Tax credit foe gains a ally in Gov. Nixon

Mar 13, 2010 — St. Louis Post-Dispatch

Tony Messenger

Mar. 13, 2010 (McClatchy-Tribune Regional News delivered by Newstex) -- JEFFERSON CITY -- Sen. Jason Crowell, R-Cape Girardeau, has been sounding the alarm for the last two years that Missouri's budget crisis would only get worse if the state kept handing out millions of dollars in tax credits to "fat cat" developers.

Crowell has battled as a "lone ranger" on many days in the Senate, holding up economic development bills much to the dismay of even his own Republican leadership.

But now Crowell has a powerful new ally in his fight against tax credits: Gov. Jay Nixon.

Echoing Crowell's rallying cry that the state's tax credit programs aren't producing much return on investment, Nixon, a Democrat, signaled this week that he's ready to wade into what might be the key fight of the 2010 legislative session.

Nixon said in a speech Thursday before Springfield business leaders that reining in poor-producing tax credit programs is a key part of his proposal to cut $500 million from the 2011 budget.

Proponents of tax credits say they have become a necessary tool to spur development and lure companies. The state awards tax credits to businesses, which often sell them to investors and use the gains to reduce the cost of a project.

The theory behind tax credits is that by offering developers and others an incentive to reduce their tax burden, the state spurs investment.

But for every dollar spent in tax credits, the state's revenue drops an equal amount, making it harder to pay for state services when the budget is tight. And some tax credit programs simply aren't producing the desired economic activity, Nixon said this week.

On Friday, the Democratic governor flew to Cape Girardeau and met with Crowell to discuss their mutual interest in a battle that Crowell has been waging with the support of only a few conservative Republican senators.

After the meeting, Crowell said he appreciated the governor's interest in the issue.

"I can't put him in the camp as a convert yet," Crowell said, "but he's willing to talk. I applaud him. I appreciate him taking the time to hear from me about what I'm trying to accomplish."

While it's not yet clear that Crowell and Nixon see eye to eye on tax credits, the very fact that they are both talking about them changes the dynamics of the legislative session when lawmakers return to work Monday.

For Nixon, it sets up what will likely be the most complicated of the legislative battles in coming weeks, following his proposals to slash state jobs, consolidate some departments and privatize some government services.

Tax credits, after all, are at the heart of this session's jobs bill being pushed by both Nixon and Republican leaders Ron Richard, speaker of the House, and Charlie Shields, president pro tem of the Senate. That bill would collect future sales taxes in the life science industry to create a business growth fund. And it would create a "closing fund" and allow some of the state's tax credit programs to give incentive money up front, rather than spreading it out over several years.

The bill has seen slow going because Crowell said he won't let it through the Senate until some compromise is reached on bringing the state's more than $570 million in tax credit programs under control.

Even the bill's sponsor, Sen. Tom Dempsey, R-St. Peters, has said it will be a "challenge" to get it through.

In his speech Thursday, Nixon wasn't specific in his proposals related to tax credits, though in questioning from reporters he specifically mentioned two programs: the state tax credits for low-income housing and the historic tax credits that are particularly popular in downtown St. Louis.

"When it comes to economic development, we have a responsibility to look at the return on investment, and determine which tax credits are delivering for Missouri taxpayers," Nixon said. "The answer right now is obvious. The state is overpaying, and tax credits are underperforming."

Nixon isn't yet saying how much of his $500 million in cuts might come from tax credits. And he and Crowell seem to differ in their approach. Nixon, for instance, wants to see the director of economic development have more sway over which tax credits get approved and which don't.

Crowell wants that power to be in the Legislature.

He has one bill that would put a one-year freeze on the low-income housing tax credits handed out by the Missouri Housing Development Commission. That move alone would save more than $150 million in the 2011 budget, though critics of the proposal say it would have devastating economic consequences by halting construction projects.

The other thing Crowell wants is to see tax credits debated just like other parts of the budget. By making them "subject to appropriation," tax credits for developers would be debated right along with Medicaid cuts and money for schools.

"I believe in a process by which every expenditure of every state dollar has to compete with each other," Crowell said.

At some point in coming weeks, Missouri lawmakers are going to have to come up with $500 million to cut out of the 2011 budget. While tax credits might dominate the discussion, other topics will create legislative conflict as well.

Nixon's proposal to cut state aid to Missouri students going to private colleges and universities, for instance, will be a tough sell in the Republican-led House. That proposal could save $52 million.

At the moment, Nixon doesn't have a price tag on the various proposals he floated this week.

"We expect to work with lawmakers next week to see which of the proposals they support moving forward and what ideas they have," Nixon spokesman Jack Cardetti said. "A lot of the savings will depend on the specifics of the legislation."

Newstex ID: KRTB-0187-42858821