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A Shocking Win in Texas
One of the worst corporate boondoggle programs in the country met its end.
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The Texas legislature earned a lot of pixels in the political press recently for the quick rise and sudden demise of a bill full of voting restrictions, which was only defeated thanks to Democrats in the statehouse literally walking out in order to run out the clock on the state’s legislative session.
As important as that victory is, though, it’s only the second-most surprising thing to occur in Texas’ statehouse recently. At the top of the list is the expiration of what’s known as Chapter 313, one of the biggest and baddest corporate tax incentive programs in the country. The death of Chapter 313 — named for its place in the Texas code — is an example of what can happen when the politics around a particular policy unexpectedly align, and people seize the opportunity.
Created in 2001, Chapter 313 is at the heart of some of Texas’ biggest corporate deals, including those for Samsung and Tesla in Austin. As I detailed here, it’s expensive, with costs in the billions of dollars, and is ultimately ineffective, as it isn’t the dealbreaker that bring corporations to the Lone Star State. As Prof. Nathan Jensen at the University of Texas at Austin found, 85 percent of firms that received Chapter 313 benefits to locate in Texas would have done so even without the money. Dick Lavine at Every Texan has a longer breakdown of the problems with Chapter 313 here.
The current iteration of Chapter 313 is scheduled to expire at the end of next year, and since Texas’ legislature only meets every other year, an extension was on the docket this session. Without it, no more Chapter 313.
The easy bet would have been on an extension passing without much debate, as the program has had the staunch support of governors, big business, and many lawmakers, and has been renewed several times without much fuss. But while the state House passed a two-year renewal by a healthy margin, the state Senate just … didn't. When Chapter 313 expires at the end of 2022, that will be that.
So what happened? I’m no expert in Texas politics, but it looks like the confluence of a few things: First, some well-timed investigative journalism. The Houston Chronicle published a major examination of Chapter 313 just as the legislative session was headed toward its finish, pointing out the program’s huge costs and myriad abuses, and pegging its total outlays at more than $211,000 per job created. Several lawmakers said the piece put 313’s problems on their radar in a way other work simply hadn’t. Maybe that’s just a convenient excuse, but let’s take it.
Second, a marriage of convenience between liberal and conservative opponents of the program: Think tanks, activists, labor unions, and NGOs from the right and left united behind a push to end Chapter 313, which they hadn’t done before. They certainly don’t agree on everything, but they agree on this and, from what I understand, had a pretty good advocacy machine up and running once they sensed an opportunity to put a real dent in a program they despise.
This was actually one of the themes in my book: There’s space for a left-right coalition to be built against corporate handouts. Both sides have different reasons for their opposition, but who cares? Let’s fight over what to do with the money we save another day. As proof of that case, you can certainly do worse than what happened in Texas.
Third, the legislature got bogged down by stuff that has particular political salience in this post-Trump presidency period. Lawmakers in red states are trying to garner favor from the man himself and his supporters in order to secure their political futures, which means moving on voting restrictions and culture war issues, not economic development. Up against a deadline, legislators in the Senate spent time trying to rush voting restrictions through — they had to do their part to keep the Big Lie alive! — so Chapter 313 fell by the wayside.
Finally, a 10-year renewal and expansion of the program was also on the table during the legislative debate, and reportedly drew attention to the program’s expenses in a way previous renewals hadn’t. Proponents of Chapter 313 overreached and it wound up backfiring, with Republican and Democratic lawmakers alike questioning the need to keep throwing massive subsidies at major corporations in a world of post-pandemic budget realities. The program’s proponents were too secure in their belief that nothing had changed, when something actually had.
This was one of those rare moments in politics when the stars aligned and made something that looked impossible suddenly very possible. The combination of serious work exposing the program’s flaws, opposition who threatened to extract a political price from lawmakers who continued their support, and the simple realities of a time crunch and lawmakers looking out for their political livelihoods caused the unthinkable: Chapter 313 went out not with a bang or even a whimper, but because one house the Texas legislature simply never got around to the task of renewing it.
Reading this post-mortem from The Texan conveys how the program’s opponents were surprised by the anti-climactic conclusion of their fight. “Every member was aware of what 313’s were and I really didn’t work it,” one said. “It just fell on the weight of itself.”
Now, this isn’t over. Texas Gov. Greg Abbott has threatened to call a special session of the legislature in order to pass the voting restriction bill, and it’s certainly possible that a Chapter 313 renewal makes it onto the agenda, too. Big business folks in the state are freaking out, and certainly mobilizing for any debate in a special session.
But if that happens, time and energy are now on the side of those who would see Chapter 313 permanently put out to pasture. So let’s bank the win and keep on working.
SHAMELESS SELF-PROMOTION: I chatted with the New York Times’ Dealbook about an important bill to reform New York’s antitrust laws, which I also published an explainer on. I’ll have more on this significant piece of legislation later.
Also, if you missed my talk on Knoxville, Tennessee’s, proposal to publicly fund a new minor league baseball stadium a few months ago, it’s now available for viewing on Youtube here.
ONE MORE THING: Speaking of stadiums, as I noted in last week’s edition, and many before that, all of the independent analyses of sports subsidies show they don’t provide economic benefits to the local community. J.C. Bradbury at Kennesaw State University has added one more cool study to the archive. He examined the new Atlanta Braves stadium in Cobb County, Georgia, to see if its presence improved property values.
Short answer: Nope.
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Finally, if you’d like to pick up a copy of my book, The Billionaire Boondoggle: How Our Politicians Let Corporations and Bigwigs Steal Our Money and Jobs, go here.
— Pat Garofalo