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Snookered again by Arkansas lawmakers


It's a rare Arkansas legislature that can't be lured into a new tax giveaway in the name of job creation.

The 2013 legislature created something called the New Markets Job Act that has even the Arkansas Economic Development Commission alarmed. Based on experience in other states, it's a scheme that enriches investors more than the states that provide the money.

In Arkansas, the legislature agreed to allow investors to tap into $96 million from taxes insurance companies pay on premiums.

The money, instead of going to support education and other state agencies, will be loaned to community economic development corporations to invest in business ventures in low-income areas. The pitch is that new jobs will generate taxes sufficient to repay the lost money and then some.

It hasn't worked out that way in other states.

In Wisconsin, a Milwaukee newspaper found the state had spent $247,000 each to create 202 jobs. The same thing happened in Missouri, which decided not to renew the program.

Articles in other states and The City Wire in Northwest Arkansas suggest that, typically, no more than a third of the state money provided actually reaches a business enterprise. The rest is paid in interest to the insurance company that loans the money or otherwise evaporates, presumably into investor pockets somewhere. States don't get principal back or interest.

Critics say, too, that the free state money often goes to projects that were going to happen anyway.

AEDC Director Grant Tennille, who wants as many development tools as possible, is critical of the lack of state control. Tennille said the state "administers" the program about as much as the TV weatherman "administers" the weather.

"They have to submit the project, along with an economic impact analysis, which they provide and we're not allowed to question. If their analysis says that the project will have a net positive financial impact to the state, we issue the tax credits.There are no claw backs for non-performance, because the state's money isn't really going to the company, it's going to an insurance company through a middle-man who's going to take a big cut."

It is, Tennille said, "Completely inefficient and designed to make money for investment bankers, not start businesses."

Tennille would like the legislature to impose stricter rules. Other states have required repayment of money advanced.

Arkansas should have thought of that on the front end. It's not too late to limit the state's exposure.

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