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A new economic stimulus package to help lure big companies to the state was approved by lawmakers in an 11th-hour deal Sunday night with overwhelming support and sent to Gov. Greg Abbott’s desk.
The agreement came under pressure from the business community and Texas state leaders to create a program to help the state stay competitive with businesses — and to replace the tax cuts that passed last year after two decades. Books.
The new Texas Jobs, Energy, Technology and Innovation Act replaces the old Texas Economic Development Act, which was informally known as Chapter 313, a section of the state tax code that gave large businesses a 10-year tax break to Texas. Their school property tax.
The bill cuts the previous deduction in half, increases public input into the process, weakens work and wage requirements, and increases oversight and accountability measures compared to the old program.
The new plan excludes wind, solar and battery energy storage projects from participating. It would also eliminate one of the most controversial aspects of the old program — the fees the companies paid directly to schools that signed up to the deal.
The incentive is contained in Chapter 403 of the tax code and will expire in 10 years unless lawmakers renew it.
The House voted 100-36, with both Democrats and Republicans voting against the bill, citing concerns about the possibility of corporate welfare programs or taking money away from schools, among other reasons. The Senate approved the bill 26-5, with some critics in the House saying they don’t like that the program is still so closely tied to school finance.
The deal reached in the last 24 hours of the legislative session was praised by the state’s powerful oil and gas trade group, which pushed for a new stimulus package to support one of Texas’ most important industries.
“We appreciate the House and Senate working together to develop tools to attract jobs and investment,” said Todd Staples, president of the Texas Oil & Gas Association. “Economic development professionals across the state are ready to go to work to grow their communities.”
The previous Chapter 313 program, which caused huge inequities in schools and was a corporate welfare program, was allowed to end in December after complaints that wealthy companies reneged on promises about entrepreneurship.
The new plan, championed by House State Affairs Chairman Todd Hunter, a Corpus Christi Republican, would give organizations a 10-year abatement on property taxes they pay to keep school districts up and running. In return, eligible companies must create certain full-time jobs — salaried or contract jobs — with health benefits for salaried jobs and competitive pay tied to statewide standards for the specific industry sector.
The company must report to the state about compliance with the agreement every two years.
The state pays schools out of the state’s general revenue fund to replace at least part of the tax money. Budget analysts say it’s not clear how much taxpayers will spend to provide the rebates to the companies.
The new package limits companies eligible for the program to companies that support innovation, including manufacturing, hydrogen fuel production and carbon capture facilities, natural resource development, thermal power generation, technologies such as semiconductor chips, and research and development organizations.
Senate Business and Commerce Chairman Charles Schwartner, R-Georgetown, who shepherded the negotiations through the Senate, said the final category could include pharmaceuticals and other massive projects — a process he likens to threading a needle.
Eligible companies receive a 50% rebate unless the project is located in an economically distressed area federally designated as an “Opportunity” zone – in which case the rebate can be as low as 75%.
“Those zones are spread across Texas, the Rio Grande Valley and some rural areas, other areas, urban and suburban areas where the Texas economic miracle didn’t happen much,” Schwertner said. “If we can put in place an incentive program that encourages investment into those areas, all Texans can grow.”
Democrats who helped craft the deal said Sunday that the new plan is more responsible and fair than the original, and they praised the focus on encouraging development, especially in rural or impoverished parts of the state.
State Sen. Jose Menendez, D-San Antonio, told Schwertner during the floor discussion, “You did a great job of making this happen. “There are a lot of groups that say it doesn’t matter, and they may or may not be right. But at the end of the day … I think we strike a balance that makes a lot of sense, and I appreciate your hard work.”
Before a new company takes the deal and moves into a community in Texas, the local school district hosts public hearings and decides whether the project should be considered by an oversight committee made up of legislative leaders.
The state regulator and the governor are very involved in the process of the law. The superintendent may impose a one-time fee of up to $30,000 paid by the company to cover costs for districts to evaluate the program.
If the company doesn’t meet the incentive’s job or salary requirements, the governor or school district can terminate the agreement at any time, and there is a mechanism to “recoup” the company’s savings by reducing penalties.
The reduction can go to projects that want to build or expand the existing “critical infrastructure”, but it prevents the participation of renewable energy companies such as wind and solar – which in the last program made up a large part of the companies – to break them from being eligible for taxes, as well as battery energy storage projects.
One conservative criticism of the defunct Chapter 313 program is that it is easily abused by renewable companies, leaving them increasingly dependent on the oil and gas industry.
The new plan does not allow companies to participate in companies that have been identified by a state regulator as harmful to Texas values and business because of their environmental, social and governance strategies, also known as ESG. Conservatives decry them as part of a left-wing “activist” agenda that pushes climate change-aware policies and threatens Texas’ oil and gas industry.
That provision was stronger in earlier versions of the bill, which excluded all companies with ESG policies, but has raised concerns from both Democrats and Republicans — as well as some in the oil and gas industry — that it would inadvertently exclude too many companies.
Participating companies must be able to demonstrate that they will not build in Texas without incentives.
“These are safeguards, if you will, so we don’t just give the school dollars to everyone who puts their hand up and asks,” Menendez said. “It’s going to be a deal, a funding package to help companies bring good jobs here.”
Fees for schools are violated
Perhaps the biggest difference between the old program and the new one is the lack of direct payments by the companies to the schools.
The payments, known by supporters as “payments in lieu of taxes” and by critics as “bribes” and “kickbacks,” create apparent unfairness in Chapter 313 because only districts lucky enough to contract with companies can receive them. Winds.
Some districts have dozens of those agreements, like the 37 agreements with Barber Hill ISD, northeast of Houston, while others, like Cuero ISD, have none.
But many told lawmakers at hearings on the bill that the fees were critical to their survival, especially when student growth outpaces property values and districts can’t afford growth costs.
Two years ago, Taylor ISD struck a deal with Samsung to build a base in Williamson County, north of Austin.
Although the project is not yet operational, students have benefited from 60 internships in a district where 70% of the student population is low-income, said Taylor ISD Superintendent Devin. Padavil
He said direct payments from the Samsung deal helped pay for facility upgrades and maintenance, as well as teacher salaries, excluding tax rates. He said $46 million in payments from Samsung will go to the district over the next 10 years.
“If state funding allowed us enough to address teacher compensation and all of our other needs, that would be wonderful,” Padaville said at the committee hearing. But more than anything, this is an opportunity for kids. When a global corporation calls Taylor, Texas home, the possibilities our students can imagine for themselves are expanded.
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