Perry’s ‘Pay-to-Play’ Job-Incentive Funds Miss Targets in Texas

Rick Perry touts Texas as home to more new jobs in the past decade than any other state. Yet the taxpayer-funded programs he has used to lure employers and finance expansion often fail to meet employment goals, according to officials and activists.

While basing his bid for the Republican presidential nomination on limited government, the governor, 61, oversees state job-stimulating funds that have provided almost $633 million to companies including retailers Cabela’s Inc. (CAB) and Home Depot Inc. (HD) and agribusinesses such as Tyson Foods Inc. (TSN) A Perry spokeswoman says the recipients have created almost 58,400 new jobs. A watchdog group says two-thirds missed their targets.

Democrats including Jim Dunnam, a former state representative from Waco, also knock Perry for using the funds to reward contributors and for delivering taxpayer money to businesses as schools and health care are shortchanged. Some Republicans have faulted the programs for inadequate disclosure and not reporting on jobs actually created.

“It’s legal plunder,” said state Representative David Simpson, a Longview Republican backed by Tea Party activists.

“You can’t avoid the appearance of impropriety when you take money from everyone and you give it to a select few,” said the first-term lawmaker. He opposes using tax money for business and said he voted against the school funding deal Perry signed.

Texas Governor Rick Perry says job creation makes him the most qualified candidate to challenge President Barack Obama next year. He also has attacked Obama’s own economic stimulus program. Photo: Chip Somodevilla/Getty Images Close

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Texas Governor Rick Perry says job creation makes him the most qualified candidate to challenge President Barack Obama next year. He also has attacked Obama’s own economic stimulus program. Photo: Chip Somodevilla/Getty Images

‘Pay-to-Play’

Funding recipients have included Washington Mutual, now a JPMorgan Chase & Co. (JPM) unit, and Countrywide Financial, now owned by Bank of America Corp. (BAC) Perry’s campaigns received at least $8,500 in donations from both political action committees and/or from individuals tied to Washington Mutual and $7,000 connected to Countrywide, state Ethics Commission records show.

“It’s a pay-to-play deal, always has been,” said Dunnam, the former representative, who was on a legislative committee that oversaw development funds.

Applicants for development-fund money “are thoroughly vetted and go through a rigorous review,” Lucy Nashed, a Perry spokeswoman, said by e-mail in response to questions about the connections between recipients and political contributions.

“The governor is interested in finding the highest and best use of the state incentive funds,” Nashed said.

Sanderson Farms

Sanderson Farms Inc. (SAFM), a Laurel, Mississippi-based poultry producer, received $500,000 in fiscal 2007 to help build a plant in Waco. Joe Sanderson Jr., chairman and chief executive officer, gave $100,000 to Perry’s campaign committee in two $50,000 contributions, in 2009 and 2010. Sanderson didn’t respond to a request for comment through an assistant.

Donors to the governor have benefited in other ways. Dallas billionaire Harold Simmons, who has given more than $1.2 million to Perry campaigns, won permission to build a radioactive-waste dump in West Texas over the objection of state environmental regulatory employees worried about possible water contamination.

“It seems to help if you donate to Perry,” said Craig McDonald, executive director of Texans for Public Justice, a nonprofit political-watchdog group. “There’s a correlation between those who pay and those who get from Perry.”

McDonald’s Austin-based group tied $17.1 million in Perry political support to 921 appointees, or their spouses, on state boards and commissions, in a September 2010 report. The donations were made from 2001 to June 2010, the group said.

Perry, who became governor in December 2000 when George W. Bush resigned ahead of his presidential inauguration, says his job-creation record makes him the best-qualified to take on President Barack Obama in 2012. Perry also has attacked Obama’s economic stimulus as unfocused government spending.

Governor Oversees Funds

Under the governor, the state created both the Texas Enterprise Fund in 2003 and the Texas Emerging Technology Fund in 2005. Perry directly oversees both, as well as a third set up to aid film and television production. Such programs steer public money into businesses and promotions for sports events, as a way to boost the economy.

For example, the state plans to provide $25 million a year for a decade to bring Formula One car racing to Austin, through a program to support special events. The same fund has been tapped to promote the National Football League’s Super Bowl championship in Dallas and college basketball tournaments. B.J. “Red” McCombs, a co-founder of broadcaster Clear Channel Communications who backs the Formula One project, has given more than $170,000 to Perry’s campaign committee, the records show.

Assessing the job-creation results from the incentive programs is difficult, critics including Dunnam and McDonald say. The funds haven’t had to report the numbers of new positions produced by recipients, and there are few independent studies to compare with figures provided by Nashed.

Job Creation

The enterprise fund has spurred the creation of 58,382 jobs by investing $435.6 million, said Nashed, the governor’s spokeswoman. Perry has referred to it as the largest “deal closing fund” in the U.S.

“We’ve worked hard here in Texas to create an economic environment that attracts jobs and allows employers to risk their capital and receive a good return,” Nashed said. “Each of these jobs represents a livelihood for a Texan and their family, and helps strengthen the state’s economy.”

Only 11 of 50 recipients of enterprise fund money that had promised to create jobs by 2009 met their goals, Texans for Public Justice, the political-watchdog group, said in a September 2010 report, among the most comprehensive available. It said more than 10 percent of the 50 projects examined were terminated, 14 managed to get their agreements amended to cut employment targets and 13 simply broke their pledges. The remainder fell somewhere in between.

Conflicting Figures

By the end of 2009, companies receiving enterprise fund money listed 22,544 jobs created in Texas, according to the report. An additional 8,147 were tied to three projects that also got cash from the program. The study said Perry claimed in January 2010 that the fund had spurred the creation of 54,600 jobs.

“The jobs are just projected jobs,” said McDonald. “Our contention is that they weren’t created and may never be created.”

Since December 2000, Texas employers have added more than 1 million nonfarm positions, even as the U.S. total was little changed, according to Labor Department figures. By 2008, when state payroll employment peaked at about 10.7 million, Comptroller Susan Combs, also a Republican, said six state economic-development programs including the funds overseen by Perry were responsible for less than 1 percent of those jobs.

Unknown to Lawmakers

The number of new jobs resulting from development-fund projects remains an unknown to lawmakers.

When enterprise fund employees appeared before the Legislature, they often couldn’t or wouldn’t testify about the positions actually created, said Dunnam, a lawmaker from 1997 to early this year. Instead, the workers talked about jobs promised to result from incentive money.

“They didn’t want us to know what the actual number of jobs created was,” said Dunnam, a member of the economic development committee that oversaw the funds. “You’d just get the runaround.”

When Simpson, the Longview Republican, tried to cut off the incentive funds in May, Perry called him into his office for a meeting. Perry was “sensitive” to criticism of the programs, the lawmaker said.

“He took offense at my call for more transparency,” said Simpson, 50. Nashed, Perry’s spokeswoman, declined to comment on the meeting.

Auditor Seeks Transparency

Simpson wasn’t alone in seeking changes in reporting from the emerging technology fund.

Closed-door funding decisions should be more transparent, Auditor John Keel said in a report in April. He also said the state needed to improve so-far limited monitoring of cash recipients and cited inadequate reporting by the organizations that got taxpayer money.

The technology fund has handed out $197.2 million to 133 “early stage” companies as well as $173 million in research grants to state universities, Nashed said. Actual job figures for the fund aren’t available because they weren’t part of reporting requirements, she said. The Legislature has since made such reports mandatory.

The administration follows legislated requirements for monitoring and providing data to state lawmakers “detailing the status of the state’s investments,” Nashed said.

The enterprise and technology funds require a “detailed application process” before being presented to Perry, she said.

Shared Control

Perry, along with Lieutenant Governor David Dewhurst and Joe Straus, the speaker of the House of Representatives, make the final decisions on funding. Dewhurst and Straus are both Republicans.

Money for the technology fund was included in the budget for the two years that begin today, even after lawmakers closed an estimated $15 billion deficit partly by shortchanging schools and Medicaid, the health-care program for the poor.

Legislators including Simpson have questioned whether the state should be picking private companies to support with taxpayer dollars. The freshman Republican said the state shouldn’t use its resources for that purpose.

“If it was a level playing field, the market would allocate capital to the right places,” Simpson said.

Others have questioned whether Perry should be running government-funded job-creation programs as he attacks Obama’s $825 billion economic-stimulus measure.

Stimulus No Answer

“Government doesn’t create jobs, otherwise the last two and a half years of stimulus would have worked,” Perry said in an Aug. 10 speech in San Antonio. “Government can only create the environment that allows the private sector to create jobs.”

The state’s development funds “are important tools to help strengthen Texas’s economic environment, and help the state compete for jobs and investment,” Nashed said.

If elected president, Perry said he wouldn’t push a stimulus program, in an Aug. 29 speech in Tulsa, the Associated Press reported. Perry hasn’t flinched from taking and spending about $17 billion from Obama’s 2009 American Recovery and Reinvestment Act funds, according to David Axelrod, a Chicago- based political adviser to the president’s re-election campaign.

While the federal spending isn’t targeted and raised the national debt, Nashed said, the Texas program is funded by a balanced budget and “has a laser focus on job creation.” She said comparing the state’s development programs with Obama’s stimulus measure isn’t fair.

“I don’t know why federal stimulus is bad and state stimulus is good,” Dunnam said.

To contact the reporter on this story: Darrell Preston in Dallas at dpreston@bloomberg.net.

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net

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