New Economic Development Story for Louisiana

A few weeks ago, I was asked to reflect on economic development narratives at a Together Louisiana assembly. Here is what I said.

As leaders of Together Louisiana and our local, constituent organiza­tions, we are well aware of the power of narratives. We tell stories as part of every public action. We know that our individual stories come together to form a larger narrative, a perspective on reality that is bigger and stronger than any one of us. Narratives guide our collective action.

Narratives also guide policy making by government at all levels. Today we are interested in the narrative of “economic development.” It is a narrative we do not currently control. It is a narrative we must change in the State of Louisiana.

So let me lay out two facts to hold in the back of your mind as I talk about economic development narratives.

Fact #1: By our own research action, Together Louisiana knows that the Industrial Tax Exemption Program, known as “I-tep,” cost our local taxing bodies $313 million in 2000. That same program had grown to almost $5 billion by 2016. Corporate subsidies, so-called ‘incentives’ for doing business in Louisiana, are 10 times the national average.

Fact #2: Louisiana remains near the bottom of national rankings of states in which to do business. In CNBC’s 2016 analysis, states were evaluated on 10 dimensions drawn from a diverse array of business and policy sources and government agencies. Louisiana ranked 44^th of 50 states. In Forbes magazine's analysis, Louisiana ranked 40th of 50 states.

Something’s wrong with this picture. If corporate subsidies in the form of tax cuts, tax exemptions and tax refunds are the key to economic development, why aren’t businesses and industries stampeding our borders? Why do we still rank so poorly as a place to do business?

Or, a question I posed to an elected official a few months ago, “Where are the jobs? If ITEP is an incentive to create jobs, where are the jobs? Given the generosity of Louisiana’s ITEP, we ought to be up to our eyeballs in jobs. We ought to have two jobs per person in Louisiana!”

For just a fraction of a second, that elected official was speechless. And then he said, “You’re right.”

The way we are doing economic development in Louisiana is not working! But there is an alternative. First, I’ll lay out the thinking that currently guides economic development in Louisiana and has for a long time, then I will discuss the alternative model we propose.

The dominant economic development narrative in Louisiana goes like this:

First, economic incentives in the form of tax cuts, exemptions and various give-backs are necessary to attract business and industry to the state, create jobs and generate economic growth.

So far, so good. We agree. We understand that to be competitive, Louisiana must offer economic incentives to business and industry.

Second, the story continues, “And just look at what wonderful companies we are. We employ hundreds of Louisianans, our employees do volunteer work in their communities, and we support charitable causes with corporate donations.”

And, yes, we appreciate the volunteerism, the corporate support of charitable causes, and the jobs industry provides.

But at this point we must begin to ask questions: ITEP is designed to attract new business and industry to the state and create new jobs. How can it be used to reward corporations for good behavior? How can it function as an incentive when it is used as a gift to those who are already here? What are the long-term consequences of converting an incentive into a reward for… what? Corporations doing what they ought to do anyway? Being responsible, reinvesting in their own business? Why must that be rewarded?

Here’s where the dominant economic development narrative takes a bit of a nasty turn. There’s a third piece to the story, and it is often hinted at rather than spoken openly. It goes like this: Keep the goodies coming or we’ll pack up our jobs and leave town. We’ll take our jobs elsewhere.

In fact, this is irrational. There’s no place to go with better tax exemptions and other forms of corporate welfare than Louisiana. As we well know, Louisiana has the most generous ITEP and the most overall generous corporate subsidy in the country.

Rather, this part of the narrative works its magic on a purely emotional level. It’s a kick in the gut. It doesn’t have to be said out loud. The implication is all it takes to frighten people who need and want jobs, and it scares the living daylights out of local elected officials.

So that’s the dominant “economic development narrative”: Subsidies must be offered to attract business and industry. The corporations thus attracted make great contributions to our communities, not only in the form of jobs but in volunteerism and corporate charity. Therefore, the subsidies must keep coming, the pot must continually be sweetened, or business and industry will pack up and leave.

The truth is, taxes and/or lack of subsidies are not why corporations move. It is rarely a factor.

Remember those analyses of the overall climate for doing business by state I mentioned earlier? Taxation and corporate subsidies aren’t even a separate factor in the analysis! They are presumably part of the “cost of doing business” factor, and guess what? Louisiana stacks up very well on the “cost of doing business” scale; we’re 7^th in the country in both the CNBC and Forbes magazine analyses. In other words, just 6 out of 50 states are cheaper places to do business than Louisiana.

What does contribute to Louisiana’s low ranking overall as a place to do business are things like “quality of life,” where we ranked 47^th in the nation in the CNBC analysis and 48th in the Forbes analysis. Louisiana ranked 46^th in overall economic strength in the CNBC analysis and 44th in the Forbes analysis.

So the new economic development narrative we propose to Louisiana is this: Invest in us, the workers of Louisiana. Make us the best workforce in the country. Invest in our institutions of higher education; relieve the overbearing workloads and lack of support staff our faculty labor under and they will do the research that leads to innovation and improving technology.

Invest in our infrastructure, which is, after all, one of the first requirements for doing business. Enable police juries and school boards and sheriffs offices to keep enough of their local taxes to get the job done. To fix roads and bridges, because you can’t run a productive business if workers, suppliers and clients have trouble getting to it. To improve water supplies. To clean out drainage ditches so the south side of Monroe and the neighborhoods of Baton Rouge don’t flood with every heavy rain.

Invest in intellectual and cultural capital. Make sure all of our kids have equal access to quality public libraries. To after school and summer school programs. To reading programs that will ensure they make that 3^rd Grade tipping point transition in their ability to read—the transition that decades of education research tell us is the best way to keep them out of jail.

Invest in essential job skills programs, like NOVA in Monroe, that takes people who are under- or unemployed, whom the education system has already failed, and moves them into living wage jobs with a career path and benefits. In short, invest in the workforce today’s business and industry requires.

Invest in keeping our cities clean and our citizens healthy. Invest in us, and Louisiana won’t have to give away the ranch to get business and industry to come here.

We are thankful for corporations that do business in Louisiana, employ our people and contribute to our communities. But we want the ITEP to do what it was designed to do: Attract new business and industry to the State, create new, quality, permanent jobs.

It can only do that if it is used as an incentive and not a mere reward for good behavior. We invite our corporate neighbors to join us in paying our fair and reasonable taxes, and in making Louisiana the best state in the country in which to do business by investing in us.