerce has to sign off on these deals and to date has approved only nine, according to Commerce officials. The winners are large corporate organizations with familiar names - Learjet, Sprint, Applebee's Services, Boeing, Goodyear and Black & Veatch, in addition to Hawker Beechcraft - all located in one of three Kansas counties, Johnson, Sedgwick and Shawnee.

But word gets around in the world of economic development, and demands will escalate. The barn door has been flung open as well over 500 Kansas businesses are now eligible for state assistance, a tenfold increase over the year 2000, thanks to lawmakers. The expanding game of brinkmanship with jobs leaves state and local officials more vulnerable and can be expected to divert millions more in state tax revenues from state government's primary obligations in response to the demands of companies that choose to play. Flentje is a professor at Wichita State University and co-author of a new book on Kansas politics.

TOPICS: Business/Economy; Government; Politics
KEYWORDS: hawker; jobs; subsidize; wichita
Flentje teaches city administrators. The whole process sounds like extension of the welfare state to businesses. Businesses that can get government subsidies don't have to worry about operating efficiently.
1 posted on 02/07/2011 8:00:34 PM PST by kathsua
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To: kathsua

In the process, taxpayers, employees and anyone else available are squeezed for all they are worth.

In other words, inefficiency is being squeezed out of the system.

2 posted on 02/07/2011 8:03:58 PM PST by taxcontrol
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To: kathsua

In a contracting job market they would seem to have the upper hand.

We let the landscape become what it is. In order to license or contract in the state or sell in the state, there should be thresholds negotiated. If you draw below that, you can’t sell here. The federal government should be required to award business to US corporations. If the portion located outside the US is too low, they should be ineligible. There should be a way to control this.

What appears to be happening is the businesses dictating to us what they will do. Lack of regulations, lower labor costs and plenty of competition for technology in lower -cost countries by more cash-flushed rival countries hastens the denouement.

It’s not too late, but the sun is setting...

3 posted on 02/07/2011 8:14:04 PM PST by One Name
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To: One Name

I can think of no better way to bankrupt that state than your post.
You sound like Pelosi

4 posted on 02/08/2011 4:32:08 AM PST by bill1952 (Choice is an illusion created between those with power - and those without)
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To: bill1952

You make a complex subject sound simple. You’re a free market guy. So am I, to a point.

Does the federal government spend our money strictly on the free market in your perfect world? What would that do/have done to our military?

Does the state government spend our money, or attract new money by cutting deals for companies that existing businesses don’t have?

Does the local city or county government have any limits to what it does as far as granting TIFs and other incentives for Home Depot (or anyone) who promises jobs against an uneven playing field with local mom-and-pop hardware stores?

Or are all the above “free market players” like you and I? That was the gist of the article.

You sound like a NAFTA supporter. I hear the giant sucking sound and smell the Mexican diesel. Please enlighten me, patriot.

5 posted on 02/08/2011 7:29:30 PM PST by One Name
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