Corruption in the Texas Enterprise Fund
What happens when 55 million dollars goes missing? According to my research, if that money disappears from the Governor’s pet grant program called the Texas Enterprise Fund, then the answer is… not much. Let me rewind: The Texas Enterprise Fund is a grant program that was created in 2003 under then Governor Rick Perry and continued under Governor Abbott, to bring businesses to Texas and boost our economy. Although the Fund has indeed brought many businesses to Texas and helped businesses already in Texas to expand their operations, controversies such as missing funds and recipients not fulfilling their promises with little consequence have plagued the fund since it was created and continue to cause contention in this 85th Legislative session.
One of the biggest protests about the Texas Enterprise Fund is that some companies who receive the grant money (taxpayer dollars) did not apply and/or are ineligible. Some of the conditions for a company to be eligible for a Texas Enterprise Fund grant are that the company has to be “a well-established, financially sound business” who has a project or projects that would create a lot of high-paying jobs and make a positive economic impact in the surrounding community. Also, another state must be competing with Texas for the project but the business can’t have already decided the project’s location. So essentially, in order to be considered for a TEF grant, you have to be a big business with a project that will bring a lot of money and jobs to Texas and be willing to improve your nearby community. While some grumbled about the negative effect the program would have on small and local businesses, the program was touted as a “deal clincher” that would bring increased work opportunities and incomes for Texans. So, did the Fund live up to the hype? In this article, I scrutinize if the Texas Enterprise Fund is a “deal closer” for Texas or just for the governor and big business.
Data shows that the best overall year for job creation was the Fund’s first full year 2004–2005. Twenty-two companies, in exchange for TEF grants, separately agreed to create at least 29,245 jobs and far exceeded their overall job goals and actually created a total of 101,751 jobs. In fact, it seemed that the total amount of jobs created by Fund recipients were always greater than the amount of jobs they pledged that they would create, however, a closer look at the facts shows a different story. Many companies fired employees during the recession and rolled back their long term job creation promises. Meanwhile, new grant recipients came nowhere near to creating 15,000 jobs, much less the nearly 30,000 pledge of the first year. Lower job pledges allowed businesses to look like they were hiring a large amount of people when in reality, their pledge levels and job creation amounts were the lowest in TEF history.
The 2008 recession made the realities of job creation, capital investment possibilities, and competition a lot grimmer than in 2005, when the War on Terror was in full swing and aeronautical companies like Triumph Aerostructures needed workers because their military aerostructure demands were so high. In 2008, then Governor Perry continued to boast about Texas’ economic performance while the legislature passed amendments to allow businesses like Texas Energy Center to cut their job promise amount and still receive or retain their TEF grants. Many other businesses such as Triumph Aerostructures and Sematech seemed to maintain their original job targets but actually created phantom jobs- job advertisements for jobs that don’t exist- or maintained pre-existing jobs and were rewarded, with forty million dollars in Sematech’s case.
The major problem with phantom jobs and stunted job offer growth, aside from the hardworking Texans who were put or kept out of work, was the issue of clawbacks. Clawbacks are what businesses are obligated to repay to the Fund from their grant money if they fail to keep their legal promises and the Governor’s office emphasized that businesses who did not live up to their end of the bargain would be appropriately penalized. In direct contradiction to both Governor Perry and Governor Abbott’s statements on this issue, Figure 2 shows very little clawbacks overall were repaid when companies did not fulfill their contracts.
In fact, as the Fund matured, it was clear that the governor’s office only paid lip service to clawbacks and other forms of consequential repayments, while businesses continued to let many of their commitments slide. Several businesses over the years should have been forced to repay their Fund grants but were able to thrive, or at least maintain a standard acceptable to the Governor’s office, which is perhaps the biggest critique of all.
Recall that businesses who want to receive a Texas Enterprise Fund grant must be eligible for the grant and they must apply. Additionally, a business hoping to receive a Fund grant have to be unanimously approved by the Governor, the Lieutenant Governor, and the Speaker of the House. Governor Perry, Governor Abbott, and the Texas Enterprise Fund have come under fire several times because of this approval system. The 2014 official state audit of the Texas Enterprise Fund revealed that Governor Perry authorized TEF grants for at least eleven companies who did not formally apply for two years. This report and several others highlighted the lack of transparency and communication between the Governor’s office and the State Legislators, and even the between the Governor’s office and the Lieutenant Governor, who claimed to be shocked by the 2014 State Auditor’s report. Additionally, the report found disparities between the amounts of money reportedly given out by the Fund versus how much money was actually given out, the largest a fifty-five million dollar discrepancy in 2014–2015. It was also discovered that Governor Perry received more than two million dollars in “TEF-tied contributions”, making him the number one recipient of these types of contributions.
Despite, the TEF seems like it’s here to stay, despite increased attacks this session from State Representatives, who want to defund it and re-appropriate the money to other less corrupt areas of need. At this point, the Governor and businesses have a vested interest in keeping the TEF alive so real change to the Fund through the Legislature may not be possible right now, however, Texans need to hold our governor accountable. We should all be able to answer my first question “ What happens when 55 million dollars goes missing?” and work to make sure we never have to ask again.
Admin. “Texas Enterprise Fund.” Official Texas Economic Development Corporation. N.p., 11 Apr. 2017. Web. 13 Apr. 2017.
8, 2010 September. “The Texas Enterprise.” P H a N T O M J O B S (n.d.): n. pag. Web.
8, Vol. 1 No., and 2007 December 18. “State Development Fund Rewards Hype: Incentives Great, Penalties Few For Companies That Overstate Their Benefits.” Exposing the Misuse and Abuse of the Public Commons (n.d.): n. pag. Web. <http://info.tpj.org/watchyourassets/enterprise/enterprisefund.pdf>.
Keel, John. An Audit Report on the Texas Enterprise Fund at the Office of the Governor. Austin, TX: State Auditor’s Office, 2014. Web. <http://www.sao.texas.gov/Reports/Main/15-003.pdf>.
Partnership:, Public-Private, and 2013 April 8. Texas GOP and Its Big Three Bag Enterprise-Fund Millions (n.d.): n. pag. Web. <http://info.tpj.org/Lobby_Watch/pdf/EnterpriseFundContribsToBig3.pdf>.
Texas Enterprise Fund, comp. “Texas Enterprise Fund Awards.” (n.d.): n. pag. Web. <https://texaswideopenforbusiness.com/sites/default/files/tef_listing.pdf>.