IV. Clean-Up Recommendations
Doling out taxpayer funds to private enterprises is controversial among liberals and conservatives alike. If continued, this controversial practice should be held to high standards and funded through straightforward appropriations (halting raids of unemployment insurance funds, as well as transfers between the Enterprise Fund and Emerging Technology Fund). To depoliticize this program, the legislature should establish a public advisory board to review and make formal, public recommendations on all proposed TEF agreements, amendments and terminations, as well as to make recommendations on TEF recipients that contractually qualify for the TEF death penalty. Final action on all proposed TEF agreements, amendments, terminations and death-penalty cases should be subject to the on-record approval of at least two of the following officials: governor, lieutenant governor and House speaker.
A precondition of TEF grants should be that the recipient is required to directly hire specific, significant numbers of Texans. TEF should prohibit grantees from claiming job credits for anyone that they do not hire directly, as well as from claiming job credits for employees who have no rational link to a TEF grant. TEF also should end the practice of counting phantom jobs generated by job multipliers. One simple standard might be: If you haven’t signed a paycheck, don’t claim to have created a “job.” All initial TEF development agreements should verify and report the recipient’s pre-contract employment “baseline” from which “new jobs” will be calculated. Long-time workers don’t suddenly have “new” jobs simply because their plant is bought out by a new parent company (e.g. Alloy Polymers). TEF should prohibit golden parachutes that allow recipients to cite conditions beyond state control to nullify contractual obligations (e.g. Sematech receiving other government grants or Vought renewing its U.S. Navy lease).
Noncompliance with TEF agreements is widespread. Increase clawback penalties and strictly enforce these fines and the termination clauses that should be used to recoup state funds and redistribute them to employers who honor contractual commitments. Prohibit “informal” amendments of TEF contracts, as well as retroactive amendments that apply to periods before an amendment is signed. Increase monetary penalties for amendments that reduce or postpone job targets (today’s jobs are worth much more than promises of jobs five years hence).
The taxpayers bankrolling TEF have a right to transparency. Those opposed to good-government transparency need not apply for public funds. Impose statutory transparency on TEF contracts, amendments, terminations and compliance reports, mandating that they be posted on the Internet within five business days (with standard exceptions for such things as Social Security numbers). Promptly post on the Internet surplus job credits earned, clawback penalties sought and paid, and repayments of any grant funds and interest. Require independent audits of annual compliance reports. Require that annual compliance reports disclose other grants or subsidies that the recipient has received from federal, state or local government entities.
TEF grants are a privilege—not a right. The legislature should consider the merits of setting prevailing wage, minority hiring or environmental standards for TEF recipients. The award and retention of TEF grants could be made contingent upon recipients receiving certificates of good standing that verify that they are in substantial compliance with state tax and environmental laws and regulations.