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AEDC’s Preston Defends Governor’s ‘Quick Action’ Fund

3 min read

The executive director of the Arkansas Economic Development Commission on Tuesday defended certain incentives his agency offers to companies that are building, moving to or expanding in Arkansas.

AEDC Executive Director Mike Preston appeared before the state Senate Constitutional Issues Subcommittee, whose chairman, Bryan King, R-Green Forest, has sponsored a proposed constitutional amendment that would abolish the $30 million “quick action closing fund.”

The fund, made up of general revenue surplus dollars and controlled by the governor, is often tapped to round out incentive packages offered by the AEDC. It was created in 2007 and has been used by Democratic Gov. Mike Beebe and Republican Gov. Asa Hutchinson.

Preston defended the fund during the hearing. He said the incentives help the state compete on a regional and global scale and have helped attract more than 20,000 new jobs with average wages of $20.63 per hour. He said companies that received incentives have invested more than $3 billion in their projects, 25 times the current $30 million appropriation for the governor’s fund. 

Preston said tax revenue the companies bring to the state also exceeds the incentives they receive.

King said the state no longer has a large surplus and that, unlike the federal government, can’t pile debt onto future generations. He suggested that the money appropriated for incentives be used for other state needs including highway maintenance and workforce training.

Jacob Bundrick, a policy analyst at the University of Central Arkansas’ Center for Research Economics, testified during the hearing. He said research by his team showed that incentives aren’t effective in Arkansas or other states.

Bundrick said the money could be better spent on steps that have been proven to enhance competitiveness, like reforming taxes, licensure requirements and infrastructure.

Preston argued that Bundrick’s team is funded by special interests slanted against incentives and, even if the funds were used for other things that improve competitiveness, it wouldn’t be enough. Incentives are the first thing companies ask about when they meet with him, Preston said.

“Even if everything was perfect — we had no state income tax, no corporate income tax — we still have competitive disadvantages we have to overcome,” Preston said. “This is a drop in the bucket for us to still be competitive.”

Sen. David Wallace, R-Leachville, and Sen. Jim Hendren, R-Gravette, were skeptical of Bundrick’s research, citing projects that brought high-paying jobs to their constituents.

They also asked Bundrick whether Arkansas should become the only state in the region to not offer incentives. Bundrick acknowledged “that’s not a political reality,” while saying he thought the money could be better spent on proven policies.

Wallace noted recent major economic development projects: Big River Steel and Denso Manufacturing in Mississippi County; Hefei Risever Machinery Co. Ltd. in Craighead County; and Shandong Ruyi Technology Group in St. Francis County. 

“We are experiencing growth in the Delta that we have not seen, and it’s because of what we are doing right now,” he said.

Bundrick and King also argued that, because the governor’s fund is taxpayer dollars, existing Arkansas companies are subsidizing competitors that receive incentives to come to the state.

King also said the money could be used to resolve the skills gap by paying for workforce training. Preston said the governor’s fund already supports workforce training programs and existing companies, including Tyson Foods Inc. of Springdale. Existing companies looking to expand qualify for incentives that help them do that, he said.

Preston also cited low unemployment as a reason businesses are struggling to employ enough skilled workers. Preston said Arkansas needs more people and a better relationship with two-year schools, and that funding for workforce training was not a challenge the state faces.

To King’s argument that the money for the fund could be better spent on highways, Preston noted that $30 million would pay for just a half mile of highway.

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