The Texas-Florida Connection
Can Florida emulate Texas in creating jobs? Here's a comparison.
Both Florida and Texas have two major incentive funds to help relocating businesses. Florida's Quick Action Closing Fund is a meant to be a deal-closer when it can give the state a "clear competitive edge" against another state. Projects must be in a targeted industry, have a positive payback ratio and create at least 10 new jobs with annual wages at least 115% of average. Florida created the fund in 1999 and has invested more than $237 million for a reported return of $5.8 billion in capital investment, 31,700 new jobs and 13,200 retained jobs.
The Texas Enterprise Fund is a similar deal-closing fund used as a final incentive in cases where a single Texas site is competing with an out-of-state option. Projects must have significant local support and create jobs with pay that exceeds average county wages. The award is tied to the number of jobs created. Established in 2003, the fund has invested nearly twice as much as Florida's — more than $435.3 million, reporting a return of $14.6 billion in capital investment and more than 58,000 new jobs. Texas has allocated $150 million to the fund for the next two-year period.
Florida's Innovation Incentive Program was created in 2006 so Florida could compete for high-value R&D or innovation-economy jobs. An R&D project must involve higher-education collaboration, be a catalyst for an emerging technology cluster and carry a local one-to-one match. An innovation project must create 1,000 jobs with a capital investment of $500 million and a local one-to-one match. The state has spent $450 million from the fund on seven projects, including Sanford-Burnham Medical Research Institute in Orlando, Max Planck in Jupiter and Torrey Pines in Port St. Lucie. Unsure of its impact, the Florida Legislature didn't fund it in 2009 or 2010, but devoted $75 million to it in 2011 and $15 million in 2012.
Michael K. Berry
The Texas Emerging Technology Fund is a $200-million initiative created in 2005.
A 17-member advisory group of high-tech leaders, entrepreneurs and research experts reviews projects and recommends funding allocations to the governor, lieutenant governor and Speaker of the House. Since it was created in 2005, the fund has allocated more than $197.2 million to 133 early-stage companies and $173 million in grant matching and research superiority funds to Texas universities. Texas has allocated $140 million to the fund for the next two-year period.
In addition, local communities in Texas can vote for up to a penny of additional sales tax to fund them. "We never give the most away" when competing with other states," says Michael K. Berry of Hillwood Development. "We feel we don't have to."
State Budget and Legislative Process
A little more than a third of the state budgets of both Florida and Texas come from the federal government. Both states' constitutions require a balanced budget, and both cut billions from their budgets in the face of revenue shortfalls — in Texas' case, some $27 billion in cuts for the state's 2012-13 biennial budget cycle.
Some believe Texas has an advantage because the Texas Legislature, by constitution, only meets once every other year.
Florida's unlikely to copy that provision. In addition to shifting the balance of power more toward the governor's office, the measure means that "we have legislators who really have to make a living doing something else," says John Doggett at UT Austin. "It creates restraint that you don't see in other states."
Texas tax policy is not all that different from Florida's. Florida has a corporate tax, 5.5% of net income, which Scott wants to eliminate. Economic developers say it's not a significant departure from Texas' gross margins tax.
This year, the Florida Legislature declined to pass Scott's plan to cut the corporate tax rate to 3% as a first step toward phasing it out over seven years. Senate President Mike Haridopolos says business leaders told him Florida's "stability is more important than reducing a 5.5% corporate tax rate."
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Florida is particularly unlikely to copy one feature of taxes in Texas: Property tax rates there are, on average, twice as high as they are in Florida.